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UNCLAS SECTION 01 OF 06 BEIJING 016631 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL ENRG SENV KIPR OREP CH TW
SUBJECT: CODEL Stevens: U.S.-China Inter-Parliamentary 
Dialogue 
 
THIS CABLE IS SENSITIVE BUT UNCLASSIFIED. PLEASE HANDLE 
ACCORDINGLY. 
 
SUMMARY 
------- 
 
¶1. (SBU) CODEL Stevens, accompanied by the Ambassador, 
discussed issues including Taiwan, North Korea, Lebanon, 
China?s defense policy, energy security, intellectual 
property rights (IPR), the exchange rate and bilateral 
trade with members of the Chinese National People?s 
Congress (NPC) in Guilin, China during the third annual 
U.S.-China Inter-Parliamentary Group (IPG) dialogue.  (See 
paragraph 28 for the Participant List).  The CODEL urged 
that China do more to address problems including the North 
Korean nuclear issue, the lack of transparency in China?s 
military buildup and the need for improved IPR protection 
in China.  NPC members emphasized that that United States 
and China share important strategic interests.  End 
Summary. 
 
¶2.  (SBU) NPC Vice-Chairman and Secretary-General Sheng 
Huaren led off the opening session of the Inter- 
Parliamentary Group dialogue by noting that U.S.-China 
relations enjoy positive momentum.  The United States and 
China share important strategic interests, but allowances 
should be made in handling sensitive questions.  Senator 
Stevens cited the importance of continuing meaningful 
exchanges of views and cooperation.  Senator Inouye added 
that increasing mutual awareness is the key to maintaining 
constructive bilateral relations and peace in the region. 
 
TAIWAN 
------ 
 
¶3. (SBU) Sheng expressed appreciation for U.S. adherence to 
a one China policy, U.S. opposition to unilateral changes 
to the status quo and U.S. ?imposition of some constraints? 
on Taiwan independence.  Sheng stated that Chen Shui-bian 
is ?deeply trapped in scandal? and has ?no credibility to 
speak of.?  He cited concerns that Chen may be pushed, out 
of desperation, to attempt to declare Taiwan independence. 
NPC Foreign Affairs Committee Chairman iang Enzhu said 
that Chen?s stubborn adherenc to independence perpetuates 
cross-straits tensions.  Jiang noted that Taiwan?s 
Democratic Progressive Party (DPP) and the Taiwan 
Solidarity Union (TSU) are planning to put forward a new 
draft constitution in September.  He warned that this 
constitutional re-engineering was ?most dangerous? and said 
he hoped the U.S. would help restrict moves towards Taiwan 
independence.  He cautioned against Congress sending the 
wrong signal to Taiwan on this issue.  Jiang told the 
Senators that China wants peaceful unification, economic 
development and stability. 
 
¶4. (SBU) Senator Stevens stated that the United States 
adheres to its one China policy and does not support Taiwan 
independence.  He urged China to be patient on the Taiwan 
issue.  Senator Inouye noted that the United States is 
aware of China?s efforts militarily ?in space, in the 
ocean, and on land,? and cautioned that such activities 
should be undertaken carefully and transparently. 
 
ECONOMIC ISSUES 
--------------- 
 
¶5.  (SBU) CODEL Stevens and the NPC members stressed the 
importance of the economic relationship to the health of 
the overall bilateral relationship, noting that the U.S.- 
China economic relationship has a global impact.  Jiang 
said that China?s long-term strategic goal is peaceful 
economic development, improving Chinese citizens? standard 
of living.  Jiang noted that while China?s GDP is about USD 
2.22 trillion, its per capita GDP is only USD 1,700. 
Rural-urban income disparities are still a problem, as is 
the need to create job opportunities for 150 million 
?redundant employees.? Sheng added that 100 million Chinese 
still live on less than one dollar per day.  China must 
deal with serious pollution, health care, and energy 
resource issues.  Jiang estimated that it would take 
several generations for China to fully achieve 
modernization and characterized China?s development as an 
opportunity, not a challenge or a threat. 
 
