VZCZCXRO8501
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #6979/01 3092352
ZNR UUUUU ZZH
P 052352Z NOV 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 3260
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 02 BEIJING 006979 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR WASHINGTON DC 
 
E.O. 12958: n/a 
TAGS: ECON ETRD EINV CH
SUBJECT:  2007 U.S.-China Legal Exchange 
 
(U) Sensitive but unclassified.  Not for 
dissemination outside USG channels.  Not for Internet 
distribution. 
 
¶1. (SBU) Summary:  The Department of Commerce and the 
Ministry of Commerce held the 2007 U.S.-China Legal 
Exchange in Xi'an, Beijing, and Shanghai from October 
22-27.  The program consisted of U.S. and Chinese 
presentations on each country's inbound investment 
and trade secrets regimes as well as open discussion 
on both topics.  The Chinese audience members were 
very engaged in the discussion and sought additional 
information on the U.S. investment regime and 
practical steps that companies can take to protect 
their trade secrets in the United States.  Government 
officials from both sides agreed to hold the 2008 
Legal Exchange program in the United States. 
 
2007 U.S-China Legal Exchange 
----------------------------- 
 
¶2. (U) During the week of October 22, the U.S. 
Department of Commerce and China's Ministry of 
Commerce (MOFCOM) held the 2007 U.S.-China Legal 
Exchange, a cooperative exchange program under 
Commercial Law Working Group of the U.S.-China Joint 
Commission on Commerce and Trade.  Department of 
Commerce General Counsel John Sullivan led a 
delegation of U.S. commercial law experts to discuss 
the U.S. legal regimes governing inbound foreign 
investment and the protection of trade secrets.  The 
delegation was composed of General Counsel Robert 
Hoyt, Department of the Treasury; Deputy General 
Counsel David Bowsher, Department of Commerce; 
Attorney-Advisor Joel Blank, Department of Commerce; 
and Rex Hockaday, Senior Corporate Counsel, 
Caterpillar, Inc.  MOFCOM hosted programs in Xi'an, 
Beijing, and Shanghai and recruited local professors, 
government officials, and attorneys to engage on both 
topics. 
 
CFIUS Process and Investment Policies 
------------------------------------- 
 
¶3. (U) Mr. Hoyt provided an overview of the legal 
regime governing investment, particularly focusing on 
the framework that guides national security reviews 
conducted by the Committee on Foreign Investment in 
the United States (CFIUS).  Mr. Hoyt stressed that 
CFIUS provides a voluntary review mechanism that 
looks only at transaction-specific national security 
concerns and does not have the authority to consider 
other issues, such as economic security or broad 
industrial policies.  Mr. Bowsher provided additional 
information on how the federal system of government 
in the United States impacts the U.S. investment 
regime as well as on the Department's Invest in 
America Initiative.  Mr. Hockaday detailed the legal 
framework governing trade secrets in the United 
States and identified practical steps that companies 
can take to protect those secrets under that legal 
framework. 
 
¶4. (SBU) Chinese professors and attorneys in each 
city presented information on China's investment and 
trade secrets regimes.  Their overviews on investment 
identified a lack of clarity on the relationship 
between China's 2006 Regulations on the Merger and 
Acquisition of Domestic Companies by Foreign 
Investors (M&A Regulations) - administered by MOFCOM - 
and the recently promulgated Anti-Monopoly Law (AML), 
which will go into effect on August 1, 2008.  Under 
the M&A Regulations, all mergers with and 
acquisitions by foreign entities must be reviewed and 
cleared by MOFCOM, which analyzes whether such 
transactions will impact the national economic 
security of China.  Under the AML, the antitrust 
authority (not yet esablished) will review similar 
mergers and acquisitions and analyze whether such 
transaction will impact national security. 
 
¶5. (SBU) The Chinese presenters noted that neither 
the M&A Regulations nor the AML define the scope of 
the respective reviews for national economic security 
and national security.  U.S. presenters noted that 
this lack of clarity on the scope of each review and 
 
BEIJING 00006979  002 OF 002 
 
 
the relationship between the reviews and the 
reviewing authorities creates confusion when foreign 
investors are considering entering the Chinese market. 
China should work to clarify these reviews in order 
to make its investment regime more manageable.  In 
addition, neither legal authority establishes a time 
frame for review, which reduces the certainty of 
investing in China. 
 
Trade Secrets 
------------- 
 
¶6. (SBU) The Chinese also presented on China's legal 
regime protecting trade secrets.  China does not have 
a single law or regulation establishing the legal 
framework for trade secrets; instead, China protects 
trade secrets through a web of laws on contracts, 
unfair competition, and labor standards.  As a result 
of this approach the system remains confusing and 
does not establish a uniform definition or consistent 
practices on trade secrets.  The Chinese presenters 
suggested that, for China to have a truly leading 
regime on trade secrets, China develop a single law 
that defines trade secrets and eliminates the lack of 
uniformity. 
 
¶7. (SBU) The Chinese audience was very engaged and 
seemed to benefit from the information exchange, 
suggesting the importance of continued dialogue on 
both of the Legal Exchange's topics and on the rule 
of law in general.  Regarding investment, the 
audience was interested in better understanding the 
CFIUS review process and the factors that CFIUS 
considers when analyzing a transaction.  Mr. Hoyt 
stated that the factors considered vary from 
transaction to transaction and that he could not 
discuss specific examples, but that the Treasury 
Department will issue guidance on the review process 
in April. 
 
¶8. (U) Mr. Bowsher extended an invitation to host a 
Chinese delegation in 2008 for the next Legal 
Exchange and suggested that coordination begin early 
next year.  The Chinese agreed that we should 
continue the program next year and look forward to 
visiting the United States. 
 
Randt