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FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4313
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHBUL/AMEMBASSY KABUL 0606
RUEHGV/USMISSION GENEVA 2492
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
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RUEATRS/DEPT OF TREASURY WASHINGTON DC
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UNCLAS SECTION 01 OF 05 BEIJING 001500 
 
SENSITIVE 
SIPDIS 
 
STATE FOR H/BETSY FITZGERALD, EAP/CM SHAWN FLATT, 
EEB/TPP ERIK MAGDANZ, SCA/RA JOHN SPILSBURY 
STATE PASS USTR FOR TIM STRATFORD, CLAIRE READE, 
AUDREY WINTER, TIM WINELAND, TERRY MCCARTIN, ANN 
MAIN, JEAN GRIER 
DOC FOR IRA KASOFF, NICOLLE MELCHER (5130), MAC 
(4420) 
TREASURY FOR OASIA/ROBERT DOHNER 
USDA FOR FAS OCRA/RADLER SHEPPARD PAULSON 
USDOE FOR INTERNATIONAL/JONATHAN SHRIER 
GENEVA PASS USTR 
 
E.O. 12958:  N/A 
TAGS: ETRD EFIN EAGR ECON PREL MCAP WTRO CH AF
 
SUBJECT:  CONGRESSMEN KIRK AND LARSEN'S  MEETING WITH MINISTER OF 
COMMERCE CHEN DEMING 
 
REFS: A.) Beijing 1434  B.) Beijing 1473 
 
(U)  This cable is Sensitive But Unclassified.  Please protect 
accordingly. 
 
¶1.  (SBU) Summary:  Congressmen Mark Kirk and Rick Larsen met with 
Minister of 
Commerce Chen Deming May 31 under the auspices of a National 
Committee on U.S.- 
China Relations visit.  Chen praised the legislators' work as 
Co-Chairs of the 
Congressional U.S.-China Working Group.  Chen observed that the 
Global Financial 
Crisis heightened the need for both nations to work together to 
"recover sooner" and 
the crisis also raised the stakes for 2009 Strategic and Economic 
Dialogue (S&ED) and 
Joint Commission on Commerce and Trade (JCCT) outcomes.  Chen 
confirmed to 
Congressman Kirk that China was considering a U.S. proposal to allow 
transit of food 
and fuel to Afghanistan via western China to help thwart 
narco-terrorism.  Chen also 
told Kirk that he would consult the Ministry of Industry and 
Information Technology 
(MIIT) on a longer phase-in period for a new non-PVC regulatory 
requirement for 
intravenous (IV) bags used in hospitals, which affects Baxter Health 
Care in China. 
Chen expressed some concern over the U.S. inflation  rate and fiscal 
policy and 
discussed China's rationale for purchasing U.S. Treasury bills and 
the global economic 
recovery. 
 
¶2. (SBU) Summary Continued:  Responding to Congressman Larsen on 
China's new 
National Postal Law, Chen indicated China was not obliged to open up 
domestic 
document delivery services to foreign companies under the terms of 
its WTO 
commitments.  With respect to China's ban on U.S. pork imports, Chen 
said the policy 
is based partly on concerns about animal-animal transmission, but it 
could be revised 
as new information comes to light.  He stated that while China finds 
the Section 727 
U.S. ban on Chinese cooked poultry imports discriminatory and 
unfair, MOFCOM is still 
deciding whether to bring a WTO case.  Chen urged that the JCCT's 
High Technology 
Working Group be revived.  Embassy will report other delegation 
meetings (Ref B and 
septel ).  End Summary. 
 
Chen Deming: Macro and Micro Issues Raised 
 
¶3.  (SBU) After listening to Congressmen Rick Larsen and Mark Kirk's 
presentations, 
Chen Deming praised their "division of labor".  He noted that Larsen 
had taken up 
primarily "macro issues" -- U.S.-China relations, planning for the 
S&ED and JCCT, and 
sectoral trade topics including China's new National Postal Law, 
China's ban on U.S. 
pork imports, status of China's WTO government procurement offer, 
and high 
technology trade.  Meanwhile, Congressman Kirk had covered mainly 
"micro issues" -- 
a U.S. proposal for China to allow transit of food and fuel to 
Afghanistan, and a request 
 
BEIJING 00001500  002 OF 005 
 
 
for longer phase-in time for a new Ministry of Industry and 
Information Technology 
(MIIT) regulation requiring non-PVC IV bags, which would affect 
Baxter Health Care's 
operations in China. 
 
