PACOM ADMIRAL FALLON'S DISCUSSION WITH CENTRAL

C O N F I D E N T I A L SECTION 01 OF 04 BEIJING 009041

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E.O. 12958: DECL: 05/14/2016
TAGS: PREL PINS MOPS CH TN KN JP
SUBJECT: PACOM ADMIRAL FALLON'S DISCUSSION WITH CENTRAL
MILITARY COMMISSION VICE CHAIRMAN AND DEFENSE MININSTER
GENERAL CAO GUANGCHUAN


Classified By: Political Minister Counselor Daniel
Shields. Reasons 1.4 (a/b/d).

Summary
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1. (C) During an extended discussion, Central
Military Commission Vice Chairman and Defense Minister
General Cao Gangchuan told PACOM Commander Admiral
Fallon that the PLA sought more military exchanges
with the United States; discussed the PLA's strategy
and budget priorities; and repeated familiar calls for
the United States to curtail its military-to-military
engagement with Taiwan. Admiral Fallon made clear he
was prepared to move forward on military ties,
provided the PLA reciprocated with concrete steps to
increase transparency and broaden the quality and
content of exchanges. He invited the PLA to send
representatives to observe a U.S. joint exercise
(Valiant Shield) in the Pacific this summer, and urged
Cao to accept a long-standing invitation for the PLA
Chief of the General Staff to attend the Chiefs of
Defense Conference to be held in Kuala Lumpur this
November. Cao appeared interested in the offer to
observe Valiant Shield and tasked his staff to examine
the invitation. Admiral Fallon provided Cao with a
courtesy notification of the imminent release of the
annual Congressionally-mandated report to Congress on
PRC military capabilities and previewed its key
elements. End Summary.

Got to Make the Evening News
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2. (C) Visiting Commander of U.S. Pacific Command
(PACOM),Admiral William Fallon, met May 10 with
Central Military Commission Vice Chairman and Defense
Minister General Cao Gangchuan at the PLA Headquarters
in Beijing. After welcoming Admiral Fallon to Beijing
and emphasizing the importance of his visit, CMC Vice
Chairman Cao Gangchuan noted that the opening portion
of the meeting was being recorded by journalists for
that evening's news and asked Admiral Fallon to share
his thoughts on U.S.-China military-to-military
relations. The cordial and wide-ranging discussion
ran 40 minutes over its scheduled time period.

Invitation to Exercises
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3. (C) Reiterating Defense Secretary Rumsfeld's
statements that the United States welcomes the
emergence of a peaceful and prosperous China on the
world scene, Admiral Fallon stressed the benefits of
bilateral cooperation while emphasizing the value of
better mutual understanding between our militaries.
Admiral Fallon welcomed the PLA to observe a U.S.
joint military exercise (Valiant Shield) planned for
this summer in the Pacific. Cao queried whether the
exercise would be conducted with other countries.
Admiral Fallon replied that the June exercise would
only involve U.S. forces and that other Asia-Pacific
nations would also be invited to observe. He stressed
that his intention was to demonstrate U.S. Pacific
Command's interest in being open and transparent
regarding the purpose and conduct of its exercises.
Cao said he would consider the proposal and tasked PLA
Deputy Chief of General Staff Ge Zhenfeng to discuss
the details of the offer with the U.S. Embassy.

Importance of Military Exchanges
--------------


4. (C) The United States and China enjoy stable
state-to-state relations and, as a result of the
policy direction from President Bush and President Hu,
bilateral military-to-military relations have
developed considerably, Cao stated. After reviewing
the exchanges between the two sides since Secretary
Rumsfeld's visit, Cao said he was impressed by the
number of exchanges in such a short period of time and
welcomed CJCS General Pace's visit to China later this
year.


5. (C) China has a positive attitude toward

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developing exchanges with the U.S. military on the
strategic and personal level, according to Cao.
Echoing Admiral Fallon's remarks, he highlighted the
importance of mid-level officer exchanges. He urged
expanding such mid-level exchanges to increase mutual
understanding between younger officers, particularly
because one day they will command our respective
militaries. Problems between our two militaries are
natural in light of different backgrounds, history and
levels of development. However, Cao continued, such
issues can be resolved through better understanding
and contact.

