VZCZCXRO8491
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #6978/01 3092352
ZNR UUUUU ZZH
P 052352Z NOV 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 3257
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 006978 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR WASHINGTON DC 
 
E.O. 12958: n/a 
TAGS: ECON ETRD CH
SUBJECT:  Strategic Economic Dialogue Meeting on 
Transparency in Administrative Licensing 
 
(U) Sensitive but unclassified.  Not for 
dissemination outside USG channels.  Not for 
Internet distribution. 
 
¶1. (SBU) Summary:  U.S. and Chinese Government 
and industry representatives met October 29-30 to 
discuss transparency in administrative licensing, 
an outcome from the second round of the Strategic 
Economic Dialogue (SED) held in May. 
The sides exchanged information on general 
licensing requirements in each country and on the 
conditions, procedures, and timeframes for 
obtaining licenses in the construction, design, 
engineering, and surety sectors.  The meeting 
also included a visit to the Tianjin 
Administrative Licensing Center, which serves as 
a Qone-stop-shopQ for obtaining administrative 
licenses from over 70 agencies in Tianjin.  End 
Summary. 
 
SED Administrative Licensing Seminar 
------------------------------------ 
 
¶2. (U) On October 29-30, Department of Commerce 
Deputy General Counsel David Bowsher and other 
U.S. Government and industry representatives 
participated in a meeting with officials from 
ChinaQs State Council Legislative Affairs Office 
and other government agencies.  The meeting, 
which focused on exchanging information on the 
conditions, procedures, and timeframes for 
obtaining administrative licenses, was the first 
of two meetings to carryout agreed-upon outcomes 
from the second meeting of the Strategic Economic 
Dialogue (SED) held in May. 
 
¶3. (U) During the meeting, experts from both 
governments presented on general licensing 
requirements in both countries that are 
applicable to and guide licensing processes.  Mr. 
Bowsher presented information on federal 
licensing regimes in the United States, 
particularly focusing on how the Due Process 
Clause of the U.S. Constitution and the 
Administrative Procedure Act ensure that federal 
licensing regimes are transparent. 
 
¶4. (SBU) Representatives from the Chinese 
Government discussed ChinaQs Law on 
Administrative Licensing (Licensing Law) and its 
requirements to ensure transparency.  The 
Licensing Law became effective in July 2004 and 
contains provisions that allow administrative 
authorities to reduce the number of licensing 
regimes and increase transparency of remaining 
regimes.  The Licensing Law specifically requires 
administrative authorities to publish all 
requirements and procedures necessary to obtain a 
license and forbids decision-making based on 
unpublished requirements.  In addition, the 
Licensing Law requires administrative authorities 
to provide written justification for rejecting an 
application and provides methods of recourse for 
adverse decisions, including administrative 
reconsideration and judicial review. 
 
¶5. (SBU) Officials from both governments 
expressed an interest in discussing the 
application of general licensing requirements to 
non-government organizations -- such as industry 
associations -- that administer licensing regimes. 
Articles 13 and 21 of the Licensing Law allows 
administrative authorities to eliminate licensing 
regimes when other methods may better regulate a 
specific matter.  The U.S. officials specifically 
noted that this practice has been implemented in 
the freight forwarding sector and has resulted in 
a lack of transparency in the licensing process. 
U.S. and Chinese officials agreed that this could 
serve as a discussion topic in future exchanges 
on licensing. 
 
Construction Sector Licensing 
----------------------------- 
¶6. (SBU) Government officials and industry 
 
BEIJING 00006978  002 OF 003 
 
 
representatives also exchanged information on the 
licensing regimes for construction, engineering, 
design, and surety companies and industryQs 
experiences with obtaining licenses in those 
areas.  Ministry of Construction, Department of 
Market Administration Deputy Division Chief Wang 
Wei discussed ChinaQs efforts to implement its 
WTO commitments in this area through the 
development of new regulations and licensing 
regimes for the aforementioned sectors. 
According to Mr. Wang, the new regimes and 
accompanying implementing regulations level the 
playing field for foreign-invested construction, 
design, and engineering companies.  Foreign- 
invested companies in these sectors must first 
establish themselves as legal entities in China 
and may then apply for a license.  Mr. Wang 
reported that the licensing conditions, 
procedures, and timeframes are the same as those 
for domestic companies. 
 