Kirk: Afghanistan Supply Proposal, MIIT Regulations on IV Bags 
 
¶4.  (SBU) Regarding issues Congressman Kirk raised, Chen said China 
would give 
"earnest study" to the proposal for China act as a supplier of food 
and fuel to 
Afghanistan via Western China to help thwart narco-terrorism in the 
region.   Chen 
understood that the Ministry of Foreign Affairs (MFA) had already 
provided a 
response to the U.S. and was awaiting feedback.  Regarding a new 
MIIT regulation 
concerning IV bags, Chen stated the issue was new to him and Kirk's 
mention of it was 
the first he had heard of it.  He said that while he lacked 
requisite technical knowledge, 
if additional time for phasing in a new regulation would help 
preserve employment in 
China and made economic sense, this would seem to be good.  Chen 
promised to 
discuss the issue with MIIT and convey U.S. views contained in a 
paper Congressman 
Kirk presented.  (Note: USG officials have raised this issue at a 
sub-Ministerial level in 
the past with MOFCOM.  End Note.) 
 
Chen: Preparations for S&ED and JCCT On Track 
 
¶5.  (SBU)  Turning to issues raised by Congressman Larsen, with 
respect to the S&ED 
and JCCT, Chen agreed  that the overall U.S.-China relationship was 
more valuable than 
just the "sum of its parts".  He reported that his recent meetings 
with National 
Economic Council Chair Summers and Secretary Locke and Ambassador 
Kirk in 
Washington went well.  Chen foresaw the S&ED retaining a "macro and 
strategic focus" 
while the JCCT should be "concrete and detailed" and said that 
Secretary Locke shared 
this view.  Chen noted with enthusiasm Locke's plans for a visit to 
China with Energy 
Secretary Chu later this year.  He spoke favorably of Chu's status 
as a Chinese- 
American and Nobel laureate, claiming Chu's family hailed from 
Suzhou, where Chen 
had once been mayor.  Chen hoped the U.S. and China would "not 
quarrel" at the 
upcoming S&ED and JCCT, but rather identify new areas for 
cooperation -- such as 
clean energy and responding to climate change.  He urged that the 
JCCT be scheduled 
prior to President Obama's participation in the APEC Leaders Summit 
in Singapore in 
November. 
 
National Postal Law: China Did Not Agree to Open Domestic Document 
Delivery in WTO 
Accession 
 
¶6.  (SBU)  Regarding concerns raised by Congressman Larsen over 
China's new National 
Postal Law that bars qualified U.S. and foreign firms from offering 
domestic document 
delivery services, Chen noted that he had relayed U.S. points on 
 
BEIJING 00001500  003 OF 005 
 
 
this to the NPC. 
Looking at China's WTO accession agreement, China had not committed 
to open up 
this service area to foreign suppliers and no subsequent legislation 
or proposals had 
been offered to do so.  In fact, "domestic delivery of letters" was 
just a "tiny part" of 
the market with "almost no impact" on the international business of 
the foreign 
express service providers.  At any rate, Chen offered to pass along 
Larsen's concerns 
to relevant authorities so that they would consider them when 
formulating 
implementing rules. 
 
Ban on U.S. Pork Imports Aimed at Protecting Humans and Pigs 
 
¶7.  (SBU)  With respect to China's ban on the import of U.S. pork, 
Chen told Larsen that 
China had banned not just U.S. pork but also imports from other 
H1N1-affected 
countries including Mexico and Canada.  He asserted that China's ban 
affected only 
pork imports from U.S. states where H1N1 had been reported.  Chen 
said Secretary 
Locke and Ambassador Kirk had tried unsuccessfully to call him after 
his return from 
the U.S. in May, but he did receive a call from  Canadian 
Agriculture Minister Day on 
the same topic.  He noted that China was acting not just for the 
health of China's 
human population, but also to protect its population of one billion 
pigs.  Pig-pig 
transmission of H1N1 had occurred; other types of transmission 
(animal-human) were 
harder to confirm.  China's H1N1 policy was always subject to 
revision based on 
changes in views of experts at the world organization for animal 
health (OIE) and the 
World Health Organization (WHO) as well as other new sources of 
information. 
 
Section 727: Considering WTO Case, "Good Chance" of Winning 
 
¶8.  (SBU) Chen assured Larsen and Kirk that China's policy on H1N1 
had nothing to do 
with retaliation for the U.S. ban on cooked poultry imports 
stipulated under Section 
727 of the 2009 Omnibus Appropriations Act.  Nevertheless, China 
strongly disagreed 
with Section 727 and found it to be unfair and discriminatory toward 
China.  "WTO 
experts" in Geneva had informed Chen that China had a "very good 
chance" of 
prevailing at the WTO if a case were brought on the matter.  But 
since doing so 
required 1-2 years of litigation and entailed a significant 
financial and resource cost, 
Chen was still "thinking about whether [MOFCOM] should do it" or 
take some other 
route. 
 
