US embassy cable - 04BEIJING3796

C O N F I D E N T I A L  BEIJING 003796 
 
 
MANILA FOR USADB 
STATE PASS USTR FOR FREEMAN/NEUREITER 
TREASURY FOR OASIA/INA - KEIDEL/DUPUY 
 
E.O. 12958: DECL: 03/03/2024 
TAGS: PGOV, ECON, EFIN, EAGR, ETRD, PREL, CH, TW, HK 
SUBJECT: WEN JIABAO'S NPC DEBUT: "PEOPLE FIRST," RURAL 
ECONOMY AND SUSTAINABLE GROWTH 
 
REF: BEIJING 3731 
 
Classified By: Political Minister Counselor Jon Aloisi. 
Reason: 1.4 (b), (d). 
 
Summary 
------- 
 
1.  (C) Premier Wen Jiabao reiterated the "people- 
centered" approach of the new Chinese leadership in 
his report to China's legislature, the National 
People's Congress, on March 5.  With former President 
Jiang Zemin and the current leadership looking on, Wen 
highlighted the new government's victory over SARS, 
effectively underscoring the contrast of its approach 
with that of previous regimes.  Wen reaffirmed the 
government's seriousness in focusing on rural 
development, social investment and good governance, 
while at the same time continuing economic 
restructuring and maintaining GDP growth at seven 
percent.  Wen glossed over references to political 
restructuring, the Three Represents and military 
modernization, but drew prolonged applause from the 
audience for comments on planned elimination of 
agricultural taxes and hopes for Taiwan's early 
reunification with the "motherland."  End Summary. 
 
NPC Stages Its Annual Opening Ceremony 
-------------------------------------- 
 
2.  (C) China's legislature, the National People's 
Congress, which is technically China's highest organ 
of government, staged its annual opening at the Great 
Hall of the People on March 5.  While largely 
ceremonial, this year's NPC session gives China's new 
leaders an opportunity to further define their vision 
and agenda.  The 2,904 people's deputies, many hailing 
from China's distant provinces and some dressed in 
elaborate minority costumes, packed the main floor of 
the hall, along with a sizable People's Liberation 
Army (PLA) delegation.  CPPCC members joined 
journalists, diplomats and the PLA band in watching 
the proceedings from the upper decks. 
 
3.  (C) Protocol arrangements for the top leadership 
mirrored those for the CPPCC opening two days earlier. 
President Hu Jintao sat in the center seat, but walked 
in briskly behind a modestly shuffling Jiang Zemin. 
While Hu seemed alert and at ease, Jiang kept his head 
down for most of the session, even while the camera 
was trained on him.  The main event at the NPC 
opening, per tradition, was the delivery of the 
Government Work Report by Premier Wen Jiabao. 
 
Wen's Debut Work Report Sets a New Tone 
--------------------------------------- 
 
4.  (C) Wen's debut report retained the traditional 
format of reviewing achievements, acknowledging 
problems and outlining plans for the coming year.  The 
speech broke no new ground, reiterating 
accomplishments and policies previewedat last fall's 
Party plenum and subsequent wok conferences.  In 
keeping with the government's new development concept, 
however, this year's report devoted more attention to 
social and rural concerns and inefficient and corrupt 
government. 
 
5.  (C) Wen played to the crowd, raising his voice 
when discussing points he wanted to emphasize (anti- 
corruption, rural problems and Taiwan), and was 
rewarded several times with enthusiastic applause.  In 
contrast to the Three Represents-laden report by CPPCC 
Chair Jia Qinglin on March 3 (reftel), Wen's remarks 
glossed over the pro forma mentions of Jiang's 
theoretical contribution in favor of a more pragmatic 
tone. 
 
Beating SARS Trumps Growth in List of Achievements 
--------------------------------------------- ----- 
 
6.  (C) In touting the new government's achievements, 
Premier Wen juxtaposed China's victory over SARS with 
its strong overall economic performance in 2003 to 
underscore that the new leadership has shown that it 
can manage tough problems successfully.  His focus on 
the current government's determination to act "in 
consideration of the people's vital interests." 
 
7.  (C) Wen went on to flag China's 9.1 percent GDP 
growth rate, attainment of the benchmark USD 1,000 
per-capita GDP level, and China's arrival as the 
world's fourth largest trading nation as hallmarks of 
China's and the new leadership's strong showing.  He 
also called attention to China's implementation of its 
WTO commitments, including cutting import tariffs and 
opening China's market further to foreign service 
providers, its welcoming attitude to foreign 
investment, and its determination to maintain a stable 
exchange rate for the RMB.  The launch of the 
Shenzhou-5 space capsule, which was highly publicized 
late last year, was mentioned only in passing. 
 
People-Centered Policies 
------------------------ 
 
8.  (C) As expected, Wen used his speech to emphasize 
the "people-centered" approach (yi ren wei ben) of the 
new government.  He noted efforts over the past year 
to improve the public health system, rural education 
and the administration of social security.  Progress 
in job creation and measures to assist vagrants and 
beggars (e.g., the elimination of the custody and 
repatriation system) also garnered specific mention. 
 
9.  (C) Before setting out work goals for 2004, Wen 
highlighted critical policy problems facing the 
leadership.  He cited slow growth of rural incomes, 
lack of an effective social security system, job 
creation, and unbalanced development as the most 
serious concerns.  A second set of problems associated 
with China's rapid but distorted approach to economic 
growth included environmental degradation, excessive 
and wasteful investment (especially in construction), 
illegal appropriation of farm land, declining grain 
production and the high cost of education and medical 
treatment. 
 
