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RHEFDIA/DIA WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
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C O N F I D E N T I A L SECTION 01 OF 04 BEIJING 009041 
 
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SIPDIS 
 
NSC FOR WILDER 
 
E.O. 12958: DECL: 05/14/2016 
TAGS: PREL PINS MOPS CH TN KN JP
SUBJECT: PACOM ADMIRAL FALLON'S DISCUSSION WITH CENTRAL 
MILITARY COMMISSION VICE CHAIRMAN AND DEFENSE MININSTER 
GENERAL CAO GUANGCHUAN 
 
 
Classified By: Political Minister Counselor Daniel 
Shields.  Reasons 1.4 (a/b/d). 
 
Summary 
------- 
 
¶1.  (C) During an extended discussion, Central 
Military Commission Vice Chairman and Defense Minister 
General Cao Gangchuan told PACOM Commander Admiral 
Fallon that the PLA sought more military exchanges 
with the United States; discussed the PLA's strategy 
and budget priorities; and repeated familiar calls for 
the United States to curtail its military-to-military 
engagement with Taiwan.  Admiral Fallon made clear he 
was prepared to move forward on military ties, 
provided the PLA reciprocated with concrete steps to 
increase transparency and broaden the quality and 
content of exchanges.  He invited the PLA to send 
representatives to observe a U.S. joint exercise 
(Valiant Shield) in the Pacific this summer, and urged 
Cao to accept a long-standing invitation for the PLA 
Chief of the General Staff to attend the Chiefs of 
Defense Conference to be held in Kuala Lumpur this 
November.  Cao appeared interested in the offer to 
observe Valiant Shield and tasked his staff to examine 
the invitation.  Admiral Fallon provided Cao with a 
courtesy notification of the imminent release of the 
annual Congressionally-mandated report to Congress on 
PRC military capabilities and previewed its key 
elements.  End Summary. 
 
Got to Make the Evening News 
---------------------------- 
 
¶2.  (C) Visiting Commander of U.S. Pacific Command 
(PACOM), Admiral William Fallon, met May 10 with 
Central Military Commission Vice Chairman and Defense 
Minister General Cao Gangchuan at the PLA Headquarters 
in Beijing.  After welcoming Admiral Fallon to Beijing 
and emphasizing the importance of his visit, CMC Vice 
Chairman Cao Gangchuan noted that the opening portion 
of the meeting was being recorded by journalists for 
that evening's news and asked Admiral Fallon to share 
his thoughts on U.S.-China military-to-military 
relations.  The cordial and wide-ranging discussion 
ran 40 minutes over its scheduled time period. 
 
Invitation to Exercises 
----------------------- 
 
¶3.  (C) Reiterating Defense Secretary Rumsfeld's 
statements that the United States welcomes the 
emergence of a peaceful and prosperous China on the 
world scene, Admiral Fallon stressed the benefits of 
bilateral cooperation while emphasizing the value of 
better mutual understanding between our militaries. 
Admiral Fallon welcomed the PLA to observe a U.S. 
joint military exercise (Valiant Shield) planned for 
this summer in the Pacific.  Cao queried whether the 
exercise would be conducted with other countries. 
Admiral Fallon replied that the June exercise would 
only involve U.S. forces and that other Asia-Pacific 
nations would also be invited to observe. He stressed 
that his intention was to demonstrate U.S. Pacific 
Command's interest in being open and transparent 
regarding the purpose and conduct of its exercises. 
Cao said he would consider the proposal and tasked PLA 
Deputy Chief of General Staff Ge Zhenfeng to discuss 
the details of the offer with the U.S. Embassy. 
 
Importance of Military Exchanges 
-------------------------------- 
 
¶4.  (C) The United States and China enjoy stable 
state-to-state relations and, as a result of the 
policy direction from President Bush and President Hu, 
bilateral military-to-military relations have 
developed considerably, Cao stated.  After reviewing 
the exchanges between the two sides since Secretary 
Rumsfeld's visit, Cao said he was impressed by the 
number of exchanges in such a short period of time and 
welcomed CJCS General Pace's visit to China later this 
year. 
 
¶5.  (C) China has a positive attitude toward 
 
BEIJING 00009041  002 OF 004 
 
 
developing exchanges with the U.S. military on the 
strategic and personal level, according to Cao. 
Echoing Admiral Fallon's remarks, he highlighted the 
importance of mid-level officer exchanges.  He urged 
expanding such mid-level exchanges to increase mutual 
understanding between younger officers, particularly 
because one day they will command our respective 
militaries.  Problems between our two militaries are 
natural in light of different backgrounds, history and 
levels of development.  However, Cao continued, such 
issues can be resolved through better understanding 
and contact. 
 
