VZCZCXRO2744
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #6168/01 2630257
ZNR UUUUU ZZH
P 200257Z SEP 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 2045
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC
RUEHOO/CHINA POSTS COLLECTIVE

UNCLAS SECTION 01 OF 03 BEIJING 006168 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: n/a 
TAGS: ECON ETRD EINV CH
SUBJECT:  AUSTR STRATFORD'S MEETING WITH MOF A/S ZHU 
GUANGYAO 
 
 
Summary 
------- 
 
¶1. (SBU) In a wide-ranging discussion September 13 
with Ministry of Finance Assistant Minister Zhu 
Guangyao, Assistant USTR for China Tim Stratford 
outlined U.S. expectations for the upcoming Joint 
Committee on Trade and Commerce (JCCT) and discussed 
the status of various follow-up items from the 
Strategic Economic Dialogue (SED) meetings in May.  He 
said that USTR was eager together with other relevant 
USG departments to continue cooperation begun at 
earlier SED meetings in the areas of investment, 
illegal logging, transparency, and enterprise 
annuities.  Zhu emphasized the importance of the SED 
in managing trade and economic issues as well as 
discussing long-term strategic issues.  He asserted 
that China had met its commitment on enterprise 
annuities made in May at SED II and hoped for further 
progress on a number of issues raised by Chinese 
officials, including bank licensing, tourism, and a 
SED hotline.  AUSTR Stratford said he hoped there 
would be continued progress on streamlining the 
approval process for financial institutions wishing to 
enter the enterprise annuity market. 
 
JCCT 
---- 
 
¶2. (SBU) Looking ahead to mid-December, AUSTR 
Stratford said it would be an important and productive 
week for U.S.-China economic relations.  The third 
meeting of the Strategic Economic Dialogue (SED) would 
follow the 18th meeting of the Joint Committee on 
Commerce and Trade (JCCT) and a seminar on innovation 
(note: the innovation seminar is a SED II outcome). 
Regarding the JCCT, Stratford informed Zhu that USTR 
and Commerce had recently presented two lists to 
MOFCOM: 1) a menu of potential agenda items; and 2) 
suggested areas of cooperation.  He planned to meet 
with MOFCOM Director General He Ning during the week 
of September 17 to further discuss the JCCT agenda. 
He said the U.S. negotiators were optimistic about a 
productive round of talks, but noted that the 
discussions would not always be easy. 
 
¶3. (SBU) Zhu noted that as two important global 
economies, it is difficult to avoid problems and 
frictions.  Our job, he asserted, was to solve these 
problems.  In this context, the Strategic Economic 
Dialogue offered a strategic framework to discuss 
issues, find solutions, and reduce tensions.  Working 
together in a cooperative manner and with a "frank and 
open" spirit would contribute to improving relations. 
 
Investment 
---------- 
 
¶4. (SBU) On investment, USTR and the State Department 
were leading productive discussions on a bilateral 
investment treaty and had further bilateral meetings 
scheduled between now and SED III.  Deputy USTR Bhatia 
was also planning to discuss these issues with MOFCOM 
during an early October visit to Beijing.  In 
addition, the Treasury Department was conducting a 
broader discussion on investment issues. 
 
Illegal Logging 
--------------- 
 
¶5. (SBU) On the issue of illegal logging, Stratford 
informed Zhu that AUSTR Mark Linscott held useful 
discussions with the State Forestry Administration on 
September 10 in Beijing.  Linscott proposed, and the 
Chinese side accepted, an outline of next steps 
leading up to the December SED meeting.  The U.S. 
would soon present draft text on a bilateral 
cooperation agreement followed by a digital 
videoconference to discuss the language in the text 
and a visit led by State Department OES Assistant 
Secretary Claudia McMurray and AUSTR Linscott in late 
 
SIPDIS 
October.  Stratford said he was pleased that MOFCOM 
and Chinese Customs officials were represented at the 
SFA meeting and stressed that interagency cooperation 
would be essential for future progress.  Zhu replied 
that the discussions should not frame the issue as 
solely a trade issue, and that the Chinese side hoped 
 
BEIJING 00006168  002 OF 003 
 
 
to have a broader discussion to include issues such as 
forestry management.  He said the MOF had helped 
coordinate the recent discussions, reflecting Wu Yi's 
interest in the issue. 
 
Transparency 
------------ 
 
¶6. (SBU) Stratford said transparency was a fitting 
topic for SED discussions because of its strategic 
significance and importance for long-term economic 
growth and sustainability.  Increased transparency 
would greatly benefit the overall relationship as 
greater understanding leads to greater trust.  U.S. 
officials had recently met in Washington to discuss 
ideas for the December SED meeting, and it was agreed 
that transparency was one of the key issues that 
should be emphasized going forward.  As agreed during 
SED II, the two sides were preparing to hold a joint 
seminar on administrative rule-making in late 
October/early November in Beijing followed by a visit 
by Chinese officials to Washington.  In Washington, 
the Office of Management and Budget would share with 
the Chinese delegation ideas on how to use cost- 
benefit analysis when considering new or revised rules 
and regulations. 
 
