VZCZCXRO0345
RR RUEHCN RUEHGH
DE RUEHGH #0535/01 2390139
ZNR UUUUU ZZH
R 270139Z AUG 07
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 6174
INFO RUEHBJ/AMEMBASSY BEIJING 1355
RUEHKO/AMEMBASSY TOKYO 0178
RUEHSH/AMCONSUL SHENYANG 0845
RUEHHK/AMCONSUL HONG KONG 0965
RUEHGZ/AMCONSUL GUANGZHOU 0823
RUEHCN/AMCONSUL CHENGDU 0843
RUEHIN/AIT TAIPEI 0667
RUCPDOC/USDOC WASHDC 0160
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 6624

UNCLAS SECTION 01 OF 03 SHANGHAI 000535 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR OASIA - CUSHNER 
TREASURY FOR AMBASSADOR HOLMER, 
TREASURY FOR TAIYA SMITH 
TREASURY FOR DAN WRIGHT 
USDOC FOR ITA DAS KASOFF 
USDOC FOR ITA/MAC/OCEA - MCQUEEN 
NSC FOR TONG, SHRIER 
 
E.O. 12958: N/A 
TAGS: ECON ENRG ETRD EFIN SENV PREL CH
SUBJECT: CODEL HASTERT VISITS SHANGHAI 
 
(U) This message is sensitive but unclassified.  Not for 
distribution outside USG channels. 
 
 
 
¶1.  (SBU) Summary:  On August 10- 12, Representative Dennis 
Hastert (R-IL), Representative John Shadegg (R-AZ) and two staff 
members from the House Committee on Energy & Commerce visited 
Shanghai to engage U.S. businesses energy, environment and 
business climate issues.  Representatives from GE showed the 
delegation its R&D labs and discussed the business potential 
created by an increased interest in fuel efficient energy and 
improving the environmental.  During a separate meeting, 
Caterpillar representatives said the company was trying to align 
itself with the government's environmental and energy objectives 
by, among other things, actively working with coal mines to 
extract and efficiently use methane.  The delegation also toured 
the Illinois Tool Works Paslode Fasteners plant and discussed 
the company's experience in exporting fasteners.  During a 
roundtable meeting, Shanghai AmCham and U.S. China Business 
Council (USCBC) members discussed energy sector-related business 
opportunities in China and urged more USG work on market access 
and standards setting issues.  The group also voiced concern 
over the China-related trade bills pending in Congress.  The 
delegation also met with members of the Shanghai Municipal 
People's Congress and a member of the National People's Congress 
to discuss potential areas of cooperation on energy issues.  End 
Summary. 
 
---------------------------------------- 
 
GE - A Lot of Room to Grow in China 
 
---------------------------------------- 
 
¶2.  (SBU) GE's China Region Infrastructure CEO Andy Solem 
briefed the delegation on GE China's six business groups and the 
company's potential for growth in the China market.  Of all GE's 
business opportunities in China, the energy sector had the most 
potential, especially in the sale of turbines.  In 2006, GE did 
approximately 3 billion worth of energy-related business in 
China.   GE could produce twice as many wind turbines as it 
currently does and still not meet the demand in China.  China's 
water problems also created opportunity for growth because GE 
had the experience and technology to help with water 
conservation and purification.  The health care market was also 
poised for growth, although political issues had temporarily 
chilled the atmosphere.  GE also worked on such projects as 
turning coal into feed for plastics.  Solem noted that except 
for inland areas that lacked financial resources, the Chinese 
Government was only looking for products not financing.    GE 
has aligned its strategies with Chinese Government industrial 
policies and priorities and had been able to sign several 
memoranda of understanding with the Chinese Government. 
 
---------------------- 
Caterpillar (CAT) 
---------------------- 
 
¶3.  (SBU) The delegation also met with Caterpillar China General 
Manager for Business Ventures Danny Davis, Vice President of CAT 
Logistics Patrice Groisiller, Marketing Manager of CAT 
Remanufacturing Adrian Koh, and other CAT representatives. 
Davis provided a presentation on Caterpillar's business in China 
and its various JVs with Chinese companies.  The company's main 
strategy was "to produce in China for China."  Caterpillar 
established an office in China in 1996 and now has thirteen 
facilities, seven of which are manufacturing centers.  They 
produced hydraulic excavators, compactors, diesel engines, 
undercarriage, iron castings, motor graders, track-type 
tractors, wheel loaders, remanufactured products machinery 
components, and electric power generator sets.  Caterpillar 
estimated its total investment in China would be USD 4 billion 
 
SHANGHAI 00000535  002 OF 003 
 
 
by 2010. 
 
