VZCZCXRO8809
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #3379 3510954
ZNR UUUUU ZZH
P 170954Z DEC 09
FM AMEMBASSY BEIJING
TO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEHUL/AMEMBASSY SEOUL PRIORITY 1439
RUEHKO/AMEMBASSY TOKYO PRIORITY 0155
RUCPDOC/USDOC WASHDC PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 7270
RUEHIN/AIT TAIPEI PRIORITY 7440
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC PRIORITY
RUEAWJA/DEPT OF JUSTICE WASHDC PRIORITY

UNCLAS BEIJING 003379 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM - WKELIN, SFLATT 
STATE FOR EEB/CIP - SFLYNN, FSAEED 
USTR FOR AWINTER, TWINELAND, JGRIER, JMCHALE 
COMMERCE FOR ITA - IKASOFF, NMELCHER, JWU 
DOJ FOR CCIPS - MDUBOSE, SCHEMTOB 
FBI FOR LBYRANT 
STATE FOR WHITE HOUSE OSTP AMBASSADOR RICHARD RUSSEL 
NSC FOR MHATHAWAY 
 
E.O. 12958: N/A 
TAGS: ECON ETRD PGOV SCUL SOCI CH
SUBJECT: INDIGENOUS INNOVATION - DEMARCHE DELIVERED AGAIN, 
MFA BELIEVES POLICIES NON-DISCRIMINATORY 
 
REF: A. SECSTATE 124680 
     ¶B. BEIJING 3296 
 
 ¶1. (SBU) Summary.  Economic Minister Counselor delivered 
reftel demarche regarding indigenous innovation to a National 
Development and Reform Commission (NDRC) official December 9. 
 The official took note of USG concerns over the Circular and 
promised to "respond accordingly."  Separately, a Ministry of 
Foreign Affairs (MFA) spokesperson on December 14 asserted 
China's indigenous innovation policies "comply with relevant 
WTO rules" and "treat both domestic and foreign-invested 
enterprises equally."  The spokeswoman did not address 
industry concerns over the requirement that intellectual 
property in indigenous innovation products be developed 
locally.  The MFA comments, however, have not been published 
and appeared to be a preliminary response only and thus may 
not be the Chinese government's final position on this issue. 
 End Summary. 
 
¶2. (SBU) Economic Minister Counselor William Weinstein 
delivered the demarche concerning the Circular on the 2009 
National Indigenous Innovation Product Accreditation Work 
(Circular) to NDRC Counselor Qi Chengyuan December 11.  EMIN 
emphasized the Circular undermined clear commitments made by 
the Chinese during both the Joint Commission on Commerce and 
Trade (JCCT) and the Strategic and Economic Dialogue (S&ED) 
to treat products of Foreign Invested Enterprises operating 
in China the same as domestic products.  He stressed that the 
Circular discriminated against foreign companies and 
therefore also violates the fundamental principle of 
non-discrimination that is the cornerstone of the rules-based 
international trading system.  EMIN further noted that 
industry and foreign governments were not given an 
opportunity to comment on the Circular before it was 
promulgated, raising transparency concerns that are 
fundamental in ensuring non-discriminatory treatment of 
foreign companies and goods.  (Note: Ref b reports other 
channels through which this same demarche was delivered). 
 
¶3. (SBU) NDRC's Qi acknowledged USG concerns and several 
times asked for clarification.  Qi said the NDRC would 
analyze these concerns, discuss them with the relevant 
ministries, in particular with the Ministry of Science and 
Technology, and "respond accordingly." 
 
¶4. (SBU) Separately, on December 14, MFA spokeswoman Jiang 
Yu, in an unpublished oral response to a press inquiry on the 
Circular, stated China's indigenous innovation policies 
accord with "international rules," and "comply with relevant 
WTO rules."  Jiang further stated China's "indigenous 
innovation product accreditation work treats both domestic 
and foreign-invested enterprises equally without 
discrimination."  "All eligible products can be accredited, 
and all types of enterprises are treated equally," according 
to Jiang. 
 
¶5. (SBU) Comment.  In her comments, Jiang did not address 
specific industry concerns over requirements that local 
intellectual property be developed and IP rights originate in 
China in order to qualify as "indigenous innovation."  These 
latter stipulations effectively exclude foreign-invested 
enterprises from participation in the indigenous innovation 
accreditation process given well-known IPR concerns in China 
that dissuade FIEs from innovating in China, and leaving them 
unable to benefit from the preferential incentives in 
government procurement under the accreditation process.  The 
fact that Jiang's response has yet to be published on the MFA 
or other official website suggests a final PRC position still 
has not been issued.  The Embassy will meet with the Ministry 
of Science and Technology December 18 in a continued effort 
to get USG and industry concerns over the Circular addressed. 
 End Comment. 
 
 
GOLDBERG