VZCZCXRO2691
OO RUEHCN RUEHGH RUEHVC
DE RUEHBJ #5655/01 2410416
ZNR UUUUU ZZH
O 290416Z AUG 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1313
INFO RUEHOO/CHINA POSTS COLLECTIVE

UNCLAS SECTION 01 OF 02 BEIJING 005655 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV KIRF ETRD PARM CH
SUBJECT: CODEL SKELTON ADDRESSES MILITARY TRANSPARENCY, 
TRADE WITH NPC CHAIR WU BANGGUO 
 
Summary 
------- 
 
¶1. (SBU) The United States and China share a long history and 
have many common interests that will only grow deeper and 
more plentiful, National People's Congress Standing Committee 
Chairman Wu Bangguo told CODEL Skelton August 27.  The 
delegation raised tough questions concerning military 
exchanges, China's military budget and transparency and the 
U.S. trade deficit with China.  Wu said Chinese military 
expenditures are relatively modest and consistent with 
China's needs, predicted that transparency will gradually 
improve and offered suggestions for improving the trade 
balance, including reducing U.S. restrictions on high-tech 
exports to China.  End Summary. 
 
A Warm Welcome 
-------------- 
 
¶2. (U) A delegation led by House Armed Services Committee 
Chairman Ike Skelton (D-MO) and including Representatives 
Randy Forbes (R-VA), John Spratt (R-SC), Robin Hayes (R-NC), 
Jeff Flake (R-AZ), Carol Shea-Porter (D-NH), Delegate 
Madeleine Bordallo (D-GU) and Rear Admiral Mark Ferguson, 
accompanied by the Ambassador, met with NPC Standing 
Committee Chairman Wu Bangguo at the Great Hall of the People 
August 27. 
 
¶3. (U) Wu welcomed Chairman Skelton and his delegation to 
Beijing, and noted that he had seen press reports of the 
delegation's visit to the Flying Tigers memorial in Yunnan. 
The "Flying Tigers period" is worth remembering, Chairman Wu 
said, because at that time U.S. and Chinese soldiers fought 
side by side, and the United States made huge sacrifices on 
China's behalf.  Today, China and the United States need to 
increase mutual understanding and trust.  Chairman Skelton 
expressed pleasure at returning to China after two years, and 
noted that the visit to the Flying Tigers memorial was 
moving, especially the experience of meeting Chinese veterans 
who had worked with the U.S. military during the war.  The 
more the United States and China work together, the more the 
two sides' common interests become clear, and with that 
clarity comes the opportunity to build stronger relations. 
 
¶4. (SBU) Representative Randy Forbes (R-VA) noted that he 
appreciated the opportunity to attend a church service in 
China and appreciated the flexibility of the Chinese 
government in permitting its people to worship.  He hoped 
that the Chinese people would have the freedom and 
opportunity to worship as they wished.  Chairman Wu declared 
"seeing is believing" and said that through their visit to 
China, the members of the delegation would get a "clear 
picture" of current conditions.  The United States' 
relationship is China's most important, he emphasized, and 
the strategic content of that relationship is more and more 
robust. 
 
Favorable Assessment of Current Relations 
----------------------------------------- 
 
¶5. (U) 2007 marks the 35th anniversary of the visit of 
President Nixon and the Shanghai Communique, Wu continued. 
Though the bilateral relationship has experienced "twists and 
turns and contradictions" in the ensuing decades, the current 
state of relations is "so remarkable it could not have been 
imagined 35 years ago."  He highlighted U.S. and Chinese 
common interests, including bilateral trade and student 
exchanges, and said it is in the interest of both countries 
to continue down the path of growing relations. 
 
¶6. (U) Chairman Wu said that interparliamentary exchanges are 
valuable tools for advancing the bilateral relationship, and 
noted that China views the House Armed Services Committee as 
one of the three most important committees in the U.S. 
Congress.  "We can cover areas where we agree and areas where 
we disagree and thus increase understanding," he said.  The 
two countries need to take a strategic view, Chairman Wu 
said, and understand that common U.S. and Chinese interests 
are growing in number.  He noted the upcoming meeting between 
President Bush and President Hu Jintao (at APEC), and said he 
is looking forward to his own visit to the United States in 
late October/early November. 
 
