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UNCLAS SECTION 01 OF 02 GUANGZHOU 030247 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD WTRO CH TW
SUBJECT: CIFIT 2006: Taiwan Tourism, Arab Oil, and U.S. Investment 
 
REFERENCE: Beijing 19645 
 
(U) This message is sensitive but unclassified.  Please handle 
accordingly. 
 
¶1. (SBU) Summary: U.S. attendees at the annual China International 
Fair for Investment and Trade (CIFIT) in Xiamen left feeling pretty 
good about their reception while Taiwan travel agents -- who turned 
out in large numbers -- had to feel somewhat disappointed about the 
lack of movement in real cross-strait tourism opportunities.  CIFIT 
also included a seminar on China-Arab cooperation in the 
petrochemical industry, as Arab representatives and Chinese 
officials touted their respective investment climates and cited 
successful joint projects.  End Summary. 
 
The Heavyweights Speak: Investment, WTO, and Energy Efficiency 
--------------------------------------------- ------ 
 
¶2. (U) CIFIT's keynote International Investment Forum featured 
speeches by Vice Premier Wu Yi, WTO Director-General Pascal Lamy, UN 
Conference on Trade and Development (UNCTAD) Secretary-General 
Supachai Panitchipakdi, and Toyota Honorary President Shoichiro 
Toyoda.  Madame Wu (reftel) said China would continue to encourage 
two-way trade and investment but place more emphasis -- in part 
through "timely changes in "the Catalogue Guiding Foreign 
Investment" -- on using foreign investment to upgrade its 
manufacturing industry, high-tech manufacturing, services, research 
and development, logistics, and modern agriculture.  She also 
singled out intellectual property protection as a key area of 
improvement.  WTO's Lamy thanked Madame Wu and Premier Wen Jiabao 
for their stated commitment to the Doha round of WTO negotiations 
and encouraged China to embark on a more sustainable path of 
economic development.  UNCTAD's Panitchipakdi took note of the 
importance of China's growth to the developing world, noting that 
China's outward FDI to developing countries had a record 13 percent 
increase in 2005.  Toyota's Toyoda highlighted the role that 
Japanese companies can play in improving energy efficiency in China. 
 
 
U.S. Participation and Discussions with Wu Yi 
--------------------------------------------- 
 
¶3. (SBU) U.S. company representatives told Econoff that they see 
CIFIT as an opportunity to meet high-level Chinese officials, learn 
of available projects, and initiate deals.  Because Vice Premier Wu 
Yi typically attends CIFIT, all of the participating provinces send 
their vice governors to attend.  According to Harley Seyedin, 
President of AmCham - South China, when a vice governor expresses 
interest in a project during a meeting, working level officials 
often follow through.  In addition, the various provinces compete to 
announce the greatest number of deals signed during CIFIT. 
AmCham-South China's delegation of 89 people at the fair this year 
included representatives from Microsoft, Air Products, and AIG, and 
met with vice governors from six provinces.  Microsoft opened a 
research and development center in Xiamen during the fair, which at 
this point is a placeholder for future expansion. 
 
¶4. (SBU) A highlight of CIFIT for approximately 20 U.S. companies 
was a two-hour meeting with Vice Premier Wu Yi, during which they 
aired their concerns on a range of issues.  According to Jeff 
Bernstein, President of AmCham Shanghai, company representatives 
made the following points during the meeting: 
-- counterfeiting organizations are becoming more violent; computer 
servers are being sold with counterfeit software installed; 
-- China's merger and acquisition regulations are overly burdensome; 
 
-- China is not positioned to capture the call-center market because 
of a lack of English skills and a five percent business tax that 
applies to all service exports; and 
-- more government leadership is needed to move China's industrial 
sector toward cleaner, more sustainable energy usage. 
 
