SCENESETTER FOR SPEAKER PELOSI'S VISIT TO SHANGHAI

UNCLAS SECTION 01 OF 03 SHANGHAI 000226 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: OVIP PREL PGOV ECON CH SUBJECT: SCENESETTER FOR SPEAKER PELOSI'S VISIT TO SHANGHAI REF: BEIJING 1315 (U) Sensitive but unclassified. Not for dissemination outside USG channels; not for Internet distribution. Summary -------------- ¶1. (SBU) Madame Speaker, your visit to Shanghai will advance U.S.-China business relations, support energy and environment cooperation, and promote religious freedom. You will arrive in Shanghai one year prior to the opening of the Shanghai 2010 World Expo, the largest World Expo in history, but for which the United States Government (USG) has not been able to confirm participation because the required funding has not yet been pledged by private sources, as required by U.S. law. An American absence at this massive event will create a perception of American weakness or disinterest in the region and could become an irritant in the bilateral relationship. Shanghai, China's commercial capital and home to the world's busiest port, has over 5,500 U.S.-invested projects, including GM, Intel, GE, Kodak, and UPS, and you will have an opportunity to hear the concerns of the U.S. business community, which is dealing with the global financial crisis and China's own economic downturn. Air and water pollution remain key issues in Shanghai, and the Environmental Protection Agency (EPA) and other USG agencies frequently cooperate on energy and the environment with institutions in East China. The Food and Drug Administration (FDA) also will begin staffing its new office in Shanghai just days after your visit. The Shanghai Consular District is home to dynamic religious communities, and Shanghai Bishop Aloysius Jin Luxian remains active and has connections to both the Vatican and to leaders within the Chinese Catholic Church. Shanghai has taken steps to improve intellectual property rights (IPR) protection and governmental transparency, but the city still lacks strong grassroots NGOs to promote the development of civil society. End Summary. Welcome to Shanghai -------------- ¶2. (SBU) Madame Speaker, we at the Consulate General in Shanghai are pleased that you have included this commercially, politically and culturally important metropolis in your China itinerary. The below information focuses on Shanghai-specific issues and serves to supplement information provided by Embassy Beijing (reftel). Shanghai: China's Commercial Capital -------------- ¶3. (SBU) Often called the "New York" of China, Shanghai is China's commercial capital and home to the world's busiest port. Shanghai enjoyed double-digit GDP growth for the 16 consecutive years prior to 2008 but fell below 10 percent in 2008, and GDP growth in the first quarter of 2009 dropped dramatically to 3.1 percent year-on-year. Despite the downturn, Municipal Government officials expect growth to rebound during the second half of the year, and Shanghai's per capita GDP remains more than USD 11,600, 3-4 times the national average. With its strategic location, highly skilled workforce and solid infrastructure, Shanghai is a magnet for foreign direct investment (FDI). Foreign-invested companies account for half of Shanghai's trade and roughly 20 percent of employment. U.S. Economic Presence in Shanghai -------------- ¶4. (SBU) Shanghai has over 5,500 U.S.-invested projects, including GM, Intel, GE, Kodak, and UPS. A majority of investment is in manufacturing, but investments in service industries are growing rapidly. U.S.-invested companies in Shanghai account for approximately one-eighth of the total of 40,000 foreign invested companies in Shanghai. Shanghai's American Chamber of Commerce (AmCham),with more than 1,500 member companies about 3,500 individual members, and 50-60 new members a month, is Asia's largest AmCham. More than 25,000 Americans are long-term residents in the Shanghai Consular District (Shanghai and the provinces of Anhui, Jiangsu and Zhejiang),with up to 50,000 visiting at any time. Shanghai 2010 World Expo - Will the USA Miss It? -------------- --- ¶5. (SBU) In 2010, Shanghai will host the World Expo, a showcase for China's development second only to the Beijing Olympics. The Shanghai Expo, which will open on May 1, 2010, will be the largest World Expo in history. The Expo will run through SHANGHAI 00000226 002 OF 003 October 31, 2010 and Shanghai officials predict it will attract more than 70 million visitors, the vast majority from China. To date, 190 countries and 48 international organizations have accepted invitations to participate in the Shanghai 2010 World Expo, the largest number in Expo history. The theme of the Expo, "Better City - Better Life", signifies Shanghai's commitment to green urban development and status as a major economic and cultural center. ¶6. (SBU) The United States Government (USG) has not been able to confirm participation in the Shanghai 2010 World Expo, however, because the required funding has not yet been pledged by private sources. The State Department is prohibited by 1994 and 1999 statutes from spending appropriated funds to support a national pavilion in the absence of a specific Congressional authorization. Since 1994, non-governmental entities have been formed to design USA national pavilions at World Fairs/Expos and to raise 100 percent of the funding from the private sector. In 2000, the USA missed the Millenium Expo in Germany. In 2005, the USA had a successful pavilion in Aichi, Japan, due primarily to the majority-funding support provided by Toyota's North American subsidiary. ¶7. (SBU) Currently, the United States has communicated only its hopes to participate, contingent on private fundraising success. The estimated total budget of the USA Pavilion is USD 61 million, which includes all construction, staffing, operation, show presentations, and post-Expo building demolition and materials removal costs. Fundraising to date for the planned USA National Pavilion has only raised a fraction of the