LABOR SECRETARY CHAO'S LUNCHEON WITH CHINESE LABOR

UNCLAS SECTION 01 OF 03 BEIJING 024654 SIPDIS C O R R E C T E D C O P Y -- PARA 9 - TEXT SENSITIVE SIPDIS STATE PASS CEQ FOR CONNAUGHTON STATE PASS CEA FOR BLOCK STATE PASS USTR FOR STRATFORD/ALTBACH/CELICO/ROSENBERG STATE PASS FEDERAL RESERIVE BOARD FOR JOHNSON/SCHINDLER NSC FOR HUNTER/SHRIER/TONG COMMERCE FOR 4420/MCQUEEN TREASURY FOR SMITH/DOHNER/HAARSAGER/BAKER/CUSHMAN GENEVA FOR CHAMBERLIN AND USTR DOE FOR INTERNATIONAL/PUMPHREY/GEBERT EPA FOR INTERNATIONAL/AYRES, FIDLER, MCCASKILL HHS FOR STEIGER, ELVANDER AND BHAT LABOR FOR OSEC-HUI, OSHA-DEMESME-GRAY AND ILAB E.O. 12958: N/A TAGS: ELAB EFIN ECON PREL CH SUBJECT: LABOR SECRETARY CHAO'S LUNCHEON WITH CHINESE LABOR MINISTER TIAN CHENGPING REF: A. A) BEIJING 9677 ¶B. B) BEIJING 22277 BEIJING 00024654 001.2 OF 003 SUMMARY -------------- ¶1. (SBU) Summary: Ministry of Labor and Social Security (MOLSS) Minister Tian Chengping hosted Labor Secretary Elaine Chao for lunch on December 15. (Participants list in para. 9) Secretary Chao said the SED was a historic occasion and very important to both the United States and China. Tian said the first SED was highly successful. Secretary Chao said she hoped to continue the cooperation between the United States Department of Labor (USDOL) and MOLSS on pension issues. There was no discussion of new projects. The Minister and the Secretary described some of the challenges each country faces in perfecting pensions systems comprised of government pensions, employer-funded pension accounts, and personal savings. Tian indicated that the draft Labor Contract Law (ref A) will get a third reading in China,s legislature no December 25. He said the All China Federation of Trade Unions, (ACFTU) campaign to organize unions in foreign-invested enterprises (FIEs - ref B) is not a new policy, but that it received a lot of attention because of the successful creation of unions in China,s Wal-Mart stores. End Summary. ¶2. (SBU) MOLSS Minister Tian Chengping hosted Secretary Chao and her delegation for lunch at the Great Hall of the People on December 15. Minister Tian said he believed the first meeting of the SED was highly successful, and said he was also pleased to have a chance to reciprocate Secretary Chao,s hospitality during his September 2006 visit to Washington. Secretary Chao said the SED was a historic occasion and very important to both the United States and China. She thanked the Chinese side for its hospitality and complimented China on the meticulous arrangements for the SED. Pension Issues -------------- ¶3. (SBU) Secretary Chao said she hoped to continue the cooperation between the United States Department of Labor (USDOL) and MOLSS on pension issues, as retirement issues are important to citizens of both countries. There was no discussion of new projects. Minister Tian asked about prospects for pension reform in the United States. Secretary Chao told him that the Pension Protection Act was passed this year and that USDOL is in the process of writing implementing regulations. Minister Tian said he took interest in President Bush,s 2005 State of the Union Address, in which he discussed proposals to reform Social Security. Secretary Chao described the issue as highly politicized. She explained that everyone in the United States knows that the Social Security system faces serious problems, and she described President Bush,s proposal to create individual accounts to help make up for Social Security benefits cuts that may be necessary in the future. She explained some of the dynamics of Social Security reform between America,s political parties, and between Congress and the White House, BEIJING 00024654 002.2 OF 003 and how it all relates to the election cycle. Minister Tian said he did not understand the &subtle politics8 of the two-party system, but that he thought the future of Social Security would be a very serious problem. ¶4. (SBU) Minister Tian explained that the Chinese Government has just issued a policy White Paper on the Aging Society last week. He said China,s aged populatin would peak around 2030, so China needs to aopt good policies on pensions and elder