¶6.  (SBU) NPC Financial and Economic Affairs Committee 
Vice-Chairman Zhou Zhengqing acknowledged U.S. concerns 
 
BEIJING 00016631  002 OF 006 
 
 
over the growing trade imbalance but stressed that both the 
United States and China have benefited from the increase in 
trade between the two nations.  U.S. companies are 
responsible for a large portion of Chinese exports to the 
United States and are reaping profits from the trade. Zhou 
stressed that China does not seek to perpetuate its trade 
surplus, which is a result of globalization, trade 
liberalization and attendant industrial restructuring. 
Sheng said he hoped that the U.S. would relax its 
restrictions on high tech trade with China and its import 
quotas on Chinese goods. 
 
¶7.  (SBU) Senator Stevens emphasized the need to establish 
controls on distant water fleets, which can do considerable 
damage to the oceans.  He cited Alaska?s scientific 
management of ocean species as a model.  On civil aviation, 
Senator Stevens said that the development of ?mosquito 
fleets? (small, low-cost aircraft with ranges of 
approximately 1,200 miles) would be a new form of 
transportation that may pose a challenge to maintaining 
control of airspace. 
 
¶8.  (SBU) Senator Cochran stressed the importance of 
protecting intellectual property rights (IPR), reminding 
the NPC members of China?s TRIPs and bilateral commitments 
in this area.  He noted China?s efforts to enforce 
compliance to date, including a recent crackdown on 14 
factories that produced pirated CDs, and encouraged further 
actions.  Citing the effect of currency valuation on U.S. 
manufacturing, Senator Cochran encouraged further moves 
toward a flexible renminbi (RMB) exchange rate.  He noted 
that China imports USD 1.4 billion in U.S. cotton and USD 1 
billion in U.S. soybeans and stated hopes for expansion of 
U.S. beef and poultry exports to China.  He raised the 
importance of port and shipping security and lauded China?s 
participation in the Container Security Initiative (CSI). 
 
¶9.  (SBU) Noting President Hu Jintao?s recent visits to 
Boeing and Microsoft in Washington, Senator Murray 
expressed appreciation for China?s recent purchases of 
Boeing aircraft.  She noted China?s efforts to ensure 
proper software licensing, especially on Chinese Government 
computers, but expressed concern over draft laws and 
standards that might discriminate against foreign products. 
Senator Alexander reiterated the need for enhanced IPR 
protection, noting in particular the problem with artist 
royalties.  Increasingly, there will be U.S.-China 
collaboration in the sciences and the arts, and the results 
of these collaborative efforts must be protected. 
 
¶10.  (SBU) Senator Specter stated that trade and economic 
development requires international peace and stability, as 
well as a strong judicial system.  In discussing the need 
for stable judicial institutions, Senator Specter raised 
the case of a Chinese-American librarian detained in China 
and the need for greater protection of human rights.  The 
Senator spoke about the separation of powers in the U.S. 
system and recent U.S. Supreme Court decisions.  In 
Pennsylvania, there are concerns about dumping of 
subsidized steel from China, he said.  The Senator 
concluded by urging China to refrain from blocking internet 
sites that do not violate laws or pose explicit threats. 
 
RMB EXCHANGE RATE 
----------------- 
 
¶11.  (SBU) Zhou Zhengqing noted that since July 2005, China 
has implemented a ?floating? rate of exchange for the RMB 
based on a basket of foreign currencies.  Since that time, 
the RMB has appreciated 3.7 percent against the dollar. 
Zhou remarked that a faster appreciation is neither 
workable for China nor a viable solution for the U.S. trade 
deficit.  Zhou cited the example of the rapid appreciation 
of the Japanese yen and the resultant economic stagnation. 
Zhou suggested that the trade imbalance could be solved by 
?altering the economic structure? in the United States, 
increasing the U.S. savings rate and increasing high tech 
exports to China.  He cautioned that a rush to alter the 
RMB exchange rate would lead to economic losses on both 
sides. 
 
