CODEL BARTLETT'S VISIT TO SHANGHAI: JANUARY 1-2

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TAGS: OREP PREL ENRG CH
SUBJECT: CODEL BARTLETT'S VISIT TO SHANGHAI: JANUARY 1-2

REF: 06 STATE 200708

This cable is Sensitive But Unclassified. For official use
only, not for dissemination outside USG channels.


1. (SBU) SUMMARY: In a January 1 meeting with Zhou Muyao, Vice
Chairman of the Shanghai Municipal People's Congress, CODEL
Bartlett discussed China's efforts to address energy issues,
especially in the rural sector. Zhou highlighted the strong
ties between the United States and Shanghai and gave an overview
of World Expo 2010 preparations, indicating the United States
had expertise to offer in the area of transportation and
infrastructure. Both parties emphasized the importance of
people-to-people contact through events like the World Expo and
the Olympics and hoped that these events would encourage
cultural understanding, as well as foster constructive dialogue
on important global issues. CODEL Bartlett also met with
Suntech Power Chairman and CEO Shi Zhengrong to discuss the
critical role of government support in developing renewable
energy technologies and the need to increase Chinese awareness
of the importance of sustainable energy. END SUMMARY.


2. (SBU) On January 1, 2007, Representative Roscoe Bartlett
(R-MD) and an eight member Congressional delegation (see list at
paragraph 15),accompanied by Acting Consul General Simon
Schuchat, met with Shanghai Municipal People's Congress (SMPC)
Vice Chairman Zhou Muyao. Zhou was joined by National People's
Congress Foreign Affairs Committee Deputy-Director General Hong
Yingchun, as well as SMPC Standing Committee members Qian
Yongming and Wang Yaoxi.

An Auspicious Start to Deepening U.S.-Shanghai Cooperation
-------------- --------------


3. (SBU) Vice Chairman Zhou welcomed the delegation as
Shnaghai's first official delegation in 2007, noting that this
demonstrated the importance Shanghai placed on close relations
with the United States. As further evidence of this close
relationship, Zhou added that the United States was the number
one destination for Shanghai's students studying abroad, number
three (behind the European Union) for expatriate residents in
Shanghai, number two in terms of foreign direct investment, and
number one and two for imports and exports, respectively.

Energy Cooperation: Work Together or Suffer Together
-------------- --------------


4. (SBU) Rep. Bartlett indicated that the main purpose of the
delegation's visit was to understand China's efforts to address
energy issues. During his warm welcome in Beijing, Bartlett had
been impressed by the National Development and Reform
Commission's five point energy development plan, comprising: 1)
energy conservation; 2) domestic energy supplies; 3)
diversification of reliance on energy sources; 4) environmental
protection; and 5) international cooperation, which Bartlett
believed was essential -- and would continue to increase in
importance -- as the world faced a deficit in fossil fuels in
the coming decades. He stressed that energy was a global issue
and that nations that did not work together would suffer
together. He also noted that officials at the National
Development and Reform Commission in Beijing recognized the need
to diminish reliance on dwindling oil and natural gas stocks and
develop alternative energy resources for the future "post-oil"
era.


5. (SBU) In particular, Bartlett said the delegation was
interested in learning more about China's plans for fostering
sustainable energy in the rural areas and that some members were
contemplating a return visit to China this summer. He lauded
China's progress in rural energy development, including creating
gas from animal waste and harnessing solar energy to generate
electricity.


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World Expo 2010: An Opportunity for All
--------------


6. (SBU) Rep. Mark Kirk (R-IL) expressed an interest in
Shanghai's plans for the World Expo 2010 and inquired about the
role the United States could play. He offered that Chicago, a
sister city of Shanghai, was keen on spurring international
interest in the World Expo and that during a planned May 2007
trip to China, Chicago Mayor Richard M. Daley would likely
announce that 2009 would be "The Year of China" in his city.
Kirk passed to Zhou a written proposal for further cooperation
between the two cities.


7. (SBU) According to Vice Chairman Zhou, preparations for the
World Expo 2010 were progressing smoothly. Out of the 200
invitations sent to countries, Zhou noted that between 40 and 50
percent have already accepted, and there are still three years
until the event. Zhou emphasized that in this information age,
people-to-people contact was still paramount and that Shanghai's
chief reason for hosting the event was to give people a greater
understanding of Shanghai and China and to allow the Shanghai
population to learn from other countries, especially in science
and technology development. With the theme "Better City, Better
Life," Zhou said that renewable energy could be an important
area to showcase during the Expo. He also underscored that the
SMPC's Eleventh Five Year Plan pledged to decrease Shanghai's
energy consumption by 20 percent and promote the development of
sustainable energy strategies.


