Identifier
Created
Classification
Origin
07BEIJING1158
2007-02-16 10:55:00
CONFIDENTIAL
Embassy Beijing
Cable title:  

CHARGE REQUESTS CLARIFICATIONS ABOUT THE XINHUA

Tags:  ECON ETRD EFIN KPAO KIPR ECPS PREK ABLD CH 
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PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #1158/01 0471055
ZNY CCCCC ZZH
P 161055Z FEB 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 4884
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEHLO/AMEMBASSY LONDON PRIORITY 3077
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEHBS/USEU BRUSSELS PRIORITY
RUEHGV/USMISSION GENEVA PRIORITY 1634
C O N F I D E N T I A L SECTION 01 OF 04 BEIJING 001158 

SIPDIS

SIPDIS

STATE PASS USTR FOR STRATFORD, READE, WINTER, MCCARTIN,
ALTBACH
GENEVA PASS USTR
TREASURY FOR OASIS/ISA DOHNER, CUSHMAN
NSC FOR SHRIER, TONG
STATE FOR OFM TED STRICKLER

E.O. 12958: DECL: 02/16/2017
TAGS: ECON ETRD EFIN KPAO KIPR ECPS PREK ABLD CH
SUBJECT: CHARGE REQUESTS CLARIFICATIONS ABOUT THE XINHUA
REGULATIONS

REF: A. ALTBACH - MADISON FEB. 13 E-MAIL

B. BEIJING 622

C. 06 BEIJING 24029

Classified By: Charge d'Affairs a.i. David S. Sedney.
Reasons 1.4 (b/d)

Summary
-------

C O N F I D E N T I A L SECTION 01 OF 04 BEIJING 001158

SIPDIS

SIPDIS

STATE PASS USTR FOR STRATFORD, READE, WINTER, MCCARTIN,
ALTBACH
GENEVA PASS USTR
TREASURY FOR OASIS/ISA DOHNER, CUSHMAN
NSC FOR SHRIER, TONG
STATE FOR OFM TED STRICKLER

E.O. 12958: DECL: 02/16/2017
TAGS: ECON ETRD EFIN KPAO KIPR ECPS PREK ABLD CH
SUBJECT: CHARGE REQUESTS CLARIFICATIONS ABOUT THE XINHUA
REGULATIONS

REF: A. ALTBACH - MADISON FEB. 13 E-MAIL

B. BEIJING 622

C. 06 BEIJING 24029

Classified By: Charge d'Affairs a.i. David S. Sedney.
Reasons 1.4 (b/d)

Summary
--------------


1. (C) The Charge raised United States Government concerns
about Xinhua News Agency's recent actions that linked renewal
of foreign financial information distributors' annual
licenses to the September 2006 media regulations with Xinhua
News Agency's Vice President Lu Wei on February 14. Vice
President Lu insisted that the regulations were not an
obstacle to the free flow of information but rather assisted
foreign financial news providers to do business in China. VP
Lu said that while the new regulations mandate that foreign
financial information providers act through a
Xinhua-designated distributor, the China Economic Information
Service (CEIS),signing an agreement with CEIS requires no
payment and that CEIS offers three choices:

-- A full service agency;
-- The right to select services with CEIS, or
-- Merely a requirement to notify CEIS of actions, but
still have direct dealings with customers.

VP Lu defended the regulations, stating that they were
implemented two months ago and have created a better market
for foreign information distributors that now enjoy higher
profits. The Charge noted that under WTO obligations, no new
regulations should be introduced to the market constricting
the flow of information and that under China's WTO
commitments the regulations should be published in the
Ministry of Commerce Gazette and that the regulations raised
a number of other concerns including giving a competitor
(Xinhua) information via a regulator, and national treatment.

End Summary.

Charge Seeks Clarification about Xinhua's Media Regulations
-------------- --


2. (SBU) Drawing from points in Ref A, the Charge told Xinhua
VP Lu Wei that the United States Government is concerned by
reports from United States and foreign financial information
providers that Xinhua has been pressuring them for several
months to designate the China Economic Information Service
(CEIS),a de facto part of Xinhua, as their distributor
before Xinhua will renew their annual business licenses. If
true, such an action by Xinhua would seem to not only violate
China's specific WTO commitment not to impose new
restrictions on financial information providrs but also
contradict Premier Wen's promise to the international
community on September 13 that the Xinhua regulations would
not affect foreign information providers. Xinhua's actions
would impose a barrier, in the form of a Xinhua-affiliated
intermediary, between the financial information providers and
their customers. The manner in which Xinhua is implementing
the regulations raises questions about China's commitment to
publish trade-related regulations in the Ministry of Commerce
Gazette. The Charge asked for clarifications.

Xinhua News Agency Vice President: New Regulations Aim to
Help Foreign Information Providers
--------------


3. (C) VP Lu insisted that Xinhua's goal via the regulations
is to serve both foreign and domestic information providers,
not to be an obstacle to the free flow of information. The
regulations will not affect the business of foreign financial
information distributors but protect them, media
organizations, and the Chinese Government. As long as the
foreign providers abide by Chinese law and regulations,
Xinhua will encourage their business. He claimed that the
new regulations are less restrictive than the regulations
issued in the mid 1990s, which did not allow subscribers to

BEIJING 00001158 002 OF 004


deal directly with foreign information distributors.

