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RR RUEHCN
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ZNR UUUUU ZZH
R 200044Z DEC 06 ZDS
FM AMEMBASSY BEIJING
TO RUEH/DEPT OF LABOR WASHDC
RUEHC/SECSTATE WASHDC 3164
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEAUSA/DEPT OF HHS WASHINGTON DC
RUEAEPA/HQ EPA WASHDC
RHEHNSC/NSC WASHDC
INFO RUEHUL/AMEMBASSY SEOUL 9777
RUEHKO/AMEMBASSY TOKYO 1097
RUEHCN/AMCONSUL CHENGDU 7655
RUEHGZ/AMCONSUL GUANGZHOU 2036
RUEHHK/AMCONSUL HONG KONG 8637
RUEHGH/AMCONSUL SHANGHAI 6646
RUEHSH/AMCONSUL SHENYANG 7317
RUEHGV/USMISSION GENEVA 1510
RUEHIN/AIT TAIPEI 6174

UNCLAS SECTION 01 OF 03 BEIJING 024654 
 
SIPDIS 
 
C O R R E C T E D  C O P Y -- PARA 9 - TEXT 
 
SENSITIVE 
SIPDIS 
 
STATE PASS CEQ FOR CONNAUGHTON 
STATE PASS CEA FOR BLOCK 
STATE PASS USTR FOR STRATFORD/ALTBACH/CELICO/ROSENBERG 
STATE PASS FEDERAL RESERIVE BOARD FOR JOHNSON/SCHINDLER 
NSC FOR HUNTER/SHRIER/TONG 
COMMERCE FOR 4420/MCQUEEN 
TREASURY FOR SMITH/DOHNER/HAARSAGER/BAKER/CUSHMAN 
GENEVA FOR CHAMBERLIN AND USTR 
DOE FOR INTERNATIONAL/PUMPHREY/GEBERT 
EPA FOR INTERNATIONAL/AYRES, FIDLER, MCCASKILL 
HHS FOR STEIGER, ELVANDER AND BHAT 
LABOR FOR OSEC-HUI, OSHA-DEMESME-GRAY AND ILAB 
 
E.O. 12958: N/A 
TAGS: ELAB EFIN ECON PREL CH
SUBJECT: LABOR SECRETARY CHAO'S LUNCHEON WITH CHINESE LABOR 
MINISTER TIAN CHENGPING 
 
REF: A. A) BEIJING 9677 
     ¶B. B) BEIJING 22277 
 
BEIJING 00024654  001.2 OF 003 
 
 
SUMMARY 
------- 
 
¶1. (SBU) Summary:  Ministry of Labor and Social Security 
(MOLSS) Minister Tian Chengping hosted Labor Secretary Elaine 
Chao for lunch on December 15.  (Participants list in para. 
9)  Secretary Chao said the SED was a historic occasion and 
very important to both the United States and China.  Tian 
said the first SED was highly successful.  Secretary Chao 
said she hoped to continue the cooperation between the United 
States Department of Labor (USDOL) and MOLSS on pension 
issues.  There was no discussion of new projects.  The 
Minister and the Secretary described some of the challenges 
each country faces in perfecting pensions systems comprised 
of government pensions, employer-funded pension accounts, and 
personal savings.  Tian indicated that the draft Labor 
Contract Law (ref A) will get a third reading in China,s 
legislature no December 25.  He said the All China Federation 
of Trade Unions, (ACFTU) campaign to organize unions in 
foreign-invested enterprises (FIEs - ref B) is not a new 
policy, but that it received a lot of attention because of 
the successful creation of unions in China,s Wal-Mart 
stores.  End Summary. 
 
¶2. (SBU)  MOLSS Minister Tian Chengping hosted Secretary Chao 
and her delegation for lunch at the Great Hall of the People 
on December 15.  Minister Tian said he believed the first 
meeting of the SED was highly successful, and said he was 
also pleased to have a chance to reciprocate Secretary 
Chao,s hospitality during his September 2006 visit to 
Washington.  Secretary Chao said the SED was a historic 
occasion and very important to both the United States and 
China.  She thanked the Chinese side for its hospitality and 
complimented China on the meticulous arrangements for the 
SED. 
 
Pension Issues 
-------------- 
 
¶3. (SBU)  Secretary Chao said she hoped to continue the 
cooperation between the United States Department of Labor 
(USDOL) and MOLSS on pension issues, as retirement issues are 
important to citizens of both countries.  There was no 
discussion of new projects.  Minister Tian asked about 
prospects for pension reform in the United States.  Secretary 
Chao told him that the Pension Protection Act was passed this 
year and that USDOL is in the process of writing implementing 
regulations.  Minister Tian said he took interest in 
President Bush,s 2005 State of the Union Address, in which 
he discussed proposals to reform Social Security.  Secretary 
Chao described the issue as highly politicized.  She 
explained that everyone in the United States knows that the 
Social Security system faces serious problems, and she 
described President Bush,s proposal to create individual 
accounts to help make up for Social Security benefits cuts 
that may be necessary in the future.  She explained some of 
the dynamics of Social Security reform between America,s 
political parties, and between Congress and the White House, 
 
BEIJING 00024654  002.2 OF 003 
 
 
and how it all relates to the election cycle.  Minister Tian 
said he did not understand the &subtle politics8 of the 
two-party system, but that he thought the future of Social 
Security would be a very serious problem. 
 
