SENATOR MCCASKILL'S SHANGHAI VISIT

UNCLAS SECTION 01 OF 02 SHANGHAI 000121

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E.O. 12958: N/A
TAGS: ETRD EINV EAIR PREL OREP CH
SUBJECT: SENATOR MCCASKILL'S SHANGHAI VISIT

REF: SHANGHAI 118

(U) This message is sensitive but unclassified. Not for
distribution outside USG channels.


1. (SBU) Summary: Senator Claire McCaskill(D-MO) visited
Shanghai on March 22-25 and met with Shanghai Deputy Mayor Tang
Dengjie and Shanghai Municipal Peoples Congress (SMPC) Deputy
Chairman Zhou Yupeng. Deputy Mayor Tang discussed Shanghai's
goals of becoming the commercial, trade, finance and logistics
center of China. He also supported the idea of establishing a
direct air cargo link with centrally-located states, such as
Missouri, to increase trade opportunities. In addition, Senator
McCaskill met with American Chamber of Commerce (AmCham)
Shanghai President Brenda Foster who discussed AmCham Shanghai's
status and Shanghai's current business environment. The
Senator's discussions with Shanghai Institute for International
Studies representatives on Taiwan, Tibet and US-China relations
are reported reftel. End Summary.

Shanghai Vice Mayor Tang

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2. (SBU) Vice Mayor Tang briefed the Senator on the
socio-economic development of Shanghai, noting Shanghai has set
the goal of becoming the commercial, trade, finance and
logistics center of China. A quarter of all China's imports and
exports transit the Port of Shanghai, and the United States is a
major trading partner for the city. Shanghai also has over 400
financial institutions and is home to futures, currency and
securities exchanges. The city has over 6.8 million visitors
each year, many who come for business reasons. There are over
40,000 foreign-invested enterprises in the city, ten percent of
which are American. Tang added that Shanghai also attaches
great importance to its relations with other countries and
municipalities, noting Shanghai's strong sister-city
relationship with San Francisco. Shanghai is also gearing up to
host some of the soccer preliminary games for the 2008 Summer
Olympics and preparing for the 2010 World Expo. Tang noted that
the biggest challenge the city faces is managing traffic issues
as the city continues to rapidly develop. Environmental
protection and energy conservation are also high on Shanghai's
agenda, as well as improving the lives of ordinary citizens.


3. (SBU) Senator McCaskill emphasized that the destinies of
China and the United States are interlinked and the relationship
requires good communication and cooperation. She is confident
that whoever becomes the next leader of the United States will
view the relationship with China as very important. The Senator
described her reason for coming to China, saying that she is
part of a larger delegation from Missouri that is working to
establish a direct air link between China and St. Louis that
will bring Chinese goods to Missouri and allow Missouri products
to be shipped directly to China. Tang replied that Shanghai is
also a major air traffic hub in China, and the city would be
pleased to establish a trading link with states such as Missouri
that are located in the central part of the United States.


SMPC Deputy Chairman Zhou Yupeng

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4. (SBU) During a separate meeting and dinner hosted by Deputy
Chairman Zhou, Senator McCaskill solicited his support for a
direct air freight link between Shanghai and St. Louis. Zhou
agreed that such a link would strengthen ties between Shanghai
and the central part of the United States. Zhou suggested that
the Senator raise the proposal with CAAC in Beijing, noting that
CAAC is now part of the newly restructured Ministry of
Transportation, which takes the lead for deciding new air
routes. If the Ministry establishes the new route, Zhou said he
would support the proposal within the SMPC and facilitate its
implementation.


5. (SBU) Vice Chairman Zhou also provided an overview of the
SMPC's work. The full SMPC of over 800 delegates meets twice a
year. Most provincial congresses only meet annually, but Zhou
explained that Shanghai holds a second plenary session each
August. One purpose of the August session is to conduct a
mid-year review of the budget and ensure that any excess funds
(such as resulting from higher tax flows) are well used -
typically for education, health and social security. Zhou
emphasized that although the SMPC reviews the government's

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budget, it does not appropriate funds. By law, outlays for
education must match the level of increase in tax revenues.
Funding for social security funds must also meet specific
targets. The city government has sought to strengthen its
management of public funds by moving most budgetary items onto
the books, as opposed to having a large number of off-line
budget items.

Meeting with AmCham Shanghai

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6. (SBU) At a breakfast meeting, Amcham Shanghai President
Brenda Foster described the chamber's rapid growth and its
strong relationship with local authorities, despite its
ambiguous legal status. She noted that this sort of ambiguity
was typical in China's current business climate. Many of the
chamber's members were producing primarily for either the
Chinese domestic market, or export to third countries, rather
than export to the U.S., and were making money. Foster noted
that U.S. and other foreign firms were beginning to face
competitiveness issues, due to rising labor and resource costs.
Although this pressure was not so serious that firms were
considering leaving China, at the margins it was leading to some
redirection of redirect of new investment to Vietnam, India,
and other developing countries.


7. (U) Senator McCaskill has cleared this message.
JARRETT