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OO RUEHCN RUEHGH RUEHVC
DE RUEHBJ #2064/01 2011045
ZNR UUUUU ZZH
O 201045Z JUL 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5288
RUCPDOC/DEPT OF COMMERCE WASHDC IMMEDIATE
INFO RHEHNSC/NSC WASHDC
RUEHOO/CHINA POSTS COLLECTIVE
RUEHRC/DEPT OF AGRICULTURE WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEAEPA/HQ EPA WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHGV/USMISSION GENEVA 2515
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 06 BEIJING 002064 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR FOR DMARANTIS, TSTRATFORD, AWINTER, 
JGRIER 
STATE FOR EEB/TPP WCRAFT, EMAGDANZ, HHELM, EAP/CM 
SFLATT, EEB/ESC DHENGEL 
COMMERCE FOR ITA MONEILL (1000), MAC IKASOFF (4400), 
IA (5120), FCS (3130) 
TREASURY FOR OASIA/RDOHNER 
NSC FOR JLOI 
GENEVA PASS USTR 
 
E.O. 12958: N/A 
TAGS: ECON ENRG ETRD EAGR EIND EINT BEXP CH
 
SUBJECT:  Secretary Locke Discusses Bilateral Trade 
and Clean Energy with Minister of Commerce Chen 
Deming 
 
(U) This cable is Sensitive But Unclassified (SBU). 
Please handle accordingly. 
 
Summary: 
 
¶1. (SBU) Secretary Locke and delegation and D/USTR 
Demetrios Marantis met July 15 with Minister Chen 
Deming and senior MOFCOM officials for a 90 minute 
discussion of bilateral trade and commercial issues 
including clean energy coooperation, global warming, 
trade remedies, Buy America/Buy China policies, and 
China?s accession to the Global Procurement 
Agreement.  Regarding China?s specific  trade 
concerns, Chen categorized the outcome of the 
ongoing USITC Section 421 safeguards case concerning 
U.S. imports of Chinese tires as China's "biggest 
concern," noting he had written to Ambassador Kirk 
recently to urge U.S. restraint.  Chen also pointed 
out that China was concerned by the large value of 
anti-dumping/countervailing duty (AD/CVD) and 
safeguards actions taken during the 111th Congress, 
which numbered 20 cases by China's count.  Chen 
expressed appreciation for Locke's role in his April 
visit to the U.S. 
 
Summary continued: 
 
¶2. (SBU) Chen also provided a detailed briefing on 
China's economy, noting that China's sustained 
prosperity ultimately depends upon a solid U.S. 
recovery.  For the first half of 2009, China's GDP 
growth rate was 7.1% and retail sales were up 15.1 
percent versus the prior year.  During the same period, 
however, exports dropped 21 percent year-on-year and 
foreign direct investment was down 20-21 percent. 
China's stimulus is helping the domestic economy to 
compensate for declining trade, and U.S.-China trade 
has declined less than China's overall trade with 
the world.  Official assessments suggest China's 
upturn is however "slight...unstable, and fragile" due 
to a sharp drop-off in external demand.  Chen 
indicated that he expects China to maintain its 
current proactive fiscal policy and moderately easy 
monetary policy.  End Summary. 
 
Joint Commerce-Energy Visit Promotes Cooperation on 
Clean Energy 
 
¶3. (SBU) Minister Chen noted this was Secretary 
Locke's first visit to China as a Cabinet member. 
He thanked Locke for the invitation to visit the U.S. 
in April and praised the Administration's high tempo 
of U.S. - China bilateral visits and cooperation. 
Secretary Locke noted that his joint visit with 
Secretary Chu is intended to promote bilateral 
cooperation on energy efficiency, alternative energy, 
and climate change, an area which could generate 
millions of jobs.  China and the U.S. should lead 
the worlds developing and developed nations on 
these urgent issues, he stated.  Locke highlighted 
his July 16 stop in Shanghai to break ground for the 
U.S. Pavilion at the Shanghai World Expo.  Locke 
also stated that he plans to attend the proposed 
late-October U.S.-China Joint Commission on Commerce 
and Trade (JCCT) session in Hangzhou, China and lead 
a clean energy trade mission to China this Fall 
(Note:  DOC's notional plan at present is for two 
separate visits in September and October.  End Note.) 
 