10.  (C) Wen reserved his harshest words for "some 
government officials," who are "subjective, 
formalistic, wasteful, extravagant, fraudulent, and 
even corrupt," noting that the government faces an 
arduous task in fighting corruption.  (Note: 
Interestingly, Wen's energetic presentation failed to 
elicit even a murmur of applause from the audience of 
officials.)  In summing up, Wen said the government 
should face "new tests" with a "new outlook" and "new 
work style" and "must not fail to live up to the 
expectations of the people." 
 
Looking Ahead: Balanced Development 
----------------------------------- 
 
11.  (C) In 2004, consistent with a scientific 
economic development approach (kexue fazhan guan), Wen 
noted that the government will attempt to improve 
macroeconomic management, reduce economic imbalances 
and address those problems that affect the concrete 
interests of the people.  He envisioned stable 
economic growth at seven percent, a pace that the 
leadership considers consistent with efficient and 
sustainable growth.  This, he said, will require 
forward thinking micro policy adjustments, which will 
enable China to maintain appropriately tight or loose 
policy stances without having to resort to "stepping 
on the brakes".  Contrary to an asserted intent for 
the government to rely on market based management 
tools and legal strictures, Wen threatened to use 
administrative measures when necessary to block 
unwanted investments through the use of central 
approval authority and across the board bans on 
rezoning of land or loans to "unapproved" investment 
projects. 
 
Dealing with Rural Problems 
--------------------------- 
 
12.  (C) Wen reiterated the central government's 
position that dealing with rural problems is its first 
priority.  The government will do this through direct 
measures that will strengthen, support and protect the 
rural sector with the goal of raising rural incomes. 
Aside from strengthening efforts to prevent illegal 
expropriation of farm land, Wen said the government 
will support grain production in core grain growing 
regions, eliminate the specialized agricultural 
products tax and cut the general agricultural tax one 
percentage point per year, eliminating it completely 
by 2007 and increasing central government fiscal 
transfers to rural areas.  The grain market will be 
totally market based in 2004, Wen said, and the 
government will provide RMB 10 billion in direct 
subsidies to gain farmers. 
 
Unequal Funding for Regional Development 
---------------------------------------- 
 
13.  (C) Wen called for more balanced regional 
economic development, while noting that some regions 
obviously will do better than others.  While all 
regions are encouraged to develop, he cautioned the 
western areas to continue implementing environmentally 
friendly policies that will cut back on logging, 
farming, and cattle raising, all to the detriment of 
rural incomes.  Some funding, however, will be made 
available to improve basic education in these areas. 
Central Chinese provinces are likewise given verbal 
encouragement, but no promises of funding support. 
What support these two regions will receive will come 
from informal transfers or investments from "sister" 
eastern provinces.  Central Government fiscal support 
in the coming year will be very focused on the 
Northeast, where many SOE restructuring projects will 
be funded, Wen indicated. 
 
Democratization Paired with Stability Concerns 
--------------------------------------------- - 
 
14.  (C) Far down the list of priorities for the 
coming year were political restructuring, public 
security and safety and defense modernization.  While 
Wen mentioned improving the legal system and 
"expanding democracy at the lowest levels of 
government," the topic was given fairly short shrift. 
Priority areas for new legislation were listed as 
emergency management, rights of farmers, and social 
security issues.  Wen alluded several times during the 
report to the need to handle "challenges to internal 
stability" and mentioned anti-terrorism and anti-cult 
efforts on the part of the security forces.  He also 
touched on military modernization, noting the need to 
improve effectiveness of defense modernization efforts 
and balance defense needs with economic growth. 
 
Improved Governance and Anti-Corruption 
--------------------------------------- 
 
15.  (C) After already speaking for 90 minutes, Wen 
adopted a more aggressive, lecturing tone for a 
section on improving governance.  Advocating 
scientific and democratic decision-making, 
transparency and strict adherence to the law, Wen also 
spoke of the need for oversight of government by the 
media and general public.  In keeping with recently 
published Party discipline guidelines, he condemned 
"vanity projects," wastefulness, false reporting, 
arrogance and other common sins of Chinese cadres. 
 
Crowd Reacts to Taiwan Remarks 
------------------------------ 
 
16.  (C) Wen's closing remarks included standard 
comments on upholding the principles governing the 
administration of Hong Kong and Macau, calling for 
strict observance of the Basic Law and support for SAR 
chief executives and governments.  His subsequent, 
well-worn slogans regarding Taiwan and hopes for quick 
reunification were greeted by prolonged applause from 
the delegates. 
 
Comment 
------- 
 
17.  (C) Wen's speech contained no surprises.  His 
report continues the public promotion and emphasis of 
the new government's shift in priorities and its 
people-centered image.  While the document lays down a 
clear marker on commitment to reform, it also hints at 
continuing controversy over policy direction and 
vision in a number of areas.  For example, after 
strongly advocating use of market-based mechanisms for 
economic policy adjustments, Wen retreats by noting 
the government's willingness to rely on administrative 
measures that recall old-style planned economy 
approaches.  This points up the ongoing compromises 
that characterize the process of China's economic 
transition.  As a political document, Wen's report 
indirectly highlights the distinctions between the new 
leadership and the past administration.  In contrast 
to Jia Qinglin's CPPCC opening presentation, the 
obsequious overemphasis on Jiang Zemin's Three 
Represents was noticeably lacking. 
 
 
RANDT