INTELLECTUAL PROPERTY RIGHTS 
---------------------------- 
 
¶12.  (SBU) NPC Law Committee Vice-Chairman Hu Kangsheng 
detailed China?s efforts to comply with its legal 
 
BEIJING 00016631  003 OF 006 
 
 
obligations regarding IPR and its successes in IPR 
enforcement.  Hu said China has committed itself to its 
TRIPs obligations and revised judicial interpretations, 
patent, trademark and copyright laws.  China has made 
considerable progress in enacting legislation to protect 
and nurture IPR.  China established the IPR Working Group 
in 2004, has conducted anti-piracy public awareness 
campaigns, established special IPR tribunals and has 
increased the number of prosecutions of IPR-related crimes. 
IPR cases involving Borland, Colgate, Crest, and Hugo Boss 
were specifically mentioned.  China has made efforts to 
improve communication on IPR issues with investors and 
Chambers of Commerce. 
 
¶13.  (SBU) Sheng added that the NPC and the Government plan 
to strengthen IPR protection laws.  Sheng admitted the 
Chinese legal system is not perfect, that the market system 
needs improving, and that the Chinese Government 
understands the importance of punishing IPR violators. 
Sheng urged any Senators who have information on IPR 
violations to bring it to his attention so he can forward 
it to the appropriate department.  He hoped this would help 
convince the Senators that the NPC is ?serious and 
proactive? on IPR issues.  Senator Stevens thanked Vice- 
Chairman Sheng and committed to taking him up on his offer 
regarding IPR violations. 
 
THE MIDDLE EAST 
--------------- 
 
¶14.  (SBU) Senator Stevens stated that radical, militant, 
Muslim forces not controlled by governments, most 
prominently Al-Qaeda, are the biggest threat to 
international security.  The Senator noted apparent 
coordination of attacks in Iraq and the Hezbollah attacks 
in Lebanon.  Stressing the dangers of supporting extremist 
elements, he urged China to change its policies with regard 
to countries such as Iran and Venezuela.  Senator Dayton 
stated that conflicts in the Middle East, Lebanon in 
particular, show that the destructive power of conventional 
weapons makes citizens less secure.  The use of such 
weapons can set a country?s economic progress back by 
decades. 
 
¶15.  (SBU) Senators Specter and Stevens questioned the NPC 
members concerning a media report that the missile that hit 
an Israeli ship in the Mediterranean was manufactured in 
China and possibly modified in Iran.  While Senator Specter 
emphasized that this was only a media report, he stressed 
that Iran is a known supporter of terrorism with ties to 
Hezbollah and that Chinese arms sales to certain countries 
are a concern.  Senator Stevens stated that it was clear 
that Hamas and Hezbollah have received considerable 
weaponry from Iran.  The U.S. policy is to stop trading 
with countries that transfer weapons to third parties, he 
said.  What would China do if this media report on the 
missile were true?  The Chinese delegation avoided a direct 
response.  Foreign Affairs Committee Vice-Chair Lu Congmin 
said that China has been ?prudent? and ?very responsible? 
in its export of arms.  China exports a ?limited number of 
conventional weapons? to sovereign nations and urges these 
nations not to transfer them to third parties.  Lu 
commented that both the United States and China need to be 
careful in exporting any type of weapons so as not to pose 
a threat to international security. 
 
¶16.  (SBU) Lu stated that in the UN Security Council, China 
has expressed its deep concern about the conflict in 
Lebanon.  China calls on all sides to cease fire 
immediately and engage in discussions.  China has no 
problem with the current draft of the UNSC resolution, but 
it hopes the U.S. and France can make adjustments which 
will help ensure full implementation.  China is willing to 
stand with the U.S. to find a text that is acceptable to 
all sides. 
 
DPRK 
---- 
 
¶17.  (SBU) Senator Specter stated that North Korea is a 
threat to peace and international stability and that the 
United States needs China?s assistance in dealing with the 
DPRK.  While the Senator said that the USG policy is 
multilateral talks, some Senators felt that direct talks 
should be undertaken.  Senator Dayton warned that if the 
DPRK or Iran develops nuclear weapons, the situation could 
 
BEIJING 00016631  004 OF 006 
 
 
go ?beyond the point of no return.?  The lack of progress 
in the Six-Party Talks is alarming and destabilizing, he 
said.  The Senator urged U.S.-China cooperation to prevent 
nuclear proliferation and protect existing nuclear 
stockpiles to prevent possible terrorist use. 
 
