Canton Fair Adds Imports, Strengthens IPR Protection

UNCLAS SECTION 01 OF 02 GUANGZHOU 000484

SIPDIS

SENSITIVE
SIPDIS

STATE PASS USTR
PACOM FOR FPA

E.O. 12958: N/A
TAGS: ETRD KIPR ECON BEXP CH
SUBJECT: Canton Fair Adds Imports, Strengthens IPR Protection

REFERENCE: Guangzhou 31300

(U) This cable is sensitive but unclassified. Please handle
accordingly.


1. (U) SUMMARY AND COMMENT: In a move that China's leaders say will
help reduce the country's trade surplus, the Canton Fair - which in
its first one hundred sessions dating back to the 1950s has focused
solely on Chinese exports - showcased, for the first time, products
that could be imported from abroad. Approximately 300 companies
from 36 countries and regions (Taiwan, Hong Kong and Macao)
exhibited at the fair, only a fraction of the more than 14,000
Chinese companies present. So far, the move to imports looks more
like a public relations effort rather than a serious effort to
attract import exhibitors. Its success will really depend on
whether "foreign companies," especially small and medium size
enterprises, take advantage of what the Fair has to offer and
whether the Chinese side does a good job of encouraging and
promoting the Fair's import dimension. This year's Fair also
introduced more stringent penalties for IPR infringers. END SUMMARY
AND COMMENT.

A Decision to Balance Trade
--------------


2. (U) Premier Wen Jiabao announced in October 2006 that the Fair
would be renamed the China Import and Export Fair, signaling China's
intention to use all of the resources at its disposal to address the
continuing imbalance between imports and exports (see reftel). Vice
Minister of Commerce Gao Hucheng stated during the opening ceremony
that China is particularly interested in importing advanced and
energy-saving technologies. Fair organizers said they plan to
expand the exhibition space for foreign companies in the October
2007 Fair.

Statistics on Buyers and IPR Complaints
--------------


3. (U) According to the Fair spokesman, 136,000 buyers attended the
first session of the Fair (April 15-20),an increase of 12 percent
from the first half of the October 2006 Fair. The top five places
of origin for buyers were Hong Kong (16,700),United States (7,600),
Taiwan (5,600),India (5,000),and Malaysia (4,500). Export deals
worth USD 24 billion were signed, up 8 percent from the October 2006
Fair. No numbers on import deals were released. The Fair's IPR
complaint center received 203 complaints in the first session, down
15 percent from the October Fair. Nine of the complaints were
against companies in the international exhibition hall.

Limited but Varied Foreign Companies
--------------


4. (U) The international exhibition hall included 314 foreign
companies from 36 countries and regions, including 19 from the
United States, 89 from Hong Kong, 42 from Taiwan, 36 from South
Korea, and 35 from Malaysia. In a briefing in early 2007, Fair
organizers told Econ Assistant that they denied requests by Hong
Kong and South Korea to buy most of the international pavilion in
order to allow a greater variety of international exhibitors. The
Ministry of Commerce reportedly invited 6,000 Chinese corporate
buyers to visit the international pavilion. Chinese exhibitors at
both sessions of the Fair, totaling 14,430, still vastly outnumber
foreign companies.


5. (SBU) Most of the U.S. exhibitors were small companies. The
Washington State Trade Development Office (which has an office in
Guangzhou) sponsored a booth that was shared by seven
Washington-based companies, several of which sold health
supplements. Asian countries or regions with large overseas Chinese
populations - Hong Kong, Singapore, Taiwan, Malaysia - filled most
of the hall. In a number of cases, however, the exhibitors seemed
to be Chinese manufacturers displaying under the name of a foreign
partner. A news report early in the week noted that a number of
booths in the international hall were rented by Chinese firms who
could not find space in the Chinese side of the Fair.


6. (SBU) The types of products on display were a jumble:
automobiles, bathtubs, coffee, appliances, and jewelry.
Nevertheless, the hall was busy with Chinese visitors and many
exhibitors said they were pleased with the response.
Director-General of the China Foreign Trade Center Wang Junwen told
Ambassador Randt, during a brief meeting on April 19, that

GUANGZHOU 00000484 002 OF 002


international exhibitors had complained there were too many foreign
and not enough Chinese buyers.

Stronger Penalties for IPR Infringers
--------------


7. (U) At a press conference during the April 19 opening ceremony,
the Fair's Deputy Secretary General announced new, more stringent
penalties against infringers. According to press reports and
materials collected at the Fair's IPR complaint center, exhibitors
who infringe on trademarks at two sessions of the Fair, or infringe
on copyrights or patents at three sessions (or two consecutive
sessions),will be banned from the next four sessions of the Fair.
(Previously, exhibitors caught three times were banned from the next
Fair.) In addition, exhibitors will be banned from the next six
Fairs if they display items for which they have previously been
penalized, administratively or judicially. The Chinese media
reported that Fair authorities used the latter penalty against a
Ningbo company in a design patent complaint brought by a Shenzhen
company. Econoff also noticed that the IPR complaint center for the
first time had English copies of complaint submission forms and
other procedural information.


8. (SBU) Though media reports said the tougher IPR penalties were a
response to the WTO complaints brought by the United States, no
official could confirm this. And a copy of the new rules available
at the Fair was dated February 13 -- prior to the announcement of
the WTO complaints.

GOLDBERG