U.S. Commercial Issues: Civilian nuclear power, 
 
BEIJING 00002064  002 OF 006 
 
 
Inner Mongolia energy project, China East Star 
 
¶4. (SBU) The Secretary requested China's favorable 
consideration of proposals pending by GE and 
Westinghouse for civilian-nuclear technology 
projects in China as well as a GE coal gasification 
plant project in Inner Mongolia.  Referring to his 
prior meeting with Minister Li of the Ministry of 
Industry and Information Technology (MIIT), Locke 
praised Li's delayed implementation of an MIIT rule 
requiring mandatory installation of Green Dam 
internet filtering software on computers sold in 
China.  Locke also emphasized the U.S. seeks release 
of planes leased by GE Commercial Aircraft Services 
to China East Star airlines, as local Chinese 
airport authorities are refusing to adhere to 
international law and refusing to comply with a 
Chinese bankruptcy court ruling which orders the 
planes to be released. 
 
Chen on State of China's Economy: "Better," But 
Upturn "Fragile" 
 
¶5.  (SBU) Chen expressed pleasure at Locke's 
speaking with "candor and in a straightforward way" 
and then provided a detailed briefing on the state of 
China's economy.  For the first half of 2009, 
China's GDP growth rate was 7.1 percent and retail sales 
were up 15.1 percent versus the prior year, he reported. 
During the same period, exports dropped 21 percent year-on- 
year and foreign direct investment declined 20-21 percent. 
China stimulus was helping the domestic economy 
compensate for declining trade, and U.S.-China trade 
had slowed less than overall trade.  China's trade 
surplus was down, indicating a greater role for 
imports.  However, official assessments suggest the 
upturn is "slight...unstable, and fragile" due to the 
sharp drop-off in external demand.  Accordingly, 
China will maintain its current proactive fiscal 
policy and moderately easy monetary policy -- but 
without a U.S. recovery, the future is uncertain. 
China cannot be successful if it is the only economy 
in the world that is growing, Chen concluded. 
 
China Proposes Hosting 20th JCCT October 29 in 
Hangzhou 
 
¶6. (SBU) Chen remarked that China has proposed that 
the 2009 Joint Commission on Commerce and Trade 
(JCCT) be held October 29 in Hangzhou, with a 
preliminary dinner on the evening of October 28, as 
previously proposed by China at a July 14 meeting 
between JCCT leads MOFCOM Vice Minister Ma Xiuhong 
and DOC Under Secretary O'Neill and D/USTR Marantis. 
Chen praised Locke's hard work in honoring a pledge 
he made in April to work with Secretary Clinton to 
ensure a U.S presence at the Shanghai Expo. 
 
China's Position on Climate Change: As Stated At G5 
 
¶7. (SBU) China attaches great importance to clean 
energy and emission reduction, Chen continued, and 
National Development and Reform Commission (NDRC) 
Chairman Zhang Ping had already briefed Secretary 
Locke on China's position on global warming.  The 
position is the same one China expressed at the 
recent G-5. Today's carbon levels are the result of 
decades of cumulative pollutants, a view that Chen 
claimed was confirmed by an expert study he 
commissioned while at NDRC.  On climate change 
 
BEIJING 00002064  003 OF 006 
 
 
issues, China intends to adhere to the UN Framework 
Convention on Climate Change (UNFCCC) and believes 
developed and developing countries should have 
"shared but differentiated responsibilities."  China 
is ready to work toward energy use reduction and 
emissions reductions by 2050, but does not wish to 
commit to any targets.  China opposes carbon tariffs 
in international trade, and questions whether these 
would be WTO-consistent.  The American Clean Energy 
and Security Act is helpful for reducing U.S. 
emissions, Chen indicated, but China remains 
concerned about proposals for a carbon tariff in 
international trade.  [Note: Chen claimed 
"colleagues say that President Obama does not agree 
with imposition of carbon tariffs as protectionist."] 
 
China's Response to U.S. Commercial Issues 
 
¶8. (SBU) Chen acknowledged U.S. requests to consider 
including GE's gasification project and GE and 
Westinghouse's interest in China's nuclear power 
plant projects.  There is great potential for China 
and the U.S. to work together on clean energy 
technology, Chen said, citing advanced work by the 
Xi'an Research Institute in Shaanxi province. 
China's technologies may differ from those of 
companies such as GE, but both sides can work 
together, and a GE visit to the Institute benefitted 
both sides.  On the China East Star case, Chen said 
MOFCOM is "paying a lot of attention" but the matter 
is complicated by judicial involvement and creditor- 
debtor relations.  Senior officials at the Civil 
Aviation Authority of China (CAAC) are coordinating 
with local authorities and MOFCOM "hopes the case is 
handled properly." 
 
