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RUEHSH/AMCONSUL SHENYANG 0710
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RUEHGH/AMCONSUL SHANGHAI 6306

C O N F I D E N T I A L SECTION 01 OF 04 SHANGHAI 000335 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EAP/CM 
NSC FOR WILDER AND TONG 
STATE PASS FOR USTR STRATFORD, WINTER, MCCARTIN, ALTBACH, READE 
TREAS FOR AMB HOLMER, WRIGHT, TSMITH 
TREAS FOR OASIA - DOHNER/HAARSAGER/CUSHMAN 
USDOC FOR ITA/MAC - DAS KASOFF, MELCHER, MCQUEEN 
 
E.O. 12958: DECL:  6/1/2017 
TAGS: PREL ECON CH TW XA XK XR XD
SUBJECT: SHANGHAI INSTITUTE FOR INTERNATIONAL STUDIES VIEWS ON 
U.S.-CHINA, IRAN, AFRICA, LATIN AMERICA AND CENTRAL ASIA. 
 
 
CLASSIFIED BY: Kenneth Jarrett, Consul General,   , U.S. 
Consulate Shanghai. 
REASON: 1.4 (b), (d) 
 
 
 
¶1. (C) Summary.  During a May 29 luncheon with the Consul 
General, Shanghai Institute For International Studies (SIIS) 
Vice President Yang Jiemian said China would be responsive to 
U.S. requests conveyed via the Strategic Economic Dialogue (SED) 
process.  He predicted that China would gradually take more 
measures to open its capitol markets and improve the RMB 
exchange rate.  Yang described his January trip to Iran and 
reported that while one part of Iran's international strategy 
was to create a parallel international system, Iran also wanted 
to share power with the United States in the Persian Gulf.  SIIS 
academics also discussed Latin America, Africa, and Central 
Asia.  (FYI: Yang Jiemian is the brother Foreign Minister Yang 
Jiechi.)  End Summary. 
 
¶2.  (C) On May 29, the Consul General hosted a lunch for SIIS 
Vice President Yang Jiemian.  Yang was accompanied by SIIS 
Department of American Studies Director Chen Dongxiao, SIIS 
Department of South Asia Studies Ms. Shao Yuqun and Office of 
Research Management and International Exchanges Director Ms. 
Wang Lei.  Deputy Principal Officer, Pol/Econ Chief and Poloff 
also attended the luncheon. 
 
SED: More Measures Forthcoming 
------------------------------ 
 
¶3.  (C) SIIS VP Yang admitted that Chinese press were being 
overly positive about the SED by calling it a "complete 
success."  He blamed this on translations problems and said that 
it was more accurate to call the talks a "great success."  He 
assured the Consul General that the Chinese government was 
paying a great deal of attention to the SED talks and had been 
responsive to some of the U.S. demands and in the future would 
gradually takes steps to open China's capital markets and 
liberalize the RMB exchange rate.  Vice Premier Wu Yi's role as 
head of the Chinese SED delegation showed that China was 
committed to the talks.  He noted that China might not do 
anything immediately after this latest round of talks, but as 
long as Wu Yi was in the "driver's seat", China would be 
responsive to U.S. demands.  Wu Yi would likely head the Chinese 
delegations during the next round of SED talks in December, but 
it was unclear whether she would be the head of delegation for 
the Spring round of talks.  Wu Yi, at 69 years of age, was close 
to the mandatory retirement age of 70 and she might retire at 
the National Party Congress in March 2008.  Nevertheless, Wu Yi 
would still be active on economic issues.  In terms of whether 
momentum on the talks could be sustained, Yang said that having 
so many ministers involved in the first two rounds of the SED 
was important.  He expected that overtime the talks would evolve 
into smaller scale focused talks.  The Consul General noted Wu 
Yi's editorial that appeared in the Wall Street Journal shortly 
before the talks.  (Note: Some believe that Yang was the author 
of the editorial. End Note.)  He asked whether an editorial from 
Secretary Paulson could be published in the People's Daily 
 
SIPDIS 
before the next round of talks.  Yang responded positively, but 
noted that this would require coordination in advance, 
particularly with the State Council Information Office. 
 
