CHINA WANTS TO IMPROVE ECONOMIC TIES WITH JAPAN

UNCLAS TOKYO 001010

SIPDIS

SENSITIVE
SIPDIS

EAP/J PLEASE PASS TO USTR STANFORD MCCOY, TIM STRATFORD

E.O. 12958: N/A
TAGS: ETRD ECON CH JP
SUBJECT: CHINA WANTS TO IMPROVE ECONOMIC TIES WITH JAPAN



1. (SBU) SUMMARY: Senior Chinese Officials told Trade
Minister Nikai that China was concerned the political chill
might begin to affect bilateral economic ties, Trade Policy
Director General Kitamura told A/DCM on February 24.
Although Premier Wen Jiabao, Commerce Minister Bo Xilai and
State Councillor Tang Jiaxuan each raised Yasukuni issues in
separate meetings with Nikai, they quickly moved on to
economic issues on the agenda, according to Kitamura who
accompanied the Minister to Beijing. They each told Nikai
that China wanted to intensify senior-level
government-to-government talks. The Commerce Minister
proposed that Japan and China work on a joint
"mid-to-long-term economic vision" and Premier Wen suggested
that Japan and China meet at the Director General-level in
March to discuss how to develop energy resources in the East
China Sea. Both sides, Kitamura explained, reiterated the
desire to resolve this dispute through dialogue. They also
agreed to talks on energy and the environment. Minister
Nikai raised many bilateral trade issues like IPR, and auto
tariffs. Although they did not make much progress on these
trade issues, Kitamura said, the talks were positive in that
China was clearly signaling the desire to intensify economic
discussions at the Minister level and below. Kitamura also
said METI wanted to continue to exchange information and
coordinate positions with the United States lest China
attempt to exploit differences in our approach. END SUMMARY.


2. (SBU) China clearly signaled it was concerned that the
cool political relationship between Japan and China might
begin to damage the economic relationship, Ministry of
Economy Trade and Industry METI) Trade Policy
Director-General Toshiaki Kitamura told A/DCM on February 24.
Chinese officials raised the issue of PM Koizumi's visits to
Yasukuni Shrine in every meeting, but they kept to previous
statements and did not make any new demands. Premier Wen
Jiabao, State Councillor Tang Jiaxuan and Commerce Minister
Bo Xilai all underlined that they were afraid that the
current situation could adversely affect Japan-China
relations, quoting actual trade and investment figures. In
response, Nikai emphasized the importance of enhancing mutual
understanding through more bilateral dialogue and exchanges
and by developing a more future-oriented Japan-China
relationship.


3. (SBU) Kitamura foresees that METI and China's Ministry of
Commerce will take the lead in developing a forum for
dialogue on a "mid-to-long-term economic vision," and that
Kitamura himself is likely to be assigned this issue. He
noted that China originally proposed the idea, so, at this
point, METI can offer no details on the proposal. But the
GOJ agreed to China's suggestion because it might provide a
good forum for dialogue on a range of issues.


4. (SBU) The two countries also agreed to set up forums on
energy conservation and environmental issues, and to resume
expert-level talks on the East China Sea in March. According
to Kitamura, China sees the East China Sea issue as more of a
territorial dispute than an energy dispute, as evidenced by
the fact that China's Ministry of Foreign Affairs (MOFA) is
taking the lead on the issue. For Japan, its MOFA Asia
Director-General Sasae and METI's Energy and Natural
Resources Agency Director Kodaira will co-chair. Kitamura was
certain that very high level Chinese officials had expressed
a strong desire to resolve the problem peacefully and
amicably through dialogue.


5. (SBU) METI Minister Nikai talked to China's Minister of
Commerce Bo Xilai also about its auto parts/IPR complaints.
(Note: Japanese automakers, particularly Honda, have
complained about counterfeit auto parts made and sold in
China. ) Bo seemed prepared for these discussions and
rebutted Nikai's arguments at length.


6. (SBU) In summing up, Kitamura stated that the USG and
GOJ should intensify exchanges of information and views on
China's trade, economic and energy policies. Kitamura
believes that now is the time for the US and Japan to start
regularly exchanging views on China economic issues at a high
level in order to avoid presenting China with opportunities
to exploit the differences in our approaches. He welcomed
next week's visit of USTR General Counsel Mendenhall to
discuss China issues.
SCHIEFFER