state-owned enterprises. The fact that formal government procurement might be open some day without the use of these catalogues is a very minimal step. This evolution resembles Japan, which didn’t open its procurement until economic forces induced it to open up.”

On the positive side, he said—in health issues, climate change, and others, where Germany and the United States face common threats—there is room for cooperation. “Non-Chinese companies are betting that China will eventually buy wind equipment from them; otherwise, Vestas and GE and Suzlon would not be doubling their bets in China, which is what they’re doing. Their hope is that things will turn around.”

Dr. Dahlman suggested that “what we need to do in the dialogues is to have very frank, tough talk.” He underlined the problem of the Chinese government’s industrial policy, which includes both requirements of technology transfer and rules that make it difficult for foreign firms to compete. Because the market is so large and fast-growing, he said, the firms continue to go to China for short-term returns, even though they operate at a disadvantage in an uncertain climate.

Charles Ebinger of the Brookings Institution raised several questions about energy. He questioned the fate of the nuclear reactor industry that seemed to rest on a confluence of trends: Germany is discussing the abandonment of nuclear power, the United States is restrained by economic factors from building new nuclear plants, and China plans to become a major vendor in the nuclear marketplace. This, he said, would seem to weaken the opportunities of GE, Siemens, and other traditional vendors. Also, he said, the Chinese, who are heavily dependent on coal, are now building “the best coal plants in the world” and “moving rapidly to prove that sequestration of CO2 can work.”

Ambassador Wolff noted that “China is run by engineers who have a clear conception of problems they face.” As coal represents an increasing proportion of their energy use, they realize its costs in terms of pollution. At the same time, China has the largest wind energy installation to date, and is pressing ahead on its renewable energy infrastructure.

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