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O 111322Z JAN 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3736
RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
RUCPDOC/USDOC WASHDC IMMEDIATE
RUEHC/DEPT OF LABOR WASHDC IMMEDIATE
RHMFISS/DEPT OF ENERGY WASHINGTON DC IMMEDIATE
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INFO RUEHOO/CHINA POSTS COLLECTIVE

UNCLAS E F T O SECTION 01 OF 04 BEIJING 000265 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE ALSO FOR OES/WATSON AND DEROSA-JOYNT 
STATE PASS CEQ CONNAUGHTON 
STATE PASS CEA FOR BLOCK, SLAUGHTER 
STATE PASS USTR FOR STRATFORD, ALTBACH, WINTERS, CELICO 
STATE PASS FEDERAL RESERVE BOARD FOR JOHNSON/SCHINDLER; SAN 
FRANCISCO FRB FOR CURRAN/LUNG; NEW YORK FRM FOR DAGES 
NSC FOR RHUNTER/JSCHRIER/KTONG 
TREASURY FOR OASIA/INA DOHNER/HAARSAGER/BAKER/CUSHMAN 
TREASURY FOR TAIYA SMITH 
DOE FOR INTERNATIONAL/PUMPHREY AND GEBERT 
EPA FOR INTERNATIONAL/AYRES, FIDLER, MCASKILL 
HHS FOR STEIGER, ELVANDER AND BHAT 
LABOR FOR ILAB 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD PREL CVIS SENV ENRG CH
SUBJECT: SED SESSION FIVE:  ENERGY, ENVIRONMENT AND 
SUSTAINABLE DEVELOPMENT 
 
REF: A. BEIJING 259 
     ¶B. BEIJING 262 
     ¶C. BEIJING 263 
     ¶D. BEIJING 264 
 
¶1. (SBU) Summary:  In the December 15 Strategic Economic 
Dialogue (SED) session on energy, environment, and 
sustainable development, National Development and Reform 
Commission Chairman Ma Kai, Department of Energy Secretary 
Samuel Bodman, State Environmental Protection Administration 
Minister Zhou Shengxian and Environmental Protection Agency 
Administrator Stephen Johnson all emphasized the need for 
increased cooperation on energy and environmental issues. 
Minister of Finance Jin Renqing stressed that the United 
States has leading energy efficient/environmentally friendly 
technologies and that China wants to buy them.  Minister Jin 
promised that the Ministry of Finance would use government 
policy to encourage Chinese companies to use more energy 
efficient environmentally friendly technologies.  End 
Summary. 
 
NDRC Chairman Ma Kai: China No Energy Threat 
-------------------- 
 
¶2.  (SBU) National Development and Reform Commission Chairman 
(NDRC) Ma Kai's presentation to open session five of the 
Strategic Economic Dialogue (SED) countered the argument that 
China is a threat to world energy security.  Chairman Ma 
stated that China successfully solved its energy needs, with 
about 92 percent being sourced domestically compared to 70 
percent for OECD countries and 62 percent for the United 
States.  Chairman Ma stated that China is confident about its 
ability to meet future energy demand because of its great 
resource development potential. 
 
¶3.  (SBU) Chairman Ma also sees huge potential for energy 
savings: first, by moving away from energy intensive 
industries; second, by taking advantage of new technologies 
such as efficient coal-fired boilers; and third, by 
conserving energy, including through pricing of resources. 
 
¶4.  (SBU) Chairman Ma stated that China faces a serious 
environmental challenge because of its reliance on coal. 
China will first address this problem by reducing energy 
consumption.  Second, China will use improved technology such 
as Integrated Gasification Combined Cycle (IGCC) coal-fired 
power plants, desulfurize existing plants, and use other 
clean coal technologies.  Chairman Ma stated that China will 
readjust its energy mix to reduce the amount of coal and 
increase clean energy such as natural gas, nuclear and 
hydroelectric.  He predicted that China's ratio of renewable 
energy will increase from the current 7 percent to 16 percent 
by 2020. 
 
