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Cablegate: U.S-China Transportation Forum Agrees to Broad Bilateral

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PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #4626/01 3570917
ZNR UUUUU ZZH
P 220917Z DEC 08
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 1527
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RULSDMK/DEPT OF TRANSPORTATION WASHDC

UNCLAS SECTION 01 OF 03 BEIJING 004626

DEPT OF TRANSPORTATION PASS TO SMCDERMOTT, JSZABAT

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ELTN EWWT EAIR ETRD CVIS CH

SUBJECT: U.S-CHINA TRANSPORTATION FORUM AGREES TO BROAD BILATERAL
COOPERATION

THIS CABLE IS SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET
DISTRIBUTION. PLEASE HANDLE ACCORDINGLY.

1. (SBU) SUMMARY: China sees an opportunity in the current global
financial crisis to develop transportation infrastructure, Ministry
of Transportation (MOT) Vice Minister Weng Mengyong told U.S.
Department of Transportation (DOT) officials attending the Strategic
Economic Dialogue's (SED) first U.S.-China Transportation Forum (TF)
on December 3. The TF brought together U.S. and Chinese government
and industry representatives to share approaches on maximizing
transportation capacity through increased infrastructure efficiency.
The two sides agreed to establish working groups on new
technologies in transport, the transport of hazardous materials,
urban congestion, innovative financing, and disaster assistance
coordination. DOT presentations focused on urban congestion, Next
Generation Air Transportation Systems and advances in rail
technology, while China's MOT presenters addressed China's port
industry, highway construction financing policy and disaster
assistance coordination. DOT announced a partnership with the U.S.
Trade and Development Agency (USTDA) to provide training to Chinese
helicopter pilots for search and rescue missions. Both sides agreed
that the forum would serve as the foundation for expanding bilateral
cooperation to find solutions for the pressing transportation
problems of the 21st century. END SUMMARY.

2. (SBU) Led by Deputy Secretary Thomas Barrett, the DOT delegation
also took part in bilateral meetings with Vice Minister of Transport
Weng Mengyong and Vice Minister of Railways Hu Yadong and a December
2 roundtable discussion with American Chamber of Commerce (AmCham)
members whose companies deal with transportation. In addition,
EconOff met with representatives of the shipping companies APL and
COSCO on November 25. These meetings, along with the presentations
and discussions at the TF, shed light on China's rapidly developing
transportation infrastructure and the country's most significant
aviation, maritime, railway, highway and disaster relief challenges.


U.S.-China Transportation Forum
-------------------------------
3. (SBU) VM Weng opened the Transportation Forum by stressing that
the development of transportation infrastructure is a major
component of China's recently announced stimulus package. Of the
ten priority areas of the stimulus package, three are focused on
transportation: water infrastructure, the rural road network and
railways. In his opening remarks, Deputy Secretary Barrett
highlighted the progress that both countries have made in improving
the efficiency of existing transportation networks and called on
both sides to share their expertise to improve transportation
capacity and boost trade. Deputy Assistant Secretary Joel Szabat
presented the major findings of the Draft Transportation Study. He
identified four main areas in which progress is needed in order to
reduce constraints and inefficiencies in transportation networks:
1)removal of bottlenecks and capacity expansion; 2)more efficient
use of the supply chain; 3)use of innovative financing mechanisms
for infrastructure; and 4)reducing urban congestion. Both parties
agreed to share expertise on the more productive utilization of
existing technologies and to make progress on the adoption of
emerging technologies. The TF concluded with Deputy Secretary
Barrett and VM Weng signing a Joint Statement that commits to the
establishment of working groups on new technologies in transport,
the transport of hazardous materials, urban congestion, innovative
financing, and disaster assistance coordination.

Aviation
--------
4. (SBU) At the TF, Civil Aviation Administration of China (CAAC)
Air Traffic Management Bureau Deputy Director-General Lu Xiaoping
discussed the rapid growth in China's aviation transportation
sector. The number of airports is expected to rise from a projected
180 in 2010 to 250 by 2020, while in the same period China's
aircraft fleet is expected to rise from 1580 planes to 2600. DDG Lu
said the major limitations of the current system include the
inefficient use of airspace resources, insufficient air traffic
management (ATM) infrastructure and the lack of collaboration in
decision-making. He stressed that ATM would continue to rely on
existing infrastructure in the near term while steadily progressing
towards greater adoption of new equipment and technology. DDG Lu
also noted that the adoption of satellite-based navigation is a
critical goal and that trials of Next Generation ATM systems have
already been launched.