Cross-Strait Tourism 
-------------------- 
 
¶5. (U) Following visits by the chairpersons of Taiwan's Nationalist 
Party and People First Party to mainland China in 2005, CIFIT 
organizers last year inaugurated a cross-strait tourism exposition 
to coincide with the fair.  This year the cross-strait expo was 
again held concurrently with CIFIT, with a prominent exhibition area 
featuring Taiwanese travel agencies.  A reported 3,967 Taiwanese 
exhibitors and attendants visited CIFIT this year, ranking first 
among visitors from outside the mainland.  Nevertheless, the level 
of activity around the Taiwan exhibition area was less pronounced 
than last year, perhaps owing to continuing restrictions on travel 
from the mainland to Taiwan.  In remarks during a seminar on 
cross-strait economic cooperation, the deputy director of the PRC's 
National Tourism Administration said he hopes Taiwan will authorize 
 
GUANGZHOU 00030247  002 OF 002 
 
 
negotiations between non-government tourist agencies on both sides 
as soon as possible.  A Taiwanese exhibitor told Econoff that he was 
confident Taiwan would announce new measures by the end of 2006. 
 
¶6. (SBU) The owner of one of Taiwan's travel agencies at the expo 
said he came to CIFIT to advertise and make personal connections, 
all in preparation for a loosening in Taiwan's travel restrictions. 
He said Taiwan travel agencies are fiercely competitive in luring 
mainland customers at this early stage and offer package deals at 
below cost.  He also mentioned that he did not see an increase in 
mainland customers despite his attendance at CIFIT last year. 
 
China-Arab Cooperation on Oil and Gas 
------------------------------------- 
 
¶7. (U) CIFIT also hosts an annual China-Arab Business Cooperation 
Forum, which this year focused on the petrochemical industry.  In 
remarks to the forum, MOFCOM Vice Minister Chen Jian cited "never 
better" China-Arab cooperation in the petrochemical industry, 
pointing to a 19 percent increase in Chinese investment in Arab 
countries in 2005, mostly in the energy sector.  He said 
approximately 50 percent of China's petrochemical imports are from 
Arab states.  Chen also said a trade agreement between China and 
Persian Gulf countries, which is currently under negotiation, has 
great potential for petrochemical companies on both sides. 
 
¶8. (U) China National Petroleum Corp. (CNPC) Assistant President 
Wang Dongjin said CNPC currently has investment in 17 Arabic 
countries, including seven projects in Sudan.  He touted CNPC's 
corporate social responsibility, which includes sponsoring schools 
and clinics in Sudan.  Sinopec Director of Development Planning Lei 
Dianwu said his company offers expertise in engineering and 
maintenance, and listed key refinery projects in Fujian, Qingdao, 
Guangdong, and Tianjin that are open to foreign investment. 
 
¶9. (U) For their part, Arab leaders expressed appreciation for their 
economic relationship with China. 
-- Sudan Minister of Energy and Mining Awad Ahmed Al-Jaz (who also 
spoke at the International Investment Forum) said oil is a top 
priority in bilateral trade.  He praised the work of CNPC in Sudan, 
citing an oil pipeline and a refinery in Khartoum that were 
completed in record time.  He also noted, somewhat pointedly, that 
CNPC "does not interfere with the internal affairs of Sudan." 
-- Bahrain's Ambassador to China Karim Ebrahim Al-Shakar said that 
China's manufacturing-based economy will rely on Arab oil for the 
foreseeable future, and estimated that China-Arab trade will triple 
over the next five years.  He also expressed hope that China would 
increase market access in the petrochemical industry to Arab 
companies in the near future. 
-- Maen Nsour, Chief Project Engineer of Algeria Petroleum and 
Natural Gas Corp., said Algeria has embarked on a large-scale 
liberalization project in its petrochemical industry and invited 
more participation from Chinese companies in downstream projects. 
-- Investment promotion representatives from Jordan and Tunisia also 
presented at the session. 
 
Comment 
------- 
 
1o. (SBU) CIFIT was better organized this year than last, when 
information about scheduling and seminars was not available until 
the last minute.  In contrast to other large trade fairs in South 
China, such as the Canton Trade Fair, products are not on display in 
the exhibition area.  Instead, the booths advertise the benefits of 
various countries, provinces, and cities as investment locations. 
Attendees come to CIFIT to strengthen relationships with Chinese 
government officials and network during seminars.  While this year's 
event was a success for Amcham reps, it seems to have resembled a 
show without substance for Taiwan's tourist agencies. 
 
GOLDBERG