Chiefs of Defense Conference 
---------------------------- 
 
¶6.  (C) Admiral Fallon expressed his disappointment 
that the PLA had chosen not to attend previous Chiefs 
of Defense Conferences, hosted by Pacific Command on 
behalf of the Chairman of the Joint Chiefs of Staff. 
He extended his personal invitation to Chief of the 
General Staff Liang Guanglie to attend this year's 
conference to be held in Kuala Lumpur and co-hosted by 
Malaysia.  Noting that this will be the ninth year of 
the conference, Admiral Fallon commented that many 
countries are eager to have China attend.  PRC 
participation at this conference would be a positive 
sign for other nations in the region, Admiral Fallon 
stated.  Cao agreed only to "remember" the invitation. 
 
Defense Department Report to Congress on State of the 
PLA 
--------------------------------------------- -------- 
 
¶7.  (C) Admiral Fallon informed Cao that he wished to 
provide him with a courtesy notification that in late- 
May, DOD will issue the Congressionally-mandated 
annual report on China's future military capabilities. 
Based on the best available public information, the 
report attempts to be factual and straightforward, 
Admiral Fallon stated.  The report, the Admiral 
stressed, is the product of a coordinated interagency 
review.  Cao expressed hope the report will 
objectively reflect the situation of both the U.S. and 
PLA military forces and will help rather than impede 
the military relationship. 
 
Taiwan: "Nothing Else Matters More" 
----------------------------------- 
 
¶8.  (C) Cao then launched into a discussion of Taiwan, 
characterizing Taiwan as the biggest issue between the 
United States and China.  "Nothing else matters more," 
Cao stated, adding that Taiwan is a "vital" PRC 
interest and Beijing's policy is very firm.  Beijing 
"will defend reunification with Taiwan and the 
territorial integrity and sovereignty of China." Cao 
offered the "one country, two systems" formulation as 
the basis for reunification because "after all both 
sides of the Strait are populated by Chinese people 
who have no wish to meet on the battlefield."  Cao 
accused Chen Shui-bian of continuing his "risky" 
pursuit of independence despite Mainland efforts last 
year to ease tension in the Strait.  Admiral Fallon 
responded that the United States shares the goal of 
"no conflict" across the Strait.  He suggested to Cao 
that it is of importance not only to the region but to 
the world for the leadership and people on both sides 
of the Strait to come to agreement on how best to 
pursue a peaceful resolution of their conflict. 
 
¶9.  (C) Cao agreed that both the PRC and the U.S. 
sought "peace and stability" in the Strait.  At the 
same time, Cao said, China expected the U.S. to do 
more to "restrain" Chen Shui-bian and "not send 
incorrect signals" to Taiwan.  The overwhelming 
support for passage of the Anti-Secession Law is a 
clear demonstration of the Chinese people's 
aspirations, said Cao.  He went on to suggest there 
are two things the U.S. could do to ensure stability 
in the Taiwan Strait.  First, the United States should 
stop all official contact with Taiwan, especially 
military contacts.  Second, the United States should 
stop all advanced arms sales to Taiwan.  Arguing that 
the "Chen Shui-bian authorities" are "encouraged" by 
 
BEIJING 00009041  003 OF 004 
 
 
the frequent engagement with senior U.S. military 
officers and by U.S. arms sales, Cao claimed these two 
steps would be more effective than "rhetoric" aimed at 
Taiwan.  Admiral Fallon emphasized that both U.S. law 
and policy require the United States to provide for 
Taiwan's ability to defend itself against military 
attacks.  The U.S., he continued, is taking a prudent 
course in this regard. 
 
Defense Authorization Act 
------------------------- 
 
¶10.  (C) Admiral Fallon informed Cao that several 
members of Congress have asked him for his views on 
the current legislative restrictions on military 
engagement with China in the Defense Authorization 
Act.  The Admiral said that he has not yet provided 
his recommendations to Congress.  He urged Cao to take 
concrete steps to demonstrate the PLA's intent to 
increase transpaency regarding military intentions 
and capabilities.  Such steps would be duly noted by 
the Administration and Congress. 
 
¶11.  (C) Cao replied that he discussed this issue with 
Secretary Rumsfeld, but the problem is not on the 
 
SIPDIS 
Chinese side.  The PRC welcomes exchanges, though the 
Defense Authorization Act prohibits the U.S. military 
from engaging the PLA in twelve areas.  For example, 
the PLA has invited U.S. logistics officers to visit 
Chinese logistics officers but this is prohibited 
under the Act.  Cao stated his hope that Admiral 
Fallon can persuade Congress to rescind the China- 
related elements of the Defense Authorization Act.  In 
the 1980's the United States and China had robust 
military exchanges, Cao stated. 
 