5. (SBU) At the roundtable discussion with AmCham members,
representatives of Boeing and United Technologies Corporation (UTC)
stressed the need for China to train more pilots and open more of
its air space for commercial flights. AmCham's Aviation Cooperation

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Program (ACP) recently completed a study that describes the benefits
of shifting more air space from military air traffic control to
general aviation control. For example, airlines' fuel usage could
be reduced by 20 percent with a more flexible air space policy. A
representative of General Electric (GE) raised the issue of U.S.
visas, arguing that the long processing time for Security Advisory
Opinions (SAO) hurts U.S. businesses in the aviation and other
transportation sectors. In one case she cited, the president of a
Chinese airline missed a business trip to the U.S. because the SAO
processing time delayed the issuance of his visa.

Maritime
--------
6. (SBU) Several presentations at the TF dealt with maritime issues.
Captain Wei Jiafu, President and CEO of China's largest shipping
company, COSCO Group, focused on problems that U.S. ports pose. He
said the high cost of U.S. inland railways, lack of efficient
inter-modal connections at ports, prevalence of labor strikes at
U.S. west coast ports, and the emergence of Prince Rupert Port in
British Columbia have resulted in a significant amount of
U.S.-destined goods being shifted away from U.S. west coast ports.
He also predicted that, when the expansion of the Panama Canal is
completed in 2014, COSCO and other shipping companies will be able
to send larger ships through the Canal to ports in the Gulf of
Mexico and the U.S. east coast for less than it would cost to ship
goods to the west coast and then cross-country by rail.

7. (SBU) MOT Department of Water Transport Deputy Director-General
Zhang Shuoguo discussed China's long-term development strategy for
port construction and enhancement. He said China's major goal is
improving port design and construction that focuses on improving
safety and security while increasing energy efficiency and lowering
emissions. DDG Zhang dismissed media reports suggesting an
overcapacity at China's ports, arguing that currently most ports are
operating above their intended capacity. This high handling
capacity is achieved at the cost of port workers who are logging
significant amounts of overtime to meet demand. VM Weng also
pointed out that ports are operating near double their intended
capacity and that further investments in port infrastructure are
needed to alleviate this problem. (COMMENT: Shipping industry
representatives told EconOff that they face serious difficulties due
to the global economic slowdown. END COMMENT.)

Railways
--------
8. (SBU) In a December 2 meeting at the Ministry of Railways (MOR),
Vice Minister Hu Yadong said China plans to speed up the
construction of railway infrastructure as part of the government's
recently announced USD586 billion stimulus package. By 2020, China
plans to construct 40,000 kilometers of new railway with increasing
focus on electric lines that generate less pollution than
diesel-powered trains. VM Hu stressed the land-use and
energy-saving advantages of rail, pointing out that a new railway
requires only 60 percent of the land of a comparable stretch of
highway and uses one-third of the amount of energy.

9. (SBU) At the AmCham roundtable, a representative of General
Electric (GE) noted that U.S. companies that deal with railways face
two obstacles to doing business in China: 1) China tends to favor
European companies for railway projects, and 2) China puts pressure
on U.S. companies to transfer technology as part of trade deals. A
U.S. industry representative at the TF noted that serious weaknesses
remain in China's rail system, including continued investment in
outdated rail technologies and the lack of containerized train
shipment, particularly refrigerated train cars.

Highway Construction
--------------------
10. (SBU) At the TF, MOT Department of Comprehensive Planning Deputy
Director-General Li Xinghua made a presentation on highway
construction financing. He noted that China's highway construction
budget has risen to over 3 percent of GDP and will continue to rise
as the infrastructure component of the stimulus package accelerates
completion of a nationwide highway system. DDG Li stated that China
is determined to reduce externalities such as the environmental
footprint of road construction. The government is in the process of
decreasing the number of toll roads and toll stations to reduce
driving inconvenience and congestion. However, DDG Li noted that,
for the foreseeable future, tolls will be necessary to pay back the
bank loans used to finance road construction. He stressed that
China will maintain its policy of encouraging road construction in
the western part of the country despite the fact that such projects
are often several times more expensive than comparable projects in
more developed regions. The government currently provides western
provinces additional leverage and direct funding from the central

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budget to facilitate such construction.

Disaster Relief
---------------
11. (SBU) At the TF, MOT Comprehensive Planning Department Deputy
Director-General Cai Yuhe spoke about China's recent experience with
disaster relief, offering lessons learned from the crippling
snowstorms in January and the devastating Sichuan earthquake in May.
He said the massive losses resulting from such disasters revealed
the need for pre-emptive contingency planning for emergencies. DDG
Cai noted that China still lacks rapid response and offshore rescue
capacities as well as the ability to quickly re-open "lifeline"
transport links, transport coal to power facilities in afflicted
areas, and rapidly and accurately collect data in a disaster
environment. He said that MOT is interested in adopting U.S. best
practices and welcomes the USTDA offer to fund the training of
Chinese helicopter pilots for search and rescue missions.

RANDT

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