TRANSPORTATION SECRETARY PETERS' MEETING WITH MINISTER

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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

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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

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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