Cablegate: Sw China City Seeks to Become Major Transportation Hub --

VZCZCXRO8508
RR RUEHGH RUEHVC
DE RUEHCN #0310/01 3510458
ZNR UUUUU ZZH
R 170458Z DEC 09
FM AMCONSUL CHENGDU
TO RUEHC/SECSTATE WASHDC 3641
RUEHBJ/AMEMBASSY BEIJING 1989
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHCN/AMCONSUL CHENGDU 4357

UNCLAS SECTION 01 OF 02 CHENGDU 000310

SENSITIVE
SIPDIS

DEPT FOR EAP/CM

E.O. 12958: N/A
TAGS: EFIN ELTN EAIR EWWT ETRD SENV PGOV CH
SUBJECT: SW CHINA CITY SEEKS TO BECOME MAJOR TRANSPORTATION HUB --
WISE PUBLIC INVESTMENT, OR WASTEFUL PUMPING UP OF CHINA'S GDP?

CHENGDU 00000310 001.2 OF 002

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

2. (SBU) Summary. Leshan officials told Consul General that
currently planned infrastructure projects would transform the
city into a transportation and industrial hub for southwest
China. The city's ambitious, three billion USD plan calls for
construction of navigation locks (and hydropower dams) along Min
River to enable larger vessels to transport goods to Shanghai,
as well as a new development zone with multi-modal rail,
highway, and river port connections. Officials also plan to
build an airport and a high-speed light rail that would connect
Leshan with Sichuan's provincial capital, Chengdu. Two of
China's largest hydropower engineering firms will pay for this
construction once the plan receives national-level approval.

3. (SBU) Comment: In the absence of data on expected returns on
investment, we have to wonder whether this massive plan
represents a smart move for China, or a white elephant. The
locks will be hugely expensive, and yet the ships that will be
able to navigate them will still have relatively small capacity.
Chengdu's international airport has just completed its second
runway, so a Boeing 757-capable airport for Leshan -- a mere 75
miles from Chengdu -- appears to be another big waste. Whether
there will be enough passenger traffic to justify a high-speed
light rail is yet another question. The only certainty in this
project is that it is one more example of local officials
lobbying provincial and central governments, and of state-owned
enterprises using retained earnings and easy-money bank loans to
pump up China's public investment -- already a grossly
excessive, steroid-like percentage of GDP. End Summary and
Comment.

Re-Engineering Water Transport to the Yangtze River

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4. (SBU) Officials in Sichuan's Leshan city recently told Consul
General that China's central government may spend about 3
billion USD to improve navigation and develop hydropower on the
Min River (Minjiang), a tributary of the Yangtze River. Leshan
city officials concede, however, that the price tag for the
construction could increase depending on the actual cost of the
navigation locks. The Minjiang already has as many as 70-80
dams, but Leshan officials seek build five additional dams along
the southern portion of the river before it flows into the
Yangtze. The combined power production of the new dams will be
1,400 megawatts.

5. (SBU) Once completed, Leshan officials expect that vessels
with cargo capacities as high as 3,000 tons will be able to
transport goods from Leshan's port facilities to Shanghai in 7-8
days. A key variable in this transit time will be how quickly
the vessels are able to pass through the locks at the Three
Gorges Dam. Leshan port currently only has the capacity to
handle vessels up to 750 tons. Low water levels during the dry
winter season from November to April currently plague navigation
along the river, but officials expressed confidence that the new
dams would resolve this issue. Sichuan's provincial government
has already approved the project, and officials said they hoped
to receive national-level approval by the end of next year.
Leshan officials said that two state-owned hydroelectric firms,
SinoHydro Corporation (Zhongguo Shuidian Jianshe Jituan Gongsi)
and China Huadian Corporation (Zhongguo Huadian Jituan Gongsi),
would pay for the construction of the dams and locks, although
it is unclear how these firms plan to recoup their investment
costs. The entire project could be completed as early as 2015,
but some officials projected that 2018-2020 is a more realistic
time frame.

Sichuan's Dongfang Electric Corporation May Benefit from
Expanded Port

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CHENGDU 00000310 002.2 OF 002

6. (SBU) At several points during the conversation, Leshan
officials mentioned that the increased shipping capacity on the
Minjiang would help companies like Dongfang Electric
Corporation, which is a large state-owned enterprise
headquartered north of Chengdu. Dongfang produces power
generation equipment for thermal, nuclear, wind, and hydropower
plants. Officials specifically highlighted that Dongfang could
use the waterway to ship parts for hydroelectric and nuclear
plants. (Note: Expanded port capacity in Leshan may be
particularly beneficial to companies like Dongfang because some
of the power generation equipment it produces is large, heavy,
and difficult to move via road or rail. End Note.)

Development Zone, Airport, and High-Speed Rail

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

7. (SBU) Leshan officials provided us a boat tour towards a
large development zone, also part of the overall development
plan, that would be located south of the city and north of the
river locks. The boat cruised past the Leshan "Giant Buddha,"
whose construction was started in 713 during the Tang Dynasty
and is now part of a UNESCO World Heritage Site. The new
development zone would be adjacent to a smaller, existing zone
that has foreign investment from several foreign companies
including a U.S.-invested semiconductor company (septel). The
multi-modal zone will also have a rail station, highways, and a
large river port loading facility. The zone's plan originally
had an airport at its center, but officials indicated that the
airport would be shifted to a new location because of concerns
by residents about noise pollution.

8. (SBU) City officials say that they plan to build an airport,
possibly located near town's main business district, which will
have the capacity to land planes as large as a Boeing 757. One
semiconductor firm in Leshan told CongenOff that an airport in
Leshan would reduce time and potentially costs for products they
export. The firm currently ships its products to Chengdu, about
75 miles north, where they are loaded on planes and exported to
destinations around the world.

9. (SBU) Leshan officials also talked about the planned
high-speed rail line that will connect the city to Chengdu and
Mianyang. The rail line, when completed, will take 30 minutes
to reach the provincial capital and another 30 minutes to reach
Mianyang, a city noted for science and technology research.
(Note: Officials did not address how the planned high-speed
rail service might undercut passenger demand for flights from
the new airport. Leshan may end up competing with Chengdu's
larger airport for customers. End Note.)
BROWN

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