¶7. (SBU) Mr. Wang provided specific information 
on Decree 114 and its implementing regulations, 
which regulate the design and engineering sector 
in China.  To apply for a 114 grade A license, 
a foreign-invested or domestic company that is 
currently applying for a license must establish a 
performance record in China that illustrates the 
companyQs engineering experience.  This is 
supposed to be done through operating under a 
grade B license.  According to Mr. Wang, the new 
regime facilitates the process of moving from a 
grade B to a grade A license by eliminating 
the former requirement to operate under a 
grade B license for two years before applying for 
a grade A license.  However, Mr. Wang did not 
specify a timeframe. Additionally, the Ministry 
of Construction will also consider the foreign 
experience of companies when reviewing an 
application for a grade A license. 
 
¶8. (SBU) Representatives from Bechtel informed 
Mr. Wang that they were currently having 
difficulties with their 114 grade A license 
application.  Bechtel sought to apply for a 114 
grade A license and was told that they must first 
operate under a grade B license because BechtelQs 
license under the previous licensing regime, 
Decree 32, was only a construction license, not 
an engineering license.  Mr. Wang agreed to 
follow-up with Bechtel on their specific issue. 
Note:  Bechtel is not interested in a Decree 113 
A or Level 1 construction license as this type 
of license restricts projects that are at or 
below five times registered capital. 
 
¶9. (SBU) One panelist emphasized that while 
several firms are applying for qualification 
certificates under Decree 114, the implementation 
rules for Decree 155 in relation to construction 
supervision have not yet been released so 
applications cannot be made by foreign companies 
interested in construction supervision. Moreover, 
the lack of a licensing regime for project 
management and engineering, procurement, and 
construction (EPC) projects prevents foreign firms 
from providing integrated project solutions -- an 
area where foreign experience and expertise is of 
the greatest benefit to Chinese construction and 
design companies, he argued.  Several panelists 
stated that Circular 200 which relates to project 
management, issued by MCON in December 2004, 
prevents foreign firms from competing in China. 
Circular 200 requires foreign firms to obtain 
qualification certificates based on one or more of 
the existing six qualification regimes, namely 
design, construction, survey, supervision, cost 
advisory and tendering agency qualifications. 
This cumbersome process discourages the 
development of project management enterprises and 
the integrated implementation of projects, they 
said. 
 
¶10. (SBU) Chinese officials asked for the U.S. 
Government officials to present information on 
 
BEIJING 00006978  003 OF 003 
 
 
the U.S. visa policy, asserting that visa 
issuance was a form of administrative licensing 
that was of great interest to Chinese travelers. 
In addition, the officials asserted that the lack 
of clarity in the visa issuance standards and 
process resulted in confusion and that increasing 
transparency could help increase business 
relations.  U.S. Government officials responded 
by noting that if the Chinese Government and 
industry wanted additional information on the 
visa issuance process, they would relay the 
request to the appropriate officials at the U.S. 
Embassy and coordinate information sharing on the 
policy.  The Chinese responded by identifying 
this as a possible concrete deliverable to 
announce at SED III. 
 
Tianjin Licensing Center 
------------------------ 
 
¶11. (U) On October 30, the U.S. and Chinese 
delegations visited the Tianjin Administrative 
Licensing Center, which serves as a central 
location to gather information on administrative 
licensing regimes as well as to file applications 
under those regimes.  The Center administers 
licensing regimes from over 70 local 
administrative agencies.  The Center tracks the 
review process to ensure that applications are 
reviewed within the specific timeframes 
applicable to each licensing regime.  To 
facilitate transparent review, applicants can 
track the status of their applications through 
the CenterQs website. 
 
Randt