8. (SBU) Zhou indicated that transportation and infrastructure
would be a key component of the World Expo and that the United
States had lots of expertise to offer. Shanghai had prioritized
transportation development in the hopes of creating a better,
smarter public system. He added that the World Expo site was in
a former industrial district of the city, an area which city
leaders wanted to transform into a more environmentally
friendly/ecological area. Zhou believed the World Expo would
bring about "development opportunities" that Shanghai hoped to
"share with its friends." In the past 10-20 years, Shanghai's
development has increased at a rapid pace due to its cooperation
with countries like the United States and Zhou said that he
would continue to share updates on World Expo preparations with
the Consulate.


9. (SBU) Rep. Rick Larsen (D-WA) underscored the importance that
global events such as the World Expo, the Olympics, and even
athletic exchanges (such as Yao Ming playing for the Houston
Rockets) had on fostering cultural understanding and cooperation
between nations. He inquired as to Shanghai's role in the 2008
Summer Olympics in Beijing.


10. (SBU) Zhou indicated that Shanghai was slated to host some
soccer competitions and would likely receive many visitors who
would attend the Beijing games. Like the World Expo, Zhou
believed the Olympics would be a prime opportunity for people to
"see and feel" what was going on in China. He said that
Shanghai's athletes were enthusiastically preparing for the
Olympics. Zhou noted that Yao Ming is a "Friendship Ambassador"
and thanked the American people for warmly supporting him.


11. (SBU) Following the meeting, Zhou hosted the delegation to
dinner where Zhou and Bartlett discussed history, culture and
places of interest in Shanghai.

Renewable Energy: Government Support Equals Development
-------------- --------------


12. (SBU) Rep. Bartlett and the delegation, along with Acting CG
Schuchat, also met with Dr. Shi Zhengrong, Chairman and CEO of
Suntech Power Holdings Co., Ltd. Shi believed that government
support was necessary to foster development of renewable energy
technologies. Pointing to Japan and Germany, Shi said that

SHANGHAI 00000006 003 OF 003


subsidies "kicked off the market" in those two countries almost
ten years ago by reducing costs exponentially and that their
programs now serve as two global models. He explained the
Japanese model focused on installation of solar cells by
providing an initial 75 percent subsidy for installation costs.
Over time, the subsidy was reduced gradually and was now
currently zero. According to Shi, the German model created a
self-sustaining market for renewable energy by compensating for
the distortions in the conventional electricity market. Shi
explained that the German model required power companies to
purchase, at peak prices, a fixed amount of energy created from
renewable energy sources, creating a market for solar power
generating facilities. He noted that many German farmers
converted their land to "solar farms" and were reaping
substantial profits. Shi believed that Germany, Spain, and
France continued to have the best regulatory environments for
enabling renewable energy development.

China: Increased Awareness is Key
--------------


13. (SBU) Shi indicated that the PRC government initially gave
Suntech Power a three year tax holiday, followed by an
additional three years at 50 percent of the prevailing rate.
Currently the company is taxed at 15 percent of its profits.
While this incentive greatly assisted Suntech Power's rapid
development, Shi believed that China could do even more to
foster the development of renewable energy. He said that while
authorities have focused primarily on wind power, emphasis on
solar energy would likely be forthcoming. Part of China's
problem, he believed, stemmed from a lack of awareness and
understanding of global environmental issues. He noted that
only recently have Chinese people realized that rapid economic
growth at the expense of a healthy, sustainable environment was
meaningless.


14. (SBU) Shi also gave an overview of Suntech Power, a leading
solar energy company that specializes in the design,
development, manufacture and sale of photovoltaic cells for a
wide range of commercial and residential applications. Shi
started the company in 2001 with USD 6 million (mainly from
government shareholders) and expanded production at a low cost
when the company acquired equipment from a fledgling company in

2004. Shi noted that Suntech was the first private Chinese
company listed on the New York Stock Exchange (NYSE: STP). He
explained that the initial public offering raised USD 400
million. While the company had mainly focused on the European
market, specifically Germany, Spain and Italy, Shi noted that
the company was expanding into the U.S. market. In 2006, the
company did over USD 650 million in sales, and the 2007 plan is
to increase the efficiency of Suntech's products while
decreasing their weight and manufacturing costs. Suntech
Power's main competitors are Sharp and Sun Power.


15. (SBU) Rep. Bartlett's delegation included: Rep. Mark Kirk
(R-IL),Rep. Rick Larsen (D-WA),Rep. Steve Israel (D-NY),Del.
Madeleine Bordallo (D-Guam),Rep. Thelma Drake (R-VA),Rep. Phil
Gingrey (R-GA),Rep. Randy Neugebauer (R-TX),and Rep. Susan
Davis (D-CA).
SSCHUCHAT