VZCZCXRO5594
RR RUEHCN RUEHGH
DE RUEHGH #0121/01 0870222
ZNR UUUUU ZZH
R 270222Z MAR 08
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 6778
INFO RUEHIN/AIT TAIPEI 0979
RUEHBJ/AMEMBASSY BEIJING 1791
RUEHSH/AMCONSUL SHENYANG 1167
RUEHGZ/AMCONSUL GUANGZHOU 1140
RUEHCN/AMCONSUL CHENGDU 1169
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 7321

UNCLAS SECTION 01 OF 02 SHANGHAI 000121 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
NSC FOR KURT TONG 
 
E.O. 12958: N/A 
TAGS: ETRD EINV EAIR PREL OREP CH
SUBJECT: SENATOR MCCASKILL'S SHANGHAI VISIT 
 
REF: SHANGHAI 118 
 
(U) This message is sensitive but unclassified.  Not for 
distribution outside USG channels. 
 
¶1.  (SBU) Summary:  Senator Claire McCaskill(D-MO) visited 
Shanghai on March 22-25 and met with Shanghai Deputy Mayor Tang 
Dengjie and Shanghai Municipal Peoples Congress (SMPC) Deputy 
Chairman Zhou Yupeng. Deputy Mayor Tang discussed Shanghai's 
goals of becoming the commercial, trade, finance and logistics 
center of China.  He also supported the idea of establishing a 
direct air cargo link with centrally-located states, such as 
Missouri, to increase trade opportunities.  In addition, Senator 
McCaskill met with American Chamber of Commerce (AmCham) 
Shanghai President Brenda Foster who discussed AmCham Shanghai's 
status and Shanghai's current business environment.  The 
Senator's discussions with Shanghai Institute for International 
Studies representatives on Taiwan, Tibet and US-China relations 
are reported reftel.  End Summary. 
 
Shanghai Vice Mayor Tang 
 
------------------------ 
 
¶2.  (SBU)  Vice Mayor Tang briefed the Senator on the 
socio-economic development of Shanghai, noting Shanghai has set 
the goal of becoming the commercial, trade, finance and 
logistics center of China.  A quarter of all China's imports and 
exports transit the Port of Shanghai, and the United States is a 
major trading partner for the city.  Shanghai also has over 400 
financial institutions and is home to futures, currency and 
securities exchanges.  The city has over 6.8 million visitors 
each year, many who come for business reasons.  There are over 
40,000 foreign-invested enterprises in the city, ten percent of 
which are American.  Tang added that Shanghai also attaches 
great importance to its relations with other countries and 
municipalities, noting Shanghai's strong sister-city 
relationship with San Francisco.  Shanghai is also gearing up to 
host some of the soccer preliminary games for the 2008 Summer 
Olympics and preparing for the 2010 World Expo.  Tang noted that 
the biggest challenge the city faces is managing traffic issues 
as the city continues to rapidly develop.  Environmental 
protection and energy conservation are also high on Shanghai's 
agenda, as well as improving the lives of ordinary citizens. 
 
¶3.  (SBU) Senator McCaskill emphasized that the destinies of 
China and the United States are interlinked and the relationship 
requires good communication and cooperation.   She is confident 
that whoever becomes the next leader of the United States will 
view the relationship with China as very important.  The Senator 
described her reason for coming to China, saying that she is 
part of a larger delegation from Missouri that is working to 
establish a direct air link between China and St. Louis that 
will bring Chinese goods to Missouri and allow Missouri products 
to be shipped directly to China.  Tang replied that Shanghai is 
also a major air traffic hub in China, and the city would be 
pleased to establish a trading link with states such as Missouri 
that are located in the central part of the United States. 
 
 
SMPC Deputy Chairman Zhou Yupeng 
 
-------------------------------- 
 
¶4.  (SBU) During a separate meeting and dinner hosted by Deputy 
Chairman Zhou, Senator McCaskill solicited his support for a 
direct air freight link between Shanghai and St. Louis.  Zhou 
agreed that such a link would strengthen ties between Shanghai 
and the central part of the United States.  Zhou suggested that 
the Senator raise the proposal with CAAC in Beijing, noting that 
CAAC is now part of the newly restructured Ministry of 
Transportation, which takes the lead for deciding new air 
routes.  If the Ministry establishes the new route, Zhou said he 
would support the proposal within the SMPC and facilitate its 
implementation. 
 
¶5.  (SBU) Vice Chairman Zhou also provided an overview of the 
SMPC's work.  The full SMPC of over 800 delegates meets twice a 
year.  Most provincial congresses only meet annually, but Zhou 
explained that Shanghai holds a second plenary session each 
August.  One purpose of the August session is to conduct a 
mid-year review of the budget and ensure that any excess funds 
(such as resulting from higher tax flows) are well used - 
typically for education, health and social security.  Zhou 
emphasized that although the SMPC reviews the government's 
 
SHANGHAI 00000121  002 OF 002 
 
 
budget, it does not appropriate funds.  By law, outlays for 
education must match the level of increase in tax revenues. 
Funding for social security funds must also meet specific 
targets.  The city government has sought to strengthen its 
management of public funds by moving most budgetary items onto 
the books, as opposed to having a large number of off-line 
budget items. 
 
Meeting with AmCham Shanghai 
 
---------------------------- 
 
¶6.  (SBU)  At a breakfast meeting, Amcham Shanghai President 
Brenda Foster described the chamber's rapid growth and its 
strong relationship with local authorities, despite its 
ambiguous legal status.  She noted that this sort of ambiguity 
was typical in China's current business climate.  Many of the 
chamber's members were producing primarily for either the 
Chinese domestic market, or export to third countries, rather 
than export to the U.S., and were making money.  Foster noted 
that U.S. and other foreign firms were beginning to face 
competitiveness issues, due to rising labor and resource costs. 
Although this pressure was not so serious that firms were 
considering leaving China, at the margins it was leading to some 
redirection of  redirect of new investment to Vietnam, India, 
and other developing countries. 
 
¶7.  (U) Senator McCaskill has cleared this message. 
JARRETT