VZCZCXRO9121
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #1625/01 1182309
ZNR UUUUU ZZH
P 272309Z APR 08
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 6916
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHOO/CHINA POSTS COLLECTIVE

UNCLAS SECTION 01 OF 04 BEIJING 001625 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EB/CBA MERMOUD/UHRE 
STATE FOR EAP/CM SECOR/YAMAMOTO 
STATE PASS USTR STRATFORD/WINTER/MAIN 
USDOC FOR ITA/MAS/GUZMAN/ECHEGARAY/FOWLER 
STATE PASS US HUD DEPT 
 
E.O. 12958: N/A 
TAGS: ETRD EINV PREL ENRG EFIN BTIO IAEA CH
SUBJECT: SPECIAL REPRESENTATIVE MERMOUD PUSHES FOR 
GREATER MARKET ACCESS DURING APRIL 21-22 CHINA VISIT 
 
THIS MESSAGE IS SENSITIVE BUT UNCLASSIFIED.  PLEASE 
HANDLE ACCORDINGLY.  NOT FOR DISTRIBUTION OUTSIDE USG 
CHANNELS. 
 
REF:  A. BEIJING 2007 6959 
 ¶B. BEIJING 2008 0487 
 ¶C. BEIJING 2008 1212 
 ¶D. BEIJING 2008 1136 
 
¶1. (SBU) Summary.  United States Department of State 
Special Representative for Commercial and Business 
Affairs J. Frank Mermoud met with Ministry of Housing 
Urban-Rural Construction (MHURC) officials and 
construction industry leaders on April 21 and 22 to 
follow-up on the March 4th United States-China 
Architecture, Construction, and Engineering (ACE) 
Services Dialogue and discuss areas for further 
cooperation.  Mermoud also met with Ministry of 
Science and Technology (MOST) officials on April 22 to 
emphasize the importance of continuing our on-going 
Innovation Dialogue with China and propose a one-day 
academic seminar on promoting innovation in June on 
the margins of SED IV. 
 
¶2. (SBU) In April 21 and 22 meetings with China Export 
and Credit Insurance Corporation (SINOSURE) officials 
and in a meeting with Chairman of China state-owned 
construction and engineering services company Sinoma 
International Engineering, Mermoud reiterated the 
importance of further collaboration on developing the 
surety bond industry in China and exploring commercial 
opportunities for Third Country United States-China 
cooperation in the construction and insurance sectors. 
Mermoud also met with Westinghouse Vice President of 
Nuclear Power Plants in China to discuss commercial 
opportunities for United States companies in China's 
civil nuclear power industry. End Summary. 
 
--------------------------------------------- --- 
Topics for Next U.S.-China Construction Dialogue 
--------------------------------------------- --- 
 
¶3. (SBU) On April 21, Mermoud met with Director 
General Wang Suqing of the Ministry of Housing and 
Urban-Rural Construction (MHURC) Department of Market 
Administration and Deputy Director General (DDG) Wang 
Zaosheng to discuss areas for further collaboration as 
a follow-up to the March 4 United States-China 
Architecture, Construction, and Engineering (ACE) 
Services Dialogue held in Washington, DC.  DDG Wang 
stated MHURC is interested in pursuing the following 
topics for the next ACE Dialogue including: more 
government-to-government exchanges at the state, city, 
municipal, and local levels, technical discussions 
with United States construction industry leaders on 
construction management techniques in areas of safety 
and quality assurance as well as economic management 
of construction projects, and technical exchanges on 
green building and energy conservation. 
 
¶4. (SBU) DDG Wang also told us that MHURC is 
interested in furthering United States-China dialogue 
on surety and licensing bonds, engineer licensure, and 
architect licensure as a follow-up to the March 4 
Dialogue.  Mermoud reiterated the need for more 
clarity in licensing regulations regarding 
opportunities for United States firms to engage in 
engineering, construction, and architecture design 
projects (ref A).  Mermoud asked that the foreign 
staffing requirements under Decree 114 be permanently 
removed.  DDG Wang said MHURC will continue to 
"temporarily" remove the foreign staffing requirements, 
but did not commit to making it permanent. 
 