China Trade Issues: Section 421, AD/CVD, Section 
727, OCTG 
 
¶9. (SBU)  China's priority concern is the Section 
421 tire safeguards case, Chen said.  He portrayed 
the case as one of many, claiming 20 anti- 
dumping/countervailing duty/safeguards actions have 
been launched under the 111th Congress and suggesting 
"protectionism in the U.S. on the rise".  Another 
example, he said, is the U.S. Section 727 ban on the 
import of poultry from China, a blatantly 
discriminatory provision aimed only at China.  While 
U.S. safeguards may be allowed under China's WTO 
accession protocol, Chen continued, they were 
drafted to be applied in a certain historical period. 
Chen recalled that the prior Administration faced 
six safeguards cases, but took no actions on any. 
He recalled a recent letter he sent to Ambassador 
Kirk expressing concern about the Section 421 tires 
case as precedent-setting, and asked Ambassador 
Marantis to emphasize the point to USTR Kirk upon 
his return to Washington.  Chen maintained that the 
recent U.S. anti-dumping case on Oil Country Tubular 
Goods (OCTG) was a huge one in value terms.  At the 
same time, MOFCOM was under tremendous pressure from 
Chinese interests to take AD/CVD action against 
rising U.S. agricultural exports to China -- "We are 
constantly being asked 'Why are you not filing any 
cases against U.S. companies'"  In light of global 
economic crisis, China and the U.S. had agreed at 
the G20 Summits in Washington and London to be very 
cautious in using trade remedies.  While some of the 
pending AD/CVD/Safeguards cases could wait until the 
JCCT to be discussed further, Section 421 requires a 
 
BEIJING 00002064  004 OF 006 
 
 
decision before October. 
 
China Open to U.S. Investment, Particularly in 
Energy Sector 
 
¶10. (SBU) China is ready to cooperate and open to 
U.S. investments in the energy sector, Chen 
reiterated, and U.S. investors are welcome to take 
part in China's plans for building a large eco-park. 
Promise exists for cooperation in other areas such 
as use of agricultural products for electricity and 
alternative fuel sources as well. 
 
Green Dam: Chen Recommended Delay Due to Technical 
Shortcomings 
 
¶11. (SBU) Regarding MIIT's proposal for mandatory 
installation of Green Dam internet filtering 
software, Chen stated that he had advised MIIT's 
Minister Li to delay implementation of the software 
installation requirement not only because of the 
concerns expressed by the U.S., but also because of 
"technical shortcomings". 
 
Locke: U.S. Concerned over "Buy China" 
 
¶12. (SBU)  Picking up on Chen's comment regarding 
U.S. protectionism, Locke countered that the U.S. 
opposed protectionism in all forms.  Locke observed 
that both China and the U.S. needed to open more 
markets, not close them, in order to promote a 
global recovery.  Furthermore, protectionism is a 
concern wherever it occurs, and China's Buy China 
policy in procurement practices has been noted by 
all countries.  Locke said use of AD/CVD trade 
remedies is part of a mature trading relationship 
and the DOC must rather act a quasi-judicial agency 
to investigate cases.  He pledged that the agency 
will carry out its role fairly and in accordance 
with the law.  Locke added that a recent analysis by 
his staff found that the total number of AD/CVD 
cases year to date was actually less than in 2007 or 
¶2008. 
 
Chen: Market Economy Status (MES) Limits Trade and 
Investment 
 
¶13. (SBU) Chen singled out U.S. insistence on 
treating China as a non-market economy as another 
reason for problematic AD/CVD cases.  He urged the 
U.S. to use third countries as a way to provide 
comparative data in such cases.  He contended that 
the MES issue slows the expansion in two-way 
bilateral trade as well as Chinese investment into 
the U.S.  Chen felt that a successful outcome to the 
U.S.-China Bilateral Investment Treaty (BIT) 
negotiations ongoing this week should help both 
countries. 
 
Chen: MOFCOM Statement Covers U.S. Concerns Over Buy 
China 
 
¶14. (SBU) Regarding Locke's concerns on "Buy China" 
policies, Chen agreed that misunderstandings had 
arisen as to how products made by foreign invested 
enterprises in China would be treated when it comes 
to government procurement.  To correct any 
misperceptions, MOFCOM (and NDRC as well, Chen 
thought) had issued a statement following his EU 
visit to clarify that "Made in China" includes 
 
BEIJING 00002064  005 OF 006 
 
 
companies legally incorporated in China with foreign 
investment.  [Note:  Embassy notes that the MOFCOM 
statement referenced by Chen, while helpful, may not 
have legal force as it is a press release rather 
than an official policy.] 
 