¶4.  (SBU)  Minister Tian explained that the Chinese 
Government has just issued a policy White Paper on the Aging 
Society last week.  He said China,s aged populatin would 
peak around 2030, so China needs to aopt good policies on 
pensions and elder care nw.  If China waits until 2030 to 
deal with the issue of an aging society, he said, it would be 
impossible to find solutions. 
 
¶5.  (SBU)  Minister Tian described a conversation he had with 
an American expert on the margins of a recent international 
conference on pensions, who said that the United States' 
experience suggests that the government should avoid taking 
greater responsibility for pensions, and leave a bigger role 
for markets.  Minister Tian noted that governments which take 
a direct role in pensions, such as the UK and some Nordic 
countries, face a very heavy burden.  Minister Tian told the 
Secretary that while in the United States in September, he 
 
SIPDIS 
met with the Principal Group, a private manager of pension 
funds.  He said the company has formed a joint-venture with 
China Construction Bank and has contacted MOLSS about future 
participation in managing Chinese pension accounts. 
 
¶6.  (SBU)  Secretary Chao said the ideal pension system had 
three elements: a government pension system, employer-funded 
pensions, and private savings.  Minister Tian said he saw 
this as the right approach.  Chao described the United States 
system in which pension management was largely a private 
sector issue, but where there are strong regulations to 
prevent the misuse of pension funds, which the Government 
enforces aggressively.  Minister Tian said Chinese Government 
policies envision a similar system, but so far it was mainly 
state-owned enterprises (SOEs) participating, and this does 
not reduce the fiscal burden on the government.  He said 
MOLSS,s challenge is to find a way to encourage non-SOEs and 
foreign-invested enterprises (FIEs) to participate in the 
pension system. 
 
The Labor Contract Law 
---------------------- 
 
¶7. (SBU)  Minister Tian said the National People,s Congress 
will have a second reading of the draft Labor Contract Law 
(ref A) on December 25, and will have at least one more 
reading after that.  Tian said the legislative process in 
China can take as little as a year, but can be very time 
consuming during the drafting phase. 
 
Efforts by Chinese Union to Organize in Foreign Invested 
Enterprises 
--------------------------------------------- ----------- 
 
¶8. (SBU)  Secretary Chao asked about ACFTU,s recent campaign 
to organize unions in all FIEs.  She said there seemed to be 
confusion about this campaign in the business community (ref 
B).  Tian said MOLSS has no direct involvement in the 
activities of ACFTU, but that all enterprises, whether SOEs 
 
BEIJING 00024654  003.2 OF 003 
 
 
or privately owned, domestic or FIEs, were supposed to have 
unions.  Jiang Mohui, Deputy Director General of the MOLSS 
international department clarified that it is not mandatory 
for any enterprise to have a union, but that if workers wish 
to form one, employers have no right to obstruct them.  Tian 
said almost all SOEs have unions, but many privately owned 
businesses and FIEs do not.  Minister Tian said ACFTU,s 
interest in organizing unions in FIEs was not a new policy. 
Unions were necessary, he said, for Chinese workers to 
bargain collectively with employers.  The reason the issue 
has gotten so much attention this year, Tian said, was 
because, after several years of trying, ACFTU established 
unions in Chinese Wal-Mart stores.  Minister Tian said ACFTU 
unions collect dues equal to two percent of the wages of 
union members, and added that ACFTU has &a lot of money.8 
 (Note:  By law, ACFTU dues are two percent of the 
enterprise,s total payroll, not just the wages of union 
members.  End note.) 
 
Participants List 
----------------- 
 
¶9. (U) United States Participants 
  -------------------------- 
 
--Elaine L. Chao, Secretary of Labor 
--Laura Genero, Associate Deputy Secretary of Labor 
--Randolph Clerihue, Assistant Secretary of Labor 
--Anna Hui, Special Assistant to the Secretary of Labor 
--Bruce Levine, Labor Officer, United States Embassy 
(notetaker) 
--Interpreter 
 
Chinese Participants 
-------------------- 
 
-- Tian Chengping, Minister of Labor and Social Security 
-- Xin Changxing, DG General Affairs Office (MOLSS) 
-- Liu Xu, DG MOLSS International Department 
-- Jiang Mohui, Deputy DG MOLSS International Department 
-- Interpreter 
 
¶10.  (U)  Associate Deputy Secretary of Labor Laura Genero 
cleared this message. 
Randt