-------------------------------------- 
MOC Name Change and Leadership Changes 
-------------------------------------- 
 
¶5. (SBU) When asked about MHURC's merger with China's 
Department of Transportation, DDG Wang stated there 
are no major restructuring changes within MHURC except 
for the change in name from Ministry of Construction 
 
BEIJING 00001625  002 OF 004 
 
 
to Ministry of Housing Urban-Rural Construction.  Wang 
stated the name change occurred in early March because 
the Central Government wants to place greater emphasis 
on providing affordable housing for the populace and 
focus on more balanced urban-rural development.  As 
far as MHURC's merger within DOT and possible 
leadership and internal structural changes that may 
result from the merger, Wang stated it is too early to 
deliberate, but that most new appointments and changes 
would not be made until early June.  At the 
Ministerial level, however, DDG Wang reiterated that 
MHURC's ministerial leadership has been in place for 
some time, and that Jiang Weixin is the designated 
Vice Minister expected to become MHURC Minister. 
DDG Wang reassured us that there will be no major 
management changes in the Department of Market 
Administration nor would the merger affect future 
United States-China ACE dialogues. 
 
-------------------------------------------- 
Pushing Forward Innovation and 1-Day Seminar 
-------------------------------------------- 
 
¶6. (SBU) Mermoud met with Director of the Ministry of 
Science and Technology (MOST) Division of Americas and 
Oceania Wang Qiang on April 22 to express appreciation 
for MOST's contributions in making the December 10, 
2007 Beijing Innovation Conference a success.  Mermoud 
reiterated the need for on-going dialogue and 
requested MOST consider co-hosting a one-day seminar 
on innovation to be held at University of Virginia on 
June 16.  Director Wang agreed that the December 
Innovation Conference was a success and emphasized 
MOST's commitment to pursuing on-going dialogue. 
 
¶7. (SBU) Wang expressed concern about the proposed 
title of the one-day seminar entitled "The Role of 
Patents in Promoting Innovation" and said any 
reference to "Intellectual Property Rights" or 
"patents" in the title would be problematic and that 
those topics would fall under Ministry of Commerce 
(MOFCOM)'s jurisdiction.  Accordingly, he suggested 
finding an alternative title for the seminar such as 
"Enterprise or Business Innovation" and requested that 
we submit our proposal via a letter addressed to 
higher levels within MOST to ensure a more efficient 
and quicker response from China's interagency working 
group on innovation.  If the above two conditions 
could be met, Wang appeared optimistic that it would 
be possible for MOST to co-host the seminar and for 
the seminar to occur on the sidelines of SED IV. 
 
------------------------------------------ 
Surety Bonds and Third Country Cooperation 
------------------------------------------ 
 
¶8. (SBU) Mermoud met with China Export and Credit 
Insurance Corporation (SINOSURE) Vice-President (VP) 
Zhang Weidong and Chairman of China state-owned 
construction and engineering services company Sinoma 
International Engineering Chairman Wang Wei in 
separate meetings on April 21 and April 22 to explore 
opportunities for United States-China collaboration in 
developing the surety bond industry in China and 
exploring commercial opportunities for Third Country 
U.S.-China cooperation in the construction and 
insurance sectors.  VP Zhang and Chairman Wang 
expressed interest.  Zhang stated that surety bonds 
are a product unique to the United States, that China 
needs more time to develop its own surety industry, 
and that SINOSURE would like to work in partnership 
with a United States insurance company to offer co- 
surety or reinsurance (ref B). 
 
¶9. (SBU) Mermoud offered to refer VP Zhang to 
President of the Surety and Fidelity Association of 
America to help answer any questions SINOSURE may have 
regarding the United States surety market.  Zhang 
welcomed the offer, and revealed that SINOSURE hired a 
United States consulting firm to assist them in the 
process and that SINOSURE has been interacting with 
three United States insurance companies to find ways 
 
BEIJING 00001625  003 OF 004 
 
 
to issue surety bonds in the United States.  When 
asked about third country involvement, Zhang noted 
SINOSURE is actively involved in promoting Chinese 
construction projects in Africa, the Middle East, and 
Central Asia. 
 
