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R 210100Z DEC 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC 4149
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEAEPA/HQ EPA WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RHEHNSC/NSC WASHDC
RUEHOO/CHINA POSTS COLLECTIVE

UNCLAS SECTION 01 OF 03 BEIJING 007579 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM SECOR/YAMAMOTO 
STATE PASS USTR FOR STRATFORD/WINTER/MAIN 
STATE PASS EX-IM BANK FOR LAMBRIGHT/MYROW 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EFIN EINV CH
SUBJECT: SED III: OPENING SESSION, DECEMBER 12, 2007 
 
(U) THIS MESSAGE IS SENSITIVE BUT UNCLASSIFIED. 
PLEASE HANDLE ACCORDINGLY.  NOT FOR DISTRIBUTION 
OUTSIDE USG CHANNELS. 
 
¶1. (SBU) At the December 12 opening session of the 
third round of the U.S.-China Strategic Economic 
Dialogue (SED), Vice Premier Wu Yi said the SED has 
improved not only bilateral business ties, but also 
overall Sino-U.S. relations and has attracted 
widespread international attention.  Wu said the theme 
of SED III focused on how to capitalize on the 
benefits of globalization and how to address the 
challenges globalization presents.  Wu said the two 
sides would use the SED forum to discuss policy steps 
to meet the challenges of globalization, including the 
integrity of trade, product safety, balanced economic 
development, energy issues, and environmental 
protection. 
 
¶2. (SBU) Vice Premier Wu raised two priority issues. 
First, she said both sides should fully appreciate the 
importance of their bilateral relationship, and should 
recognize that business ties are its most important 
aspect, with the capacity to boost cooperation in 
other areas.  Since the visit of President Nixon in 
1972, she said, bilateral trade between the countries 
has developed to nearly $300 billion, and that the 
United States and China now represent each other?s 
second largest trade partners and fastest growing 
markets.  Second, she noted that, in the course of 
rapid bilateral growth, difficulties have occurred. 
She said that such challenges can only be resolved 
through consultation and dialogue, and that our 
countries? historical relationship has repeatedly 
shown cooperation to be more effective than finger- 
pointing and confrontation. 
 
¶3. (SBU) Wu Yi raised two suggestions for the SED 
meeting.  First, she said both sides, as stakeholders 
and constructive partners, should make concerted 
efforts to cooperate to gradually ease the bilateral 
trade imbalance and resolve trade disputes, thus 
laying a stronger foundation for future growth. 
Second, she said both sides should work to strengthen 
mutual trust and enhance understanding through 
deepened dialogue and consultation to address each 
other?s concerns. 
 
Wu Yi: U.S. Protectionism Will Harm Relations 
--------------------------------------------- 
 
¶4. (SBU) Vice Premier Wu said both countries must not 
allow interest groups to harm the development of 
business interests, and should oppose the 
politicization of important issues.  Wu expressed her 
personal concern with the ?more than 50 China-related 
protectionist bills in Congress,? which she said can 
only be counterproductive.  If adopted, she said, they 
would severely undermine United States business ties 
with China, and would have grave consequences.  She 
said she welcomed a July 30 letter from Secretary 
Paulson, Secretary Gutierrez, and Ambassador Schwab to 
the Senate Finance Committee opposing such bills. 
Similarly, Wu also said she welcomed a September 26 
joint letter from 106 multinational corporations and 
business associations emphasizing that trade sanctions 
are the wrong approach to resolving problems, and are 
harmful to United States business interests.  Wu 
expressed her hope that the administration will heed 
the voice of industry and will recognize the 
importance and overall beneficial nature of the 
bilateral trade relationship. 
 
¶5. (SBU) Wu stressed the need to adopt more creative 
policy measures to address problems that may occur, 
raising product quality and food safety as an example. 
The issue has become a global one, she said, and 
therefore both countries must assume their due share 
of the responsibility to ensure the quality of the 
lives of their citizens. 
 
BEIJING 00007579  002 OF 003 
 
 
 
¶6. (SBU) On bilateral trade imbalances, Wu said China 
has no intention to seek large a trade surplus with 
the United States, but only wishes to maintain a basic 
balance in its international payments.  She called on 
the United States to relax export controls of civilian 
high technology products to help increase United 
States exports to China.  Wu cited President Hu?s 
remarks that China would continue to grow by 
significantly increasing domestic consumption while 
also improving energy efficiency.  Thus, China?s 
demand for energy-efficient, environmentally friendly 
products will increase considerably. 
 
