METI OUTLINES ABE-WEN SUMMIT OUTCOMES

C O N F I D E N T I A L SECTION 01 OF 03 TOKYO 001946 SIPDIS SIPDIS STATE PASS USTR TREASURY FOR EAST ASIA OFFICE - HAARSAGER, CUSHMAN, YANG, POGGI TREASURY ALSO FOR IA DOHNER PARIS FOR USOECD GENEVA ALSO FOR USTR E.O. 12958: DECL: 05/01/2027 TAGS: ECON EFIN PREL PGOV JA CH SUBJECT: METI OUTLINES ABE-WEN SUMMIT OUTCOMES Classified By: Joseph R. Donovan, Charge d'Affaires, a.i. Reason: 1.4 (b, d) ¶1. (C) Summary: The recent meeting between the Japanese Prime Minister and the Chinese Premier produced few tangible economic results, according to an official of Japan's Ministry of Economic, Trade, and Industry (METI). Nevertheless, the summit meeting did signal political commitment for further, more substantive discussions, in which -- the official took pains to highlight -- METI would play a leading role. The METI official also communicated strong Japanese interest in the possible outcomes of the upcoming U.S.-China Strategic Economic Dialogue and noted that Japanese officials and politicians, recalling the fallout of Japan's own boom years of the 1970s and 1980s, have actively been engaging the Chinese on ways to address the weaknesses in China's economy. End summary. Abe-Wen Summit Light on Substance (But That's OK) -------------- -------------- ¶2. (C) The April 11 meeting between Japanese Prime Minister Shinzo Abe and Chinese Premier Wen Jiabao yielded little in the way of substantive progress on economic issues, acknowledged METI Northeast Asia Division Deputy Director Masato Sasaki in a meeting with econoffs on April 24. The main achievement, Sasaki stressed, was top-level blessing to proceed with additional discussions, a necessary condition for the Chinese. ¶3. (C) In addition, although endorsement of the high-level economic dialogue to be led on the Japanese side by Foreign Minister Taro Aso and on the Chinese side by Vice Premier Zeng Peiyan was the crowning economic achievement of the Abe-Wen summit, other ministerial-level exchanges would remain the main channel of discussion between Tokyo and Beijing on important issues, Sasaki said. Notably, energy issues would not be a major portion of the new high-level dialogue, but would continue to be discussed primarily in regular meetings between METI Minister Akira Amari and Ma Kai, the head of China's National Development and Reform Commission (NDRC). Sasaki also provide a briefing paper in English with the highlights of the outcomes of the Abe-Wen meeting along with brief summaries of the meetings held by Minister Amari with other senior Chinese officials accompanying Wen, including NDRC Chairman Ma, Commerce Minister Bo Xilai, and Minister of China's Administration of Supervision, Inspection, and Quarantine Li Changjiang. ¶4. (C) According to Sasaki, the Japanese were pleased with the economic content of the joint statement emerging from the Abe-Wen meeting, even though details were sparse. He pointed to the item on intellectual property rights (IPR) in the joint statement, which calls on both sides to "strengthen dialogue and cooperation and make constant efforts to enhance management" of the IPR system and protections as an achievement for just having the Chinese acknowledge IPR protection as an important element in China's economic relations with Japan. When asked whether the two leaders had discussed efforts to reach a successful conclusion to the Doha Round of negotiation in the World Trade Organization (WTO), Sasaki responded that the subject had not been raised. TOKYO 00001946 002 OF 003 He added that while Japan might bring up the WTO negotiations with certain other countries -- Australia, Brazil, and India, for example -- they did not see China as relevant to the process, largely because China had tended to follow India's lead with respect to the Doha Round. High-level Dialogue -------------- ¶5. (C) As for the timing of the first formal session of the high-level dialogue, Sasaki indicated that it could not be arranged before September and would probably not happen until late November or early December. The timing of a return visit to China by Prime Minister Abe would affect these plans, he noted. In the meantime, the possible content of the high- level meeting would be discussed with the Chinese through diplomatic channels; no working groups or preparatory meetings are planned. Nevertheless, Sasaki emphasized that the Japanese would be looking for "substance" when the high-level dialogue finally convened. He observed, however, that while business groups like the Japan Business Federation (Keidanren) had urged the government to take steps to improve Japan-China relations, now that the improvement had been realized, there was no common business agenda. Different firms or industries had specific issues or complaints that they would like to have addressed with the Chinese without any major unifying themes. East China Sea -------------- ¶6. (C) Sasaki said that the Japanese had raised the dispute over offshore oil and gas development in the East China Sea both in the Abe-Wen meeting and in the side meeting between Minister Amari and NDRC Chairman Ma. Although the lack of tangible results on this issue had disappointed the Japanese, Sasaki indicated that the instruction by the two leaders to have a report prepared by both countries on "specific measures" related to joint development of the disputed area signaled limited progress. He noted that an April 6 experts meeting on the East China Sea issue has produced no results but had been significant simply for having taken place at all. Interest in SED -------------- ¶7. (C) Sasaki expressed great interest in the possible content and outcomes of the upcoming U.S.- China Strategic Economic Dialogue. In particular, Japan was interested in the "signal from the SED to the markets." According to Sasaki, the U.S. administration appeared to be under growing pressure to achieve a tangible outcome from the next session of the SED. Nevertheless, current economic conditions in both China and the United States are "fragile" with serious structural issues needing to be addressed. To do so properly would take time, he noted, but international market perceptions could change quite quickly. Learn from Japan (in the 1970s) -------------- ¶8. (C) With respect to concerns vis-a-vis China, the TOKYO 00001946 003 OF 003 Japanese were recounting their own experiences of industrial policy and economic management of the 1970s and 1980s, Sasaki noted. Many of the same conditions that had existed in Japan at that time -- an excessively high savings rate, a weak financial sector (especially in industrial finance),and production overcapacity -- can be seen in China, Sasaki observed. The Chinese know this as well, he noted, and have discussed the Japanese experience in a number of different forums at all levels. According to Sasaki, the Chinese had shown interest not just in the policies of the Japanese government related to these phenomena but also to the political strategies and responses of Japan's ruling Liberal Democratic Party (LDP) in that era -- specifically how Japan had reacted to foreign pressure and why. LDP Secretary- General Hidenao Nakagawa had been particularly engaged with his Chinese interlocutors on this topic, Sasaki said. Comment -------------- ¶9. (C) Interestingly, the April 24 meeting at METI occurred at the Ministry's behest. Sasaki offered nothing on the content of the Abe-Wen summit that had not been available in the press but did look to emphasize the meetings METI Minister Amari held with various Chinese counterparts in order, we presume, to let the USG know that METI is a player in the China relationship, despite the fact that Foreign Minister Aso will lead the new high-level dialogue. DONOVAN