¶10. (SBU) On April 21, Sinoma Chairman Wang Wei said 
Sinoma would support United States efforts to promote 
dialogue on construction and engineering services 
including in the area of developing the surety bond 
industry in China.  Chairman Wang noted that Sinoma 
International Engineering is increasingly involved in 
construction projects in Russia, Central Asia, Saudi 
Arabia, Libya, Egypt, Ethiopia, South Africa, and 
Nigeria.  He said Sinoma has six construction projects 
underway in Russia and 10 projects in Central Asia. 
He noted that from January to April 2008, the contract 
value of exports for his company has already surpassed 
that of last year.  Wang expressed interest in finding 
a United States partner to work on energy projects, 
energy efficient power plants, and industrial waste 
processing.  Mermoud suggested Wang coordinate with 
the United States Foreign Commercial Service to 
explore opportunities for third-country collaboration. 
 
------------------------------------------ 
Window of Opportunity for Nuclear Advocacy 
------------------------------------------ 
 
¶11. (SBU) Mermoud met with Westinghouse China Vice- 
President Bill Poirier to discuss future opportunities 
for United States companies in China's civil nuclear 
power industry.  The current political situation in 
China could provide an ideal opening to advocate for 
additional purchases of U.S. reactor technology, 
Poirier said.  Anti-French sentiment is on the rise, 
the leadership has announced plans to build nuclear 
plants in the interior in response to massive February 
snow storms which cut-off coal shipments (ref C) and 
therefore electricity for as many as several weeks in 
some locations, and China has announced purchases of 
both French and Russian reactors since the December 
2007 Westinghouse announcement. 
 
¶12. (SBU) Poirier said that China has released plans 
to build 18 reactors at inland sites along with 
another four reactors at each of the two current 
AP1000 sites, and has expressed a preference for Gen 
III nuclear technology at these sites.  Chinese 
officials have asked Westinghouse if the AP1000 could 
be adapted for inland use; Poirier noted that the 
AP1000 was actually designed for inland use and had 
been adapted for the current coastal AP1000 sites. 
While the AP1000 would presumably be the frontrunner, 
he continued, the final decision will ultimately be a 
political one as there is much contention in 
government and industry nuclear circles about how 
quickly China should build the first-of-its kind 
AP1000 fleet (refs C and D). 
 
--------------------------------------------- -- 
Quicker Contracts = More U.S. Sourced Equipment 
--------------------------------------------- -- 
 
¶13. (SBU) Poirier said that Westinghouse's expected 
scope for these projects is greater the earlier the 
plant is ordered; he estimated each two plant order 
would be worth USD 1 billion to Westinghouse and its 
United States partners.  Westinghouse is hoping to get 
two plants at each of the three inland sites. 
(Comment: The list of planned reactors provided by 
Westinghouse showed 100 total plants at 21 sites. 
China currently has 11 operating nuclear plants and 
plans to have up to another 45 completed by 2020 with 
18 under construction at that time (ref C); China has 
not yet formally announced a timeframe for 100 
operating reactors.  China will probably initially 
announce a bid for two reactors at each internal site, 
for as many as six plants in the first round.  The 
inland sites are Dafan near Wuhan in Hubei province, 
Taohuajiang near Changsha in Hunan province, and 
Pengze near Nanchang in Jiangxi province.  End 
 
BEIJING 00001625  004 OF 004 
 
 
comment.) 
 
--------------------------------------- 
Need for Greater International Advocacy 
--------------------------------------- 
 
¶14. (SBU) China has expressed a preference for 
PressurizedWater Reactors (PWRs) in previous bids and 
is not expected to change this in the near future. 
However, although Westinghouse is currentlythe only 
U.S. commercial PWR supplier, opportnities exist for 
other companies to supply China's nuclear industry 
with components and services beyond the nuclear island, 
such as auxiliary equipment, turbine-generators, 
valves, etc. Mermoud noted to Poirier that the U.S. 
nuclear industry needs to be more visible in China and 
throughout the world, and suggested that Westinghouse 
augment its presence at international venues, such as 
by providing "cost-free experts" to the International 
Atomic Energy Agency, as is the custom of the French. 
 
¶15. (U) This message was cleared by Special 
Representative Mermoud. 
 
#Randt