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RR RUEHCN RUEHGH
DE RUEHGH #0083/01 0390358
ZNY CCCCC ZZH
R 080358Z FEB 07
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 5522
RUEATRS/DEPT OF TREASURY WASHINGTON DC
INFO RUEHBJ/AMEMBASSY BEIJING 0817
RUEHCN/AMCONSUL CHENGDU 0444
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHGZ/AMCONSUL GUANGZHOU 0429
RUEHHK/AMCONSUL HONG KONG 0549
RHEHAAA/NSC WASHINGTON DC
RUEHSH/AMCONSUL SHENYANG 0452
RUEHIN/AIT TAIPEI 0377
RUEHGH/AMCONSUL SHANGHAI 5877

C O N F I D E N T I A L SECTION 01 OF 02 SHANGHAI 000083 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS FEDERAL RESERVE BOARD FOR JOHNSON/SCHINDLER; SAN 
FRANCISCO FRB FOR CURRAN/GLICK/LUNG; NEW YORK FRB FOR 
CLARK/CRYSTAL/MOSELEY 
STATE PASS CFTC FOR OIA/GORLICK 
CEA FOR BLOCK 
USDOC FOR ITA/MAC DAS KASOFF, MELCHER AND OCEA/MCQUEEN 
TREASURY FOR OASIA - DOHNER/CUSHMAN 
TREASURY FOR IMFP - SOBEL/MOGHTADER 
NSC FOR KURT TONG 
 
E.O. 12958: DECL:  2/8/2032 
TAGS: EFIN EINV PREL CH
SUBJECT: NYSE SAYS REP OFFICES NOT LIKELY SOON 
 
REF: A. SHANGHAI 70 
     ¶B. 06 SHANGHAI 7129 
     ¶C. SHANGHAI 25 
 
CLASSIFIED BY: Mary Tarnowka, Pol/Econ Chief, U.S. Consulate 
General Shanghai, Department of State. 
REASON: 1.4 (b), (d) 
 
 
 
¶1. (C) Summary: New York Stock Exchange (NYSE) Executive 
Director for Asia Pacific Yeeli Zheng updated Econoff on NYSE's 
efforts to open a representational office on February 8.  China 
Securities Regulatory Commission (CSRC) Chairman Shang Fulin 
appeared resistant to timely progress on this issue out of a 
combination of economic protectionism and bureaucratic pique. 
Without additional political pressure from the State Council, at 
its current pace, the CSRC was unlikely to have final 
regulations for foreign exchanges to open offices until late in 
¶2007.  End summary. 
 
¶2. (C) Zheng coordinated NYSE's government relations in China 
and had been meeting with CSRC officials and CSRC Chairman 
Shang, who she knew socially, for more than a year.   According 
to her CSRC contacts, CSRC was still conducting "research," at 
only a junior staff level staff as to the possible content or 
scope of the regulations.  She confirmed CSRC International 
Director Zhang Weiguo's January 25 statement to Treasury DAS 
Mark Sobel (Ref A) that a draft of the regulations was on 
schedule to be completed by the end of March.  While CSRC's 
Zhang had been non-committal as to whether or not this 
end-of-March time period would include the required "public 
comment period," Zheng said that her contacts indicated it would 
not.  This public comment period on the draft regulations would 
give every other government ministry a chance to review, and 
possibly delay, the regulations.  Once the comment period was 
over, CSRC would then revise its draft into final regulations. 
Zheng believed that given these parameters it was highly 
unlikely NYSE would be able to open its offices by May; she said 
she had been told only "sometime this year." 
 
¶3. (C) Zheng believed there were two separate reasons for CSRC's 
foot-dragging on China's December 2006 Strategic Economic 
Dialogue (SED) commitment.  The first reason was CSRC Chairman 
Shang's longstanding concerns that Chinese exchanges could not 
compete with foreign exchanges.  Since for ideological reasons 
he believed that Chinese companies should be listed in China, he 
was resistant to allowing foreign exchanges any foothold in the 
Chinese market.  The second reason, according to Zheng, was 
Shang's bureaucratic pique at having this decision forced on the 
CSRC by the Ministry of Finance without consulting him.  Zheng 
said she had dinner with Shang shortly after the mid-December 
SED talks and asked when NYSE could open an office.  Shang told 
her he had not been part of the SED talks in December and had 
been "surprised" by what he termed the "Ministry of Finance's 
(MoF) announcement" to allow the exchanges to open offices.  He 
told Zheng that "I don't make decisions based on what I have 
heard in the news," and, "The MoF does not have the authority to 
make that promise."  Zheng noted that the CSRC fell under Vice 
Premier Huang Ju's purview and said that he was "most likely 
beyond caring about such things now." (Ref B) 
 
¶4. (C) Shang's reputation inside the Chinese government as an 
economic decision-maker had been greatly enhanced by the success 
of China's stock market reforms and market gains (Ref C), 
according to Zheng.  Based on this, other officials were more 
likely to value Shang's opinion and give him political room to 
slow down the process of allowing international stock exchanges 
to open in China.  Zheng said that the CSRC had been told to 
allow NYSE and NASDAQ open offices, but that there had been no 
clear guidelines on how fast the CSRC would have to move. 
Without pressure from above, Shang was unlikely to move the 
process forward any faster than he had already done.  With 
pressure from the State Council, Zheng said she thought final 
regulations could be issued within six weeks. 
 
SHANGHAI 00000083  002 OF 002 
 
 
 
¶5. (C) Zheng said that NYSE wanted very much to be granted "the 
first license to open in China" for symbolic reasons.  The NYSE 
had already collected and translated all of the information it 
believe the CSRC would ask for, basing this on the CSRC's 
established guidelines for foreign securities firms to open in 
China.  She had offered to submit these documents already, but 
been told by CSRC officials that they were not in any position 
to process the documents.  She said that NYSE intended to rent a 
property in Beijing for its prospective office within the next 
two weeks.  (Note: NASDAQ already has rented office space in 
Beijing.  End note.) 
 
¶6. (C) Zheng said that it would be very helpful for the USG to 
persuade the CSRC "from the top down" that allowing Chinese 
companies to list overseas -- especially in the Unite States -- 
was actually beneficial for China rather than detrimental.  She 
said that the CSRC believed the proper way to help their 
companies was to keep them in China.  But, she argued, allowing 
companies to list overseas strengthened Chinese companies 
overall by enhancing their accounting, corporate governance, and 
transparency standards.  She gave the example of Chinese 
investor confidence in the dual-listed China Life Insurance 
Company (listed both in the United States and China).  She said 
that Chinese investors believed its reports to be more 
trustworthy since it had to issue reports that met U.S. 
standards. 
JARRETT