care nw. If China waits until 2030 to deal with the issue of an aging society, he said, it would be impossible to find solutions. ¶5. (SBU) Minister Tian described a conversation he had with an American expert on the margins of a recent international conference on pensions, who said that the United States' experience suggests that the government should avoid taking greater responsibility for pensions, and leave a bigger role for markets. Minister Tian noted that governments which take a direct role in pensions, such as the UK and some Nordic countries, face a very heavy burden. Minister Tian told the Secretary that while in the United States in September, he SIPDIS met with the Principal Group, a private manager of pension funds. He said the company has formed a joint-venture with China Construction Bank and has contacted MOLSS about future participation in managing Chinese pension accounts. ¶6. (SBU) Secretary Chao said the ideal pension system had three elements: a government pension system, employer-funded pensions, and private savings. Minister Tian said he saw this as the right approach. Chao described the United States system in which pension management was largely a private sector issue, but where there are strong regulations to prevent the misuse of pension funds, which the Government enforces aggressively. Minister Tian said Chinese Government policies envision a similar system, but so far it was mainly state-owned enterprises (SOEs) participating, and this does not reduce the fiscal burden on the government. He said MOLSS,s challenge is to find a way to encourage non-SOEs and foreign-invested enterprises (FIEs) to participate in the pension system. The Labor Contract Law -------------- ¶7. (SBU) Minister Tian said the National People,s Congress will have a second reading of the draft Labor Contract Law (ref A) on December 25, and will have at least one more reading after that. Tian said the legislative process in China can take as little as a year, but can be very time consuming during the drafting phase. Efforts by Chinese Union to Organize in Foreign Invested Enterprises -------------- -------------- ¶8. (SBU) Secretary Chao asked about ACFTU,s recent campaign to organize unions in all FIEs. She said there seemed to be confusion about this campaign in the business community (ref B). Tian said MOLSS has no direct involvement in the activities of ACFTU, but that all enterprises, whether SOEs BEIJING 00024654 003.2 OF 003 or privately owned, domestic or FIEs, were supposed to have unions. Jiang Mohui, Deputy Director General of the MOLSS international department clarified that it is not mandatory for any enterprise to have a union, but that if workers wish to form one, employers have no right to obstruct them. Tian said almost all SOEs have unions, but many privately owned businesses and FIEs do not. Minister Tian said ACFTU,s interest in organizing unions in FIEs was not a new policy. Unions were necessary, he said, for Chinese workers to bargain collectively with employers. The reason the issue has gotten so much attention this year, Tian said, was because, after several years of trying, ACFTU established unions in Chinese Wal-Mart stores. Minister Tian said ACFTU unions collect dues equal to two percent of the wages of union members, and added that ACFTU has &a lot of money.8 (Note: By law, ACFTU dues are two percent of the enterprise,s total payroll, not just the wages of union members. End note.) Participants List -------------- ¶9. (U) United States Participants -------------- --Elaine L. Chao, Secretary of Labor --Laura Genero, Associate Deputy Secretary of Labor --Randolph Clerihue, Assistant Secretary of Labor --Anna Hui, Special Assistant to the Secretary of Labor --Bruce Levine, Labor Officer, United States Embassy (notetaker) --Interpreter Chinese Participants -------------- -- Tian Chengping, Minister of Labor and Social Security -- Xin Changxing, DG General Affairs Office (MOLSS) -- Liu Xu, DG MOLSS International Department -- Jiang Mohui, Deputy DG MOLSS International Department -- Interpreter ¶10. (U) Associate Deputy Secretary of Labor Laura Genero cleared this message. Randt