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Cablegate: U.S.-China Commission Visit to Hong Kong: Amcham

VZCZCXRO4542
PP RUEHCN RUEHGH RUEHVC
DE RUEHHK #1692/01 1760713
ZNR UUUUU ZZH
P 250713Z JUN 07
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC PRIORITY 2072
INFO RHEHNSC/NSC WASHDC PRIORITY
RUEHOO/CHINA POSTS COLLECTIVE

UNCLAS SECTION 01 OF 02 HONG KONG 001692

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR EAP, EAP/CM
NSC FOR DENNIS WILDER

E.O. 12958: N/A
TAGS: PGOV PREL PINR KIPR SENV CH HK
SUBJECT: U.S.-CHINA COMMISSION VISIT TO HONG KONG: AMCHAM
AND ENVIRONMENTALISTS

REF: A. HONG KONG 01689
B. HONG KONG 01691

1. (SBU) Summary: American Chamber of Commerce (AmCham)
representatives discussed IPR issues in Hong Kong and
mainland China with a visiting delegation from the U.S.-China
Economic and Security Review Commission (USCC) on April 30.
One AmCham representative observed that there was "very
little legitimate (IPR) business" in the mainland, due to
both weak enforcement of existing legal protections for IPR
and continuing constraints on market access. Despite some
signs of progress on enforcement, market access has worsened.
The continuing inadequacy of mainland IPR protection,
however, may be beneficial to Hong Kong, with an increasing
number of U.S., Chinese, and other companies basing at least
some of their operations in Hong Kong, which offers IPR
protection and a level playing field. The relocation of
companies from Hong Kong to Shanghai and/or Beijing "has
calmed down;" the movement continues in both directions, with
Hong Kong's advantages for financial and arbitration services
proving to be attractive to some mainland companies. Media
self-censorship in Hong Kong clearly occurs but is very
difficult to prove. Also on April 30, several environmental
experts briefed the delegation on Hong Kong views toward
climate change, air quality, urbanization, and water issues
in both Hong Kong and the mainland. End Summary.

AmCham: IPR and Media Self-Censorship
-------------------------------------

2. (SBU) During an April 30 meeting with the USCC delegation,
several AmCham representatives observed that there was "very
little legitimate (IPR) business" in the mainland, due to
both weak enforcement of existing legal protections for IPR
and continuing constraints on market access. That said,
however, one member noted that there were some signs of
progress in protection, perhaps due to a political decision
that innovation and intellectual property were "good for
China," although there was "still a long way to go" before
the new political will to enforce protection filtered down.
On market access, however, the same person observed that the
situation had worsened; for example, the approval process for
foreign movies remained "capricious," probably due to
government market manipulation to protect the domestic film
industry. The same member said his firm also had problems
with television program black-outs and animation products;
for the latter, he said that "China hates to pay royalties,"
but domestic animation producers, while technically
competent, lacked good stories due to political control of
the content.

3. (SBU) Another AmCham member noted that the continuing
inadequacy of IPR protection on the mainland was beneficial
to Hong Kong. He said an increasing number of U.S., Chinese,
and other companies were basing at least some of their
operations in Hong Kong, in part because the HKSAR offered
IPR protection and a level playing field. He said even some
Shenzhen companies had chosen to conduct some of their
research and innovation in Hong Kong, rather than the
mainland, for these reasons. The same member observed that
the shift of companies from Hong Kong to Shanghai and/or
Beijing "has calmed down;" relocations still occur, but the
movement is in both directions, with Hong Kong's advantages
for financial and arbitration services proving to be
attractive to some mainland companies.

4. (SBU) Asked whether media self-censorship was increasing,
one member observed that it clearly was occurring but also
was very difficult to prove. He said it was "generally
expressed through the business side," i.e. through impacts on
advertising contracts and revenue. He said Hong Kong's most
prominent pro-democracy paper, the "Apple Daily," had
positioned itself as "anti-China" through its editorials and
carved out a niche for itself, but ordinary Hong Kong people
tended not to use it for reliable news coverage. Several
other papers, such as "Ming Pao" and the "Hong Kong Economic
Journal," were viewed as independent and factual in their
coverage of Hong Kong events.

Environmental Issues
--------------------

5. (SBU) During an April 30 lunch to discuss environmental
issues, delegation members inquired about Hong Kong's efforts
to address climate change. CEO Christine Loh of Civic
Exchange responded that some Chinese people in both Hong Kong
and the mainland were aware of the climate change problem,

HONG KONG 00001692 002 OF 002


but that local air quality was a more immediate issue. Both
Loh and Professor Cho Nam Ng of the University of Hong Kong
observed that cleaning up the manufacturing and
transportation sectors would produce a short-term positive
impact on air quality and a long-term impact on climate
change. Loh urged close involvement of the market in all air
quality and climate change solutions.

6. (SBU) Regarding urbanization, Loh observed that
uncontrolled urban growth in the mainland was having a
detrimental impact on the environment. China was investing
in roads, rather than public transportation, which forced
more people to depend on cars. Ng said Chinese cities in
general were extremely polluted, but urban leaders were
starting to realize the extent and costs of the problem. As
cities began to enforce environmental regulations, however,
the major polluters simply moved to rural areas, where they
began polluting again. All three interlocutors agreed that
China already had adequate environmental laws, but weak
enforcement mechanisms. They noted that local mayors on the
mainland were evaluated based on economic growth, resulting
in much competition among regional governments to attract
investment and factories, with little regard to the
environmental impact. The central government conducted
Environment Impact Assessments, which local governments
tended to ignore.

7. (SBU) According to the environmentalists, the lack of
clean water in China has become a security issue because it
is beginning to affect the country's economic development.
The PRC faces three main water issues: 1) supply (in
particular, shortage in the north); 2) lack of sewage
treatment; and 3) cleaning of contaminated water. Pollution
of the Yangtze River has garnered international attention,
and the Pearl River in Guangdong faces similar pollution
problems, although not yet at Yangtze levels. To increase
the water supply, China must reduce consumption, increase the
use of recycled water in manufacturing, and clean up
contaminated bodies of water. Some areas (the north, west,
Shanghai, and Macau) have specific water supply problems that
could slow regional growth.

8. (SBU) The USCC delegation cleared this cable.
Cunningham

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