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 
--------------------------------------------- -------------- 
-------- 
 
¶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 
--------------------------------------------- -------------------- 
 
¶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 
--------------------------------------------- -------------- 
------- 
 
¶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