¶4.  (C) Yang hoped that U.S. disappointment over inadequate 
results at the SED would not be used as an excuse for a trade 
war.  A stable, predictable U.S.-China relationship was in 
everyone's interest.  There would be two opportunities for 
President Bush and President Hu to meet before next fall's 17th 
Party Congress; on the margins of the G8 meeting in Germany in 
June and during the September APEC meeting in Australia.  China 
was busy making preparations for these meetings.  Yang believed 
that the next two years would be the most important years for 
the U.S.-China relationship and urged that more be done to 
stabilize the relationship and make visible progress.  According 
to Yang, the relationship had two aspects.  On the one hand, 
both sides were trying to promote cooperation.  On the other 
 
SHANGHAI 00000335  002 OF 004 
 
 
hand, both sides were able to air their differences.  He was 
pleased that the latter aspect was of secondary importance.  He 
added that China would like to isolate difficult issues to 
prevent them from spilling over onto other issues.  For example, 
the Chinese government greatly appreciated the USG's opposition 
to Taiwan's bid to join the WHO as a sovereign state.  While it 
did not appreciate the U.S. Department of Defense's Annual 
Report to Congress on the Military Power of the People's 
Republic of China, it appreciated that the report had been 
issued after Wu Yi's visit. 
 
¶5.  (C) Yang acknowledged that China did not react well when the 
United States brought cases against it to the WTO, in part due 
to cultural reasons.  He said in China, friends never go to 
court.  This attitude was changing but slowly.  He suggested 
that the United States use "back channels" and empower a 
credible figure such as Henry Kissinger to communicate U.S. 
intentions and goodwill to Chinese leaders.  He recognized that 
some USG officials were tired of Dr. Kissenger being involved 
but stressed that he was well-liked in China.  The United States 
should emphasize to Chinese leaders that it was normal for 
countries to go to court against one another.  The USG should 
also clearly tell Chinese leaders what the disadvantages would 
be if the United States did not take cases to the WTO. 
 
¶6.  (C) When asked whether Beijing was pleased by the SED 
results, Yang said that in negotiations one could never be 
satisfied.  Beijing was very focused on getting more high 
technology, especially high technology related to energy 
efficiency.  He noted that Premier Wen Jiabao also recently 
complained that China had too many foreign reserves and there 
was a great need to develop more expertise on financial 
management issues. 
 
Iran: Great Ambitions 
--------------------- 
 
¶7.  (C) Yang reported that he had visited Iran and Saudi Arabia 
in January.  It was clear from his visit to Iran that the 
country's leaders were very ambitious.  Interlocutors emphasized 
Iran's 7000 year old history and glorious past numerous times 
during his trip.  Yang said that Iran had three international 
strategies.  First, Iran wanted to build an international system 
outside of the existing one, which it believed was dominated by 
the United States and Western Europe.  It wanted to use the 
Shanghai Cooperation Organization (SCO) as a means to develop 
its own internal trading system and market.  Iranian 
interlocutors urged that China join this system, noting that the 
United States was not reliable and was always using sanctions. 
Yang told his interlocutors that Stalin tried to create a 
similar system in the 1950's, which failed.  China was not 
interested in another system and was already fully integrated in 
the international system and market. 
 
¶8.  (C) Second, Iran wanted a regional framework in the Persian 
Gulf in which Iran shared leadership in the region with the 
United States.  It did not want to share power with other 
countries and only wanted to talk to the United States.  This 
was a factor in Iran's agreement to have talks with the United 
States.  Finally, Iran had a complicated relationship with Arab 
countries.  Iranian interlocutors emphasized to Yang that 
Persians and Arabs did not mix.  Iran had never forgiven Arab 
countries for supporting Iraq during the Iran-Iraq war and was 
happy when Saddam Hussein was deposed.  Yang added that many 
young people and elites in Iran still had good feelings toward 
the United States.  He urged that the United States think 
strategically about the Persian Gulf and noted that Iran and 
Iraq were the two pillars of the Arab world.  Increased dialogue 
would ease tensions in the region. 
 
Africa:  The China Alternative? 
------------------------------ 
 
¶9.  (C) SIIS Department of American Studies Director Chen 
Dongxiao briefed the group on his recent trips to Ethiopia, 
South Africa, Brazil, Argentina and Mexico.  According to Chen, 
 
SHANGHAI 00000335  003 OF 004 
 
 
his interlocutors in Africa had ambivalent attitudes towards the 
continent's relationship with developed countries.  These 
countries were pleased that countries such as China, India and 
South Korea were playing a more active role in Africa. 
Interlocutors believed that competition between diverse actors 
in Africa was much better than domination by one country or one 
type of power.  However, African countries were still mentally 
and culturally dependent on European powers.  In addition, their 
economic relationship with European countries remained strong. 
He noted that some African scholars were unhappy with how 
Western countries made human rights, rule of law and other 
political issues pre-conditions for economic assistance. 
However, other African scholars complained that Chinese 
assistance often did not include any pre-conditions or were 
condition neutral.  They worried that this would prevent 
economic assistance from being used properly. 
 
