CHINA/ECONOMY: HU JINTAO RECONFIRMS ECONOMIC

C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 000310

SIPDIS

PACOM FOR FPA PICCUTA
NSC FOR LOI

E.O. 12958: DECL: 02/05/2025
TAGS: ECON PGOV PREL CH
SUBJECT: CHINA/ECONOMY: HU JINTAO RECONFIRMS ECONOMIC
RESTRUCTURING

REF: OSC/CPP20100203004009

Classified By: Economic Minister Counselor William Weinstein. Reason 1.
4 (a and d)


1. (C) SUMMARY: In a major February 3 speech at the Central
Party School, President Hu Jintao called for the ministers
and top provincial leaders present to accelerate China's
economic structural adjustment. While acknowledging the
impact of the financial crisis, Hu emphasized that the crisis
had not changed overall global development trends and China's
need to accelerate reforms left moribund over the past year.
Some observers assessed the speech was intended to underscore
for the party membership the leadership's strong support for
continued economic reform, restructuring and rebalancing of
the economy toward stronger domestic demand. END SUMMARY.

The Speech: Gathering at the Party School
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2. (SBU) Chinese President Hu Jintao on February 3 delivered
a major policy speech to top leaders, ministers and
provincial authorities at the Central Party School (Reftel).
Vice President Xi Jinping presided over the event. In his
remarks--which were covered prominently in local
Chinese-language media--Hu claimed that the financial crisis
had borne heavily on China. But he asserted that the crisis
had not altered fundamental global economic growth trends,
which mandated that China remain open to the outside world.
Further, China had to lay the groundwork for a sustainable
future by boosting domestic demand and improving the welfare
of the common people.


3. (SBU) Expanding on this last point, Hu urged those present
to accelerate work towards fundamental economic
restructuring, citing what the media has subsequently dubbed
his "eight accelerations":

--accelerate structural economic adjustment, including income
redistribution and urbanization. (Note: These two goals were
also key themes in the State Council and Chinese Communist
Party's January 31 Number One Document. End Note.)

--accelerate industrial structural adjustment and the
development of new strategic industries.

--accelerate innovation.

--accelerate reform and modernization of the agriculture
sector and the food security system.

--accelerate creation of a "conservation culture," including
enhanced energy savings and emissions reductions.

--accelerate efforts to improve the social safety net and
promote even economic growth.

--accelerate the development of "cultural" industries (e.g.
publishing, advertising, entertainment, etc.)

--accelerate adjustment of the "externally-oriented economic
development" (focused on exports and foreign-direct
investment) and promotion of the "going out" strategy
(including outward-bound investment).

Message to the Troops
--------------


4. (SBU) Bank of America-Merrill Lynch analyst Lu Ting,
writing from Hong Kong, commented that "now that they're more
assured about the recovery, China's leaders want to redirect
the economy back to structural reform, which was on track
through 2007 but disrupted by the financial crisis."
Likewise, a contact in a Chinese government think-tank said
that Hu was clearly asserting his leadership over the
economy, refocusing provincial and ministerial attention on
national goals of rebalancing and reform. He noted that
during the crisis many special interests had taken the
opportunity to resist reforms detrimental to their benefit,
but that the Central Leadership was now reassuming control.

Comment: High-level Support
--------------

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5. (C) President Hu's speech repeated many themes from other
recent high profile policy statements, which will likely
appear again in the upcoming National People's Congress (NPC)
and National Committee of the Chinese People's Political
Consultative Conference (CPPCC) meetings in early March, as
well as in the 12th Fifth-year Plan. The main purpose of the
speech appears to have been establishing indisputable
political support for the policy course, endorsing
rebalancing at a level too high for local opponents or
commentators to touch.


6. (C) Lower-level decision-makers and officials will now
focus on various aspects of Hu's speech as it touches on
their industries, pouring over it for signals of where
Central Government work priorities lie, and where they might
best position themselves to continue to protect their
interests. As President Hu himself acknowledged in the
speech, implementing these goals will be a long and difficult
process.
HUNTSMAN