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C O N F I D E N T I A L SECTION 01 OF 03 BEIJING 004557 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS USTR FOR STRATFORD, WINTER, MCCOY 
USDOC FOR DAS LEVINE, ITA/OCEA/MCQUEEN AND CELICO 
GENEVA PASS USTR 
 
E.O. 12958: DECL: 03/10/2016 
TAGS: ETRD WTRO KIPR PREL EFIN CH JA
SUBJECT: JAPANESE ECONOMIC OFFICERS ON MINISTER NIKAI 
VISIT, AUTO PARTS, IPR IN CHINA 
 
REF: A. TOKYO 1010 
     ¶B. NAHA 43 
 
BEIJING 00004557  001.2 OF 003 
 
 
Classified By: Minister-Counselor for Economic Affairs 
Robert S. Luke, Reasons 1.4 (B) and (D). 
 
¶1.  (C)  Summary.  EconMinCouns and Econoff met with Japanese 
Embassy Economic Counselor Nishimiya and First Secretary 
Ishikawa to discuss Trade Minister Nikai,s February 21-23 
visit to Beijing (ref A) and other issues.  Nikai met with 
Premier Wen Jiabao, State Councilor Tang Jiaxuan, Ministry of 
Commerce (MOFCOM) Minister Bo Xilai, National Development and 
Reform Commission (NDRC) officials and Chinese Communist 
Party Central Committee International Department head Wang 
Jiarui.  Important results included announcement of bilateral 
discussions on East China Sea maritime and gas exploration 
issues (the meeting had been previously agreed during the 
China-Japan Comprehensive Dialogue in early February; the 
first discussions were conducted March 6-7 in Beijing); 
agreement for METI to host 300 Chinese trainees over three 
years; proposal of an annual bilateral conference on energy 
conservation and environmental issues; and proposal of a 
conference of thinktank researchers to discuss long-term 
visions of the bilateral relationship.  Bo repeatedly raised 
historical issues while pressing Japan to grant market 
economy status to China.  He said that Japanese interests 
would not be served if Japan joined the U.S. and EU 
complaints about Chinese tariff treatment of auto parts 
imports.  The Japanese Embassy officers said that the 
probationary period for China to make right its protection 
and enforcement of intellectual property rights (IPR) has 
passed.  They downplayed Japanese banks, interest in 
expanding their presence in China.  The Japanese Embassy 
expects its new Ambassador to take up his post in mid-April. 
End summary. 
 
Historical Burdens and Market Economy Status for China 
 
¶2.  (C)  Nishimiya and Ishikawa spoke at length about 
Minister Nikai,s meeting and lunch with MOFCOM Minister Bo 
Xilai.  Bo lectured Nikai on historical issues, in a manner 
different than when the same issues were raised by Premier 
Wen Jiabao.  Nishimiya considered Bo,s manner as a tactical 
decision, trying to exert pressure on the "pro-China" Nikai 
to work harder on Bo,s agenda, in which granting of market 
economy status is clearly Bo,s highest priority.  (Comment: 
Under China,s WTO accession agreement, market economy 
status, or MES, makes it more difficult for foreign companies 
and countries to seek anti-dumping protections against 
inexpensive imports from China.  MES would also be a nice 
sound bite for Bo at home to show that trading partners are 
recognizing progress in China,s transition away from its 
past centrally-planned model of economic development.  End 
comment.)  Nikai told Bo that he would look into the MES 
matter.  Nishimiya said the interpreter used in this meeting 
might have been more forthcoming about the speed of looking 
into the matter in his translation than Minister Nikai,s 
actul words.  Nishimiya explained that he saw no paticular 
movement in Japan to grant MES to China, and that Nikai needs 
to increase his understanding of the issue and discuss the 
matter with METI officials. 
 
Annual Conferences on Energy Conservation and Environmental 
Issues? 
 
