UNCLAS SECTION 01 OF 02 SHANGHAI 000690

SIPDIS

SENSITIVE
SIPDIS

STATE FOR OES AND EAP/CM
STATE PASS USTR FOR STRATFORD/WINTER/LOI/MCCARTIN/ALTBACH/READE
CEA FOR BLOCK
USDOE FOR MIZROCH/CHIANG/GINSBERG
USDOE FOR INTERNATIONAL/PUMPHREY AND GEBERT
USDOC FOR ITA/MAC DAS KASOFF, MELCHER AND MCQUEEN
TREASURY FOR DOHNER/SOBEL/CUSHMAN/MOGHTADER/WINSHIP
TREASURY FOR WRIGHT AND AMB HOLMER
NSC FOR WILDER AND TONG

E.O. 12958: N/A
TAGS: ENRG SENV EINV ELTN EIND CH
SUBJECT: SHANGHAI INVESTS USD 175 MILLION IN AUTOMOTIVE RESEARCH

REF: SHANGHAI 541

SHANGHAI 00000690 001.2 OF 002


(U) This cable is sensitive but unclassified and for official
use only. Not for distribution outside of USG channels or via
the internet.


1. (SBU) Summary: In conjunction with the United States-China
Science and Technology Executive Secretaries Meeting (ESM), the
U.S. delegation visited a high-tech park and two high-tech
projects in Shanghai on October 12. Interlocutors reported that
the Shanghai municipal government aims to build up the
automotive industry and has already invested almost USD 175
million in automotive research and development projects at
Shanghai's Tongji University. These funds are being used to
develop automotive fuel cell technologies and an advanced wind
tunnel for vehicle and part design. Their current fuel cell
prototype vehicle has sufficient power and responsiveness to
power a normal car, but is very loud and prohibitively
expensive. There is sufficient hydrogen produced as a
by-product of Shanghai's steel and chemical industries to power
all public transportation in Shanghai. Due to open in March
2008, Shanghai's wind tunnel will be the first full-scale
automotive wind tunnel in China. End summary.


2. (SBU) State Department Office of Science and Technology
Cooperation Director E. Bruce Howard led a delegation to the
United States-China Science and Technology Executive Secretaries
Meeting (ESM) held in Shanghai October 11-12. In conjunction
with the meetings, site visits were arranged on October 12 to
Shanghai's Caohejing Hi-tech Park, and Shanghai's Tongji
University's Fuel Cell Vehicle Facility and new wind tunnel

project.

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Tongji University's Fuel Cell Vehicle Facility
-------------- -


3. (SBU) The ESM delegation visited the Fuel Cell vehicle
facility at Shanghai's Tongji University in Jiading (an
administrative district in Shanghai city). They toured the fuel
cell vehicle lab and wind tunnel project. Tongji University
Automotive College Dean Yu Zhuoping and Vice Dean Ma Jun briefed
the delegation on the development of fuel cell vehicles at
Tongji University.


4. (SBU) According to Yu, the Shanghai government has invested
RMB 800 million (USD 106 million) in the development of Tongji's
Clean Energy Automotive Engineering Research Center (CEAEC).
More than half of these funds were earmarked for the wind tunnel
project. Yu said that Shanghai has invested so much money in
automotive research in order to have balanced development in
Shanghai. Shanghai has Bao Steel up in the north, Pudong
Airport to the east, Jin Shan Petrochemicals in the south, but
no landmark to the west. Given Jiading's strength in automotive
industry, the government encouraged Tongji to set up its
Automotive College in Jiading and supported it with a strong
financial package.


5. (SBU) Ma told the delegation that the performance of Tongji's
latest prototype vehicle has almost met the standards for normal
cars as far as acceleration and speed are concerned. The
biggest challenges facing them are reducing costs and developing
necessary infrastructure. Current cost to build such a fuel
cell prototype vehicle is about RMB 1 million (USD 133,000),
although unit cost could drop to RMB 700,000 (USD 93,000) if
mass produced. Infrastructure development is another
bottleneck. Currently Tongji only has built one hydrogen
filling station. The station is located close to its Jiading
campus which is distant from the central part of Shanghai city.


6. (SBU) Ma said that the hydrogen currently used by the
vehicles is a by-product of the steel and chemical industries
located in Shanghai. He estimated that the two industries
produce enough hydrogen to meet the demand of all taxis and
buses in Shanghai if they were powered by fuel cells.


7. (SBU) Members of the delegation test drove the fuel cell
prototype vehicle. They found that while the ride was

SHANGHAI 00000690 002.2 OF 002


comparable to normal cars, noise levels were high. Ma explained
that most of the noise came from an air compressor that was
needed to supply sufficient oxygen to the fuel cell.

--------------
Shanghai Automotive Wind Tunnel Center
--------------


8. (SBU) Tongji University's Shanghai Automotive Wind Tunnel
Center (SAWTC) Chief Engineer Yang Zhigang led the delegation
through the SAWTC site, which is still under construction. Yang
said that the project, with a cost of almost RMB 500 million
(USD 67 million), was initiated by Ministry of Science and
Technology Minister Wang Gang when he was dean of Tongji
University's automotive college. SAWTC will be the first
full-scale automotive wind tunnel in China. The project
includes an aerodynamic and aero-acoustic full-scale wind
tunnel, a climatic full-scale wind tunnel and the supporting
facilities for vehicle test preparation. The project will
provide R&D support and test services for automobile
manufacturers, high speed train manufacturers, and vehicle
components manufacturers for their product development. The
wind tunnel is scheduled to be in operation in March 2008.

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Caohejing Hi-Tech Park
--------------


9. (SBU) The delegation met with Caohejing (CHJ) High-Technology
Park President Chen Qingzhou and CHJ Science and Technology
Department Manager Han Baofu. CHJ was created as a state-level
economic and technological development zone in 1988, and
re-designated as a state-level high-tech industrial development
zone in 1991. According to Chen, the four pillar industries in
the park are Information Technology, New Materials,
Biotechnology & Pharmaceuticals, and Aeronautics & Astronautics.
Chen expressed an interest in seeking more cooperation with
United States businesses, as U.S.-invested companies account for
the largest share (27 percent) of foreign investment in CHJ
Park. The first foreign company established in the park was the
Foxboro Company. Other major players in the park include:
Philips, Du Pont, 3M, Cisco, Lucent, and Unilever.


10. (SBU) Chen told the delegation that CHJ is expanding
geographically. A new sub-park called Pujiang Hi-tech Park has
been set up nearby to accommodate the growing demand for
manufacturing and research space. The new park is dedicated to
developing modern manufacturing in the fields of electronics,
computer, new materials & energy. The park is also in the
process of building its fifth pillar industry, i.e. Modern
Service Industry (service outsourcing).


11. (U) The delegation cleared on this report.
JARRETT