USD 61 million required, though several well-known companies have made modest commitments in recent days. A number of American companies are involved in the Expo on their own, independent of a national pavilion. Coca-Cola, General Motors-China, and possibly Best Buy will build their own corporate pavilions in a separate area of the Expo, entirely unrelated to the USA National Pavilion. Cisco and IBM have become Senior Sponsors of the overall Expo. The NBA and Anschutz Entertainment Group are helping to build the Expo's permanent Performing Arts Center on the Expo grounds. ¶8. (SBU) Taking place within China for the first time, the Shanghai Expo is not a typical World Expo/Fair. Its unprecedented size and public diplomacy value far surpass those of other Expos in recent decades. Unlike the Olympics, which last just two weeks and allow the host country to showcase itself to a global audience, World Expos are six months long and allow the rest of the world to showcase themselves to the citizens of the host country. For the United States, a USA National Pavilion at the Expo represents an outstanding public diplomacy opportunity to tell America's story directly to an expected 60 million Chinese visitors the way that we want it to be told. Speculation that America will be one of only two countries that have diplomatic relations with China to miss the Expo (the other is Andorra) is already rampant in both Chinese and Western media and blogospheres. Chinese observers are already making the unfortunate and inaccurate conclusion that the U.S. is in decline and "cannot afford a pavilion." Others are interpreting a possible U.S. absence as a deliberate slap in China's face and warning it could damage U.S. commercial interests in China. Looking further afield to China's neighbors, at a time when America is seeking to emphasize its strong interest in the region -- as evidenced by Secretary Clinton's choice of Asia as her first overseas trip -- a U.S. absence at the Expo will not go unnoticed. Environmental and Health Cooperation in East China -------------- -------------- ¶9. (SBU) As one of China's key areas of economic growth and development with a large, concentrated population, East China has a broad range of environmental and health issues. Water and air pollution are the key environmental issues in East China. Authorities grapple with the need to mitigate industrial air and water pollution while maintaining sustained economic development. Nearby Lake Tai, a source for drinking water, has had blue algae issues attributed to industrial waste and agricultural and residential pollution, causing the neighboring Jiangsu Provincial Government to adopt a series of stricter regulatory measures. As the affluence of East China's populace has grown, so has its focus on environmental and quality of life issues. ¶10. (SBU) The U.S. Environmental Protection Agency (EPA) recently extended its cooperation agreement with the Ministry of Environmental Protection and has many cooperative programs in the region on water and air pollution, waste treatment, and SHANGHAI 00000226 003 OF 003 legal/regulatory frameworks. EPA Region 9 (California) has a "sister" relationship with the East China Regional Supervision Center near Nanjing, which facilitates visits and information sharing between the two sides. Research institutions in East China frequently host international conferences on a wide range of environmental issues, drawing U.S. visitors from EPA, HHS, NOAA, DOE, NSF, NIH, academia, and the private sector. The Food and Drug Administration (FDA) is currently in the process of setting up a presence in Shanghai to work on medical device and pharmaceutical issues, and the first U.S.-direct hire for the FDA Shanghai office is expected to arrive at post at the end of May. Religious Freedom in Shanghai -------------- ¶11. (SBU) The Shanghai Consular District is home to dynamic religious communities. Consulate officers routinely meet with religious contacts to better understand current developments. The most prominent Catholic figure in the Consular District is 92-year-old Shanghai Bishop Aloysius Jin Luxian. Bishop Jin remains active and has connections to both the Vatican and to leaders within the Chinese Catholic Church. His designated successor, Bishop Xing Wenzhi, received approval from both the Vatican and Beijing prior to his elevation to that position. We are working with Xujiahui Church and the Shanghai Municipal People's Congress to arrange a meeting with Bishop Jin during your visit. ¶12. (SBU) The official Protestant Church of China, CCC/TSPM, is headquartered in Shanghai. Two of China's most active Protestant congregations are located in neighboring Zhejiang Province, where there are approximately 1.5 million Protestants according to Zhejiang CCC/TSPM officials. (It remains difficult to estimate the actual number of Protestants in East China because official statistics do not include house church members.) China's only "megachurch" -- with a capacity to hold 6,350 parishioners -- is located in Hangzhou, Zhejiang's capital. Nanjing in Jiangsu Province is home to the CCC/TSPM's seminary and to the Amity Bible Printing Press, the world's largest printer of Bibles. Shanghai Politics: Limited Reforms -------------- ¶13. (SBU) To attract investors and bolster economic development, Shanghai has taken measures to protect intellectual property rights (IPR) and improve governmental transparency. The municipal government has an Open Government Information Act and publishes some of its draft laws on the Internet for public comment. The Pudong New District in the eastern half of Shanghai is also experimenting with transparency and has put many of its regulations on the Internet. In other spheres, however, such as media, religion, and NGO development, the Shanghai Government continues to be very cautious. As in most cities in China, the media is tightly controlled and the Internet monitored. Shanghai has very few grassroots NGOs, and most NGOs have a close relationship with the Government. SCHUCHAT