Chiefs of Defense Conference
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6. (C) Admiral Fallon expressed his disappointment
that the PLA had chosen not to attend previous Chiefs
of Defense Conferences, hosted by Pacific Command on
behalf of the Chairman of the Joint Chiefs of Staff.
He extended his personal invitation to Chief of the
General Staff Liang Guanglie to attend this year's
conference to be held in Kuala Lumpur and co-hosted by
Malaysia. Noting that this will be the ninth year of
the conference, Admiral Fallon commented that many
countries are eager to have China attend. PRC
participation at this conference would be a positive
sign for other nations in the region, Admiral Fallon
stated. Cao agreed only to "remember" the invitation.

Defense Department Report to Congress on State of the
PLA
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7. (C) Admiral Fallon informed Cao that he wished to
provide him with a courtesy notification that in late-
May, DOD will issue the Congressionally-mandated
annual report on China's future military capabilities.
Based on the best available public information, the
report attempts to be factual and straightforward,
Admiral Fallon stated. The report, the Admiral
stressed, is the product of a coordinated interagency
review. Cao expressed hope the report will
objectively reflect the situation of both the U.S. and
PLA military forces and will help rather than impede
the military relationship.

Taiwan: "Nothing Else Matters More"
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8. (C) Cao then launched into a discussion of Taiwan,
characterizing Taiwan as the biggest issue between the
United States and China. "Nothing else matters more,"
Cao stated, adding that Taiwan is a "vital" PRC
interest and Beijing's policy is very firm. Beijing
"will defend reunification with Taiwan and the
territorial integrity and sovereignty of China." Cao
offered the "one country, two systems" formulation as
the basis for reunification because "after all both
sides of the Strait are populated by Chinese people
who have no wish to meet on the battlefield." Cao
accused Chen Shui-bian of continuing his "risky"
pursuit of independence despite Mainland efforts last
year to ease tension in the Strait. Admiral Fallon
responded that the United States shares the goal of
"no conflict" across the Strait. He suggested to Cao
that it is of importance not only to the region but to
the world for the leadership and people on both sides
of the Strait to come to agreement on how best to
pursue a peaceful resolution of their conflict.


9. (C) Cao agreed that both the PRC and the U.S.
sought "peace and stability" in the Strait. At the
same time, Cao said, China expected the U.S. to do
more to "restrain" Chen Shui-bian and "not send
incorrect signals" to Taiwan. The overwhelming
support for passage of the Anti-Secession Law is a
clear demonstration of the Chinese people's
aspirations, said Cao. He went on to suggest there
are two things the U.S. could do to ensure stability
in the Taiwan Strait. First, the United States should
stop all official contact with Taiwan, especially
military contacts. Second, the United States should
stop all advanced arms sales to Taiwan. Arguing that
the "Chen Shui-bian authorities" are "encouraged" by

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the frequent engagement with senior U.S. military
officers and by U.S. arms sales, Cao claimed these two
steps would be more effective than "rhetoric" aimed at
Taiwan. Admiral Fallon emphasized that both U.S. law
and policy require the United States to provide for
Taiwan's ability to defend itself against military
attacks. The U.S., he continued, is taking a prudent
course in this regard.

Defense Authorization Act
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10. (C) Admiral Fallon informed Cao that several
members of Congress have asked him for his views on
the current legislative restrictions on military
engagement with China in the Defense Authorization
Act. The Admiral said that he has not yet provided
his recommendations to Congress. He urged Cao to take
concrete steps to demonstrate the PLA's intent to
increase transpaency regarding military intentions
and capabilities. Such steps would be duly noted by
the Administration and Congress.


11. (C) Cao replied that he discussed this issue with
Secretary Rumsfeld, but the problem is not on the

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Chinese side. The PRC welcomes exchanges, though the
Defense Authorization Act prohibits the U.S. military
from engaging the PLA in twelve areas. For example,
the PLA has invited U.S. logistics officers to visit
Chinese logistics officers but this is prohibited
under the Act. Cao stated his hope that Admiral
Fallon can persuade Congress to rescind the China-
related elements of the Defense Authorization Act. In
the 1980's the United States and China had robust
military exchanges, Cao stated.

