VZCZCXRO3618
RR RUEHCN RUEHGH RUEHVC
DE RUEHBJ #3938/01 3240948
ZNR UUUUU ZZH
R 200948Z NOV 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC 2298
INFO RUEHOO/CHINA POSTS COLLECTIVE
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 03 BEIJING 023938 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
STATE FOR EAP/CM GWARD AND PSECOR, EB/ESC PHAYMOND 
NSC FOR RHUNTER, JSHRIER, DWILDER 
USDOE for DOE OIC DPUMPHREY, OFFICE OF THE SECRETARY for 
MWILLIAMSON 
TRESURY FOR OASIA/ISA ADAMS/DOHNER/CUSHMAN 
USDOC FOR 4220/ITA/MAC/CMMCQUEEN/HAMROCK 
USDOC FOR 1003/ITA/OUS/OC 
USDOC FOR 6310/ITA/TD/OIEM/KMURPHY/HBURROUHGS 
UDDOC FOR 6000/ITA/TD/RPACE 
 
E.O. 12958: N/A 
TAGS: ENRG PREL ETRD SENV TRGY CH
SUBJECT: CHINA/ENERGY: SENIOR DIRECTOR HUNTER, NDRC VICE-CHAIRMAN 
ZHANG XIAOQIANG MEET TO DISCUSS BILATERAL ENERGY ISSUES 
 
REF: BEIJING 23859 
 
Summary 
------- 
 
¶1. (SBU)  NSC Senior Director Roszell Hunter and National 
Development and Reform Commission (NDRC) Vice-Chairman Zhang 
Xiaoqiang met to discuss energy and environmental issues relating to 
the Strategic Economic Dialogue (SED) on November 16, 2006.  Senior 
Director Hunter stated Washington wants cross-cutting discussions 
during the SED that move it beyond an exchange of talking points and 
towards frank exchanges.  The United States has thirty years 
experience balancing economic growth and environmental protection 
that China can draw on during the SED.   Washington policymakers 
have broad interest during the SED in learning more about the role 
of market forces in China's energy policy, said Senior Director 
Hunter.  Vice-Chairman Zhang stated China also wants a cross-cutting 
approach to the SED.  China is looking for assistance to meet energy 
conservation goals.  The NDRC hopes the SED will give Beijing a 
better understanding why Washington has inconsistent standards for 
western oil companies and Chinese oil companies as they conduct 
business abroad.   Zhang noted that China needs a long-term 
commitment from the United States in order for Westinghouse to 
secure the contract to bid the next generation of China's nuclear 
power plants.  End Summary. 
 
Senior Director Hunter Raises SED Framework 
------------------------------------------- 
 
¶2. (SBU) NSC Senior Director Roszell Hunter and NDRC Vice-Chairman 
Zhang Xiaoqiang met to discuss energy and environmental issues 
relating to the SED on November 16, 2006.  Senior Director Hunter 
said that his objective visiting the NDRC is to facilitate 
cross-cutting discussions during the SED.  Washington's goal is to 
move the SED beyond an exchange of talking points and towards frank 
exchanges focused on finding solutions to common problems.   For 
example, discussing the role of market forces in economic 
development can bring senior energy and health care policymakers 
together.   Both groups must ensure government enables timely and 
effective delivery of critical services, such as electricity and 
medical care, to customers, according to Senior Director Hunter. 
 
 
¶3. (SBU) Senior Director Hunter emphasized that the United States 
now has more than thirty years legal and regulatory experience 
managing the relationship between economic growth and environmental 
protection.  These experiences can be helpful to China as it manages 
its own economic growth.  The SED is a good opportunity for Beijing 
to gain greater access to this type of assistance from the United 
States, according to Senior Director Hunter.  United States 
Government officials participating in the SED have broad interest in 
learning more about the role of market forces in China's energy 
policy.  For example, they want to learn more about the role of the 
market in regulating China's energy demand and enabling China to 
improve its energy supplies while discouraging wasteful energy 
practices, said Senior Director Hunter. 
 
Zhang: Cross-cutting Approach Best 
---------------------------------- 
 
¶4. (SBU) Vice-Chairman Zhang stated during the last round of 
meetings about the SED representatives from both countries agreed 
for the need to have a cross-cutting approach.  This technique helps 
when attempting to balance energy needs and environmental concerns 
in a way that fosters sustainable economic development.  Zhang said 
that China has a very ambitious plan to develop renewable energy 
resources and other energy resources such as nuclear energy.  China 
is looking for technology, equipment, and capital to help develop 
these resources. 
 
¶5. (SBU) Vice-Chairman Zhang noted that Beijing and Washington 
should use the SED to explore opportunities for cooperation in the 
energy and environmental protection arena.   China's participation 
in the United States-led Futuregen clean coal power plant program is 
a good example of the type of cooperation the two sides should 
further develop.  Additionally,  Beijing will look to Washington to 
provide assistance in helping China reduce its energy intensity 
level.  China's Eleventh Five Year Plan has an ambitious goal of a 
twenty percent cut in energy intensity by 2011.  The NDRC is anxious 
 
BEIJING 00023938  002 OF 003 
 
 
for any assistance the United States can provide in enabling China 
to meet this goal, according to Zhang. 
 
