Cablegate: Guiyang Hopes Are High Under Enthusiastic Leader;

DE RUEHCN #0285/01 3380015
P 040015Z DEC 09




E.O. 12958: N/A


CHENGDU 00000285 001.2 OF 003

1. (U) This cable contains sensitive but unclassified
information - not for distribution on the internet.

2. (SBU) Summary: Brimming with confidence, Guiyang Vice-Mayor
Li Zhong told Consul General recently that his city -- long the
isolated capital of one of China's poorest provinces -- would
catch up with the rest of the PRC over the next decade. Guiyang
is now like two cities: one old and backward, hemmed in by
mountains; the other new and modern, created on a huge, man-made
plain. Guiyang's GDP grew 12.6 percent in the first three
quarters of 2009, well above the national average; Guizhou
Province's GDP growth outpaced the national average in nine of
the last 10 years. The Vice Mayor's optimism was based on:

-- Guizhou's rich mineral (and hydroelectric) resources;

--Guiyang's location at a crossroads between east and west
China, and between north China and Southeast Asia; and,

-- preferential national policies including the Great Western
Development Strategy and the on-going stimulus plan, which have
led to a road/rail infrastructure boom, and will lead to airport
improvements. One negative for Guiyang is a weak university

3. (SBU) We believe the Vice Mayor's optimism is well placed, at
least in the longer term: once the on-going road/rail/air
build-out is completed, Guiyang will be much better positioned
to finally break its geographical isolation, and attract
higher-tech domestic and foreign investment to its low-wage
economy. End Summary.

Guiyang's Backwards Past and Hopeful Future


4. (U) Guiyang is a city in transition, where its backwards past
collides with its future aspirations. Guiyang locals -- both in
visa interviews in Chengdu, and on-the-ground in this provincial
capital -- are often quick to disparage their hometown as poor
and backwards relative to wealthier coastal cities, or even the
southwestern cities of Kunming, Chongqing, and Chengdu. In a
province that is 92 percent mountainous, the reminders of
Guizhou's difficult topography are everywhere. The old part of
town looks like a poor, mountainous, cramped, 700 year-old city
with winding roads. Decrepit tenements are carved awkwardly
into Karst rock formations, while even the modern buildings that
have sprout up are often adjacent, to dusty, run-down alleys.
Yet this old part of Guiyang is also undergoing large-scale
up-grading of its major traffic arteries -- leading one to
cautious optimism that life will improve, while for now leading
to some of Southwest China's worst traffic congestion. (Note:
As with many other Chinese cities, there is a car boom underway
in Guiyang, with several hundred new cars registered daily. End

5. (U) Guiyang also has another, completely different face:
modern and spacious, built on a man-made plateau 30 minutes from
the old city. The new part of town has row after row, complex
after complex, of tall, modern apartment and office buildings.
A real estate boom is on-going, our Foreign Affairs Office (FAO)
handlers told us, with a rapid rise in prices. Some of this
boom (and speculation) is fueled by wealthy, out-of-province
buyers, many of them older and retired or on the verge of it,
who buy second (pied-a-terre) apartments so that they can enjoy
the cool, pleasant summers in higher-altitude Guiyang. The city
hall complex, designed by an American architectural firm, was
grassy, treed, and spacious -- quite a contrast to the huge
concrete boxes in other cities. Overall, we came away
pleasantly surprised by Guiyang's potential, while also
recognizing its persistent challenges.

Guiyang's Vice Mayor:

An Out-of-Province Party Apparatchik, But Still Impressive

CHENGDU 00000285 002.2 OF 003

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6. (SBU) Li, a native of China's northern Shanxi province, was
infectious in his optimism about Guiyang's future and, speaking
without notes, displayed an impressive understanding of the
issues facing his adopted city. Guiyang has 3.6 million people
in its urban center, representing 64 percent of the overall
population under the city's urban-rural administrative region.
Through the first three quarters of 2009, Guiyang's total GDP
reached 63.6 billion RMB, a 12.4 percent increase for the year.
Li stated that, so far in 2009, the city had grown about two
percentage points faster than Guizhou province, whose growth, in
turn, was above the national average of 7.7 percent.

7. (SBU) 53.5 billion RMB in fixed asset investment was made in
Guiyang in the first three quarters of 2009 to stimulate the
economy and revitalize infrastructure, Li said. (Comment: Li's
figures seem incongruous in that they imply that 84 percent of
Guiyang's GDP in the first three quarters of 2009 were fixed
asset investment. This fixed asset figure may be calculated
differently from in the U.S., perhaps reflecting fixed
investment project started (but not completed) during this
period. Nevertheless, this huge figure -- and the bustle of
construction cranes and road-building projects that we witnessed
-- are suggestive that Guiyang, like many other cities in China,
is in the midst of a stimulus-package-fueled infrastructure
boom. End Comment.)

