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Cablegate: Looking Toward Asean - Guangxi Hopes to Expand Economic

VZCZCXRO9160
RR RUEHCHI RUEHCN RUEHDT RUEHGH RUEHHM RUEHNH RUEHVC
DE RUEHGZ #0097/01 0460837
ZNR UUUUU ZZH
R 150837Z FEB 08
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6894
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCNASE/ASEAN MEMBER COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASH DC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC

UNCLAS SECTION 01 OF 02 GUANGZHOU 000097

SIPDIS

SENSITIVE
SIPDIS

STATE PASS USTR CHINA OFFICE


E.O. 12958: N/A
TAGS: ETRD PREL EINV ELTN EWWT EIND ECON ASEAN CH
SUBJECT: Looking toward ASEAN - Guangxi Hopes to Expand Economic
Relations with Southeast Asia

REF: 07 GUANGZHOU 1190

(U) This document is sensitive but unclassified. Please protect
accordingly. Not for release outside U.S. government channels. Not
for internet publication.

1. (SBU) Summary: Guangxi Zhuang Autonomous Region is eager expand
economic relations with Southeast Asia. ASEAN already accounts for
32 percent of its total foreign trade, and the capital, Nanning,
hosts the high-profile China-ASEAN Expo, which attracts hundreds of
businesses and many heads of state from Southeast Asia every year.
Guangxi has dedicated an 18,000 hectare economic zone for investment
from ASEAN and businesses interested in trade with the bloc. There
has also been considerable investment in cross-border
infrastructure, including roads, port links and power supply.
Despite these efforts, one well known academic commented that trade
expansion is limited by the size of markets in ASEAN. He believes
that Guangxi's comparative advantage would favor expanding the
province's trade with more developed markets like the United States.
End summary.

Looking South
-------------

2. (U) Government and business in Guangxi Zhuang Autonomous Region
are eager to leverage the area's proximity to Southeast Asia into
trade and investment that will drive economic growth. ASEAN
countries already account for approximately 32 percent of Guangxi's
foreign trade at US$2.9 billion in 2007. Vietnam, which shares a
400-mile border with Guangxi is the Autonomous Region's largest
trading partner with US$2.3 billion in trade last year, an amount
that accounted for 25 percent of total foreign trade. Singapore,
Indonesia and Thailand are also major trading partners, each with
more than US$100 billion in annual trade. By comparison, Guangxi's
total trade with the United States was US$700 million.

Putting on a Show
-----------------

3. (SBU) The annual China-ASEAN Expo is the most high-profile tool
in Guangxi's strategy to expand trade with Southeast Asia. The
trade and investment show hosted by China each year in Nanning
attracted almost 2,000 companies and other exhibitors in 2007
(reftel). Qin Guokan, president of the Guangxi Association of
Enterprises with Foreign Investment pointed out to econoff that
since 2004 the event has brought 23 ASEAN heads of state to Nanning.


If You Build It...
------------------

4. (SBU) Guangxi has also established an industrial and commercial
park covering an area of 18,000 hectares (nearly 45,000 acres) to
attract investment from ASEAN countries and companies eager to trade
with the bloc. Initially aimed at overseas Chinese investors, the
park's mission was altered in 2004, and it was renamed the
China-ASEAN Economic Zone. Zhang Xiangxin, vice director of the
zone, told us the government has invested RMB 1.4 billion (about
US$190 million) to develop the infrastructure of the park, including
52 kilometers of roads, 50 kilometers of electricity lines, and 30
kilometers of water lines. The park currently houses 160
enterprises with output of RMB 2.2 billion (about US$300 million) in
2007. However, the vast majority of investment in the park is from
domestic sources, and only a quarter of foreign investment is from
ASEAN countries. Most is from Hong Kong, Japan, Taiwan and South
Korea.

Transportation Expansion
------------------------

5. (SBU) The Chinese government is investing substantially in
transportation links between Guangxi and ASEAN neighbors. A highway
connecting Nanning with the Vietnam border has been completed,
reducing travel time to just 1.5 hours. Li Zhiyong, deputy director
general of the Guangxi Department of Commerce, noted that Beijing
had recently approved the North Beibu Gulf Economic Cooperation
program aimed at enhancing transportation links, especially maritime
links, between six Guangxi cities and six ASEAN partner nations. In
addition, the China Development Bank and Asian Development Bank have
provided loans for infrastructure harmonization between China and
Vietnam; new projects should further enhance Guangxi's highway,
railway and port links with its southern neighbor. There has also

GUANGZHOU 00000097 002 OF 002


been cross-border collaboration with Vietnam on the development of
power infrastructure, including planned Guangxi investment in
thermal power plants in Vietnam.

Advantages and Obstacles
------------------------

6. (SBU) Explaining some of the advantages Guangxi enjoys in
expanding trade with ASEAN, Professor Li Xinguan of Guangxi
University's College of Business commented that the autonomous
region was well positioned to take advantage of the China-ASEAN
Agreement on Trade in Goods, which has already eliminated tariffs on
many agricultural products. He believes Laos and Cambodia are
particularly promising markets for Guangxi. However, he noted that
those markets are limited in size, and he was less optimistic about
the potential for growth in trade with other ASEAN nations.
Comparative advantages lend themselves more to expansion of
Guangxi's trade with the United States rather than trade with ASEAN,
according to Li. He also commented that support from Beijing for at
least one proposal to enhance economic cooperation between Guangxi
and Vietnam had been weak, leaving Guangxi's government to work with
provincial counterparts rather than Hanoi.

GOLDBERG

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