VZCZCXRO5470
RR RUEHCN RUEHGH
DE RUEHGH #0060/01 0420131
ZNR UUUUU ZZH
R 110131Z FEB 08
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 6685
INFO RUEHBJ/AMEMBASSY BEIJING 1710
RUEHCN/AMCONSUL CHENGDU 1114
RUEHGZ/AMCONSUL GUANGZHOU 1085
RUEHSH/AMCONSUL SHENYANG 1112
RUEHIN/AIT TAIPEI 0925
RUEHHK/AMCONSUL HONG KONG 1246
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 7220
UNCLAS SECTION 01 OF 03 SHANGHAI 000060
SIPDIS
SENSITIVE
SIPDIS
STATE PASS USTR
USTR FOR STRATFORD/WINTER/READE/MCCARTIN
USDOC FOR DAS KASOFF AND ITA/OCEA
TREASURY FOR OASIA - CUSHMAN, WINSHIP
E.O. 12958: N/A
TAGS: ETRD ECON KIPR CVIS PREL BEXP CH
SUBJECT: EAP DAS CHRISTENSEN'S JANUARY 22-23 MEETINGS WITH SHANGHAI
MAYOR AND AMCHAM MEMBERS
SHANGHAI 00000060 001.2 OF 003
1. (SBU) Summary: EAP DAS Thomas Christensen met separately
January 22 and 23 with Shanghai Mayor Han Zheng and American
Chamber of Commerce in Shanghai (AmCham) representatives. Mayor
Han said the city's 2008 growth target would be only ten
percent, after realizing 13.3 percent in 2007. Han expressed
confidence that inflation will not adversely affect Shanghai's
growth or competitiveness. He attributed recent increases in
inflation almost entirely to increased food costs. Mayor Han
also urged the United States to join about 200 other nations and
regions in having a national pavilion at the 2010 Shanghai World
Expo. The Mayor made a pitch for the waiver of biometric
collection for senior officials at the local level, as can be
done for some senior officials in Beijing. DAS Christensen's
exchange of views with U.S. business representatives elicited
continuing concerns about protection and enforcement of
intellectual property rights (IPR) in China as well as a less
welcoming environment for foreign mergers and acquisitions in
China. End summary.
Relaxed Mayor Han Touts Shanghai's Continuing Rapid Economic
Growth
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2. (U) A relaxed Mayor Han started the January 22 meeting with
a long recitation of figures about Shanghai's. Shanghai GDP
growth in 2007 would be announced in a few days' time as 13.2 or
13.3 percent, and the consumer price index had increased 3.2
percent versus an early 2007 prediction of 3 percent.
Disposable income was up about 10 percent in Shanghai in 2007
after inflation. The city continues to pursue its goal of
becoming an international center for trade, shipping, and
financial services, and the Mayor highlighted that shipping
services had grown particularly well in 2007.
3. (SBU) DAS Christensen contrasted the 13 percent GDP growth
rate in 2007 with the recent imposition of price controls and
increased concern among Chinese Government officials about
rising inflation. The Mayor asserted that inflation has had no
impact to date on Shanghai's growth rate or competitiveness.
Under the concept of "scientific development," Shanghai's
economic development goals have become both quality growth and
high efficiency. The city's 2008 growth rate goal is only ten
percent, and measures are being implemented to control
investment and land use and to reduce pollution emissions year
after year. The Mayor attributed 3.1 points of the city's 3.2
percentage point change in CPI in 2007 to food price increases.
Therefore officials found temporary price controls on basic
foods such as meats and cooking oil necessary, especially as the
Lunar New Year holiday period draws near. Mayor Han noted that
rising corn prices had benefits for China's farmers, while
diversion of corn to ethanol production and changing dietary
habits also impacted the supply and price of other agricultural
goods. The Mayor expressed optimism that despite many
challenges, difficulties and risks, Shanghai's GDP should grow
10 percent in 2008, disposable income should increase 10
percent, and the CPI increase should be controlled within
China's national target rate.
Mayor Stresses Importance of U.S. Pavilion at Shanghai World Expo
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4. (SBU) Shanghai hopes to attract more than 200 nations and
regions as exhibitors at the 2010 World Expo in Shanghai, Mayor
Han said. Already 188 exhibitors are signed up. Shanghai very
much hopes that the United States will have a national pavilion
at the Expo, in addition to exhibits planned by U.S.
corporations. The Mayor noted that the United States had a
national pavilion at the 2005 World Expo in Aichi, Japan but had
not been a participant at the 2000 World Expo in Hanover,
Germany. DAS Christensen briefly outlined the legislative
restraints on the Executive Branch for organizing a U.S.
national pavilion, including the requirement that the cost of a
pavilion be covered entirely by private funds. DAS Christensen
assured the Mayor that the United States appreciates the
importance of the Shanghai World Expo and wants to have a
national pavilion.
