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### Viewing cable 07GUANGZHOU832, Pearl River Flotsam and Jetsam, July 24, 2007

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07GUANGZHOU832 | 2007-07-24 05:37 | 2011-08-23 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Consulate Guangzhou

`

    VZCZCXRO0501
    RR RUEHCN RUEHGH RUEHVC
    DE RUEHGZ #0832/01 2050537
    ZNR UUUUU ZZH
    R 240537Z JUL 07
    FM AMCONSUL GUANGZHOU
    TO RUEHC/SECSTATE WASHDC 6296
    INFO RUEHOO/CHINA POSTS COLLECTIVE
    RUEAIIA/CIA WASHDC
    RUEKJCS/DIA WASHDC

` `

    UNCLAS SECTION 01 OF 03 GUANGZHOU 000832

    SIPDIS

    SENSITIVE
    SIPDIS

    E.O. 12958: N/A
    TAGS: ELAB ECON PINR SENV PGOV CH
    SUBJECT: Pearl River Flotsam and Jetsam, July 24, 2007

    (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. (U) SUMMARY: This is the first in a series of periodic
    cables that will feature snapshots of the Guangzhou
    consular district.  We expect to cover items that are
    timely for Washington consideration but at this point, do
    not merit fuller treatment.  We are, of course, willing to
    take a second look at some of the matters raised in these
    "miscellany" cables should there be interest.  Highlights
    of this first piece include: labor unrest; the new role of
    public relations firms; American company complaints and
    concerns about technology transfer restrictions; food and
    water; a mass swim in the Pearl River; foreign firms that
    focus on middle-class Chinese; and the change in Haikou
    city leadership. END SUMMARY

    Unrest and Apparent Resolution in Heyuan
    -----------------------------------------

    ¶2. (U) The June 29 labor dispute at a hydroelectric plant
    construction site in Guangdong's Heyuan city appears to
    have been resolved.  Approximately 300 employees of Qiutian
    Construction Company, a contractor of Fuyuan Hydropower
    Development Company, had earlier complained to Fuyuan
    management that they had not been paid for four months.
    When their demands for compensation were turned down, the
    angry migrant workers started to dismantle installations at
    the power station - and not surprisingly, they were
    attacked by roughly three hundred thugs armed with spades,
    axes and steel pipes. Three of the workers died from wounds
    sustained during the melee.

    ¶3. (U) The Dongyuan county government reportedly resolved
    the situation by forcing the construction company to
    compensate the unpaid workers; more than RMB 140,000
    (roughly USD 18,500) in wages has already been paid to
    eight workers, with the remainder of their colleagues
    expected to be paid soon.

    New Roles for Public Relations Firms
    -------------------------------------

    ¶4. (SBU) The influence of public relations campaigns on
    both government policy and legal rulings is increasing in
    South China.  Coalition-based lobbying (CBL) is becoming a
    popular instrument for companies looking to influence
    government policy in China, particularly in the field of
    intellectual property.  According to Marc Parich, whose
    public relations firm APCO Worldwide pioneered the first
    CBL model, coalition-based lobbying provides investors an
    opportunity to present controversial views to the
    government while insulating them from negative government
    or media reaction.  Parich points to the success of APCO's
    Intellectual Property CBL, the Quality Brands Protection
    Committee (QBPC), as an example of the popularity of the
    CBL method.  As of today, QBPC is comprised of more than
    160 multinational companies representing over USD 70
    billion of investment in China.

    ¶5. (SBU) When it comes to supporting litigation, public
    relations firms are finding opportunities in South China
    that are unavailable in other parts of the country.
    According to Ouyang Jun, a former government official and
    current associate director for APCO Worldwide, this is
    primarily due to the region's welcoming business climate.
    As part of its litigation support strategy, APCO promotes
    its clients through media conferences and television and
    newspaper interviews.  Although Jun cautions against being
    too critical of the opposition in litigation, he believes
    that the process, when handled sensitively, has influenced
    public opinion and even affected the outcome of several
    litigations.  Jun noted that the media in South China has
    been especially receptive to assisting in this area, as
    commercially-related topics are one of the few subjects
    which the press is relatively free to explore.

    Complaints from Across the Sea
    ------------------------------

    ¶6. (SBU) While the majority of complaints by businesspeople
    in South China relate to local regulatory impediments, many
    companies have also raised concerns about the
    discriminatory treatment of several U.S. regulations.  In
    particular, some companies are worried that technology
    transfer restrictions have put them at a competitive
    disadvantage with their European competitors; the latter
    often face fewer barriers to the types of technology

    GUANGZHOU 00000832  002 OF 003

    allowed for export.  According to APCO Worldwide, clients
    primarily complain when the restriction applies to a
    particular technology which is already openly available in
    the Chinese market.  Nevertheless, this has led many, such
    as Nicholas Blank, Director of Kroll Asia, to counsel U.S.
    clients to err on the side of caution by not selling any
    technology which could conceivably have a dual-purpose use.