China's Accession to WTO GPA, Activity by Foreign 
Firms 
 
¶15. (SBU) China is not legally obliged to allow 
foreign participation in its government procurement 
contracts, as it is not yet a member of the GPA, 
Chen continued.  However, foreign companies do 
participate in such contracts.  He then mentioned 
that he had heard that some U.S. states and 
localities waive GPA requirements, despite the U.S. 
status as a GPA member.  While China hopes to move 
ahead on its GPA accession soon, in practice this 
depends upon many GPA member countries and not just 
the U.S. 
 
¶16. (SBU) "Our hope is that the U.S. government and GPA 
members adopt a flexible and realistic attitude" 
when it comes to China's GPA offer, Chen said.  He 
urged existing GPA parties not apply too high a bar 
for China, a developing country.  Chen claimed 
foreign companies had won contracts to supply 
products under China's program to distribute 
electrical appliances to the countryside.  In 
addition, he said, GE, Siemens, and ABB are all 
competing for contracts under China's high-speed 
rail projects.  For their part, Chinese companies 
are highly competitive in engineering services and 
are ready partners for U.S. infrastructure projects 
-- having receiving many inquiries already from 
interested U.S. construction firms. 
 
Locke: MES analysis underway, Commerce Actions on 
Buy America 
 
¶17.  (SBU) Locke closed the meeting by noting that 
progress is ongoing on China's consideration for 
market economy status, and both countries are 
exchanging information.  He clarified that U.S. "Buy 
America" provisions in the stimulus bill only apply 
to stimulus funded projects, and not to normal 
procurement by U.S. states, or the federal or local 
governments.  And despite the Buy America provisions 
in the stimulus, the Departments of Commerce and 
Agriculture had waives Buy America requirements for 
approximately $5 billion for a high speed internet 
program and $2 billion for USDA funded procurement, 
demonstrating their commitment to do whatever 
possible to fight protectionism. 
 
¶18. (SBU) Participants: 
 
U.S. 
---- 
Mr. Gary Locke, Secretary of Commerce, DOC 
Mr. Robert Goldberg, Charge d' Affaires, U.S. 
Embassy Beijing 
Mr. Chris Lu, Assistant to  the President and 
Cabinet Secretary 
Mr. Demetrios Marantis, Deputy United States Trade 
Representative, USTR 
Ms. Michelle O'Neill, Acting Undersecretary for 
International Trade, DOC 
Mr. Tim Stratford, Assistant U.S. Trade 
Representative for China, USTR 
 
BEIJING 00002064  006 OF 006 
 
 
Mr. Ira Kasoff, Deputy Assistant Secretary for Asia, 
DOC 
Ms. Ellen Moran, Chief of Staff, DOC 
Mr. Chris Adams, Minister Counselor for Trade 
Affairs, U.S. Embassy Beijing 
Mr. William Brekke, Commercial Councillor, U.S. 
Embassy Beijing 
Ms. Teresa Howes, Director, Market Access and 
Compliance, DOC, U.S. Embassy-Beijing 
Mr. Jeffery Young, First Secretary, Economic Section, 
U.S. Embassy-Beijing 
Ms. Lisa Rigoli, Trade Policy Officer, Market Access 
& Compliance, DOC, U.S. Embassy-Beijing 
Interpreter 
 
PRC 
--- 
Mr. Chen Deming, Minister of Commerce (MOFCOM) 
Ms. Ma Xiuhong, Vice Minister, MOFCOM 
Mr. Li Zhiquin, DG, Foreign Investment 
Administration Department, MOFCOM 
Mr. Zhang Ji, DG, Mechanical, Electronic and Hi-Tech 
Industry Department, MOFCOM 
Mr. Zhang Kening, DG/Commercial Counselor, 
International Trade and Economic Affairs Department, 
MOFCOM 
Mr. Shen Danya, Ex-Vice President, Chinese Academy 
of International Trade and Economic Cooperation, 
MOFCOM 
Mr. Li Chengang, DDG, Treaty and Law Department, 
MOFCOM 
Mr. Liang Shuhe, DDG, Foreign Trade Department, 
MOFCOM 
Mr. Liu Danyang, DDG, Bureau of Fair Trade for 
Imports and Exports, MOFCOM 
Ms. Wang Hongbo, DDG, Department of North American 
and Oceanian Affairs, MOFCOM 
Mr. Wang Xu,  Director of US Division, Department of 
North American and Oceanic affairs, MOFCOM 
Mr. Liu Danyang, DDG of Bureau of Fair Trade, MOFCOM 
Interpreter 
 
¶19. (U) Secretary Locke's delegation did not have 
the opportunity to clear this message before 
departing. 
 
GOLDBERG