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UNCLAS SECTION 01 OF 03 BEIJING 004626 
 
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SUBJECT: U.S-CHINA TRANSPORTATION FORUM AGREES TO BROAD BILATERAL 
COOPERATION 
 
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¶1. (SBU) SUMMARY: China sees an opportunity in the current global 
financial crisis to develop transportation infrastructure, Ministry 
of Transportation (MOT) Vice Minister Weng Mengyong told U.S. 
Department of Transportation (DOT) officials attending the Strategic 
Economic Dialogue's (SED) first U.S.-China Transportation Forum (TF) 
on December 3.  The TF brought together U.S. and Chinese government 
and industry representatives to share approaches on maximizing 
transportation capacity through increased infrastructure efficiency. 
 The two sides agreed to establish working groups on new 
technologies in transport, the transport of hazardous materials, 
urban congestion, innovative financing, and disaster assistance 
coordination.  DOT presentations focused on urban congestion, Next 
Generation Air Transportation Systems and advances in rail 
technology, while China's MOT presenters addressed China's port 
industry, highway construction financing policy and disaster 
assistance coordination.  DOT announced a partnership with the U.S. 
Trade and Development Agency (USTDA) to provide training to Chinese 
helicopter pilots for search and rescue missions.  Both sides agreed 
that the forum would serve as the foundation for expanding bilateral 
cooperation to find solutions for the pressing transportation 
problems of the 21st century.  END SUMMARY. 
 
¶2. (SBU) Led by Deputy Secretary Thomas Barrett, the DOT delegation 
also took part in bilateral meetings with Vice Minister of Transport 
Weng Mengyong and Vice Minister of Railways Hu Yadong and a December 
2 roundtable discussion with American Chamber of Commerce (AmCham) 
members whose companies deal with transportation.  In addition, 
EconOff met with representatives of the shipping companies APL and 
COSCO on November 25.  These meetings, along with the presentations 
and discussions at the TF, shed light on China's rapidly developing 
transportation infrastructure and the country's most significant 
aviation, maritime, railway, highway and disaster relief challenges. 
 
 
U.S.-China Transportation Forum 
------------------------------- 
¶3. (SBU) VM Weng opened the Transportation Forum by stressing that 
the development of transportation infrastructure is a major 
component of China's recently announced stimulus package.  Of the 
ten priority areas of the stimulus package, three are focused on 
transportation:  water infrastructure, the rural road network and 
railways.  In his opening remarks, Deputy Secretary Barrett 
highlighted the progress that both countries have made in improving 
the efficiency of existing transportation networks and called on 
both sides to share their expertise to improve transportation 
capacity and boost trade.  Deputy Assistant Secretary Joel Szabat 
presented the major findings of the Draft Transportation Study.  He 
identified four main areas in which progress is needed in order to 
reduce constraints and inefficiencies in transportation networks: 
1)removal of bottlenecks and capacity expansion; 2)more efficient 
use of the supply chain; 3)use of innovative financing mechanisms 
for infrastructure; and 4)reducing urban congestion.  Both parties 
agreed to share expertise on the more productive utilization of 
existing technologies and to make progress on the adoption of 
emerging technologies.  The TF concluded with Deputy Secretary 
Barrett and VM Weng signing a Joint Statement that commits to the 
establishment of working groups on new technologies in transport, 
the transport of hazardous materials, urban congestion, innovative 
financing, and disaster assistance coordination. 
 
Aviation 
-------- 
¶4. (SBU) At the TF, Civil Aviation Administration of China (CAAC) 
Air Traffic Management Bureau Deputy Director-General Lu Xiaoping 
discussed the rapid growth in China's aviation transportation 
sector.  The number of airports is expected to rise from a projected 
180 in 2010 to 250 by 2020, while in the same period China's 
aircraft fleet is expected to rise from 1580 planes to 2600.  DDG Lu 
said the major limitations of the current system include the 
inefficient use of airspace resources, insufficient air traffic 
management (ATM) infrastructure and the lack of collaboration in 
decision-making.  He stressed that ATM would continue to rely on 
existing infrastructure in the near term while steadily progressing 
towards greater adoption of new equipment and technology.  DDG Lu 
also noted that the adoption of satellite-based navigation is a 
critical goal and that trials of Next Generation ATM systems have 
already been launched. 
 
¶5. (SBU) At the roundtable discussion with AmCham members, 
representatives of Boeing and United Technologies Corporation (UTC) 
stressed the need for China to train more pilots and open more of 
its air space for commercial flights.  AmCham's Aviation Cooperation 
 
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Program (ACP) recently completed a study that describes the benefits 
of shifting more air space from military air traffic control to 
general aviation control.  For example, airlines' fuel usage could 
be reduced by 20 percent with a more flexible air space policy.  A 
representative of General Electric (GE) raised the issue of U.S. 
visas, arguing that the long processing time for Security Advisory 
Opinions (SAO) hurts U.S. businesses in the aviation and other 
transportation sectors.  In one case she cited, the president of a 
Chinese airline missed a business trip to the U.S. because the SAO 
processing time delayed the issuance of his visa. 
 
