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Cablegate: Cifit 2006: Taiwan Tourism, Arab Oil, and U.S. Investment

DE RUEHGZ #0247/01 2610831
R 180831Z SEP 06




E.O. 12958: N/A
SUBJECT: CIFIT 2006: Taiwan Tourism, Arab Oil, and U.S. Investment

REFERENCE: Beijing 19645

(U) This message is sensitive but unclassified. Please handle

1. (SBU) Summary: U.S. attendees at the annual China International
Fair for Investment and Trade (CIFIT) in Xiamen left feeling pretty
good about their reception while Taiwan travel agents -- who turned
out in large numbers -- had to feel somewhat disappointed about the
lack of movement in real cross-strait tourism opportunities. CIFIT
also included a seminar on China-Arab cooperation in the
petrochemical industry, as Arab representatives and Chinese
officials touted their respective investment climates and cited
successful joint projects. End Summary.

The Heavyweights Speak: Investment, WTO, and Energy Efficiency
--------------------------------------------- ------

2. (U) CIFIT's keynote International Investment Forum featured
speeches by Vice Premier Wu Yi, WTO Director-General Pascal Lamy, UN
Conference on Trade and Development (UNCTAD) Secretary-General
Supachai Panitchipakdi, and Toyota Honorary President Shoichiro
Toyoda. Madame Wu (reftel) said China would continue to encourage
two-way trade and investment but place more emphasis -- in part
through "timely changes in "the Catalogue Guiding Foreign
Investment" -- on using foreign investment to upgrade its
manufacturing industry, high-tech manufacturing, services, research
and development, logistics, and modern agriculture. She also
singled out intellectual property protection as a key area of
improvement. WTO's Lamy thanked Madame Wu and Premier Wen Jiabao
for their stated commitment to the Doha round of WTO negotiations
and encouraged China to embark on a more sustainable path of
economic development. UNCTAD's Panitchipakdi took note of the
importance of China's growth to the developing world, noting that
China's outward FDI to developing countries had a record 13 percent
increase in 2005. Toyota's Toyoda highlighted the role that
Japanese companies can play in improving energy efficiency in China.

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U.S. Participation and Discussions with Wu Yi

3. (SBU) U.S. company representatives told Econoff that they see
CIFIT as an opportunity to meet high-level Chinese officials, learn
of available projects, and initiate deals. Because Vice Premier Wu
Yi typically attends CIFIT, all of the participating provinces send
their vice governors to attend. According to Harley Seyedin,
President of AmCham - South China, when a vice governor expresses
interest in a project during a meeting, working level officials
often follow through. In addition, the various provinces compete to
announce the greatest number of deals signed during CIFIT.
AmCham-South China's delegation of 89 people at the fair this year
included representatives from Microsoft, Air Products, and AIG, and
met with vice governors from six provinces. Microsoft opened a
research and development center in Xiamen during the fair, which at
this point is a placeholder for future expansion.

4. (SBU) A highlight of CIFIT for approximately 20 U.S. companies
was a two-hour meeting with Vice Premier Wu Yi, during which they
aired their concerns on a range of issues. According to Jeff
Bernstein, President of AmCham Shanghai, company representatives
made the following points during the meeting:
-- counterfeiting organizations are becoming more violent; computer
servers are being sold with counterfeit software installed;
-- China's merger and acquisition regulations are overly burdensome;

-- China is not positioned to capture the call-center market because
of a lack of English skills and a five percent business tax that
applies to all service exports; and
-- more government leadership is needed to move China's industrial
sector toward cleaner, more sustainable energy usage.

Cross-Strait Tourism

5. (U) Following visits by the chairpersons of Taiwan's Nationalist
Party and People First Party to mainland China in 2005, CIFIT
organizers last year inaugurated a cross-strait tourism exposition
to coincide with the fair. This year the cross-strait expo was
again held concurrently with CIFIT, with a prominent exhibition area
featuring Taiwanese travel agencies. A reported 3,967 Taiwanese
exhibitors and attendants visited CIFIT this year, ranking first
among visitors from outside the mainland. Nevertheless, the level
of activity around the Taiwan exhibition area was less pronounced
than last year, perhaps owing to continuing restrictions on travel
from the mainland to Taiwan. In remarks during a seminar on
cross-strait economic cooperation, the deputy director of the PRC's
National Tourism Administration said he hopes Taiwan will authorize

GUANGZHOU 00030247 002 OF 002

negotiations between non-government tourist agencies on both sides
as soon as possible. A Taiwanese exhibitor told Econoff that he was
confident Taiwan would announce new measures by the end of 2006.

6. (SBU) The owner of one of Taiwan's travel agencies at the expo
said he came to CIFIT to advertise and make personal connections,
all in preparation for a loosening in Taiwan's travel restrictions.
He said Taiwan travel agencies are fiercely competitive in luring
mainland customers at this early stage and offer package deals at
below cost. He also mentioned that he did not see an increase in
mainland customers despite his attendance at CIFIT last year.

China-Arab Cooperation on Oil and Gas

7. (U) CIFIT also hosts an annual China-Arab Business Cooperation
Forum, which this year focused on the petrochemical industry. In
remarks to the forum, MOFCOM Vice Minister Chen Jian cited "never
better" China-Arab cooperation in the petrochemical industry,
pointing to a 19 percent increase in Chinese investment in Arab
countries in 2005, mostly in the energy sector. He said
approximately 50 percent of China's petrochemical imports are from
Arab states. Chen also said a trade agreement between China and
Persian Gulf countries, which is currently under negotiation, has
great potential for petrochemical companies on both sides.

8. (U) China National Petroleum Corp. (CNPC) Assistant President
Wang Dongjin said CNPC currently has investment in 17 Arabic
countries, including seven projects in Sudan. He touted CNPC's
corporate social responsibility, which includes sponsoring schools
and clinics in Sudan. Sinopec Director of Development Planning Lei
Dianwu said his company offers expertise in engineering and
maintenance, and listed key refinery projects in Fujian, Qingdao,
Guangdong, and Tianjin that are open to foreign investment.

9. (U) For their part, Arab leaders expressed appreciation for their
economic relationship with China.
-- Sudan Minister of Energy and Mining Awad Ahmed Al-Jaz (who also
spoke at the International Investment Forum) said oil is a top
priority in bilateral trade. He praised the work of CNPC in Sudan,
citing an oil pipeline and a refinery in Khartoum that were
completed in record time. He also noted, somewhat pointedly, that
CNPC "does not interfere with the internal affairs of Sudan."
-- Bahrain's Ambassador to China Karim Ebrahim Al-Shakar said that
China's manufacturing-based economy will rely on Arab oil for the
foreseeable future, and estimated that China-Arab trade will triple
over the next five years. He also expressed hope that China would
increase market access in the petrochemical industry to Arab
companies in the near future.
-- Maen Nsour, Chief Project Engineer of Algeria Petroleum and
Natural Gas Corp., said Algeria has embarked on a large-scale
liberalization project in its petrochemical industry and invited
more participation from Chinese companies in downstream projects.
-- Investment promotion representatives from Jordan and Tunisia also
presented at the session.


1o. (SBU) CIFIT was better organized this year than last, when
information about scheduling and seminars was not available until
the last minute. In contrast to other large trade fairs in South
China, such as the Canton Trade Fair, products are not on display in
the exhibition area. Instead, the booths advertise the benefits of
various countries, provinces, and cities as investment locations.
Attendees come to CIFIT to strengthen relationships with Chinese
government officials and network during seminars. While this year's
event was a success for Amcham reps, it seems to have resembled a
show without substance for Taiwan's tourist agencies.


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