¶4.  (SBU) Davis particularly noted Caterpillar's work with coal 
mines to help extract and efficiently use methane gas. 
Caterpillar has aligned itself with the Chinese Government's 
strategy to improve the environment and viewed this as a great 
business opportunity.   Davis added that if the Chinese 
Government did a better job enforcing environmental laws, it 
would create even more business for the company.  Koh discussed 
the growing demand for remanufacturing in China as the country 
had realized the potential monetary savings as well benefits for 
energy conservation and the environment.   Caterpillar mainly 
remanufactured locomotives.   Groisiller said that CAT's 
logistics services generated over USD 2.4 billion a year and 
that China was moving to "just in time" supply.  Given that 
China's transportation infrastructure was still developing, CAT 
focused on bringing reliability to the supply chain. 
 
--------------------------------------------- -------------- 
------------ 
Meeting with Illinois Tool Works (ITW) Paslode Fasteners 
--------------------------------------------- -------------- 
------------ 
 
¶5.  (SBU) During a visit to Illinois Tool Work (ITW) Paslode 
Fastener, General Manager Tian Yan Ci gave a short presentation 
on the company's Shanghai factory.  Tian said the company 
established its factory in the Songjiang Export Processing Zone 
in March 2006, with the initial investment USD 30 million.  The 
factory produced fasteners for use in construction, furniture 
making and other relevant industries.  All of the company's 
products were exported to the United States and the company had 
experienced rapid growth since it was established.  Tian also 
noted the company faced anti-dumping issues in the United States. 
 
--------------------------------------------- -------------- 
------------- 
U.S. Business Sees Opportunity in China's Drive for Sustainable 
Energy 
--------------------------------------------- -------------- 
------------- 
 
¶6.  (SBU) In a roundtable hosted by AmCham Shanghai and 
U.S.-China Business Council, business representatives discussed 
energy sector-related business opportunities in China, U.S. 
competitiveness, market access and standard setting issues, as 
well as the current China-related bills in Congress.  Managing 
Director for Emerge Logistics Jeff Bernstein opined that the 
U.S. may be at risk of falling behind China in important 
energy-related technologies and said China's emphasis on such 
technologies presented a huge business opportunity for U.S. 
firms.  For example, U.S. companies were selling precipitators 
to coal burning power plants.  Applied Materials China Vice 
President and Chairman Vice President Chen Rong added that his 
company had experienced great success in selling solar energy 
products and saw more growth potential as China focused more on 
environmentally friendly growth.  URS Consulting Shanghai 
Managing Director and AmCham Shanghai Energy Committee Chairman 
Simon Lee noted that his committee has worked with Chinese 
regulatory authorities to influence the regulatory framework and 
promote opportunities for U.S. businesses that are compatible 
with environmentally sustainable growth.   Although China has 
sound environmental laws, the laws are unevenly implemented and 
enforced, which has disadvantaged U.S. businesses. 
 
¶7.  (SBU) On general business climate issues, Emerge Logistics 
Managing Director Jeffrey Bernstein said the United States. 
Should focus more on market access issues, saying non-tariff 
barriers are still a major impediment to U.S. exports to China. 
 Also, the United States has fallen behind the E.U. in standards 
setting and urged the congressmen to increase support for U.S. 
Department of Commerce standards setting efforts.   The Vice 
President of Tyson Foods Shanghai Rep Office noted that many 
 
SHANGHAI 00000535  003 OF 003 
 
 
U.S. businesses in Shanghai are concerned about the current 
China-related bills in Congress that may negatively affect 
trade.   He added his own company has already suffered from 
trade retaliation by the Chinese and pressed for engagement 
rather than conflict with the Chinese.   Representative Hastert 
agreed that it was better to pragmatically engage China and 
added that many of the bills were simply "saber rattling."  He 
also urged businesses to help Congress understand their 
perspective on how to best make America competitive.  Companies 
also should educate their employees in the United States that 
their jobs depend on American firms being able to operate in a 
global environment. 
 
--------------------------------------------- ------------------- 
Meeting with Shanghai Municipal People's Congress 
--------------------------------------------- ------------------- 
 
¶8.  (SBU) During a meeting with Deputy Chairman of the Shanghai 
Municipal People's Congress (SMPC) Zhou Muyao, SMPC Member Qian 
Yongming, and National People's Congress Member Yang Bailing, 
Rep. Hastert noted that China and the United States faced 
similar energy-related issues and both had vast coal resources. 
The two countries should work together; China's large talent 
pool and U.S. technology could solve many problems.   Rep. 
Hastert noted that it was ironically easier for U.S. companies 
to unlock some of the energy problems in China than in the 
United States because of regulatory restrictions.  Zhou agreed 
that China and the United States faced similar energy-related 
issues and said the main issue is how both sides can make the 
most efficient use of its energy resources.   China has set a 
goal to make more efficient use of energy resources, reducing 
energy intensity 20 percent by 2010.   Since China and the 
United States had similar goals, it made sense for the two to 
work together. 
 
¶9.  (U) Codel Hastert has cleared this cable. 
JARRETT