SHANGHAI INSTITUTE FOR INTERNATIONAL STUDIES VIEWS ON

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E.O. 12958: DECL: 6/1/2017
TAGS: PREL ECON CH TW XA XK XR XD
SUBJECT: SHANGHAI INSTITUTE FOR INTERNATIONAL STUDIES VIEWS ON
U.S.-CHINA, IRAN, AFRICA, LATIN AMERICA AND CENTRAL ASIA.


CLASSIFIED BY: Kenneth Jarrett, Consul General, , U.S.
Consulate Shanghai.
REASON: 1.4 (b),(d)




1. (C) Summary. During a May 29 luncheon with the Consul
General, Shanghai Institute For International Studies (SIIS)
Vice President Yang Jiemian said China would be responsive to
U.S. requests conveyed via the Strategic Economic Dialogue (SED)
process. He predicted that China would gradually take more
measures to open its capitol markets and improve the RMB
exchange rate. Yang described his January trip to Iran and
reported that while one part of Iran's international strategy
was to create a parallel international system, Iran also wanted
to share power with the United States in the Persian Gulf. SIIS
academics also discussed Latin America, Africa, and Central
Asia. (FYI: Yang Jiemian is the brother Foreign Minister Yang
Jiechi.) End Summary.


2. (C) On May 29, the Consul General hosted a lunch for SIIS
Vice President Yang Jiemian. Yang was accompanied by SIIS
Department of American Studies Director Chen Dongxiao, SIIS
Department of South Asia Studies Ms. Shao Yuqun and Office of
Research Management and International Exchanges Director Ms.
Wang Lei. Deputy Principal Officer, Pol/Econ Chief and Poloff
also attended the luncheon.

SED: More Measures Forthcoming
--------------


3. (C) SIIS VP Yang admitted that Chinese press were being
overly positive about the SED by calling it a "complete
success." He blamed this on translations problems and said that
it was more accurate to call the talks a "great success." He
assured the Consul General that the Chinese government was
paying a great deal of attention to the SED talks and had been
responsive to some of the U.S. demands and in the future would
gradually takes steps to open China's capital markets and
liberalize the RMB exchange rate. Vice Premier Wu Yi's role as
head of the Chinese SED delegation showed that China was
committed to the talks. He noted that China might not do
anything immediately after this latest round of talks, but as
long as Wu Yi was in the "driver's seat", China would be
responsive to U.S. demands. Wu Yi would likely head the Chinese
delegations during the next round of SED talks in December, but
it was unclear whether she would be the head of delegation for
the Spring round of talks. Wu Yi, at 69 years of age, was close
to the mandatory retirement age of 70 and she might retire at
the National Party Congress in March 2008. Nevertheless, Wu Yi
would still be active on economic issues. In terms of whether
momentum on the talks could be sustained, Yang said that having
so many ministers involved in the first two rounds of the SED
was important. He expected that overtime the talks would evolve
into smaller scale focused talks. The Consul General noted Wu
Yi's editorial that appeared in the Wall Street Journal shortly
before the talks. (Note: Some believe that Yang was the author
of the editorial. End Note.) He asked whether an editorial from
Secretary Paulson could be published in the People's Daily

SIPDIS
before the next round of talks. Yang responded positively, but
noted that this would require coordination in advance,
particularly with the State Council Information Office.


4. (C) Yang hoped that U.S. disappointment over inadequate
results at the SED would not be used as an excuse for a trade
war. A stable, predictable U.S.-China relationship was in
everyone's interest. There would be two opportunities for
President Bush and President Hu to meet before next fall's 17th
Party Congress; on the margins of the G8 meeting in Germany in
June and during the September APEC meeting in Australia. China
was busy making preparations for these meetings. Yang believed
that the next two years would be the most important years for
the U.S.-China relationship and urged that more be done to
stabilize the relationship and make visible progress. According
to Yang, the relationship had two aspects. On the one hand,
both sides were trying to promote cooperation. On the other

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hand, both sides were able to air their differences. He was
pleased that the latter aspect was of secondary importance. He
added that China would like to isolate difficult issues to
prevent them from spilling over onto other issues. For example,
the Chinese government greatly appreciated the USG's opposition
to Taiwan's bid to join the WHO as a sovereign state. While it
did not appreciate the U.S. Department of Defense's Annual
Report to Congress on the Military Power of the People's
Republic of China, it appreciated that the report had been
issued after Wu Yi's visit.


