BIDEN STAFFER MEETS CHINESE MINISTRY OF FINANCE

UNCLAS SECTION 01 OF 02 BEIJING 003513 SIPDIS STATE FOR EEB/CM STATE FOR H/PASS SENATE FOREIGN RELATIONS OFFICE STATE PASS USTR STRATFORD/WINTERS DEPT OF THE TREASURY FOR TAIYA SMITH/HOLMER/WRIGHT/OASIA DEPT OF COMMERCE/ITA DAS KASOFF NSC FOR HAENLE/LOI/WINTER INFO DEPT OF LABOR E.O. 12958: N/A TAGS: CM ECON PREL SUBJECT: BIDEN STAFFER MEETS CHINESE MINISTRY OF FINANCE ¶1. (SBU) SUMMARY: On September 9, Frank Januzzi, from the staff of Senator Biden (D-DE) and the Senate Foreign Relations Committee, met with China's Vice Minister of Finance Zhu Guangyao. The two discussed the U.S.-China Strategic Economic Dialogue (SED) as a forum for bilateral cooperation and confidence building. The discussion affirmed the mutual value of the SED and touched upon the U.S. presidential election. Vice Minister Zhu began by describing the substance of the previous four rounds of the SED, and explained that the SED has a high degree of support all the way to the top of China's leadership. END SUMMARY. How the SED is Viewed in Washington and Beijing -------------- -- ¶2. (SBU) Januzzi explained how the Senate Foreign Relations Committee views the Strategic Economic Dialogue. To maintain strong bilateral political ties, China and the U.S. must control economic problems, whether related to intellectual property rights or the trade surplus. He said that the Senate regards the SED as a channel to manage these issues, and it has proven that by doing so, it can also protect the bilateral relationship from political volatility. Januzzi stated that in the U.S., there is broad support for bilateral dialogue with China, and that China could expect to have the interest of the new administration, no matter who wins the election. Januzzi added that in Washington, there is bipartisan support for negotiating a bilateral investment treaty (BIT) with China. Vice Minister Zhu added that likewise, the SED has enabled China's leadership to focus on matters of bilateral interest. He emphasized that in China, all matters of great importance are decided by the president, and therefore, the SED is a forum in which the U.S. should present its foremost interests. The SED has been instrumental in addressing 140 separate issues that were included in previous outcomes documents, ranging from environmental protection to managing macroeconomic cycles, said Zhu. China's Interests during the Post-Election Period -------------- -------------- ¶3. (SBU) Januzzi emphasized the importance of the SED and raised the possibility that after the coming election, the SED might have a new lead on the U.S. side, for example the office of the vice president or perhaps the State Department. This will create an opportunity re-examine priorities for cooperation, he said. Januzzi agreed with Zhu that the critical elements of the SED, namely high-level political support, capable working level staff, and a skillful ability to cut cross bureaucratic stovepipes, must all be maintained in the future. Januzzi asked what priorities China has for future rounds of the SED. ¶4. (SBU) Zhu said that at this time, China is highly focused on two issues: the investment climate abroad and managing China's financial assets. Zhu noted the investment problems of the telecom company Huawei in the U.S., which have roiled decision-makers in China. More importantly, said Zhu, and a matter of urgent concern, is the recently-announced conservatorship of Freddie Mac and Fannie Mae. Zhu said that an orderly and deft management of this problem is in China's direct interests, and China will place an emphasis on financial cooperation in SED-V. Because the government faces a public opinion backlash associated with a loss in value of its foreign assets, China wants to minimize the political costs of this crisis, said Zhu. The Democratic Party and China - Interests -------------- ¶5. (SBU) Januzzi said that if Democrats win the coming election, the U.S. side is likely to place a stronger emphasis on labor, energy and the environment. Januzzi noted that Senator Biden has also been active in the area of IPR protection in the Senate. Januzzi noted that China's laws on IPR have improved, and that enforcement is an outstanding area for improvement. He added that when dialogue with China is not fruitful, the U.S. will continue to use the WTO dispute settlement mechanism, which is regarded as a valuable alternative to bilateral dialogue. ¶6. (SBU) Januzzi said it will be important for the next president to balance the macroeconomic situation in order to reduce America's debt level. However, this will be a long-term endeavor, and China should not expect any major upset of the economic status quo characterized by robust BEIJING 00003513 002 OF 002 trade ties and financial interdependence. Jannuzi said it is important to keep the SED on track, and that due to the two-year congressional cycle, agreements need to be reached and closed in a timely fashion. Lastly, Januzzi noted that there is broad bilateral support for further integration of China into the global economic system and related multilateral organizations. The two sides closed with a friendly note of mutual appreciation and stated they hope to work together for the benefit of the public. Note: This cable was cleared by Frank Januzzi, Senate Foreign Relations office. RANDT