VZCZCXRO4477
OO RUEHCN RUEHGH RUEHVC
DE RUEHBJ #1404/01 0631252
ZNR UUUUU ZZH
O 041252Z MAR 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5216
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEKJCS/SECDEF WASHINGTON DC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 BEIJING 001404 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL MARR ECON CH TW
SUBJECT: NPC PRESS BRIEFING REPORTS DEFENSE SPENDING 
INCREASE, SHANGHAI CORRUPTION, PROPERTY LAW, TAIWAN 
 
REF: BEIJING 01403 
 
 Summary 
------- 
 
¶1.  (SBU) National People's Congress (NPC) press spokesman 
Jiang Enzhu touched on all the hot-button issues in his 
opening NPC press conference, convened on March 4, the day 
prior to the NPC's official opening.  Jiang said: 
 
-- China's military budget will increase by 17.8 percent in 
2007, 
 
-- the corruption investigation of Politburo Member and 
Shanghai Party Secretary Chen Liangyu is still underway but 
that Chen would not attend the NPC, 
 
-- the controversial Property Law expected to be passed is 
consistent with the PRC constitution and reflects a 
"consensus" on how to best balance the competing interests it 
is designed to satisfy, 
 
-- the new Corporate Income Tax Law will not dampen 
enthusiasm for foreign investment, and 
 
-- Chen Shui-bian will use his final year in office to 
intensify his campaign for de jure independence and the 
Mainland differentiates among DPP members according to their 
support for Taiwan independence. 
 
Comment:  The session appeared orchestrated to plant the 
toughest questions in the mouths of Chinese journalists at 
the outset to ensure that Jiang would maintain the advantage. 
 End Summary. 
 
NPC Ready to Roll 
----------------- 
 
¶2.  (SBU) Jiang began the press conference with a brief 
summary of procedural issues resolved at the usual 
"preparatory meeting" of NPC deputies held just prior to the 
press event. He said the meeting had approved the NPC agenda, 
elected a 175-member Presidium and elected Politburo member 
and NPC Vice Chair Wang Zhaoguo as Secretary General of this 
year's NPC.  The Presidium held its first meeting and 
approved voting methods and other procedural matters.  Jiang 
gave a preview of the official reports and legislation to be 
considered and press conferences to be held (see Ref) then 
opened the floor to questions.  Jiang was on top of his 
brief, seemed non-plussed by tough questions, and offered a 
spirited response to the various issues raised.  Comment: 
The first few questions addressing tough subjects such as the 
controversial property law and the purge of Chen Liangyu were 
asked by PRC journalists and allowed Jiang to control the 
discussion while appearing responsive.  End comment. 
 
Jump in Military Spending 
------------------------- 
 
¶3.  (SBU) In response to a question from a Japanese 
journalist, Jiang said China's defense spending would 
increase by 52.99 billion RMB (USD 6.79 billion), or 17.8 
percent, in this year's military budget--the biggest jump in 
military spending in several years.  (Note:  The increases in 
2004, 2005, and 2006, according to statistics released at the 
NPC in previous years, were 15.3 percent, 12.5 percent, and 
14.7 percent, respectively. End note).  He said this year's 
defense budget accounted for 7.5 percent of the total 
government budget, a figure consistent with previous 
years--7.4 percent last year, 7.3 percent in 2005, and 7.7 
percent in 2004. 
 
¶4. (SBU) As in past years, Jiang defended the increase by 
claiming that it was primarily an effort to keep military 
spending in line with economic development and by asserting 
that China spent considerably less of its national budget on 
defense than the United States, Japan, Great Britain and 
France.  He maintained that the increase reflected only a 
"slight" upgrade in spending on weapons and that most of the 
increase will be used to boost military incomes and qualty 
of life and to improve military training.  Jiang went out of 
his way to underscore the Chinese government's awareness of 
foreign concerns over military spending, stating that he 
wanted to "especially stress this point."  He proceeded to 
reiterate China's claims that it will continue a foreign 
policy of "peaceful development" and a "defensive" national 
security strategy.  China "has neither the ability nor the 
intention" to engage in an arms race with any country, he 
said, and is "no threat" to anyone. 
 
 
BEIJING 00001404  002 OF 002 
 
 
Status of Purged Shanghai Party Secretary 
----------------------------------------- 
 
¶5. (SBU) Jiang brushed aside a question on whether Politburo 
Member and former Shanghai Party Secretary Chen Liangyu would 
lose his NPC delegate status, but said the NPC Secretariat 
had decided Chen should not attend with the Shanghai 
delegation.  Jiang said the Central Disciplinary 
Investigation Commission inquiry was still underway and that 
Chen's NPC qualifications and other details would be 
"disclosed at an appropriate time." 
 
Property and Income Tax Laws 
---------------------------- 
 
¶6. (SBU) Jiang acknowledged that the controversial Property 
Law had gone through more readings (seven) than any law in 
NPC history and offered a surprisingly candid account of the 
various "interests" at play in addressing the legal issues 
raised by the status of private property in China's 
"socialist market economy."  Engaging in deft verbal 
sleight-of-hand to reject assertions that the law is 
inconsistent with the PRC constitution, or that the latter is 
contradictory, Jiang said the bottom line was to ensure 
"equal protection" of the property rights of all interested 
parties, state, collective, and private.  Otherwise, he 
argued, the incentive to "legally create and accumulate 
wealth" for all social groups would be lost.  He claimed that 
a "consensus" among interested parties had finally emerged 
but that the upcoming NPC session would "improve upon" the 
law before it is passed. 
 
¶7.  (SBU) Jiang rejected out of hand a journalist's 
suggestion that abolishing the privileged status of foreign 
and foreign-funded enterprises would dampen enthusiasm for 
foreign investment.  He said the new Corporate Income Tax law 
was drafted after considerable research input from central 
and local officials as well as experts who agreed that the 
China's economy had developed to the point where the change 
was necessary.  He said the impact on foreign-funded firms 
would be softened by the fact that there will be a transition 
period, that some privileges have not been revoked, and that 
many other factors affect the decision to invest. 
 
Taiwan 
------ 
 
¶8.  (SBU) Jiang strongly reiterated Beijing's concern that 
Chen Shui-bian's alleged drive for de jure independence for 
Taiwan would intensify during 2007, Chen's last year in 
office.  Warning that Chen's efforts might reach a 
"substantive stage," and would present a "grim challenge" to 
cross-Strait relations, Jiang nonetheless claimed that Chen 
lacked the popular support in Taiwan to succeed.  In response 
to a question regarding the possibility of a DPP victory in 
Taiwan's 2008 presidential election, Jiang said China 
differentiates between those members of the DPP who are true 
independence advocates and other members who are not. 
RANDT