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R 260528Z APR 07
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UNCLAS SECTION 01 OF 03 BEIJING 002793 
 
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TRANSPORTATION FOR X1, X40 
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NSC FOR TONG, SHRIER 
 
E.O. 12958: N/A 
TAGS: ELTN ECON BEXP PGOV OVIP SECRETARY PETERS CH
SUBJECT: TRANSPORTATION SECRETARY PETERS' MEETING WITH MINISTER 
OF RAILWAYS LIU:  CLOSER COOPERATION AND BUSINESS ADVOCACY 
 
¶1. (SBU)  Summary.  Secretary of Transportation Mary E. Peters 
highlighted opportunities for cooperation in railway expansion 
and economic development and advocated on behalf of United 
States railroad equipment suppliers in her April 14 meeting with 
Chinese Minister of Railways Liu Zhijun.  Minister Liu affirmed 
ChinaQs continuing interest in cooperating with the United 
States Government and with American companies in the upgrading 
and expansion of ChinaQs rail network and said that an equipment 
maintenance contract valued at about USD 400 million may be 
signed soon.  China will build 25,000 kilometers of new railroad 
track by 2020, of which about 50 percent will be double-line or 
electrified and of which about 12,000 kilometers will be capable 
of handling high-speed trains.  A sixth upgrading of ChinaQs 
existing rail network will be announced on April 18.  Expansion 
of China's rail network is consistent with President Hu Jintao's 
concept of scientific development as well as being 
environmentally friendly, Minister Liu explained.  End summary. 
 
¶2. (U) Minister of Railways Liu Zhijun hosted Secretary of 
Transportation Peters, her delegation, the Ambassador and 
Embassy officers at a 45-minute meeting on Saturday, April 14. 
Minister Liu underscored long-term cooperative relations between 
the Chinese and American rail sectors, including provision of 
locomotives, rolling stock, communications and signaling 
equipment and infrastructure maintenance by American companies. 
Director General for International Cooperation Chen Juemin 
placed the value of recent American rail equipment sales to 
China at USD 600 million per year.  Minister Liu said he hopes 
to travel to the United States soon to sign an equipment 
maintenance contract valued at USD 400 million, and identified 
Ministry of Railways Deputy Chief Engineer and Director General 
of the Transportation Department Zhang Shuguang as his 
Ministry's lead negotiator on that maintenance contract.  Liu 
noted frequent government-to-government contacts on rail issues, 
including former Secretary MinetaQs visit to China and his own 
travels to the United States for agreement signings, and praised 
cooperation by Union-Pacific, CSX, General Electric and ITT with 
Chinese counterparts.  He recalled his meeting with 
Transportation Assistant Secretary for Aviation and 
International Affairs Andrew Steinberg at the December 2006 
Strategic Economic Dialogue (SED) in Beijing and forecast that 
the Secretary's visit would promote bilateral cooperation and 
development of ChinaQs rail sector. 
 
U.S. Companies Can Play Even Bigger Role 
---------------------------------------- 
 
¶3. (SBU) Secretary Peters extended congratulations to Minister 
Liu and his colleagues on important recent developments in the 
Chinese rail sector.  These included recent completion of an 
acoustic track inspection, allowing for higher speeds and 
increased traffic flows while ensuring safety.  Higher speeds 
while maintaining safety standards is becoming increasingly 
important for the United States.  Second, the Secretary 
congratulated the Ministry for its recognition of the importance 
of the rail network for both passengers and freight to ChinaQs 
economic development.  Spreading economic development to Western 
China will require good rail lines.  The Secretary also thanked 
the Minister for China's good work with American companies and 
highlighted those and other companies' interests in working in 
China.  These include General Electric, which already supplies 
electric motor drives to China and has opportunities to bring 
forth new technologies to improve rail operations in China and 
the United States; the Robbins Company, with worldwide 
experience and competitiveness in tunnel boring projects; and 
Picton Technologies, manufacturers of ballast integrity sensors 
to detect and warn against rail bed problems such as washouts. 
Minister Liu noted the interest of American companies to 
participate in expansion of ChinaQs rail network as just 
outlined by the Secretary and expressed particular interest in 
learning more about track maintenance equipment. 
 
Overview of Chinese Railway Expansion 
------------------------------------- 
 
¶4. (SBU) Minister Liu provided a short briefing on expansion and 
upgrading of ChinaQs rail network.  He first contrasted the rail 
situation in the United States (large country; small population 
relative to China's population; 217,000 km of railways) with 
that of China (large country; large population; only 70,000 km 
of railways).  Movement of freight in the most important 
function of the rail system in the already industrialized United 
States, while the rail system in China, which is still 
 
BEIJING 00002793  002 OF 003 
 
 
undergoing industrialization, has important roles in moving both 
freight and passengers.  The Chinese rail system today can only 
meet about one-third of market demand for freight and passenger 
movements.  Demand exists for 300,000 freight railcar movements 
per day in China, but only 100,000 freight railcar movements can 
be supplied at present.  Passenger movements still face 
widespread bottlenecks. 
 
