UNCLAS SECTION 01 OF 02 BEIJING 004700

DEPARTMENT FOR EAP/EX LARRY BAER, OBO/PE JOE TOUSSIANT, OBO/SPCD,
L/BA, OFM AND EAP/CM

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ABLD AMGT CM

SUBJECT: DCM URGES MFA TO SIGN COCA II AGREEMENT

THIS CABLE IS SENSITIVE BUT UNCLASSIFIED. PLEASE HANDLE
ACCORDINGLY.


1. (SBU) SUMMARY: China cannot go forward on the COCA II agreement
unless the renovation of the old Chinese chancery in Washington DC
is included under the 2003 COCA I agreement, MFA Department of
Administration Director General Li Chao told the DCM in a December
30 meeting. China would like to see the design/permitting of the
renovation, the shipment of construction materials and the issuance
of visas related to the old chancery renovation project all
controlled by COCA I terms. The DCM requested the meeting with DG
Li to urge the Chinese to sign the COCA II agreement. The
Ambassador and DCM have repeatedly raised the issue in high-level
meetings, including the Ambassador's December 29 meeting with MFA
Assistant Foreign Minister Liu Jieyi and the DCM's December 19 and
29 meetings with MFA North American and Oceania Affairs Department
Director General Zheng Zeguang. The Ambassador and DCM also
discussed COCA II in detail with PRC Ambassador to the United States
Zhou Wenzhong in Beijing on December 24. End Summary.

No Deal Unless COCA I Applies to Chancery Renovation
-------------- --------------

2. (SBU) DG Li said China agrees that COCA II - the Agreement on
Conditions of Construction of the U.S. Consulate in Guangzhou and
the Renovation of the PRC Permanent Mission to the UN - should be
signed, but only on the condition that the renovation of China's old
chancery in Washington DC fall under the 2003 COCA I agreement. He
stressed that putting the old chancery renovation project under COCA
I is as important to China as maintaining visual control of
construction materials and equipment is to the United States. He
said the Chinese would like to see COCA I terms apply to the
design/permitting of the renovation, the shipment of construction
materials and the issuance of visas related to the old chancery
renovation project.


3. (SBU) DG Li noted that he and other MFA officials have repeatedly
made this request, adding that the inclusion of the renovation
project under COCA I would be for the "convenience" of both sides.
He urged the Department to assist in streamlining the local approval

of the planning and design of the renovation project. He argued
that the "excuse" of local DC laws is "unreasonable" and reiterated
that moving forward on construction of the U.S. Consulate in
Guangzhou is contingent upon "strong U.S. support" for China's old
chancery renovation project.

December 18 Dip Notes Confusion
--------------

4. (SBU) DG Li said the Embassy's three diplomatic notes delivered
to the MFA on December 18 caused some "confusion" in the MFA. He
said the terms of the Dip Notes conflicted with the Chinese
understanding of earlier consensus reached by the two sides. He
claimed that Diplomatic Note 2152 runs counter to the conversation
between Under Secretary Patrick Kennedy and Ambassador Zhou in
regard to the sale of the U.S. Embassy's Er Ban compound.
Apparently, Li believes Zhou informed us that the Er Ban sale should
not be linked to the renovation of China's old chancery or
consulates in the United States. DG Li also similarly requested
that the Er Ban sale not be linked to approval for leases for the
Xinhua News Agency, as the MFA does not control Xinhua.

China Knows Rush and Risks
--------------

5. (SBU) DG Li noted the importance of the U.S.-China relationship,
adding that the recent construction of new U.S. and Chinese
Embassies marks a starting point for further development of the
bilateral relationship. He said he has been responsible for budgets
and understands what can happen to "idle" money. Although Li
stressed the "urgent task" of reaching an agreement and mentioned
China's "maximum sincerity" in meeting U.S. needs, he also made it
clear that the Chinese would hope to continue negotiations to
success in the new year if necessary.

DCM Responds
--------------

6. (SBU) The DCM promised to convey DG Li's message to Washington
and to stress the Chinese desire for relief from DC planning and
permitting laws. The DCM observed that the issues of visas and
shipment of materials for the renovation project were less likely to
be problematic. However, he cautioned that the location of the old
chancery in Washington DC and not on land owned by the USG makes it
difficult if not impossible for the Department to get the renovation
"exempted" from DC permitting by applying COCA I. The DCM stressed
the PRC could count on the USG's good faith efforts in support of
the Chinese renovation. He also expressed concern that the
expiration of the bids on construction of the new U.S. Consulate in
Guangzhou could diminish the USG appetite for continuing
negotiations in 2009, particularly given that delay may jeopardize
funding.

BEIJING 00004700 002 OF 002



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