China Threat Proponents Comparing Apples to Oranges 
--------------------------------------------- ------ 
 
¶12.  (C) Returning to the annual report, Cao stated 
that many China-watchers are discussing a "China 
Threat" theory, but these people only have a 
superficial understanding of the Chinese military. 
The PLA's only objective is to maintain China's 
stability and sovereignty and China will not send 
troops overseas except to participate in multilateral 
peacekeeping operations, Cao said. In the 1980s and 
1990s China was solely focused on its economic growth 
and the Government told the military to be patient. 
Now the PLA's budget is growing but the double digit 
increases need to be put into perspective, Cao argued, 
saying "if the PLA's budget started at only one dollar 
and then doubled, you still have only two dollars." 
China has a defense budget of 35 billion USD but has a 
force of 2.3 million men.  Cao called attention to the 
limited amount of funds available on a per-person 
basis, which limits the development of the PLA. 
Admiral Fallon responded that while China may spend 
much less per soldier, the real problem is that 
China's goals and priorities are unclear.  Admiral 
Fallon asked Cao why the PLA spends a large portion of 
its budget on building strategic systems if its goal 
is to increase the capabilities of its soldiers. 
 
¶13.  (C) Comparing China's defense budget with 
Japan's, Cao noted that despite its comparatively 
small population, military and land mass, Japan still 
has a defense budget that is 33 percent higher than 
China's.  Admiral Fallon responded that much of 
Japan's defense budget is used to offset the cost to 
the U.S. of maintaining its forces in Japan.  The U.S. 
provides for the defense of Japan so it does not have 
to build and maintain a military capability beyond 
what is required for self-defense.  Admiral Fallon 
pointed out that this is Japan's only security 
arrangement and it has been in place for the past 50 
years.  The world does not want to see a repeat of 
what happened in the 1930's and 40's.  The Admiral 
also pointed out the United States has over the years 
reduced its military presence in Japan as well as 
Korea and will continue to do so. 
 
PLA Soldiers to Receive Significant Pay Raise 
--------------------------------------------- 
 
 
BEIJING 00009041  004 OF 004 
 
 
¶14.  (C) Seizing on the Admiral's point concerning the 
PLA's apparent priority on strategic systems at the 
expense of personnel, Cao said the PLA is, in fact, 
reforming its pay system and later this year will 
announce a 13 percent or higher pay raise for its 
troops, according to Cao.  Cao stated that this pay 
raise has not been made public yet.  The PLA has 
determined that it must improve the wages of its 
troops if it wants to retain talented people and this 
is where the lion's share of the defense budget is 
being spent. Cao said that foreign speculation on 
China's investment in strategic systems is 
exaggerated.  He pointed out that the PLA recently 
downsized by 200,000 troops and noted that a large 
part of the PLA budget is assisting the transition of 
these officers into civilian life and providing for 
their retirement.  Cao said this process is very 
expensive and not covered by a civilian social 
security system.  Admiral Fallon responded that these 
types of details are what the two militaries need to 
discuss and share in order to build better confidence 
and understanding.  He stated that at the end of the 
Cold War, the United States military went through a 
similar downsizing and understands that troop 
drawdowns can be expensive. 
 
Comment 
------- 
 
¶15.  (C) Cao was very effusive and willing to joke 
with Admiral Fallon and his delegation, asking all to 
participate in a group photo.  Admiral Fallon broke 
the ice by asking General Cao what he preferred being 
called: General or Mr. Minister.  Cao demurred saying 
he was comfortable with either.  To Cao's obvious 
delight, Admiral Fallon responded "Well, okay Mr. 
Minister General." During substantive discussion, Cao 
consulted frequently with General Ge Zhenfeng for 
clarification on particular points or names.  Cao 
referred to General Ge as the "executive" Deputy Chief 
of Staff and told Admiral Fallon that Ge is very 
capable and his opinions are well-respected within the 
PLA and the civilian leadership.  Cao stated he would 
defer the decision on sending PLA representatives to 
observe the U.S. military exercises to General Ge, 
saying "if General Ge agrees that the PLA should send 
observers, then I'll endorse it when it comes across 
my desk."  At the end of the meeting, Cao said he 
hoped Admiral Fallon would return to China soon 
because Cao wanted another chance to exchange ideas 
with the Admiral before Cao retired.  End Comment. 
 
Participants 
------------ 
 
¶16.  (U) U.S. Participants: 
 
Admiral William J. Fallon, Commander, United States 
Pacific Command 
Ambassador Clark T. Randt, Jr. 
Ravic Huso, Political Advisor, Department of State, 
United States Pacific Command 
Brig. Gen. Ralph Jodice, Defense Attache 
COL Bob Brown, Executive Assistant, United States 
Pacific Command 
Lt Col Sesh Munipalli, Special Assistant to the 
Commander, United States Pacific Command 
CAPT Kevin Ketchmark, Naval Attache 
MAJ Roger Cavazos, China desk officer, United States 
Pacific Command 
Embassy Poloff, Notetaker 
 
¶17.  (U) PRC Participants: 
 
Cao Gangchuan, Vice Chairman of the Central Military 
Commission and Minister of Defense 
General Ge Zhenfeng, Deputy Chief of the General Staff 
Senior Colonel Li Ji 
MGEN Qian Lihua 
LTC Dong Xilin 
COL Huang Xueping 
CAPT Cheng Kai 
 
¶18.  (U) Admiral Fallon has cleared this message. 
RANDT