¶5.  (SBU) Chairman Ma stated that China and other developing 
countries must chose a more energy efficient path of 
industrialization but that growth of developing countries 
must not be restricted.  He said that developed countries 
should bear more responsibility for sustainable development 
through increased investment in energy efficiency and 
technology transfer since the developed countries consumed 
most of the world's energy and resources.  He made proposals 
for future cooperation in the following areas: the Energy 
Policy Dialogue; energy conservation and energy efficiency; 
renewable and alternative energy; clean energy technology; 
oil reserve technology and management; and multilateral 
cooperation, including joint investment in third world 
countries. 
 
 
BEIJING 00000265  002 OF 004 
 
 
USDOE Bodman: Energy Projections and Energy Security 
--------------------- 
 
¶6.  (SBU) Department of Energy (DOE) Secretary Samuel Bodman 
stated he does not believe that China and the United States 
should be competitors for energy resources, but rather 
cooperate, such as in the Asia Pacific Partnership (APP) and 
the Carbon Sequestration Forum.  He stated that the United 
States has improved energy efficiency and is ready to share 
our experiences, including appliance standards, research on 
biofuels and possibly the Global Nuclear Energy Partnership 
(GNEP).  Secretary Bodman stated that the most important area 
for cooperation is on clean coal and that he is pleased with 
China'sparticipation in Futuregen, a zero emission 
coal-fired power plant.  He also stated that a large 
investment in new technologies needs to start today and that 
a better investment climate in China will help.  Secretary 
Bodman urged China to welcome foreign companies in its energy 
markets.  He hopes China will focus on securing access to 
energy resources and not ownership of resources as the first 
is a more flexible and reliable strategy. 
 
SEPA Minister Zhou 
------------------ 
 
¶7.  (SBU) State Environmental Protection Administration 
(SEPA) Minister Zhou Shengxian said that the State Council 
now attaches equal importance to economic growth and 
environmental protection with less reliance on administrative 
measures.  He stated that SEPA's major tasks include 
pollution prevention and control; ensuring safe drinking 
water and ecological conservation.  Minister Zhou referred to 
the 11th Five-Year Plan goals of energy intensity reduction 
of 20 percent by 2010 and 10 percent reduction in overall 
pollutants.  He emphasized the importance of international 
environmental cooperation, especially with the United States. 
 
 
EPA Administrator Johnson 
------------------------- 
 
¶8.  (SBU) United States Environmental Protection Agency (EPA) 
Administrator Stephen Johnson outlined the benefits of EPA's 
Acid Rain Program.  He said that the program used economic 
incentives to encourage investments in new technologies. 
Another success story is in the transportation sector, where 
by requiring better quality fuels and encouraging cleaner 
engine technologies, the United States saved USD 175 billion 
in health benefits.  He outlined how Methane to Market (M2M) 
Partnerships in the United States have reduced methane by 10 
percent from 1990 levels and he commended China, as a 
founding member of the partnership, on hosting the 2007 M2M 
Expo.  Johnson also outlined the United States' Energy Star 
program, an energy efficient appliance labeling system. 
Johnson welcomed increased cooperation with China on clean 
coal and Futuregen. 
 
MOST Minister XU 
---------------- 
 
¶9.  (SBU) Ministry of Science and Technology (MOST) Minister 
Xu Guanhua stated that as labor and land costs increase, 
China is losing its comparative advantage and must improve 
its innovation.  He said that research and development 
spending in China is too low.  Minister Xu stated that a top 
priority for China is conservation of energy and water 
resources and environmental protection.  Therefore MOST 
strongly supports the development of clean energy and energy 
efficient technologies.  Minister Xu proposed the following: 
 
BEIJING 00000265  003 OF 004 
 
 
strengthen cooperation with the United States; establish a 
joint funding mechanism for energy research and development 
including both demonstration and commercial projects; joint 
formulation of preferential energy conservation policies and 
incentives; and increase cooperation in fighting communicable 
diseases. 
 