Xinhua: Register with CEIS - It's the Law and It's Free
-------------- --------------


4. (C) VP Lu said that foreign financial information
providers are legally mandated to sign with a
Xinhua-designated distributor, but that signing an agreement
with CEIS will incur no costs. Over the past few months,
enforcement of these regulations has led to the discovery of
some unregistered foreign information distributors who have
evaded taxes. He insisted that CEIS is forbidden by law to
exploit the relationship for its own gain. Furthermore, CEIS
is enjoined to protect the trade secrets and intellectual
property of foreign financial information providers.

Three Choices!
--------------


5. (C) Foreign financial information providers can choose
from three types of Agency agreements with CEIS:

1) A full service Agency agreement where the information
distributor authorizes CEIS to seek subscribers, negotiate
with them and have CEIS handle the entire business
relationship;

2) CEIS and the information distributor seek subscribers
together and CEIS provides some Agency services; or

3) The information distributor itself seeks subscribers, only
informs CEIS and otherwise has a direct relationship with its
subscribers.

VP Lu reiterated that under the third option, the actual
transmission of information would move directly from the
foreign information distributor to its customers and not pass
via CEIS.

Charge: CEIS as Intermediary is an Obstacle
--------------


6. (C) The Charge (CDA) noted that in the financial world,
time is money, and that the new regulations create an
intermediary which risks delaying economic information,
preventing foreign information distributors from providing
timely information and having Chinese customers. The
introduction of an intermediary has changed the situation
foreign information distributors now face, and has created a
market barrier that did not exist prior to China's WTO
accession. Moreover, the intermediary's purpose remains
unclear as it does not provide any new function to facilitate
the distribution of financial information.

Xinhua: No WTO Violation, and No Foreign Company is Suffering
-------------- --------------


7. (C) VP Lu claimed that Xinhua had studied the WTO angle on
its own and is confident the regulations comply with China's
commitments. None of the foreign industry reps have told
Xinhua that it has violated WTO rules. Vice President Lu
added that the number of Bloomberg's subscribers has
increased since the regulations were issued and that the
market has improved after the implementation rules were
released two months ago. He argued that the issuance of the
regulations has created better results, with both Bloomberg
and Reuters enjoying higher profits. As for transparency, Lu
offered to publish Xinhua regulations in any media foreign
governments and firms required.

Taiwan, Real Estate, National Treatment, and More
-------------- --------------


8. (C) During the extraordinarily long meeting, originally
expected to be one hour, but stretching to two and one-half
hours, VP Lu and CDA engaged in a spirited exchange that hit
multiple levels of United States concerns and Chinese
sensitivities. In addition to the above, the CDA:

BEIJING 00001158 003 OF 004



-- Emphasized the good relations between the United States
and China, including between our Presidents who had agreed we
should have more open and effective economic relations, a
goal the new regulations moved away from;

-- Reminded VP Lu that Deng Xiaoping's "reform and opening
up" was the basis for China's amazing economic growth and
that the new regulations were counter to Deng's successful
policies;

-- Pressed hard on the potential for the new regulations to
delay or deform information reaching financial consumers in
China, thereby handicapping Chinese consumers vis--vis the
rest of the world;

-- Pointed out that the exemption of the China Daily's (CD's)
financial news service from the regulations gave the CD a
competitive advantage and might violate the WTO requirement
for national treatment;

-- Sought a reason for the new regulations;

-- Contested VP Lu's assertion that CEIS was independent of
Xinhua;

-- Hit VP Lu hard on the commercial dangers posed to foreign
firms by having to offer software, business models and other
proprietary information to its competitor Xinhua; and

-- Noted the supervisory role the Communist Party played in
China vice the freedom Xinhua has to operate in the United
States.

Vice President Lu:

-- Insisted that the regulation "changed nothing;"

-- Rebutted the CDA's comments on Deng Xiaoping by claiming
Xinhua followed Deng's guidance;

-- Alleged that the China Daily did not have an exemption
from the regulations;

-- Claimed that foreign news firms, especially Reuters, had
allowed into China "dangerous" political stories that said
Taiwan was an independent country;

-- Acknowledged the Party's role in Xinhua;

-- Said that, while China had its own laws it had to enforce,
Xinhua was prepared to consider the views of the foreign
firms and the United States; and

-- Raised the alleged refusal of the United States to allow
Xinhua to buy property in the United States as evidence of
United States hostility to Xinhua (CDA offered to discuss the
Xinhua property issue in another forum.)

Xinhua News Agency's Participants
--------------


9. (U) Xinhua News Agency's Participants:

--Lu Wei, Vice President
--Zhou Zongmin, Director General, Foreign Affairs Office

--Yuan Xiaoping, Deputy Director, Administrative Department
--Liang Xiangbin, Deputy Director, News and Information
Center
--Sun Xin, Director, Foreign Information Administration
Center
--Wang Jianxin, Interpreter

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


10. (C) After Xinhua had rebuffed attempts by the Embassy

BEIJING 00001158 004 OF 004


and visiting USTR officials to seek urgent clarifications
about the Xinhua regulations at the working level in January
and early February, the Charge sought the meeting with Lu
Wei, a Vice Minister-level Xinhua official. The meeting
lasted over two and a half hours, with Lu frequently dodging
the core issues. Near the end of the meeting, Lu Wei
confessed, "I thought this meeting would consist merely of
diplomatic niceties. I didn't expect such a serious
discussion!" Lu, who invited the Charge to meet with him
again to discuss the issue, obviously realizes the United
States Government attaches great importance to this issue and
is not satisfied with the response it has received thus far.
End comment.

SEDNEY