¶18.  (SBU) Jiang stated that China opposed the DPRK missile 
test.  UN Security Council Resolution 1695 sends a clear 
message to the DPRK.  All parties need to maintain dialogue 
and build mutual trust.  China and the United States have a 
common strategic interest in stability and a peaceful 
resolution of these issues.  Jiang said the Six-Party Talks 
are at an impasse.  The DPRK says it is committed to 
implementing the September Joint Statement from the Talks, 
but will not return to the Six-Party Talks while the 
?financial sanctions? are in place.  Jiang said that China 
is working on North Korea concerning these issues and 
stated that "we should not sacrifice the greater issue for 
a lesser issue.?  He said China is willing to cooperate in 
creating an environment for a DPRK return to the Six-Party 
Talks. 
 
CHINA?S DEFENSE POLICY 
---------------------- 
 
¶19.  (SBU) NPC Standing Committee and Foreign Affairs 
Committee Member Li Yuanzheng said China has a peaceful 
foreign policy and that its military intent is transparent. 
Li stated that China has ?not a single soldier or military 
base abroad.?  China will not use nuclear weapons and 
opposes an arms race, Li said.  He suggested that the five 
nuclear powers should conclude a no first strike agreement. 
China believes in ?post-emptive? strikes and ?will never 
launch a pre-emptive attack.?  Li acknowledged increases in 
China's defense spending and pointed to U.S. statements 
citing China as a potential military threat.  Li asserted 
that, given China?s long land borders and problems with 
Taiwan, Tibet and "East Turkestan" elements, any increase 
in defense spending is normal.  Li said that the increase 
will go to raising soldiers? pay and purchasing fuel and 
more modern equipment.  China?s 2006 defense budget of USD 
35 billion is only 1.5 percent of China?s GDP and only 7 
percent of the total national budget.  Li speculated that 
China may be as much as 20 years behind the United States 
militarily. 
 
¶20.  (SBU) Senator Inouye said that relations can falter 
because of misinformation, rumors and innuendo.  The 
Senator stated that we know China has is developing a 
submarine-launched nuclear missile, a carrier aircraft wing 
and advanced space instruments.  The Senator said that 
these are not defensive weapons.  Li responded by saying 
that China has an "active defense" policy.  Senator Stevens 
added that the U.S. has forces in 121 countries and the 
United States protects our (and China?s) trade routes. 
U.S. forces protect freedom in general.  The United States 
wants China to have a strong military so China can help 
maintain peace and stability in the world. 
 
ENERGY SECURITY 
--------------- 
 
¶21.  (SBU) Senator Inouye emphasized shared interests in 
bilateral energy cooperation and development of new 
technologies.  Senator Coleman noted that China is expected 
to double its energy consumption by 2020 and said that 
China's oil dependency could have a negative impact on 
U.S.-China relations, if it involves dealings with 
countries that foment instability and violate international 
norms and treaties, such as Iran.  It is essential for the 
United States and China to develop alternative and 
renewable energy sources, such as wind, solar, biofuel, 
hydrogen fuel cells, clean coal, and nuclear fusion. 
 
¶22.  (SBU) NPC Internal and Judicial Affairs Committee 
Member Sun Jinlong gave a presentation on China?s energy 
production and consumption, including production of 2.19 
billion tons of coal and 180 million tons of oil per year, 
accounting for 90 percent of China?s energy consumption. 
Sun noted that China only consumes 8 percent of the world?s 
supply of oil and that China?s energy consumption is no 
threat to world consumption.  Nevertheless, China is giving 
priority to energy efficiency measures and hopes to reduce 
pollution and energy consumption per unit of GDP.  The 
trend for the 21st century is towards alternative and 
renewable energy sources and China plans to increase 
 
BEIJING 00016631  005 OF 006 
 
 
nuclear power generation from the current 16,000MW to 
40,000MW by 2020. 
 
¶23.  (SBU) Chinese Academy of Sciences Institute of Plasma 
Physics Vice-President Wu Songtao made a detailed 
presentation on China?s efforts to develop nuclear fusion. 
Wu outlined the benefits of fusion as opposed to fission 
reactors in regards to safety, waste disposal, and fuel 
limitations.  Wu explained the need for further research to 
achieve controllability and sustainability of a fusion 
reaction.  He speculated that a commercially viable fusion 
reactor could be available by 2050.  Wu invited CODEL 
members to visit the Institute of Plasma Physics facility 
in Hefei, Anhui Province. 
 