Maritime 
-------- 
¶6. (SBU) Several presentations at the TF dealt with maritime issues. 
 Captain Wei Jiafu, President and CEO of China's largest shipping 
company, COSCO Group, focused on problems that U.S. ports pose.  He 
said the high cost of U.S. inland railways, lack of efficient 
inter-modal connections at ports, prevalence of labor strikes at 
U.S. west coast ports, and the emergence of Prince Rupert Port in 
British Columbia have resulted in a significant amount of 
U.S.-destined goods being shifted away from U.S. west coast ports. 
He also predicted that, when the expansion of the Panama Canal is 
completed in 2014, COSCO and other shipping companies will be able 
to send larger ships through the Canal to ports in the Gulf of 
Mexico and the U.S. east coast for less than it would cost to ship 
goods to the west coast and then cross-country by rail. 
 
¶7. (SBU) MOT Department of Water Transport Deputy Director-General 
Zhang Shuoguo discussed China's long-term development strategy for 
port construction and enhancement.  He said China's major goal is 
improving port design and construction that focuses on improving 
safety and security while increasing energy efficiency and lowering 
emissions.  DDG Zhang dismissed media reports suggesting an 
overcapacity at China's ports, arguing that currently most ports are 
operating above their intended capacity.  This high handling 
capacity is achieved at the cost of port workers who are logging 
significant amounts of overtime to meet demand.  VM Weng also 
pointed out that ports are operating near double their intended 
capacity and that further investments in port infrastructure are 
needed to alleviate this problem.  (COMMENT:  Shipping industry 
representatives told EconOff that they face serious difficulties due 
to the global economic slowdown.  END COMMENT.) 
 
Railways 
-------- 
¶8. (SBU) In a December 2 meeting at the Ministry of Railways (MOR), 
Vice Minister Hu Yadong said China plans to speed up the 
construction of railway infrastructure as part of the government's 
recently announced USD586 billion stimulus package.  By 2020, China 
plans to construct 40,000 kilometers of new railway with increasing 
focus on electric lines that generate less pollution than 
diesel-powered trains.  VM Hu stressed the land-use and 
energy-saving advantages of rail, pointing out that a new railway 
requires only 60 percent of the land of a comparable stretch of 
highway and uses one-third of the amount of energy. 
 
¶9. (SBU) At the AmCham roundtable, a representative of General 
Electric (GE) noted that U.S. companies that deal with railways face 
two obstacles to doing business in China:  1) China tends to favor 
European companies for railway projects, and 2) China puts pressure 
on U.S. companies to transfer technology as part of trade deals.  A 
U.S. industry representative at the TF noted that serious weaknesses 
remain in China's rail system, including continued investment in 
outdated rail technologies and the lack of containerized train 
shipment, particularly refrigerated train cars. 
 
Highway Construction 
-------------------- 
¶10. (SBU) At the TF, MOT Department of Comprehensive Planning Deputy 
Director-General Li Xinghua made a presentation on highway 
construction financing.  He noted that China's highway construction 
budget has risen to over 3 percent of GDP and will continue to rise 
as the infrastructure component of the stimulus package accelerates 
completion of a nationwide highway system.  DDG Li stated that China 
is determined to reduce externalities such as the environmental 
footprint of road construction.  The government is in the process of 
decreasing the number of toll roads and toll stations to reduce 
driving inconvenience and congestion.  However, DDG Li noted that, 
for the foreseeable future, tolls will be necessary to pay back the 
bank loans used to finance road construction.  He stressed that 
China will maintain its policy of encouraging road construction in 
the western part of the country despite the fact that such projects 
are often several times more expensive than comparable projects in 
more developed regions.  The government currently provides western 
provinces additional leverage and direct funding from the central 
 
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budget to facilitate such construction. 
 
Disaster Relief 
--------------- 
¶11. (SBU) At the TF, MOT Comprehensive Planning Department Deputy 
Director-General Cai Yuhe spoke about China's recent experience with 
disaster relief, offering lessons learned from the crippling 
snowstorms in January and the devastating Sichuan earthquake in May. 
 He said the massive losses resulting from such disasters revealed 
the need for pre-emptive contingency planning for emergencies.  DDG 
Cai noted that China still lacks rapid response and offshore rescue 
capacities as well as the ability to quickly re-open "lifeline" 
transport links, transport coal to power facilities in afflicted 
areas, and rapidly and accurately collect data in a disaster 
environment.  He said that MOT is interested in adopting U.S. best 
practices and welcomes the USTDA offer to fund the training of 
Chinese helicopter pilots for search and rescue missions. 
 
RANDT