C O N F I D E N T I A L SECTION 01 OF 02 SHANGHAI 000219

SIPDIS

NSC FOR WILDER AND TONG

E.O. 12958: DECL: 6/16/2033
TAGS: PREL PGOV CH TW MARR
SUBJECT: SHANGHAI SCHOLARS ZHANG NIANCHI PREDICTS SLOW PROGRESS IN
CROSS-STRAIT RELATIONS

REF: (A) SHANGHAI 43; (B) SHANGHAI 212

CLASSIFIED BY: Christopher Beede, Political/Economic Section
Chief, U.S. Consulate , Shanghai .
REASON: 1.4 (b), (d)




1. (C) Summary: In a June 16 meeting, Shanghai Institute for
East Asian Studies President Zhang Nianchi expressed pleasure
that talks between Taiwan and the Mainland have resumed, but
cautioned against high expectations for future talks. Tough
issues, including more international space for Taiwan, lay ahead
and would unlikely be resolved in the near future. Beijing is
intensely interested in whether the United States will change
its Taiwan policies and cancel arms sales if relations between
Taiwan and the Mainland improve dramatically. Poloff noted that
the USG is pleased by progress on cross-Strait relations and
urged that the Mainland take steps to encourage further
progress, including considering ways of expanding Taiwan's
international space. End Summary.


2. (C) Poloff called on Shanghai Institute for East Asia Studies
President Zhang Nianchi on June 16 to get his reaction to the
recently concluded talks between Association for Relations
Across the Taiwan Straits (ARATS) Chairman Chen Yunlin and
Straits Exchange Foundation (SEF) Chairman P.K. Chiang. SIEAS
Deputy Director Hu Lingwei and Jiaotong University professor
Zhuang Jianzhong, who recently joined SIEAS but still maintains
his position at Jiaotong, were also at the meeting.

Process More Important Than Results
--------------


3. (C) Zhang said he was not surprised by the results of the
June 11-14 talks between ARATS Chairman Chen and SEF Chairman
Chiang, which he called unexceptional and expected. The most
important part about the talks is that there is now a mechanism
for the Mainland and Taiwan to discuss issues. For the past 10
years, the Mainland and Taiwan had no mechanism to resolve
issues. Zhang noted that in addition, the talks are an
indication that the Taiwan people have accepted the notion that

both the Mainland and Taiwan are a part of China. He did not
like to emphasize this point since there are many people in
Taiwan who still support independence. However, the January
Legislative Yuan (LY) and the March Presidential elections in
Taiwan demonstrated that the people of Taiwan have moved away
from Chen Shui-bian's destructive independence path and toward
accepting the "One China" concept. Of course, there continues
to be disagreements over the definition of "One China" and it
will be a while before this issue is resolved.

Tough Times Ahead?
--------------


4. (C) Zhang predicted that future talks between the Mainland
and Taiwan would be much more difficult. The June talks were
just part of the first stage of discussions between the two
sides. This stage, which will take place from June to
September, will not touch on difficult issues. Stage two will
begin in October when ARATS Chairman Chen will visit Taiwan.
That stage will be more difficult because both Taiwan and the
Mainland will be reluctant to compromise. Taiwan's reluctance
stems from domestic political "checks and balances." President
Ma Ying-jeou still has not consolidated his control over the KMT
and must contend with strong DPP opposition to too many
concessions. The Mainland will also be reluctant to concede on
many issues. Zhang noted, however, that Beijing needs to have
an open mind on Taiwan. Beijing should consider whether
conceding on an issue will improve cross-Strait relations and
also whether not conceding on an issue will lead to a
deterioration of relations. He did not specify what issues will
be raised during this stage of negotiations but said that
political issues, including more international space for Taiwan,
will only be dealt with during the third and fourth stage of
negotiations.


5. (C) Zhang said that newly appointed ARATS Chairman Chen and
State Council Taiwan Affairs Office Director Wang Yi are very
competent and well suited for their jobs. Chen has considerable
experience on cross-Strait issues. Wang has a great deal of
diplomatic experience and will be able to handle difficult
issues if they arise. He did not think that the appointment of
Wang is an indication that Beijing is ready to provide more
international space for Taiwan.

SHANGHAI 00000219 002 OF 002



No Breakthroughs On International Space For Taiwan
-------------- --------------


6. (C) According to Zhang, there will likely not be any
breakthroughs to provide Taiwan with more international space in
the near future. He said that Beijing is not too concerned with
increasing the number of countries with which it has diplomatic
relations. Many countries that have relations with Taiwan have
signaled to Beijing that they are ready to break off relations
with Taiwan and establish relations with Beijing. According to
Zhang, Beijing has told these countries to slow down out of
concern about how this would affect Ma Ying-jeou's Presidency.


7. (C) Diplomatic recognition by international organizations is
of greater concern to Beijing. Zhang believes that it would not
be a problem for Taiwan to join the WHO but it would be more
difficult for it to join other organizations such as the World
Bank and the United Nations. He said that it could be possible
one day for Beijing and Taiwan to reach a compromise on this
issue as long as Taiwan did not join these organizations as an
independent state, however for the immediate future he did not
expect any breakthroughs in this area.

U.S. Policy Changes
--------------


8. (C) Zhang said that Beijing is very interested in what
effect Taiwan and Beijing's improved relations would have on USG
policy. He said Beijing has commissioned many scholars to
research this issue and determine whether the United States
would change its long-standing policy of selling arms to Taiwan
if cross-Strait relations stabilize. Poloff noted that the USG
supports stable cross-Strait relations and is pleased by recent
positive developments. In order to support these developments,
Beijing should take measures to improve its image with the
Taiwan people, including finding ways of allowing Taiwan to have
more international space.
JARRETT