¶7. (SBU) Zhu noted the PRC was preparing to issue 
several new laws next year, including an employment 
promotion law, that would place a great deal of 
pressure and responsibility on government officials 
and agencies.  This would require significant funds in 
order to disseminate information about the new rules. 
Zhu commented that any discussion of transparency 
needed to take into account Chinese law and ChinaQs 
current conditions.  Stratford said China had taken 
many steps to increase transparency in recent years, 
but that it had yet to implement a mandatory public 
comment period for new and revised rules.  This 
limited public confidence in the rule-making process 
because the public would not know what is being 
hidden.  Zhu suggested that the U.S. side continue its 
discussions with the State Council Legal Affairs 
Office (SCLAO) on the distinction between QshouldQ and 
Qmust.Q  Stratford agreed this would be an important 
topic for further discussions. 
 
Enterprise Annuities 
-------------------- 
 
¶8. (SBU) Regarding ChinaQs SED II commitment to 
streamline the approval process for enterprise 
annuities, Stratford said this would likely be 
discussed during the upcoming JEC talks.  The U.S. 
viewed this issue as an opportunity to share ideas and 
offer suggestions as China continues to reform its 
pension and retirement system.  Zhu replied that the 
Chinese government intended to strengthen the 
CountryQs social safety net and to develop its 
annuities and capital markets as part of ts economic 
reforms.  He said China could learn a great deal from 
the United States and the international community, but 
that China was a large country with large differences 
between the urban and rural populations.  Zhu said 
there was an ongoing debate within government 
agencies, particularly the Ministry of Labor and 
Social Security (MOLSS), regarding Qfirst lineQ and 
Qsecond lineQ forms of social welfare. 
 
¶9. (SBU) Stratford said it would be important for 
China to coordinate policies among its regulatory 
agencies and expressed hope that China would provide 
further details on its SED II promise to streamline 
the process.  Adding that he expected this issue would 
be discussed in more detail during the JEC deputies 
meeting next week, Stratford expressed the hope that 
all financial institutions would have important roles 
to play as China moved forward in reforming its social 
welfare system.  Zhu replied that MOLSS had recently 
concluded three agreements with the Department of 
Labor covering unemployment insurance, labor 
statistics, and pensions (enterprise annuities) thus 
fulfilling ChinaQs SED II commitment on this issue. 
Stratford said he was not aware of these agreements, 
but stressed the importance of continuing efforts to 
streamline the approval process for financial 
institutions offering enterprise annuities prior to 
 
BEIJING 00006168  003 OF 003 
 
 
SED III.  Zhu insisted that from ChinaQs perspective, 
MOLSS had satisfied the commitment made at SED II and 
that if the United States wanted to raise additional 
points on this topic, it could do so during SED III. 
He noted that MOLSS officials had not participated in 
recent SED III preparatory meetings, and that the U.S. 
would need to engage quickly on this topic if it 
expected MOLSS to be at the table in December. 
Stratford said he was concerned there might be an 
important disconnect between U.S. and Chinese 
expectations regarding this SED II outcome and that he 
would immediately check with other USG agencies to 
confirm. 
 
Other SED Topics 
---------------- 
 
¶10. (SBU) Zhu informed Stratford that the New York 
Stock Exchange had received authorization to open a 
branch office and that Chinese regulators were waiting 
on additional information from NASDAQ.  FinAtt David 
Loevinger noted that NASDAQ had recently submitted 
additional information and was waiting for regulatory 
approval. 
 
¶11. (SBU) DOC China Office Director Cheryl McQueen 
informed Zhu that the September 17-19 Express Delivery 
Symposium would be a good opportunity to further 
dialogue and cooperation in this field.  On the 
subject of tourism, Zhu noted that China was not 
prepared to offer multiple entry visas as Chinese 
tourism officials were concerned with Qlosing control 
of Chinese tourists who went to the United States. 
 
¶12. (SBU) Zhu asked for an update on pending 
applications by two Chinese banks to open branches in 
the United States.  Loevinger replied that Federal 
Reserve officials had visited China in July to review 
the applications, but that he was uncertain when a 
decision would be made.  He noted that this topic was 
on the JEC agenda and that U/S McCormick had asked for 
a report from the Fed on the pending cases. 
 
¶13. (SBU) Zhu raised the issue of Great WallQs 
frustration with the slow pace of OFACQs review, 
noting the United States had exceeded the usual amount 
of time needed for the review.  Loevinger said OFAC 
was examining the case but had requested additional 
information from Great Wall.  He informed Zhu that 
Treasury U/S for Terrorism and Financial Intelligence 
Stuart Levey was planning to visit Beijing October 10- 
11 and that this would be a good topic for him to 
discuss with Chinese officials. 
 
¶14. (SBU) In closing, Zhu expressed appreciation for 
the letter Secretary Paulson, USTR Schwab, and 
Secretary Gutierrez had recently sent to Congress 
 
SIPDIS 
urging a balanced approach to U.S.-China trade issues. 
He said he hoped that an agreement would soon be 
finalized on a SED hotline between Secretary Paulson 
and Wu Yi, modeled on the presidential hotline between 
Presidents Bush and Hu. 
 
¶15. (U) AUSTR Stratford cleared this cable. 
 
RANDT