VZCZCXRO5008
RR RUEHCN RUEHVC
DE RUEHGH #0441/01 2880907
ZNR UUUUU ZZH
R 140907Z OCT 08
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC 7239
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHGV/USMISSION GENEVA 0037
RHEHAAA/NSC WASHINGTON DC
RUEHGH/AMCONSUL SHANGHAI 7830

UNCLAS SECTION 01 OF 02 SHANGHAI 000441 
 
SENSITIVE 
SIPDIS 
 
TREASURY FOR OASIA/INA/CUSHMAN AND WINSHIP 
DEPT FOR EAP/CM, INR/B 
USDOC PASS BUREAU OF ECONOMIC ANALYSIS 
USDOC FOR ITA DAS KASOFF, MELCHER, OCEA 
STATE PASS USTR FOR STRATFORD, WINTER, KATZ 
GENEVA PASS USTR 
 
E.O. 12958: N/A 
TAGS: ECON PGOV EFIN ETRD EINV WTRO CH
SUBJECT: SHANGHAI WTO CENTER DIRECTOR SPEAKS ON THE FINANCIAL CRISIS 
AND RESULTS OF WASHINGTON VISIT 
 
REF: SHANGHAI 436 
 
SHANGHAI 00000441  001.2 OF 002 
 
 
(U) This cable is sensitive but unclassified and for official 
use only.  Not for distribution outside of USG channels or via 
the internet. 
 
Summary 
------- 
 
¶1.  (SBU) In an October 9 meeting with the Consul General, 
Shanghai WTO Affairs Consultation Center Director Wang Xinkui 
emphasized that the global financial crisis will have a deep 
effect on the Chinese economy, particularly the trading sector. 
It will also have significant implications for the global trade 
regime.  According to Wang, the financial crisis will create a 
call for a new international mechanism to handle global 
financial issues.  Regarding the WTO Center's September visit to 
Washington, Wang was enthusiastic about his meetings with 
various federal agencies, expressing deep appreciation to the 
State China Desk and the Consulate for assistance in arranging 
the meetings.  Wang also emphasized the WTO Center's unique role 
in shaping China's trade policy, particularly in its support 
role for the Ministry of Commerce (MOFCOM).  End Summary. 
 
Perspectives on the Global Financial Turmoil 
-------------------------------------------- 
 
¶2. (SBU) According to Wang, the onset of the global financial 
crisis marked the beginning of a global economic downturn that 
will persist for some time.  The impact will be felt throughout 
China's economy.  Wang foresaw that the crisis will have 
far-reaching implications for global trade as major economies 
continue to contract.  As a result of the crisis, China is 
taking a series of measures to stimulate the economy, such as 
lowering the banking reserve ratio and eliminating the bank 
deposit interest tax.  Economic stimulus measures would also be 
a major topic of discussion at the third plenary session of the 
Chinese Communist Party's Seventeenth Party Congress (met 
October 9-12).  As a reaction to the crisis, Wang said many 
people in China will question the country's path of openness and 
reform, particularly in the financial sector.  However, he is 
optimistic the Central Government will persist in its path of 
economic liberalization and will send policy signals to this 
effect. 
 
¶3. (SBU) Chinese export industries will be the first to suffer 
from the global economic slowdown, Wang asserted.  Many - Wang 
said a "vast majority" - of China's exports are labor-intensive, 
thus the global economic slowdown will have a major impact on 
China's employment rate.  Just as a Hangzhou Vice Mayor noted in 
a separate October 9 meeting with the CG (reftel), Wang said 
Chinese officials are paying close attention to the impact on 
exporters due to concerns about unemployment.  During the early 
stage of the financial crisis in the United States, Chinese 
leaders pinned their hopes on the E.U. economy remaining robust 
and picking up some of the slack from the declining U.S. 
economy.  Given that the E.U. economy is also experiencing 
trouble, the Central Government now is even more intent on 
stimulating domestic demand.  Wang recognized, however, domestic 
stimulus measures will take time and expected China's growth 
rate to continue slowing.  On the positive side, Wang believes a 
global economic downturn will reduce inflationary pressures on 
labor and material costs in China. 
 
A New Global Economic System 
---------------------------- 
 
¶4. (SBU) Wang said the global economic system established after 
World War II is irreparably broken.  The three pillars of global 
stability - the U.N., IMF, and WTO - are no longer able to 
support the weight of the international economy.  Of the three, 
the WTO is the only institution playing a truly constructive 
role, and therefore should be given the responsibility needed to 
handle international financial issues.  Wang emphasized that it 
is necessary to create international rules for "trade in 
finance" through an international mechanism.  This is the only 
way to ensure a continued liberalization of international 
finance.  Wang said the current financial crisis would not have 
reached such a global scale had there been a coordinated global 
response.  As a result, there will be more calls for 
multilateral coordination of financial issues. 
 
SHANGHAI 00000441  002.2 OF 002 
 
 
 
Recent WTO Center Visit to Washington 
------------------------------------- 
 
¶5. (SBU) The Shanghai WTO Center was recently tasked by MOFCOM 
to research and develop a quantitative methodology to evaluate 
free trade agreements.  As part of that research, a delegation 
from the Shanghai WTO Center, including Wang Xinkui, traveled to 
Washington in September 2008 to meet with a range of Washington 
agencies, including the Government Accountability Office, 
Treasury, Agriculture, the International Trade Commission, and 
Commerce.  Wang was particularly pleased with his visit to 
Department of Commerce Bureau of Economic Analysis (BEA), noting 
that the work of BEA and the Shanghai WTO Center have a lot in 
common.   He said that China lacks the "skills and a 
comprehensive model" for evaluating trade agreements and hoped 
to draw on U.S. knowledge and experience. 
 
¶6. (SBU) Wang said the WTO Center plans on revamping its 
organizational model and welcomed U.S. assistance in this 
endeavor.  A key part of this effort includes technical training 
on the design, implementation and utilization of a trade 
evaluation model.  According to Wang, some of the agencies he 
met in Washington are willing to provide assistance in this 
regard.  The CG welcomed the opportunity to continue working 
with the WTO Center to build on common ground the WTO 
established with Washington agencies. 
 
WTO Center's Unique Role 
------------------------ 
 
¶7. (SBU) Established in 2002, the Shanghai WTO Center operates 
as an NGO, but is fully funded by the Shanghai Municipal 
Government.  Wang described the center's responsibilities as 
three-fold:  provide trade advice and research to MOFCOM, 
provide legal advice on trade regulations and laws to the 
Shanghai Municipal Government, and serve as a platform for trade 
discussions with foreign institutions.  He noted that 
approximately 80 percent of his time is devoted to the first 
responsibility, which including writing a yearly market access 
report and providing analysis on trade agreements.  Wang also 
emphasized the WTO Center's role as a conduit to the Shanghai 
and Central Governments, relaying suggestions and opinions of 
foreign institutions on China's trade policy. The Center's staff 
includes experts from universities and research institutes in 
China and abroad. 
CAMP