Zhang: Free Market Not Always the Best 
-------------------------------------- 
 
¶6. (SBU) Vice-Chairman Zhang went on to state that China is working 
to find the balance between market forces and the regulatory role of 
the Central Government in energy matters.  Beijing's view is that at 
times the market's "invisible hand" fails to adequately provide for 
the welfare of average citizens.   Problems relating to 
build-own-operate (BOT) power plant projects in the Philippines and 
California's power shortages in 2001 are examples of how markets 
left to their own design can fail to provide adequate services at an 
appropriate price.  As a domestic example,  Zhang highlighted that 
many industrial polluters in China, such as  power plants, have 
installed emissions controls at their facilities.  Unfortunately, 
the emissions controls are only operational during environmental 
inspections because the equipment is expensive to operate, according 
to Zhang. 
 
Zhang: United States Restricting China's Energy Market Abroad 
--------------------------------------------- --------- 
 
¶7. (SBU)  Vice-Chairman Zhang stated a cross-cutting approach to the 
SED should also facilitate discussions on energy security since that 
issue involves numerous factors including geopolitics, 
transportation security, and the role of market speculators in the 
international energy market.  China and the United States as the 
world's leading energy consumers have a shared responsibility to 
promote energy security.  NDRC Chairman Ma Kai believes that China 
and the United States have a shared, but differentiated 
responsibility in that regard, said Zhang. 
 
¶8. (SBU) Vice-Chairman Zhang said that the NDRC wants to gain a 
better understanding why the United States Government is so 
concerned about where, and with whom China seeks oil deals.  The 
NDRC believes the United States has inconsistent standards for 
western oil companies and Chinese oil companies, said Zhang.  For 
example, Washington is very concerned about Chinese companies 
seeking deals in Iran.  The United States is apparently unconcerned 
about British, French, Italian, Japanese, and Russian firms doing 
the same, according to Zhang.  SED discussions on this issue do not 
have to take place at a country-specific level, but a broad 
discussion would help Beijing to better understand Washington's 
thinking on the matter. 
 
Zhang: Need MOU for Westinghouse Deal 
------------------------------------- 
 
¶9. (SBU) Vice-Chairman Zhang noted that China needs a long-term 
commitment from the United States in order for Westinghouse to 
secure the contract to bid the next generation of China's nuclear 
power plants.  The United States and China currently have good 
energy cooperation, but if the United States continues to retain 
strict control over exports of civilian high-technology products to 
China, then Washington will hurt the competitiveness of American 
companies.  Zhang acknowledged that Beijing has received advocacy 
letters on behalf of Westinghouse from Energy Secretary Bodman, 
Commerce Secretary Gutierrez, and Secretary of State Rice. 
 
¶10. (SBU) Vice-Chairman Zhang stated that the letters demonstrate 
Washington's commitment to helping Westinghouse win the nuclear 
power plant contract.  The letters do little to provide assurances 
on the United States' long-term view on energy cooperation with 
China.  Zhang claimed that Beijing is concerned that if bilateral 
ties become strained, or if the United States enacted some sort of 
new sanctions against China, cooperation on the nuclear power plant 
contract could be affected.  Beijing also is concerned that 
tightened export control restrictions could impede the progress of 
the program.  The best way to mitigate this concern is for 
Washington and Beijing to sign a memorandum-of-understanding 
relating to the project, said Zhang. 
 
Hunter: More Information Needed On MOU 
-------------------------------------- 
 
¶11. (SBU) Senior Director Hunter responded that the United States 
Government understands China's concerns about export control 
 
BEIJING 00023938  003 OF 003 
 
 
restrictions.  Washington does not normally use 
government-to-government MOU's to support commercial transactions. 
Senior Director Hunter said that because of this fact it is 
important for the NDRC to provide a clear understanding of what it 
expects to be in such an agreement.  (Note:  Embassy Beijing met 
with NDRC officials on Friday November 17, 2006 in response to 
Senior Director Hunter's request for more information. See Reftel 
for more information.  End Note.) 
 
Participants and Clearances 
--------------------------- 
 
¶12. (U) Chinese participants: 
 
Zhang Xiaoqiang, Vice-Chairman of the NDRC 
Ma Xin, Director General, NDRC Department of Foreign Affairs 
Li Bin, Deputy Director General, NDRC Department of Foreign Affairs 
Gu Jun, Director,  NDRC Department of Foreign Affairs 
Guo Xin, NDRC Department of Foreign Affairs (Interpreter) 
 
¶13. (U) United States participants: 
 
Roszell Hunter, Senior Director, NSC 
Robert Dohner, Deputy Assistant Secretary of Treasury 
Robert Luke, Economic Minister-Counselor 
Deborah Seligsohn, Environmental, Science, Technology, and Health 
Counselor 
Marco Dicapua, DOE Beijing Office Director 
Cheryl McQueen, Director, Office of the Chinese Economic Area, 
Market Access & Compliance, Commerce Department 
Sarah Ellerman, Commercial Officer 
Brian Jones, Economic Officer (Notetaker) 
 
¶14. (U)  Senior Director Hunter and his delegation did not have an 
opportunity to clear this cable before departing Beijing. 
 
RANDT