¶10.  (C) According to Chen, many African scholars were critical 
of the United States decision to create an African Command in 
the U.S. military.  African interlocutors noted that this 
decision was made without prior consultation and believed it was 
motivated by U.S. desires to prevent China's influence from 
undermining U.S. interests in Africa.  He added some 
interlocutors hoped that China's presence in Africa would 
marginalize Western influence, a position he said he did not 
share.  They believed that African countries could play China 
off of the United States and the European Union and that China 
could be an alternative to the West.  Chen added that this was 
unlikely to happen.  According to Chen, the biggest challenge 
for the African continent was that it still did not know what it 
really wanted from its relationship with China.  There was no 
agreement on objectives and on whether African nations should 
work together under the African Union or break up into regional 
groups in their discussions with China. 
 
Latin America: Political Infighting 
----------------------------------- 
 
¶11.  (C) According to Chen, the Latin American countries he 
visited all faced the same challenge of how to compete with big 
powers such as the United States.  However, these countries were 
not able to focus on this issue because of political infighting. 
 Neither Mexico nor Brazil had strong central governments. 
There were also disagreements about regional cooperation. 
Argentina favored relying on Mercosur.  Brazil advocated keeping 
a balance between Mercosur and having a relationship with the 
United States.  Mexican scholars were concerned about whether 
Mexico's overdependence on the United States would be 
economically sustainable and they were looking to countries such 
as China and Japan to diversify their economy. 
 
Central Asia: U.S., China, Russia Dialogue Needed 
--------------------------------------------- ---- 
 
¶12.  (C) SIIS Department of South Asia Studies Deputy Director 
Shao Yuqun discussed China's relationship with Central Asia. 
According to Shao, the United States' relationship with Central 
Asian countries had shifted.  The "honeymoon" was over and the 
United States appeared to have backed off on pushing democracy 
in the region.  This was due to the realization that the "Tulip 
Revolution" in Kyrgyzstan did not have the influence that the 
United States had hoped on other countries in Central Asia.  The 
United States had also improved its relationship with India and 
was urging more integration between South Asia and Central Asia. 
 She had recently visited India and Pakistan and many of the 
scholars with whom she met expressed reservations about the 
re-organization in the Department of State in which the Central 
Asian states were moved to the South Asian regional bureau. 
Pakistani scholars were upset that the United States had 
embarked on this regional initiative without consulting 
Pakistan.  South Asian academics believed that integration was 
not possible as long as Afghanistan remained unstable.  She said 
the United States should not underestimate the role of China and 
Russia in the region and urged that there be more discussions 
between Russia, China and the United States on Central Asia. 
 
 
SHANGHAI 00000335  004 OF 004 
 
 
SIIS Programs 
------------- 
 
¶13.  (SBU) Office of Research Management and International 
Exchanges Director Wang Lei provide a brief overview of SIIS 
programs.  She said that SIIS had around 18 programs with 
international think-tanks and universities every year.  It 
organized a similar number of programs for internal think-tanks. 
 Yang added that SIIS in cooperation with the James Baker 
Institute at Rice University would hold a conference on Energy 
Security in Beijing in the fall.  SIIS also had an active 
exchange with Brookings, which wanted to establish an office in 
Shanghai.  Yang added that he was going to participate in a 
conference on China organized by Texas A&M.  He said that the 
conference would be called the "Bush Summit on China" rather 
than the "George H. W. Bush Summit" so that in the future 
President Bush could also equally participate after he left the 
White House. 
 
Comment 
------- 
 
¶14.  (C)  Yang's fortunes appear to be on the rise.  SIIS 
President Ms. Yu Xintian is scheduled to retire this year and 
many have speculated that Yang would take over as President.  In 
addition, the appointment of Yang's brother Yang Jiechi as 
Minister of Foreign Affairs should tighten SIIS's relationship 
with the MFA and put SIIS in good position for any MFA programs 
in Shanghai.  Yang seemed to be more relaxed during this 
discussion then in previous meetings with Consulate officers. 
In the past, Yang controlled the discussion and his staff was 
very differential to him and did not contribute much to the 
conversation.  During this meeting, his staff was still 
differential and waited to be prompted, but Yang ensured that 
they each had a chance to speak. 
JARRETT