VZCZCXRO5580
RR RUEHCN RUEHGH
DE RUEHBJ #3919/01 1810628
ZNR UUUUU ZZH
R 300628Z JUN 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC 0726
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUCPDOC/USDOC WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 02 BEIJING 013919 
 
SIPDIS 
 
STATE PASS USTR FOR STRATFORD, WINTER, PORTER, LAWRENCE 
TREASURY FOR OASIA/KOEPKE 
USDOE FOR OIC AND OFFICE OF FOSSIL FUELS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON ENRG PREL PGOV SOCI SENV CH
SUBJECT: Chinese Think-tank Addresses Challenges to 
Sustainable Development 
 
 
¶1. (U) Summary:  Officials at the Central Government's 
premier foreign affairs research and policy institution 
stressed the importance of sustainable human-based 
development at a meeting on June 6.  A comprehensive 
approach, which takes into account social, environmental, 
and resources costs, is necessary to build a harmonious 
society, they said, which is necessary not only to ensure 
domestic stability, but also to demonstrate to the region 
and globe China's desire for peaceful development.  In 
addition to concerns about internal stability, researchers 
at the institute also focused on recent economic growth 
trends and overcapacity, as well as China's view on energy 
security. End Summary. 
 
¶2. (U) Tao Jian, Vice President of the China Institutes of 
Contemporary International Relations (CICIR) and a senior 
advisor to the Chinese leadership on sustainable 
development, briefed Embassy-sponsored visitors from the 
Defense Orientation Conference Association (DOCA) on 
China?s sustainable development goals on June 6.  During 
the briefing (also attended by Econoffs), Tao and CICIR 
officials gave their take on the 11th Five-Year Plan, 
economic development, and energy policy. 
 
CICIR on China's Efforts to Build A Harmonious Society 
--------------------------------------------- --------- 
 
¶3. (U) Reiterating already promulgated policy, Tao stated 
that China's economic development priorities are to develop 
western China, to rebuild China's northeastern "rust belt," 
and to promote development in rural areas.  Tao added that 
developed coastal areas will continue to play a leading 
role in paving the way for spreading their economic 
development to these areas.  Specifically, Tao said, the 
developed areas will have responsibility for helping 
develop neighboring provinces.  Overall, Tao continued, the 
Central Government's goal is to strike a balance between: 
a market-driven and centrally-planned economy, local and 
Central Government control, and social and economic 
development.  China's number one goal, he said, is to 
improve the overall standing of Chinese citizens.  CICIR's 
view is that economic progress is essential for two main 
reasons:  to promote a harmonious society and strengthen 
national security. 
 
¶4. (U) Concentrating on economic development by 
prioritizing human-based development is indispensable to 
forming a harmonious society and maintaining internal 
stability, CICIR officials said.  Without strong economic 
development, CICIR argues, China is more vulnerable to 
internal and external threats and will not be able defend 
its national security interests.  To illustrate recent 
economic success, CICIR pointed to recent predictions of 
China's gross domestic product (GDP) reaching USD 3 
trillion by 2010. 
 
¶5. (U) Balancing social progress and economic development 
within China's borders is one of the main reasons for 
highlighting a harmonious society, CICIR officials said, 
because if China does not achieve at least 7-8 percent 
growth annually, then the economy will not be able to 
provide for the 8-10 million jobs that are needed each year. 
According to one researcher, the number of registered urban 
unemployed in China has reached approximately 24 million. 
The same researcher noted that China must also deal with an 
aging population, and pointed out that 10 percent of 
China?s population (134 million) is over the age of 60. 
Furthermore, China's social welfare safety net is deficient, 
with less than 10 percent of the population receiving 
social welfare benefits according to CICIR statistics.  In 
a similar vein, the researcher expressed concern about 
China's growing rich-poor wealth gap, an increasingly 
sensitive issue.  (Note: Recent media reports state that 
China's Gini coefficient has reached 0.46, one of the worst 
income distribution ratios in the world.  End note.) 
 
CICIR on China's "Overheating" Economy 
--------------------------------------------- ---- 
 
¶6. (U) CICIR officials disputed claims by international 
experts that China's economy is "overheating," and 
attributed unexpectedly high first quarter 2006 GDP growth 
(which reached 10.2 percent according to the National 
 
BEIJING 00013919  002 OF 002 
 
 
Bureau of Statistics) to a surge in investment during the 
last quarter of 2005.  High growth in the first quarter of 
2006 also was due to increases in consumer spending, 
technological improvements, increases in export volume, and 
rises in living standards, they said.  In addition, CICIR 
officials hope that the New Socialist Countryside program, 
officially approved as a part of the 11th Five-Year Plan 
during the March 2006 session of the National People's 
Congress, will boost consumption in rural areas and 
stabilize the economy in the long-term, enhancing China's 
ability to achieve economic development, improving 
stability, and raising the overall quality of life in rural 
areas. 
 
¶7. (U) CICIR officials noted three potential challenges 
regarding economic growth in the near future:  1) internal 
and external uncertainties; 2) "overcapacity" in industries 
such as steel; and 3) China's shortage of electricity 
resulting from an increased demand for energy sources. 
CICIR officials gave as examples of internal uncertainties 
limited natural resources and industrial accidents such as 
coal mine disasters, and as examples of external 
uncertainties trade friction with major trading partners 
and the rising cost of crude oil. 
 
CICIR on China's Energy Security and Strategy 
--------------------------------------------- 
 
¶8. (U) China's energy strategy, according to the CICIR 
officials, aims to diversify energy sources, rely more on 
domestic energy sources, and concentrate on coal and oil as 
the main sources of energy.  Energy security is a priority 
in the Eleventh Five-Year Plan, CICIR officials noted. 
 
¶9. (U) In terms of industrially-consumed energy, it is 
vital to improve efficiency in the use of natural resources, 
CICIR officials asserted.  To address this problem, CICIR 
officials believe that industrial-sector businesses need 
more specific guidance from the Central Government.  Also, 
CICIR officials stressed the importance of reducing energy 
consumption by 20 percent per unit of output, which they 
believe is possible to achieve in the next five years. 
 
¶10. (U) CICIR officials stated several potential challenges 
in terms of securing domestic sources of energy:  1) 
diversifying energy resources; 2) environmental protection 
and cooperation with international counterparts; and 3) 
opening energy companies up to private sector investment. 
 
¶11. (SBU) Comment:  CICIR's official comments reinforce and 
support the official party line.  Building a harmonious 
society, strengthening the economy, and securing a sound 
energy strategy are three essential areas of concentration 
for Chinese officials.  Overall, CICIR officials noted 
three major challenges that China will have to confront in 
the near future:  1) finding a solution to the impact 
economic growth is having on the environment, 2) striking a 
balance between economic and social progress, and 3) 
mitigating external risks and challenges to China's 
progress.  However, given the historically strong emphasis 
on GDP growth over other areas such as labor rights, 
environmental considerations, and social progress, these 
goals will not be easy to achieve, especially in the short 
term.  End Comment. 
 
RANDT