Military Expenditures, Exchanges and Transparency 
--------------------------------------------- ---- 
 
¶7. (SBU) Chairman Skelton said it had been an honor and a 
privilege to be the first CODEL to visit the Second Artillery 
headquarters (septel).  Military-to-military visits are 
"hugely important" because there is no better way to improve 
transparency than to have military officers become friends 
 
BEIJING 00005655  002 OF 002 
 
 
and build understanding.  He thanked Chairman Wu for working 
with the United States on mil-mil exchange.  He highlighted 
the House Armed Services Committee's bipartisan nature, and 
said it reflects the fact that the U.S. military is 
nonpartisan. 
 
¶8. (SBU) China "vigorously promotes" mil-mil exchanges, 
Chairman Wu said, and transparency will increase with more 
exchanges.  The Chinese military budget has increased, he 
acknowledged, but in absolute terms it remains very low. 
China's military spending is ten percent of U.S. military 
spending, and on a per-capita basis, it is even lower. 
Increases in the military budget are no more than 17 percent, 
he said, while education expenditures are up 80 percent and 
health expenditures up 40 percent.  Most of the increase in 
military spending goes for welfare of the troops; in 
addition, China has 22,000 kilometers of land borders to 
defend and over 18,000 kilometers of coastline.  The money 
China spends on its army goes to raising military salaries 
and buying new uniforms.  In addition, he continued, China is 
concerned about U.S. involvement in the Taiwan issue.  China 
seeks peaceful options for reunification, but also requires a 
military deterrent to separatist forces.  China needs 
improved military personnel policies and practices, and its 
budget will grow to accommodate those, but there is no need 
to exaggerate, he said.  The United States has far more 
advanced equipment, such as next-generation naval vessels. 
 
Trade 
----- 
 
¶9. (U) Representative Spratt (R-SC) noted that trade with 
China is a concern of the Congress, and said that trade 
should be an engine of positive development of relations. 
The lack of balance in the U.S.-China trade relationship is 
causing problems, and we need to restore some balance to the 
trade relationship, he said.  Chairman Wu acknowledged 
China's large trade surplus with the United States, but 
highlighted efforts to address the issue, including 
high-level economic dialogue.  The designation of Vice 
Premier Wu Yi to meet with Treasury Secretary Paulson to 
discuss the problem is indicative of the seriousness with 
which China takes these issues, he said. 
 
¶10. (SBU) The trade surplus problem is structural, Wu 
explained.  U.S. trade deficits with Korea, Japan and Taiwan 
have all moved to China as those economies' industrial bases 
relocated to China.  This is a natural side effect of 
globalization, and the United States and China need to work 
together to demonstrate how businesses and consumers benefit 
from the high trade volume.  China is eager to import more 
and procure more from the United States, especially in the 
technology sector.  U.S. efforts to relax restrictions on 
high-technology exports to China would go a long way to 
improve the trade picture.  Wu cited telecommunications as an 
example.  China's import market for high technology is worth 
USD 100 billion, Wu explained.  However, the U.S. share of 
that is only six percent because of export restrictions.  In 
telecommunications, the United States has only two percent of 
the market.  European and Japanese firms are "grabbing" U.S. 
market share because of unreasonable U.S. government attempts 
to restrict a "natural effect of globalization." 
 
¶11. (U) Restricting imports from China to the United States 
would not be an effective way to reduce the deficit, he 
continued.  The United States and China have such 
complementary economies that restricting Chinese exports 
would only shift production and procurement to other 
producers in the region without affecting the overall U.S. 
current account deficit. 
 
Wu's Message to the Delegation's Constituents 
--------------------------------------------- 
 
¶12. (U) Chairman Wu asked the delegation to pass a message 
along to their constituents: China and the United States 
fought side-by-side in the Second World War; almost a hundred 
thousand Chinese students study at U.S. universities; 
friendly contact between the two parliaments is evidence of 
good relations; and China values the practical benefits of 
relations (including trade relations) and believes they can 
only get better. 
 
¶13. (U) The delegation cleared this cable. 
Randt