Suggestions and Questions 
------------------------- 
 
¶10.  (SBU) Secretary of Commerce Carlos Gutierrez suggested 
increasing cooperation on managing fisheries and prevention 
of overfishing and that this topic could be included in the 
next SED.  Minister Zhou responded that China was already 
participating in some multilateral cooperation on this issue 
through the United Nations. 
 
¶11. (SBU) Department of State Assistant Secretary Daniel 
Sullivan recommended that, if China wants to strengthen oil 
reserve technology and management, it should increase 
cooperation with the International Energy Agency which works 
on coordinating strategic stocks. 
 
¶12. (SBU) NDRC Vice Chairman Zhang Xiaoqiang discussed 
reforms to separate power plant operations from power grid 
operations to increase competition.  He said that China will 
upgrade grids in rural areas.  Vice Chairman Zhang stated 
that China will continue energy reforms so that prices 
reflect cost. 
 
¶13. (SBU) Matthew Slaughter, Member of the Council of 
Economic Advisors, underscored that energy markets and price 
signals foster sustainable economic growth and minimize the 
impacts of energy shortages.  Treasury Secretary Henry 
Paulson asked how China requires coal-fired power plants to 
use clean technology.  NDRC Chairman Ma Kai replied that 
China has established 970 coal cleaning sites and is also 
pursuing IGCC technology. 
 
Ministry of Finance Picks Up the Check 
------------------- 
 
¶14. (SBU) Minister of Finance Jin Renqing stated that the 
United States has leading energy efficient and 
environmentally friendly technologies and that China wants to 
buy them.  Minister Jin promised that the Ministry of Finance 
would implement policies to encourage Chinese companies to 
use more energy efficient and environmentally friendly 
technologies. 
 
Participants 
------------- 
 
¶15. (U) United States: 
 
--Henry Paulson, Secretary of Treasury 
--Clark T. Randt, Jr., United States Ambassador to China 
--Michael Leavitt, Secretary of Health and Human Services 
--Samuel Bodman, Secretary of Energy 
--Carlos Gutierrez, Secretary of Commerce 
--Elaine Chao, Secretary of Labor 
--Susan Schwab, United States Trade Representative 
--Stephen Johnson, Administrator of the Environmental 
  Protection Agency 
--Benjamin Bernanke, Chairman of the Federal Reserve 
--James Lambright, Chairman and President of Ex-Im Bank 
--Daniel Sullivan, Assistant Secretary, Department of State 
--Andrew Steinberg, Assistant Secretary, Department of 
Transportation 
 
BEIJING 00000265  004 OF 004 
 
 
--Matthew Slaughter, Member of Council of Economic Advisors 
 
¶15. (U) Chinese Delegation: 
 
--Wu Yi, Vice Premier 
--Jin Renqing, Minister of Finance 
--Ma Kai, Chairman of National Development and Reform 
  Commission 
--Xu Guanhua, Minister of Science and Technology 
--Tian Chengping, Minister of Labor and Social Security 
--Liu Zhijun, Minister of Railways 
--Li Shenglin, Minister of Communications 
--Wang Xudong, Minister of Information and Industry 
--Bo Xilai, Minister of Commerce 
--Gao Qiang, Minster of Health 
--Zhou Xiaochuan, Governor of People's Bank of China 
--Li Changjiang, Administrator of General Administration of 
  Quality Supervision, Inspection, and Quarantine 
--Zhou Shengxian, Administrator of State Environmental 
  Protection Administration 
--Zhou Wenxhong, Chinese Ambassador to the United States 
--Xu Shaoshi, Deputy Secretary-General, State Council 
--Yang Jiechi, Senior Vice Minister, Ministry of Foreign 
Affairs 
--Zhang Xiaoqiang, Vice Chairman, National Development and 
Reform Commission 
--Li Yong, Vice Minister, Ministry of Finance 
--Yi Xiaozhun, Vice Minister, Ministry of Commerce 
--Hu Xiaolian, Vice Governor, People's Bank of China 
--Li Ruogu, Chairman of China Export-Import Bank 
SEDNEY