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Cablegate: Speaking Out at the Cppcc: Nine Dragons Ceo Zhang Yan Urges

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R 200631Z MAR 08
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6986
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UNCLAS SECTION 01 OF 02 GUANGZHOU 000168

SIPDIS

SENSITIVE
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STATE FOR EAP/CM
STATE PASS USTR

E.O. 12958: N/A
TAGS: ELAB EINV ECON SENV PGOV CH
SUBJECT: SPEAKING OUT AT THE CPPCC: NINE DRAGONS CEO ZHANG YAN URGES
REVISION OF LABOR CONTRACT LAW


(U) THIS DOCUMENT IS SENSITIVE BUT UNCLASSIFIED. IT SHOULD NOT BE
DISSEMINATED OUTSIDE U.S. GOVERNMENT CHANNELS OR IN ANY PUBLIC FORUM
WITHOUT THE WRITTEN CONCURRENCE OF THE ORIGINATOR. IT SHOULD NOT BE
POSTED ON THE INTERNET.

1. (SBU) Summary: In a May 19 conversation with the Consul General,
Nine Dragons dynamic CEO Zhang Yan said that she had been moved to
offer suggestions to the government on the Labor Contract Law, taxes
on the well-to-do and import incentives for energy
efficient/environmentally friendly machinery to help promote and
sustain national economic growth rather than enrich those who are
increasingly well-off as a result of China's reforms. She observed
that while the government may deny that firms are leaving the PRD
for greener pastures elsewhere, the fact is that firms (not just
Hong Kong and Taiwan, but Korean and Japanese as well) are looking
at the potential for moving their base of operations to southeast
Asia; without incentives, companies, including large Chinese ones,
would not use China as a platform to create better (and to some
extent "greener") products that would appeal to a global consumer
market. End Summary.

2. (SBU) Nine Dragons' CEO Zhang Yan, at one time China's richest
woman ("richer than Oprah"), has recently been in the news for
comments she made at the early March Chinese People's Political
Consultative Conference (CPPCC) on revising the Labor Contract Law,
lowering taxes on individuals who earn RMB 100,000 and above, and
reducing/eliminating the high import tax on energy efficient,
environmentally friendly equipment. She told the Consul General
over dinner March 19 that while the press may have reported that she
had been heatedly criticized by her CPPCC colleagues, she felt she'd
gotten good support from the majority of delegates and was confident
that the leadership would act positively to address the concerns she
had brought to the fore. Otherwise, she added, foreign-invested
companies (and perhaps even larger Chinese companies) would start to
move out of the Pearl River Delta (PRD) and individuals the
government wanted to attract to live and work in China, including
those who were looking forward to returning home, would remain
overseas. The result: more jobless people, poorer management, less
creativity and cutting-edge intellectual property originating in
China, an increased burden on the government to provide services to
people who can no longer afford them, and a decline in quality of
life for migrant workers - all with a real and negative impact on
the social order.

3. (SBU) Zhang pointed out that she could hardly be criticized for
her first proposal, i.e., an amendment to the Labor Contract Law to
exempt labor-intensive companies from the new requirement that they
sign permanent contracts with employees who have served for more
than ten years. Nine Dragons, she noted, is a capital-intensive
company, which seeks to retain its employees, many of whom it
supports as they attend university in exchange for coming to work at
the company for 3-5 years. Frankly, she acknowledged, keeping the
kind of employee Nine Dragons attracts for up to ten years, however
desirable, is impossible. It is the other more vulnerable PRD
companies that she was seeking to assist, many of which are already
planning their exit strategies. So while the Chinese government may
deny that firms are leaving the PRD for greener pastures elsewhere,
the fact is that firms (not just Hong Kong and Taiwan, but Korean
and Japanese as well) are looking at the potential for moving their
base of operations to southeast Asia. Unless the Chinese government
counters with incentives, this would kill the its hope that many of
these same firms would simply move inland, where Zhang Yan said,
they would confront problems of moving product to market.

4. (SBU) With regard to her proposal for reducing/even eliminating
import taxes on energy efficient/environmentally friendly machinery,
she said that she had been tempted to go even further and was
considering advising the government to use its reserves to provide
subsidies to companies to purchase the machinery from abroad. In
fact, if much of the machinery were American in origin, the
government could be credited with "killing four birds with one
stone:" improving air and water quality, helping companies
(especially in energy poor Guangdong province) better utilize fuels,
getting firms to retool and redesign products to make them more
competitive in a global economy that increasingly values "green"
production, and reducing the deficit with the United States.

5. (SBU) Zhang noted that this year's CPPCC was more democratic than
in years past: she didn't come with a specific agenda but was
encouraged to speak out and tried to encourage others - those who
sit and rest at times when they should be advising the government on
better ways of doing them - to be similarly proactive. The CPPCC
can show the way forward, she said, in ways that NPC delegates
cannot; the latter are constrained by virtue of their ties to a

GUANGZHOU 00000168 002 OF 002


political system that, when it comes to opening up, moves glacially
if at all.

6. (SBU) Comment: For someone who seemed under fire just a week ago,
and whose company stock had declined March 17 by a bit over 40
percent before meeting with the CG, Madame Zhang was in remarkably
good spirits and good humor. She and her husband, Liu Mingchung
(Taiwan by birth, Brazilian by upbringing, possessor of HK residency
and fluent in four or five languages) were preparing for a roadshow
to Europe and America as well as a visit to their new plant in Ho
Chi Minh City (part of their diversification planning for the
future). She has been reassured that her proposals will not cause
any problems for Nine Dragons business operations in the future. If
that were the case, she said, how likely would it be that the
government could attract similarly outspoken executives to the CPPCC
and to sit on government advisory boards? The trick was to couch
your advice as a "suggestion" and not a criticism, which she felt
she had done.

GOLDBERG

© Scoop Media

 
 
 
 
 
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