Government Procurement: China Has Tabled a Revised Offer 
 
¶9.  (SBU)  Regarding China's accession to the WTO Government 
Procurement 
Agreement, Chen stated that China had tabled a new offer to the U.S. 
and other GPA 
parties but was still waiting for a reply.  [Note:  Geneva 00400 
dated May 29 indicates 
that as of the May meeting of the WTO Government Procurement 
 
BEIJING 00001500  004 OF 005 
 
 
Committee, China 
had not yet indicated when it will present a revised GPA offer.]  In 
any case, Chen 
continued, the U.S. should bear in mind during negotiations that 
China is still a 
developing country and therefore "the bar should not be set too 
high".  He added that 
some U.S. states had still not signed on to the GPA requirements 
and/or had taken 
exceptions for products including steel. 
 
Export Controls, JCCT High Technology Working Group 
 
¶10.  (SBU) Chen emphasized to Larsen that on high-tech trade, much 
could be done to 
narrow the U.S.-China trade deficit by loosening up U.S. export 
control requirements, 
a view which he maintained was backed up by AmCham China's White 
Paper.  In 2007, 
the U.S. and China signed a new Verified End User (VEU) Program 
administered by the 
Department of Commerce to streamline U.S. high tech export controls. 
 Nevertheless, 
there were still only a handful of VEUs approved, and all were 
foreign-invested 
entities.  The situation was unfair to U.S. high tech exporters, as 
most items subject to 
export controls were easily available to China from other suppliers 
(such as France) or 
could even be produced in China.  Chen agreed with Larsen that the 
JCCT High Tech 
Working Group, which last met in 2007, should be revived. 
 
Chen's Views on Investing in T-Bills, Global Recovery 
 
¶11.  (SBU) Congressman Kirk stated that actions taken by "two 
state-owned 
enterprises, Fannie Mae and Freddie Mac" had helped spark the 
financial crisis in the 
U.S.  China should not conclude from the crisis that a poorly 
regulated U.S. private 
sector was the cause.  Rather, the crisis was caused by a Congress 
that had not acted 
to properly regulate these state-owned enterprises.  He also stated 
that the 
Administration's projection of the U.S. budget deficit is well below 
what it will really be, 
since at year-end Congress will inevitably go beyond the spending 
levels already 
projected.  Finally, he stated that high levels of government 
spending in the U.S. and 
Europe would likely produce 4-5 years of low growth and 
high-inflation, and China 
should take this into account when planning its investments, 
including in U.S. Treasury 
bonds. 
 
¶12.  (SBU) In response, Chen offered his views on China's purchase 
of U.S. Treasury 
bills as a means to invest its U.S. trade surplus.  Chen said China 
"must" buy U.S. 
Treasuries because insufficient depth exists in Japanese yen- and 
Euro-denominated 
debt.  If China were to make larger purchases in these markets, it 
might raise their 
prices dramatically.  In addition, as total worldwide gold 
production is only 2400 tons 
per year, it would be impossible for China to purchase sufficient 
gold reserves.  "So the 
only way for China is to continue to buy T-bills," he concluded.  As 
a result, China was 
 
BEIJING 00001500  005 OF 005 
 
 
interested in matters such as U.S. government spending, the U.S. 
inflation outlook, 
and the printing of dollars by the Federal Reserve.  Chen compared 
the current policy 
response to the Global Financial Crisis to firefighting -- no time 
to study the cause of 
the blaze, but it might be useful to do so in the future.  In 
addition, Chen thought the 
current response involving stimulus spending must change if the 
crisis proves to be 3-5 
years instead of one year.  If that happens, countries would need to 
rethink what to 
do, he felt.  We should avoid a "fake dawn" by thinking the crisis 
is past before it is 
truly over, he concluded. 
 
¶13. (U) Participants: 
 
(U) U.S. Participants: 
Honorable Rick Larsen, Co-Chair, U.S.-China Working Group 
Honorable Mark Kirk, Co-Chair, U.S.-China Working Group 
Stephen Orlins, President, National Committee on U.S.-China 
Relations 
Scott Kennedy, Associate Professor of Political Science, Indiana 
University 
Jasper MacSlarrow, Legislative Director for Congressman Larsen 
Richard Goldberg, Senior Aide to Congressman Kirk 
 
(U) PRC Participants: 
Minister of Commerce Chen Deming 
Other MOFCOM officials 
 
¶14.  (U) Representatives Kirk and Larsen did not have the 
opportunity to clear this 
message before departing. 
 
PICCUTA