    ¶7. (SBU) In contrast, few companies in South China have
    complained about, or received, penalties for violations of
    the Foreign Corrupt Practices Act.  In a business climate
    often fraught with issues of corruption, foreign investors
    have generally maintained compliance with U.S. regulations
    on prohibited payments to government officials.  Similarly,
    U.S. companies in the region have had few complaints
    related to the Alien Tort Statute, which regulates the
    treatment of employees by American companies overseas.
    According to Harley Seyedin, President of AmCham - South
    China and CEO of First Washington Group, which established
    the first Western majority-owned power plant in South China,
    this is a direct reflection of the favorable treatment
    received by local employees of U.S. companies in the region.
    In its 2006 report, AmCham - South China reported that less
    than twenty-five percent of U.S. companies were concerned
    about criticism for operating "sweatshops" in the country.
    Seyedin estimates that figure has dropped below twenty
    percent in the past year.

    Man Bites Rat! And Drinks Unsafe Water!
    ---------------------------------------

    ¶8. (U) Guangdong Party Secretary Zhang Dejiang is concerned
    about news reports that rats from Hunan are being sold in
    Guangdong for food, and has asked relevant government
    agencies to put and end to the rat-selling.  The Guangzhou
    Food Safety Office and the Guangzhou Food and Drug
    Administration have warned citizens against eating rats,
    but reports of truckloads of the vermin making their way to
    Guangdong persist. This is one of those delicacies that the
    Chinese used to (but no longer necessarily) enjoy putting
    on a platter in front of a visiting guest and joking about
    the disposition of Mi Lao-shu (or Mickey Mouse).

    ¶9. (U) The Guangdong Water Resource Department reported on
    July 18 that 16.65 million people in the province drink
    water with excessive fluorine, excessive arsenic, or water
    with a bitter and salty taste.  According to the Eleventh
    Five-Year Plan, Guangdong's goal is to solve the unsafe
    drinking water problem for 7.5 million people.  Presumably,
    the remaining 9.15 million people hope to be included in
    the next Five Year Plan.

    Human Flotsam
    --------------

    ¶10. (SBU) Weeks in the making!  A pivotal moment in the
    environmental clean-up of the once heavily-polluted Pearl
    River!  Imagine, if you will, the image of 3,600 people,
    including senior city officials, from "danweis" large and
    small, swimming between Sun Yat-sen University and the
    Xinghai Conservatory?  What could better demonstrate the
    commitment to a "green" water system?  Well, start with the
    fact that three weeks before the big swim, the flow of
    water from other polluted rivers was blocked off.  Then
    every day, for 21 days running, a fleet of small vessels
    with large nets trawled the area where the swim would take
    place, removing everything from leaves and Styrofoam
    containers to the odd fish or tennis shoe floating on the
    surface.  Of course, while removing the "debris," the boats
    left behind an oil slick that was hardly "environmentally
    friendly."

    ¶11. (SBU) And then the big day:  pomp (speeches and skiing
    and racing boats) and ceremony (more, but better speeches
    because they were read out by "higher ups.").  The big
    moment came when, flashbulbs a-poppin', city officials
    jumped in for the all-important photo - only to jump out
    and be replaced by others in the big swim.  Well, "float"
    would be more like it.  It is unclear whether there really
    were 3,600 participants, but there were enough to make it
    look that way; surrounding the signs (suspended on pontoons)
    of the various organizations were hordes of people, in
    circles or oblongs, perched on top their floats, paddling
    along from one side of the river to the other.  And then it
    was over, a great success!

    ¶12. (SBU) Day two: the water was a curious brackish green
    and brown.  We asked why.  Well, the water from the other
    rivers was flowing back in and adding a bit of "color."
    And besides, the swim (float) was over, the Pearl River

    GUANGZHOU 00000832  003 OF 003

    saved (for one day at least) and next year would see a
    bigger and better event, for sure.

    Major Companies Shifting Focus Toward Domestic Market
    --------------------------------------------- --------

    ¶13. (SBU) Production of goods or services for the China
    market currently ranks first among the top company goals
    for foreign invested enterprises (FIEs) in South China.
    Many businesspeople in the region attribute this to the
    increased purchasing power of China's rising middle class.
    Proctor & Gamble, for instance, no longer produces a single
    bottle of shampoo in South China for export to the United
    States, and instead invests solely in the production of a
    lower-quality good directly targeting middle-class Chinese.
    Similarly, IBM recently has invested millions of dollars in
    research and development to uncover new strategies for
    tapping into China's middle markets.  According to the
    local American Chamber of Commerce, the fact that China's
    burgeoning middle class remains mostly untapped will
    continue to invite large amounts of investment from a wide
    range of industry sectors.

    New Acting Mayor for Haikou
    ---------------------------

    ¶14. (SBU) The Haikou Foreign Affairs Office notified post
    on July 17 that Xu Tangxian had recently been elected
    Acting Mayor of Haikou City. NOTE: Haikou, with a
    population in excess of 600,000, is the capital of Hainan
    Province. END NOTE. Xu, most recently the Executive Vice
    Mayor of Haikou, has held a series of jobs in both local
    government and the Communist Party since 1999.  Prior to
    that, he taught at Zhongnan University of Finance and
    Economics.  On leave from the university, Xu studied
    accounting in the United States from 1992-1995.  Xu was
    born April 1954, in Hubei province.

    GOLDBERG

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