VZCZCXRO9210
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #3513/01 2540659
ZNR UUUUU ZZH
P 100659Z SEP 08
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 9832
INFO RUEHOO/CHINA POSTS COLLECTIVE

UNCLAS SECTION 01 OF 02 BEIJING 003513 
 
SIPDIS 
 
STATE FOR EEB/CM 
STATE FOR H/PASS SENATE FOREIGN RELATIONS OFFICE 
STATE PASS USTR STRATFORD/WINTERS 
DEPT OF THE TREASURY FOR TAIYA SMITH/HOLMER/WRIGHT/OASIA 
DEPT OF COMMERCE/ITA DAS KASOFF 
NSC FOR HAENLE/LOI/WINTER 
INFO DEPT OF LABOR 
 
E.O. 12958: N/A 
TAGS: CM ECON PREL
SUBJECT: BIDEN STAFFER MEETS CHINESE MINISTRY OF FINANCE 
 
¶1. (SBU) SUMMARY: On September 9, Frank Januzzi, from the 
staff of Senator Biden (D-DE) and the Senate Foreign 
Relations Committee, met with China's Vice Minister of 
Finance Zhu Guangyao. The two discussed the U.S.-China 
Strategic Economic Dialogue (SED) as a forum for bilateral 
cooperation and confidence building.  The discussion affirmed 
the mutual value of the SED and touched upon the U.S. 
presidential election.  Vice Minister Zhu began by describing 
the substance of the previous four rounds of the SED, and 
explained that the SED has a high degree of support all the 
way to the top of China's leadership.  END SUMMARY. 
 
How the SED is Viewed in Washington and Beijing 
--------------------------------------------- -- 
¶2. (SBU) Januzzi explained how the Senate Foreign Relations 
Committee views the Strategic Economic Dialogue.  To maintain 
strong bilateral political ties, China and the U.S. must 
control economic problems, whether related to intellectual 
property rights or the trade surplus.  He said that the 
Senate regards the SED as a channel to manage these issues, 
and it has proven that by doing so, it can also protect the 
bilateral relationship from political volatility.  Januzzi 
stated that in the U.S., there is broad support for bilateral 
dialogue with China, and that China could expect to have the 
interest of the new administration, no matter who wins the 
election. Januzzi added that in Washington, there is 
bipartisan support for negotiating a bilateral investment 
treaty (BIT) with China. 
 
Vice Minister Zhu added that likewise, the SED has enabled 
China's leadership to focus on matters of bilateral interest. 
 He emphasized that in China, all matters of great importance 
are decided by the president, and therefore, the SED is a 
forum in which the U.S. should present its foremost 
interests.  The SED has been instrumental in addressing 140 
separate issues that were included in previous outcomes 
documents, ranging from environmental protection to managing 
macroeconomic cycles, said Zhu. 
 
China's Interests during the Post-Election Period 
--------------------------------------------- ----- 
¶3. (SBU) Januzzi emphasized the importance of the SED and 
raised the possibility that after the coming election, the 
SED might have a new lead on the U.S. side, for example the 
office of the vice president or perhaps the State Department. 
 This will create an opportunity re-examine priorities for 
cooperation, he said.  Januzzi agreed with Zhu that the 
critical elements of the SED, namely high-level political 
support, capable working level staff, and a skillful ability 
to cut cross bureaucratic stovepipes, must all be maintained 
in the future.  Januzzi asked what priorities China has for 
future rounds of the SED. 
 
¶4. (SBU) Zhu said that at this time, China is highly focused 
on two issues: the investment climate abroad and managing 
China's financial assets.  Zhu noted the investment problems 
of the telecom company Huawei in the U.S., which have roiled 
decision-makers in China.  More importantly, said Zhu, and a 
matter of urgent concern, is the recently-announced 
conservatorship of Freddie Mac and Fannie Mae.  Zhu said that 
an orderly and deft management of this problem is in China's 
direct interests, and China will place an emphasis on 
financial cooperation in SED-V.  Because the government faces 
a public opinion backlash associated with a loss in value of 
its foreign assets, China wants to minimize the political 
costs of this crisis, said Zhu. 
 
The Democratic Party and China - Interests 
------------------------------------------ 
¶5. (SBU) Januzzi said that if Democrats win the coming 
election, the U.S. side is likely to place a stronger 
emphasis on labor, energy and the environment.  Januzzi noted 
that Senator Biden has also been active in the area of IPR 
protection in the Senate.  Januzzi noted that China's laws on 
IPR have improved, and that enforcement is an outstanding 
area for improvement.  He added that when dialogue with China 
is not fruitful, the U.S. will continue to use the WTO 
dispute settlement mechanism, which is regarded as a valuable 
alternative to bilateral dialogue. 
 
¶6. (SBU) Januzzi said it will be important for the next 
president to balance the macroeconomic situation in order to 
reduce America's debt level.  However, this will be a 
long-term endeavor, and China should not expect any major 
upset of the economic status quo characterized by robust 
 
BEIJING 00003513  002 OF 002 
 
 
trade ties and financial interdependence.  Jannuzi said it is 
important to keep the SED on track, and that due to the 
two-year congressional cycle, agreements need to be reached 
and closed in a timely fashion.  Lastly, Januzzi noted that 
there is broad bilateral support for further integration of 
China into the global economic system and related 
multilateral organizations.  The two sides closed with a 
friendly note of mutual appreciation and stated they hope to 
work together for the benefit of the public. 
 
Note: This cable was cleared by Frank Januzzi, Senate Foreign 
Relations office. 
RANDT