¶5. (SBU) Under the attention of President Hu Jintao and Premier 
Wen Jiabao, the Chinese Government has approved a medium and 
long-term railway development plan through 2020.  During this 
period, China will build 25,000 km of new rail track, of which 
about 50 percent will be double-line or electrified track; 
12,000 km will be capable of handling high-speed trains. 
Furthermore, 20,000 km of existing rail lines will be upgraded 
through 2020.  Within that period, in the current (Eleventh; 
2006-2011) Five-Year Plan, China will build 17,000 km of new 
rails, of which 7,000 km will be capable of handling high-speed 
trains at an average speed of 200 kph and in some stretches up 
to 350 kph.  China will increase the density of the rail network 
in Eastern China, such as by constructing two new lines linking 
Beijing and Shanghai and thereby separating passenger and 
freight traffic.  In Western China, the focus will be on 
construction of new rail lines, such as one to link Lanzhou 
(capital of Gansu Province in China's Northwest) with Chongqing 
(the world's most populous city, on the Yangtze River in 
southwestern China).  Construction of new lines in the Eleventh 
Five-Year Plan will ease some of the rail network bottlenecks in 
China, it still will not resolve fully the fundamental 
difficulties facing China.  Upgrading of existing lines to 
enhance traffic capacity is also necessary.  A sixth upgrading 
project to be announced on April 18 is intended to increase 
passenger capacity on the existing system by 18 percent and 
freight capacity by 12-15 percent. 
 
¶6. (SBU)  China must upgrade rapid freight service, Minister Liu 
continued, and improve capacity so that trains can carry 5000 - 
6000 tons of freight while shortening the interval between 
trains to as short as five minutes.  China must also operate 
more double-deck container trains.  Despite the difficulties in 
meeting demand, China's rail system can be regarded as the 
worldQs leader in efficiency and profitability, the Minister 
averred.  Six percent of ChinaQs rail equipment generates 25 
percent of its traffic volume.  In 2007, ChinaQs rail system 
will move three billion tons of freight, 1.36 billion 
passengers, generate more than 300 billion renminbi (more than 
USD 38 billion at the April 14 exchange rate) in revenue. 
ChinaQs most advanced high-speed line, linking Beijing and 
Tianjin (port city 80 miles away), will be open by the time of 
the 2008 Summer Olympic Games; Minister Liu would be pleased to 
welcome the Secretary at that time to ride that new train. A new 
1000-kilometer line linking WuChang and Guangzhou will be 
completed by 2010, with three-hour travel between those 
destinations possible then.  A new line between Guangzhou and 
Shenzhen to be completed before 2010 will allow 20-minute travel 
between those two cities. 
 
¶7. (SBU) The reason that the Chinese Government has chosen to 
funnel resources into development of the railway network is 
because it accords with the principles of scientific development 
raised by President Hu Jintao, Minister Liu concluded. 
Railroads compared to other means of freight and passenger 
transportation are less polluting, occupy less land, economical, 
energy-saving, QgreenQ (i.e., eco-friendly), and are not 
influenced by the weather.  Thus the decision to develop China's 
railways was taken.  The rapid development and scale of China's 
rail network will present more opportunities for China to 
cooperate with American companies.  The railway network 
development process will be independent and open.  China will 
study advanced experiences around the world and continue 
exchanges with the United States. 
 
Clarification re Electrified Lines 
---------------------------------- 
 
¶8. (SBU) Secretary Peters thanked Minister Liu for his 
explanation of China's rail transportation goals and noted that 
rail network development has played or will play a further role 
in the economic development of the western parts of the United 
States and China.  The United States faces capacity constraints, 
too, and government officials are engaged in discussion with the 
rail industry about how to achieve expansion to move more 
freight and less cost.  Moving freight and passengers on the 
 
BEIJING 00002793  003 OF 003 
 
 
same lines is also a challenge in the United States.  The 
Secretary recalled her 2005 visit to China as then Administrator 
 
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of the Federal Highway Administration and her pleasant train 
ride from Nanjing to Shanghai.  She then requested the 
Minister's clarification and additional information about 
electrification of Chinese rail lines and plans for electronic 
ticketing in China. 
 
¶9. (SBU)  Rail line electrification will be undertaken in 
several areas of China. Minister Liu replied.  These will 
include mountainous areas and special areas like Tibet, so that 
local environmental conditions can be protected. 
Electrification will also be undertaken in economically advanced 
areas of China such as the Pearl River Delta (note:  between 
Guangzhou and Hong Kong), the Yangtze River delta (note: 
Shanghai and surrounding areas) and the Bohai region (note: 
Beijing - Tianjin and coastal areas on the Bohai Sea), as well 
as in other locations east of the Beijing-Guangzhou rail line, 
in accordance with the Eleventh Five-Year Plan.  By the end of 
the Five-Year Plan, as much as 45 - 50 percent of ChinaQs rail 
lines should be electrified.  Minister Liu said that electronic 
ticketing will be an important part of the expansion of high- 
speed rail lines in China. 
 
United States Participants 
-------------------------- 
 
¶10. (U) United States Government participants in this April 14 
meeting were: 
 
Secretary of Transportation Mary E. Peters 
 
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Ambassador Clark T. Randt, Jr. 
Assistant Secretary for Aviation and International Affairs 
Andrew Steinberg 
Deputy Chief of Staff Simon Gros 
Assistant to the Secretary for Policy Jana Weir 
Assistant to the Secretary for Public Affairs Sarah Echols 
Embassy Minister-Counselor for Economic Affairs Robert Luke 
Embassy Economic Section Trade and Investment Policy Unit Chief 
Eric Madison 
Embassy Economic Section Deputy Chief Christopher Beede (note 
taker) 
 
¶11.  (U)  Ministry of Railways participants were: 
 
Minister of Railways LIU Zhijun 
Deputy Chief Engineer and Director-General of the Transportation 
Department ZHANG Shuguang 
Director-General of the International Cooperation Department 
CHEN Juemin 
Director of the International Cooperation Department ZHONG Qigui 
Official of the International Cooperation Department LIU Ya 
(interpreter) 
 
¶12.  (U)  Secretary Peters' delegation has cleared this report 
of meeting. 
 
RANDT