¶24.  (SBU) Senator Burr emphasized the need for adequate, 
predictable, and affordable energy streams today and in the 
near future.  In the near term, oil prices need to become 
more affordable and we need to ensure adequate supplies for 
both China and the United States, the Senator said.  He 
stated that nuclear power generation is essential for the 
immediate future.  Senator Burr stressed that the 
government can be the source of seed money, can set goals 
and give direction, but that the private sector is 
essential to making things a reality.  Senator Coleman 
mentioned that in the United States, the maximum capacity 
for ethanol production is about 16 billion gallons.  With 
additional cooperation and collaboration between the U.S. 
and China, cellulosic ethanol production could jump to 60 
billion gallons. 
 
TIBET 
----- 
 
¶25.  (SBU) NPC Internal and Judicial Affairs Committee 
Vice-Chairman and Chinese Buddhist Association Vice- 
President Jia Muyang delivered a prepared speech on Tibet 
and the Qinghai-Tibet railway, stating that Tibetans 
welcome the railway and that it is important for the 
economic and social development of the region.  Government- 
funded railway construction was completed a year ahead of 
schedule and President Hu presided over the inauguration 
ceremonies in July.  The railway demonstrates the unity of 
Chinese minorities, he claimed, but stated that "some 
people" have expressed unhappiness with the railway.  He 
characterized this latter group as ?ethnic secessionists? 
led by the Dalai Lama. 
 
AVIAN FLU 
--------- 
 
¶26.  (SBU) NPC Education, Science, Culture, and Public 
Health Committee Vice-Chairman Sang Guowei outlined China?s 
efforts to prevent avian flu outbreaks and to prepare 
response measures in case of an outbreak.  Sang said that 
the current avian flu situation in China is stable.  China 
has optimized its laws, increased disease monitoring and 
reporting, engaged in intense research to develop a vaccine 
and implemented culling of birds, according to Sang. 
 
¶27.  (SBU) Senators Stevens and Inouye thanked their 
Chinese hosts and Senator Stevens suggested that the IPG 
expand to include Japan for trilateral discussions.  Sheng 
did not respond directly to the suggestion, noting only 
that the IPG should continue on a long-term basis and that 
the next round should be in the United States. 
 
PARTICIPANTS 
------------ 
 
¶28.  (U) U.S. Participants: 
Senator Ted Stevens, IPG Co-Chairman 
Senator Daniel Inouye, IPG Co-Chairman 
Ambassador Clark T. Randt, Jr. 
Senator Thad Cochran 
Senator Arlen Specter 
Senator Patty Murray 
Senator Mark Dayton 
Senator Lamar Alexander 
Senator Norm Coleman 
Senator Richard Burr 
Senate Staff 
Interpreters 
Notetaker 
 
Chinese Participants: 
 
BEIJING 00016631  006 OF 006 
 
 
 
Sheng Huaren, IPG Chairman 
Jiang Enzhu, IPG Executive Chairman 
Hu Kangsheng, Legal Affairs Committee Vice-Chair 
Lu Congmin, Foreign Affairs Committee Vice-Chair 
Zhou Zhengqing, Finance and Economic Affairs Vice-Chair 
Jia Muyang, Internal and Judicial Affairs Committee Vice- 
Chairman and Chinese Buddhist Association Vice-President 
Sang Guowei, Education, Science, Culture, and Public Health 
Committee Vice-Chairman 
Li Yuanzheng, Foreign Affairs Committee 
Sun Jinlong, Internal and Judicial Affairs Committee 
Wu Songtao, Chinese Academy of Sciences Institute of Plasma 
Physics Vice-President 
Xin Chunying, NPC Deputy 
Ni Yuefeng, NPC Deputy 
Fang Xin, NPC Deputy 
Wang Wanbin, NPC Deputy 
 
¶29.  (U) CODEL Stevens cleared this message. 
 
RANDT