Paulson: Deeping Interdependence 
-------------------------------- 
 
¶7. (SBU) In his opening remarks, Treasury Secretary 
Henry Paulson explained that, when Presidents Bush and 
Hu created the SED in 2006, their intent was not to 
replace the many other important bilateral dialogues 
between China and the United States.  Rather, he said, 
they envisioned an overarching, senior-level, long- 
term, and strategic forum that could also address 
immediate, sensitive issues as they arise. 
 
¶8. (SBU) Paulson highlighted two points in his 
introduction of SED III: the deepening interdependence 
between the United States and China, and the rise of 
nationalism and protectionism in both countries. 
Addressing the first, he said that both countries? 
interests overlap on most issues.  As bilateral 
economic ties increase, he explained, citizens must 
have confidence in the goods they buy, which raises 
the challenge of food and product safety.  The 
December 11 signing of the MOUs on food and product 
safety was a critical step toward this end. 
 
¶9. (SBU) Paulson continued that the United States 
welcomes the rise of a stale and prosperous China, 
but noted recent concerns over the overheating of the 
Chinese economy, asset bubbles, macroeconomic 
policies, and inflation.  Especially in this 
environment, he said, a flexible currency is important 
to solve China?s internal and external challenges.  At 
the same time, Paulson said, aspects of the United 
States economy ? such as its housing market ? are also 
facing challenges, but that the deep and liquid United 
States capital markets are playing a role in 
mitigating the impact of these problems.  China, 
Paulson suggested, should further open its own markets 
to gain access to the capital it needs for continued 
economic growth.  Simultaneously, he said, the United 
States and China should also share responsibility for 
ensuring clean and reliable energy supplies and 
protecting the environment.  A healthy environment and 
strong economy are not mutually exclusive, he said; 
they are mutually necessary. 
 
¶10. (SBU) Addressing the rise of nationalism and 
protectionism in both countries, Paulson said that 
whereas trade was once a source of bilateral stability 
between the United States and China, it has recently 
become a source of tension.  He called on both 
countries to resist attempts to reduce transparency 
and raise obstacles to protect domestic industries. 
Paulson noted that the Bush administration has to date 
resisted anti-China bills in Congress, but warned that 
many people remain unsure that the benefits of trade 
are fairly shared between the United States and China, 
and urged that China continue to keep its markets open 
to alleviate such concerns. 
 
¶11. (SBU) In conclusion, Paulson said the focus of the 
SED is to keep the bilateral economic relationship on 
an even keel in times of tension and in times of calm. 
He noted that the success of the dialogue will be 
judged by what progress both sides are able to 
achieve. 
 
 
BEIJING 00007579  003 OF 003 
 
 
¶12. (U) SED III Delegates: 
 
United States: 
Henry M. Paulson, Jr., Secretary of Treasury 
Clark T. Randt, Jr., U.S. Ambassador to China 
Carlos M. Gutierrez, Secretary of Commerce 
Michael O. Leavitt, Secretary of Health and Human 
Services 
Susan C. Schwab, United States Trade 
Representative 
Stephen L. Johnson, EPA Administrator 
Clay Sell, Deputy Secretary of Energy 
Reuben Jeffery III, State Department Under 
Secretary for Economic, Energy and Agricultural 
 
SIPDIS 
Affairs 
James H. Lambright, Chairman Export-Import Bank 
 
China: 
Wu Yi, State Council Vice Premier 
Xie Xuren, Minister of Finance 
Zhou Wenzhong, Chinese Ambassador to the U.S. 
Yang Jiechi, Minister of Foreign Affairs 
Ma Kai, National Development and Reform 
Commission Chairman 
Shang Yong, Vice Minister of Science Technology 
Hu Xiaoyi, Vice Minister of Labor and Social 
Security 
Sun Zhengcai, Minister of Agriculture 
Chen Deming, Acting Minister of Commerce 
Chen Zhu, Minister of Health 
Zhou Xiaochuan, People?s Bank of China Governor 
Li Changjiang, AQSIQ Minister 
Zhou Shengxian, State Environmental Protection 
Administration Administrator 
Zhu Lieke, State Forestry Administration Vice 
Administrator 
Shao Mingli, State Food and Drug Administration 
Administrator 
Zhang Qiong, State Council Legislative Affairs 
Office Vice Minister 
Liu Mingkang, China Banking Regulatory Commission 
Chairman 
Shang Fulin, China Security Regulatory Commission 
Chairman 
Wu Dingfu, China Insurance Regulatory Commission 
Chairman 
Li Ruogu, China Import-Export Bank President 
Liu He, Central Leading Group on Finance and 
Economic Affairs Vice Minister 
 
Randt