SHANGHAI 00000060 002.2 OF 003
5. (SBU) U.S. Nonimmigrant Visa Application Procedures: The
Mayor expressed concern about the waiting period for Chinese to
obtain a visa interview and urged the Consulate General to
increase the number of personnel assigned to handle visa
applications. DAS Christensen noted the rapid increase of
applications in the Shanghai Consular District (adjudications
have been increasing at a 15 percent rate or higher for several
years) and highlighted the great number of student visa
issuances within the total workload; person-to-person exchanges
are a key role to build greater understanding. The Mayor also
said fingerprinting requirements are not welcomed by many
applicants, especially provincial and local government
officials. He referenced the new procedures in place in Beijing
for senior government officials at the level of vice minister
and above, who do not need to be fingerprinted. Mayor Han urged
that the Consulate implement similar procedures for senior
government officials at the local level. The Consul General
noted that with the transition to ten-digit biometric
collection, we would soon be able to waive the interview
requirement for reissuance of some visas.
6. (SBU) The Mayor also expressed appreciation for the
participation of U.S. company executives on the Mayor's
international business advisory committee, which meets every
autumn and provides recommendations on means to improve the
business and investment climate in Shanghai. 2008 marks the
twentieth anniversary of this advisory committee. He also
appreciated the exchange of views between the Shanghai Municipal
Government and American business community that occurs each year
at the Shanghai AmCham Government Appreciation dinner. These
practices and events also contribute importantly to bilateral
understanding.
AmCham Concerns about IPR and Climate for Mergers and
Acquisitions
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7. (U) DAS Christensen exchanged views with AmCham officers and
member company representatives at a January 23 breakfast. He
outlined for AmCham the importance of the Senior Dialogue and
the Strategic Economic Dialogue to maintaining and improving
bilateral relations, especially underscoring the need for
Chinese progress on economic issues in the near term.
Subsequent discussion with the AmCham representatives elicited
concerns about IPR enforcement and China's forthcoming national
IPR strategy as well as about the current climate for mergers
and acquisitions in China.
8. (SBU) IPR: AmCham reps predicted that Vice Premier Wu Yi's
successor is likely to be more conservative than she in
propelling progress on IPR enforcement and on other trade and
economic issues. The business community does not see a new
leader on IPR enforcement emerging. Enforcement at the local
level remains the critical requirement for successful and
sustained IPR protection, and WTO cases against China on IPR may
not exert pressure on the local levels to improve enforcement.
Guangdong Province remains the biggest problem area for most
industries, whether in terms of export goods, wholesaling of
infringing goods or distribution of infringing goods. U.S.
companies in China have increasing concerns about patent
protection and technology transfer issues, a company
representative asserted. Furthermore, China's national IPR
strategy will address twenty or more topics when released,
probably in June 2008, and the business community still knows
very little about what China plans to do and how that strategy
may affect their operations and opportunities in China.
9. (SBU) IPR - continued: While the annual AmCham member
survey indicates an important perception of IPR enforcement
improvements, that data is subjective, not scientific, company
reps contended. The Quality Brands Protection Committee (QBPC,
an association of multinational companies in China formed to
advocate better trademark protection but now also addressing
other areas of IPR) will launch monitoring of IPR enforcement in
Zhejiang Province with respect to complaints filed by QBPC
member companies. The U.S. Chamber of Commerce will undertake a
related effort in Jiangsu Province. Tracking of enforcement
SHANGHAI 00000060 003.2 OF 003
complaints should provide a better benchmark with which to
evaluate the efficacy of China's IPR enforcement efforts. One
company representative suggested that blending current AmCham
survey results with respect to IPR and fraud and corruption may
be a better benchmark to evaluate IPR enforcement than the
explicit IPR responses alone. Several companies highlighted the
importance of due diligence by new market entrants and the vital
importance for companies in the China market to have
intellectual property protection and risk management as
explicit, highly ranked goals. One company representative
discussed an innovative program in which U.S. companies would
honor and reward local officials for good enforcement of
intellectual property rights at ceremonies in Beijing. While
there was some gloomy evaluations of the environment nationwide
on IPR and the prospects of significant improvement, at DAS
Christensen's prompting, skeptics seemed to agree that the fact
that areas like Shanghai were better on issues like IPR
protection than many less developed inland areas, there is
reason for some hope that further engagement of China on these
issues and further economic development will eventually
transform some deeply entrenched bad habits in the Chinese
government and society.
10. (SBU) Mergers and Acquisitions: DAS Christensen inquired
about the climate for mergers and acquisitions; did U.S. company
representatives in China see evidence of what outside observers
describe as increased economic nationalism? All present
affirmed that they felt that the climate for mergers and
acquisitions has become less welcoming recently. The criteria
by which the China Securities Regulatory Commission considers
acquisitions via stock shares remain unknown to outsiders, one
businessman highlighted. Chinese companies' expectations about
their intrinsic value and desirability as takeover targets often
have risen unrealistically because of expectations that a
domestic initial public offering could raise tremendous
proceeds. Representatives of two companies that have acquired
Chinese factories or soybean and feed mills in the past but now
find greater regulatory or perceptual hurdles to new
acquisitions expressed hope that the mid-January correction on
the Shanghai Stock Exchange (down 12 percent in two days) might
prove to be a good dose of realism for domestic companies who
believe that IPOs and subsequent stock trading can only result
in higher and higher company valuations.
11. (U) DAS Christensen has cleared this report.SCHUCHAT