¶3.  (C)  Nikai proposed an annual bilateral public-private 
conference on energy conservation and environmental issues 
with a first session in Japan in May.  METI and private 
sector representatives would constitute the Japanese 
delegation, Nishimiya explained, with representatives from 
MOFCOM, the NDRC and Chinese oil companies on the Chinese 
side.  Energy security is not among the proposed topics, 
Nishimiya replied to Econoffs, question.  MOFCOM Minister Bo 
accepted in principle to visit Japan in May, but underscored 
that first he would need approval from central government 
higher-ups for such travel.  Recounting Bo,s reply, 
Nishimiya speculated that this again was a tactical move by 
the MOFCOM Minister, wondering whether Bo wished to continue 
playing the history card or continue pounding Nikai on the 
 
BEIJING 00004557  002.2 OF 003 
 
 
MES topic before rendering a final decision on whether to 
travel to Japan in May.  Nishimiya also recalled the spring 
2005 visit to Japan by Vice Premier Wu Yi, who scrapped 
planned meetings in Tokyo to return to China after Prime 
Minister Koizumi announced that he would continue to visit 
the Yasukuni Shrine.  Nishimiya further noted that MOFCOM and 
the NDRC might vie for leadership of the Chinese delegation 
at such a conference, and that those two Chinese agencies had 
provided May dates differing by two weeks in suggesting 
possible conference times to Nikai.  Nishimiya predicted that 
MOFCOM,s proposed dates would ultimately prevail and that Bo 
would make sure that he is in Japan at the time of the 
conference, even if he does not attend the conference. 
Nishimiya said that Japanese private sector representatives 
had offered ideas about such a conference to Premier Wen 
Jiabao during an autumn 2005 meeting and the issue had been 
raised again at the end of 2005.  Bo probably feels pressure 
from the Chinese oil sector to engage in such a conference, 
Nishimiya further commented. 
 
That Ploy about Chinese Tariffs on Auto Parts 
 
¶4.  (C)  Bo and Nikai discussed Japanese concerns about 
China,s use of import tariffs on automobile parts.   (Note: 
China Customs sometimes charges the higher import duty due on 
whole automobiles if it believes that imported automobile 
parts are intended to be assembled into complete cars in 
China rather than to replace broken or worn-out parts; WTO 
rules call for imposition of tariffs at the port of entry 
based on the product classification and not based on the 
post-importation end use of a product.  End note.)  According 
to Nishimiya, Bo said that the "so-called auto parts tariff 
issue" is a scheme developed by the United States and the 
European Union to compete with super-competitive Japanese 
automobile companies in China.  Japan has nothing to gain 
from joining in this game, Bo warned Nikai.  Bo again alluded 
to history and said that it is not in Japan,s interest to go 
down the road of bringing anti-dumping cases against Chinese 
companies or to maintain tough export controls on sales of 
Japanese goods to China.  It is very much in Japan,s 
interest to loosen its export controls and accept that China 
rightly deserves market economy status.  Nishimiya commented 
that Bo,s statements assumed that because Japan brings few 
if any anti-dumping cases against China, Japan does not need 
easy recourse to potential anti-dumping actions against 
Chinese goods.  China has launched more than fifty 
anti-dumping actions against Japanese goods in recent years, 
Nishimiya claimed. 
 
¶5.  (C)  Asked to summarize Japanese auto companies, views 
on the Chinese tariff issue, Nishimiya said Bo,s analysis 
that most Japanese suppliers to Japanese auto manufacturers 
are shifting production to China is largely correct, 
particularly with respect to Toyota and its suppliers. 
Still, the Government of Japan is considering analyses of the 
Chinese practice and views from Japanese companies, and is 
presently undecided on whether to participate in a WTO 
challenge on this matter.  Many in the GOJ believe that a 
good case can be made against the Chinese practice. 
 