5. (C) Yang acknowledged that China did not react well when the
United States brought cases against it to the WTO, in part due
to cultural reasons. He said in China, friends never go to
court. This attitude was changing but slowly. He suggested
that the United States use "back channels" and empower a
credible figure such as Henry Kissinger to communicate U.S.
intentions and goodwill to Chinese leaders. He recognized that
some USG officials were tired of Dr. Kissenger being involved
but stressed that he was well-liked in China. The United States
should emphasize to Chinese leaders that it was normal for
countries to go to court against one another. The USG should
also clearly tell Chinese leaders what the disadvantages would
be if the United States did not take cases to the WTO.


6. (C) When asked whether Beijing was pleased by the SED
results, Yang said that in negotiations one could never be
satisfied. Beijing was very focused on getting more high
technology, especially high technology related to energy
efficiency. He noted that Premier Wen Jiabao also recently
complained that China had too many foreign reserves and there
was a great need to develop more expertise on financial
management issues.

Iran: Great Ambitions
--------------


7. (C) Yang reported that he had visited Iran and Saudi Arabia
in January. It was clear from his visit to Iran that the
country's leaders were very ambitious. Interlocutors emphasized
Iran's 7000 year old history and glorious past numerous times
during his trip. Yang said that Iran had three international
strategies. First, Iran wanted to build an international system
outside of the existing one, which it believed was dominated by
the United States and Western Europe. It wanted to use the
Shanghai Cooperation Organization (SCO) as a means to develop
its own internal trading system and market. Iranian
interlocutors urged that China join this system, noting that the
United States was not reliable and was always using sanctions.
Yang told his interlocutors that Stalin tried to create a
similar system in the 1950's, which failed. China was not
interested in another system and was already fully integrated in
the international system and market.


8. (C) Second, Iran wanted a regional framework in the Persian
Gulf in which Iran shared leadership in the region with the
United States. It did not want to share power with other
countries and only wanted to talk to the United States. This
was a factor in Iran's agreement to have talks with the United
States. Finally, Iran had a complicated relationship with Arab
countries. Iranian interlocutors emphasized to Yang that
Persians and Arabs did not mix. Iran had never forgiven Arab
countries for supporting Iraq during the Iran-Iraq war and was
happy when Saddam Hussein was deposed. Yang added that many
young people and elites in Iran still had good feelings toward
the United States. He urged that the United States think
strategically about the Persian Gulf and noted that Iran and
Iraq were the two pillars of the Arab world. Increased dialogue
would ease tensions in the region.

Africa: The China Alternative?
--------------


9. (C) SIIS Department of American Studies Director Chen
Dongxiao briefed the group on his recent trips to Ethiopia,
South Africa, Brazil, Argentina and Mexico. According to Chen,

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his interlocutors in Africa had ambivalent attitudes towards the
continent's relationship with developed countries. These
countries were pleased that countries such as China, India and
South Korea were playing a more active role in Africa.
Interlocutors believed that competition between diverse actors
in Africa was much better than domination by one country or one
type of power. However, African countries were still mentally
and culturally dependent on European powers. In addition, their
economic relationship with European countries remained strong.
He noted that some African scholars were unhappy with how
Western countries made human rights, rule of law and other
political issues pre-conditions for economic assistance.
However, other African scholars complained that Chinese
assistance often did not include any pre-conditions or were
condition neutral. They worried that this would prevent
economic assistance from being used properly.