Can Guiyang Catch Up?


8. (SBU) Is Li right about Guiyang catching up? One thing for
sure is that the city started from a low base. Guiyang is still
significantly poorer than most provincial capitals, with urban
per capita income of only 11,000 RMB, and rural per capita
income of 4,033 RMB. While Guizhou province outpaced the
national GDP growth rate nine of the last ten years, the gap in
absolute inequality between Guizhou and the coastal provinces
continued to grow wider over the past decade. Li acknowledged
this gap, but expressed confidence that during the next decade,
Guiyang (and Guizhou) would be able to catch up with wealthier
cities and provinces. His optimism was based on:

a. Preferential National Policies: Guizhou continues to benefit
from China's "Great Western Development Strategy" which funnels
resources into improved infrastructure, ecological protection,
and commerce. Guizhou, which only represents three percent of
China's population, also received a disproportionate four
percent of the central government's recent economic stimulus
package. (Note and Comment: Premier Wen Jiabao said October 16
in Chengdu that Beijing planned to increase fiscal transfers and
preferential tax and other policies in a new 10-year western
China development plan starting January 1, 2010 (ref A). This
bodes well for beneficiary cities and provinces such as Guiyang
and Guizhou. End Note and Comment.)

b. Rich Natural Resources: With over 240 different types of
mineral deposits, Guizhou is one of China's richest provinces in
mineral resources -- wealth that benefits its provincial
capital. Coal and phosphorous are especially important; for
example, Guizhou has the largest phosphorus mine in Asia. (See
also ref B, which discusses Guizhou's huge hydroelectric

c. Infrastructure: Guizhou has made huge improvements to its
infrastructure over the past 10 years, which much more on the
way. 87 counties in Guizhou will be connected with expressways,
most that link up with Guiyang, which will aid their nascent
tourism industry. Beijing recently approved the construction of
a new Guiyang Airport, which will bring in 3.7 billion RMB in
investment to create Guizhou's first truly international airport.

CHENGDU 00000285 003.2 OF 003

d. Good Location: Guiyang (and Guizhou) are at a geographic
crossroads connecting east and west China, as well as northern
China with Southeast Asia. Officials hope to capitalize on the
city's (and province's) geographic position through improved

New Development Zones Bring Hope of Higher Tech in Future

--------------------------------------------- ------------

9. (SBU) Two new national-level development zones also underlie
Li's hopes for a modern (and ecologically-friendly) city: the
Guiyang High-Tech Zone and the Guiyang Economic Development
Zone. The former primarily emphasizes high-tech companies,
while the latter emphasizes manufacturing and industry. There
are currently 57 high-tech companies operating in the High-Tech
Zone, none of them large and famous, including several from the
UK, Singapore, and Taiwan. Many of these "high-tech" companies
are in the pharmaceutical sector, including producers of
traditional Chinese medicines. Guiyang is home to over 70
pharmaceutical factories, Li explained, but they lack the
necessary technology and management skill to compete in foreign

10. (SBU) Guiyang officials hope to leverage these economic
zones to attract more foreign investment in the future,
particularly in the area of technology. Li pointed out that
more and more companies are migrating from China's eastern
provinces further inland to the western provinces including
Guizhou. He made an interesting aside, stating that projects in
heavy-polluting sectors are "not welcome" in Guiyang due to its
"Ecologically Civilized City" initiative (ref C). (Comment: The
fact that Li was unable to cite any well known multinationals as
having located manufacturing or R&D facilities in these
high-tech zones suggests that they have not been very
successful. However, we believe that once the on-going
road/rail build-out is completed, Guiyang and Guizhou will be
much better positioned to attract high-tech foreign investment
to its low-wage economy. End Comment.)

One Drag on Economy: Weak University System


11. (SBU) One weak point of Guiyang (and Guizhou) is the poor
quality of its relatively small network of universities.
Guiyang only has 12 colleges and universities, Li lamented, and
none is considered a "National Key University" (Comment: "Guojia
Zhongdian Daxue" is a now defunct term which used to refer to
prestigious universities that received direct support from the
central government. In this context, Li likely meant that
Guizhou lacks any universities directly managed by the Chinese
Ministry of Education. End Comment.)

12. (SBU) Li said that Guiyang was trying to upgrade its
higher-educational system. Guizhou University recently became
a top-100 university in the rigid Chinese ranking system. Five
years ago, no colleges or universities were under the management
of the Guiyang city government, but now the city government
manages Guiyang University and Guiyang Technical College.
Guiyang needs more support from Beijing on higher-education,
however, to help it catch up.

© Scoop Media

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