¶6.  (C)  Nishimiya also highlighted that one should not 
underestimate the Chinese Government's willingness to address 
trade issues.  He used China,s tariff classification of 
certain photographic films as an example, saying that Japan 
and China had been able to reach an accord on that vexatious 
issue.  Agreement on a guiding principle for the solution had 
been the crucial first step, in this case, that China could 
continue to impose a specific duty on films - so long as the 
ad valorem equivalents of China,s specific duties were the 
same as China,s ad valorem tariff bindings in the WTO.  Once 
that face-saving principle had been agreed, agreements on 
which date to use over what time spans, calculation methods 
and annual reviews followed quickly.  Japan believes it won 
the outcome, and China likewise believes it prevailed.  The 
applied duties on such photograpic film imports from Japan 
have fallen to one-tenth their previous values, Nishimiya 
said 
 
¶7.  (C)  Minister Nikai also proposed to Bo that METI host 
 
BEIJING 00004557  003.2 OF 003 
 
 
100 trainees from China per year for three years, which Bo 
accepted.  Bo proposed that Chinese and Japanese think tanks 
should engage in discussions of the long-term view of 
Sino-Japanese relations, to which Nikai replied that is a 
good idea.  Nishimiya and Ishikawa said they did not know any 
more details about Bo,s proposal. 
 
¶8.  (C)  Nishimiya lamented that Bo had grabbed all that 
Nikai,s delegation offered, declined all that the delegation 
wanted, blasted Japan on history, but Nikai had left Beijing 
happy. 
 
Chinese Media Portrayal of Nikai,s Visit 
 
¶9.  (C)  Ishikawa recounted that Tokyo and the Nikai 
delegation had much interest in how China would report his 
visit to Beijing.  People's Daily and Xinhua had factually 
reported that Premier Wen met earlier that day with the 
German Foreign Minister and the Japanese Trade Minister, full 
stop.  Ishikawa said that this intentional limit to the 
content of official media reporting on Nikai,s visit 
reflected the sensitive status of bilateral relations while 
neatly balancing the reporting with that on another important 
high-level visitor. 
 
Intellectual Property Rights and Standards Challenges in - 
and from - China 
 
¶10.  (C)  Asked about Japanese companies facing IPR 
difficulties in China, Nishimiya observed that the IPR 
situation could be worse.  He recounted stories of 
near-identical trademarks being registered easily in Hong 
Kong and then marketed in China in competition to genuine 
foreign-brand products.  However, Panasonic/Matsushita has 
its own IPR enforcement unit that works closely with local 
law enforcement officials and that company, at least, has 
scored some important successes in protecting its IPR in 
China.  USTR is right, Nishimiya said, the time for China,s 
probation to get IPR protection right is over.  Nishimiya and 
Ishikawa speculated that the Chinese policy of "autonomous 
innovation" announced to some fanfare this winter could lead 
in several years time to a flood of Chinese patent applicants 
at the U.S. Patent and Trademark Office.  China is also 
increasingly looking at global standards issues, which should 
be setting off warning bells, Nishimiya continued.  He 
predicted lawsuits in overseas jurisdictions by Chinese 
persons and entities challenging foreign standards.  If 
Japan,s technical barriers to trade are thought by China to 
lack sound scientific bases, China could be ready to 
challenge those Japanese practices before the WTO in another 
four or five years. 
 
Japanese Banking Interest in China? 
 
¶11.  (C)  EconMinCouns noted China,s WTO accession 
commitment to further liberalize financial services in 
December 2006 and asked about Japanese banks, interest in 
expanding in China.  Nishimiya replied that while Tokyo 
Mitsubishi Bank has been reported to have an interest in 
investing in a Chinese bank, in the view of the Japanese 
Embassy most Japanese banks are not interested in markets 
outside of Japan.  Japanese banks are institutions that do 
not reward innovation and are risk averse.  To the extent 
that Japanese banks have established operations in China to 
date, that is a result of following Japanese investors to 
China in order to service them.  Japanese banks are largely 
satisfied with that situation.  As Japanese businesses in 
China increasingly demand transactions in renminbi, Japanese 
banks will move into that service as regulations allow them 
to do so. 
 
New Japanese Ambassador Coming to Beijing 
 
¶12.  (SBU)  The Japanese Embassy officers said that a new 
Japanese Ambassador would arrive in Beijing in mid-April (see 
ref B).  Regarded as a China hand, the new Ambassador has 
previously served as Deputy Chief of Mission in Beijing, 
departing that assignment about five years ago. 
RANDT