10. (C) According to Chen, many African scholars were critical
of the United States decision to create an African Command in
the U.S. military. African interlocutors noted that this
decision was made without prior consultation and believed it was
motivated by U.S. desires to prevent China's influence from
undermining U.S. interests in Africa. He added some
interlocutors hoped that China's presence in Africa would
marginalize Western influence, a position he said he did not
share. They believed that African countries could play China
off of the United States and the European Union and that China
could be an alternative to the West. Chen added that this was
unlikely to happen. According to Chen, the biggest challenge
for the African continent was that it still did not know what it
really wanted from its relationship with China. There was no
agreement on objectives and on whether African nations should
work together under the African Union or break up into regional
groups in their discussions with China.

Latin America: Political Infighting
--------------


11. (C) According to Chen, the Latin American countries he
visited all faced the same challenge of how to compete with big
powers such as the United States. However, these countries were
not able to focus on this issue because of political infighting.
Neither Mexico nor Brazil had strong central governments.
There were also disagreements about regional cooperation.
Argentina favored relying on Mercosur. Brazil advocated keeping
a balance between Mercosur and having a relationship with the
United States. Mexican scholars were concerned about whether
Mexico's overdependence on the United States would be
economically sustainable and they were looking to countries such
as China and Japan to diversify their economy.

Central Asia: U.S., China, Russia Dialogue Needed
-------------- --------------


12. (C) SIIS Department of South Asia Studies Deputy Director
Shao Yuqun discussed China's relationship with Central Asia.
According to Shao, the United States' relationship with Central
Asian countries had shifted. The "honeymoon" was over and the
United States appeared to have backed off on pushing democracy
in the region. This was due to the realization that the "Tulip
Revolution" in Kyrgyzstan did not have the influence that the
United States had hoped on other countries in Central Asia. The
United States had also improved its relationship with India and
was urging more integration between South Asia and Central Asia.
She had recently visited India and Pakistan and many of the
scholars with whom she met expressed reservations about the
re-organization in the Department of State in which the Central
Asian states were moved to the South Asian regional bureau.
Pakistani scholars were upset that the United States had
embarked on this regional initiative without consulting
Pakistan. South Asian academics believed that integration was
not possible as long as Afghanistan remained unstable. She said
the United States should not underestimate the role of China and
Russia in the region and urged that there be more discussions
between Russia, China and the United States on Central Asia.


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SIIS Programs
--------------


13. (SBU) Office of Research Management and International
Exchanges Director Wang Lei provide a brief overview of SIIS
programs. She said that SIIS had around 18 programs with
international think-tanks and universities every year. It
organized a similar number of programs for internal think-tanks.
Yang added that SIIS in cooperation with the James Baker
Institute at Rice University would hold a conference on Energy
Security in Beijing in the fall. SIIS also had an active
exchange with Brookings, which wanted to establish an office in
Shanghai. Yang added that he was going to participate in a
conference on China organized by Texas A&M. He said that the
conference would be called the "Bush Summit on China" rather
than the "George H. W. Bush Summit" so that in the future
President Bush could also equally participate after he left the
White House.

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


14. (C) Yang's fortunes appear to be on the rise. SIIS
President Ms. Yu Xintian is scheduled to retire this year and
many have speculated that Yang would take over as President. In
addition, the appointment of Yang's brother Yang Jiechi as
Minister of Foreign Affairs should tighten SIIS's relationship
with the MFA and put SIIS in good position for any MFA programs
in Shanghai. Yang seemed to be more relaxed during this
discussion then in previous meetings with Consulate officers.
In the past, Yang controlled the discussion and his staff was
very differential to him and did not contribute much to the
conversation. During this meeting, his staff was still
differential and waited to be prompted, but Yang ensured that
they each had a chance to speak.
JARRETT