China Threat Proponents Comparing Apples to ORANGEs
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12. (C) Returning to the annual report, Cao stated
that many China-watchers are discussing a "China
Threat" theory, but these people only have a
superficial understanding of the Chinese military.
The PLA's only objective is to maintain China's
stability and sovereignty and China will not send
troops overseas except to participate in multilateral
peacekeeping operations, Cao said. In the 1980s and
1990s China was solely focused on its economic growth
and the Government told the military to be patient.
Now the PLA's budget is growing but the double digit
increases need to be put into perspective, Cao argued,
saying "if the PLA's budget started at only one dollar
and then doubled, you still have only two dollars."
China has a defense budget of 35 billion USD but has a
force of 2.3 million men. Cao called attention to the
limited amount of funds available on a per-person
basis, which limits the development of the PLA.
Admiral Fallon responded that while China may spend
much less per soldier, the real problem is that
China's goals and priorities are unclear. Admiral
Fallon asked Cao why the PLA spends a large portion of
its budget on building strategic systems if its goal
is to increase the capabilities of its soldiers.


13. (C) Comparing China's defense budget with
Japan's, Cao noted that despite its comparatively
small population, military and land mass, Japan still
has a defense budget that is 33 percent higher than
China's. Admiral Fallon responded that much of
Japan's defense budget is used to offset the cost to
the U.S. of maintaining its forces in Japan. The U.S.
provides for the defense of Japan so it does not have
to build and maintain a military capability beyond
what is required for self-defense. Admiral Fallon
pointed out that this is Japan's only security
arrangement and it has been in place for the past 50
years. The world does not want to see a repeat of
what happened in the 1930's and 40's. The Admiral
also pointed out the United States has over the years
reduced its military presence in Japan as well as
Korea and will continue to do so.

PLA Soldiers to Receive Significant Pay Raise
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14. (C) Seizing on the Admiral's point concerning the
PLA's apparent priority on strategic systems at the
expense of personnel, Cao said the PLA is, in fact,
reforming its pay system and later this year will
announce a 13 percent or higher pay raise for its
troops, according to Cao. Cao stated that this pay
raise has not been made public yet. The PLA has
determined that it must improve the wages of its
troops if it wants to retain talented people and this
is where the lion's share of the defense budget is
being spent. Cao said that foreign speculation on
China's investment in strategic systems is
exaggerated. He pointed out that the PLA recently
downsized by 200,000 troops and noted that a large
part of the PLA budget is assisting the transition of
these officers into civilian life and providing for
their retirement. Cao said this process is very
expensive and not covered by a civilian social
security system. Admiral Fallon responded that these
types of details are what the two militaries need to
discuss and share in order to build better confidence
and understanding. He stated that at the end of the
Cold War, the United States military went through a
similar downsizing and understands that troop
drawdowns can be expensive.

Comment
--------------


15. (C) Cao was very effusive and willing to joke
with Admiral Fallon and his delegation, asking all to
participate in a group photo. Admiral Fallon broke
the ice by asking General Cao what he preferred being
called: General or Mr. Minister. Cao demurred saying
he was comfortable with either. To Cao's obvious
delight, Admiral Fallon responded "Well, okay Mr.
Minister General." During substantive discussion, Cao
consulted frequently with General Ge Zhenfeng for
clarification on particular points or names. Cao
referred to General Ge as the "executive" Deputy Chief
of Staff and told Admiral Fallon that Ge is very
capable and his opinions are well-respected within the
PLA and the civilian leadership. Cao stated he would
defer the decision on sending PLA representatives to
observe the U.S. military exercises to General Ge,
saying "if General Ge agrees that the PLA should send
observers, then I'll endorse it when it comes across
my desk." At the end of the meeting, Cao said he
hoped Admiral Fallon would return to China soon
because Cao wanted another chance to exchange ideas
with the Admiral before Cao retired. End Comment.

Participants
--------------


16. (U) U.S. Participants:

Admiral William J. Fallon, Commander, United States
Pacific Command
Ambassador Clark T. Randt, Jr.
Ravic Huso, Political Advisor, Department of State,
United States Pacific Command
Brig. Gen. Ralph Jodice, Defense Attache
COL Bob Brown, Executive Assistant, United States
Pacific Command
Lt Col Sesh Munipalli, Special Assistant to the
Commander, United States Pacific Command
CAPT Kevin Ketchmark, Naval Attache
MAJ Roger Cavazos, China desk officer, United States
Pacific Command
Embassy Poloff, Notetaker


17. (U) PRC Participants:

Cao Gangchuan, Vice Chairman of the Central Military
Commission and Minister of Defense
General Ge Zhenfeng, Deputy Chief of the General Staff
Senior Colonel Li Ji
MGEN Qian Lihua
LTC Dong Xilin
COL Huang Xueping
CAPT Cheng Kai


18. (U) Admiral Fallon has cleared this message.
RANDT