SHANGHAI ACADEMIC YANG JIEMIAN ON THE SENIOR DIALOGUE, SED,

C O N F I D E N T I A L SECTION 01 OF 05 SHANGHAI 000041

SIPDIS

SIPDIS

STATE FOR EAP/CM
NSC FOR DENNIS WILDER

E.O. 12958: DECL: 2/1/2033
TAGS: PREL PGOV PTER MARR CH TW IR BM
SUBJECT: SHANGHAI ACADEMIC YANG JIEMIAN ON THE SENIOR DIALOGUE, SED,
TAIWAN, NORTH KOREA AND BURMA

REF: SHANGHAI 573 AND PREVIOUS

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




1. (C) Summary: During a January 22 meeting, EAP DAS Thomas
Christensen and Shanghai Institute for International Studies
(SIIS) President Yang Jiemian exchanged views on the Senior
Dialogue and Strategic Economic Dialogue (SED),Taiwan, Iran,
North Korea, and China's non-interference principle. Yang
supported the SED and Senior Dialogue processes, noting that
they played an important role in stabilizing and establishing a
"vision" for U.S.-China relations. While he was pleased with
the results of the Legislative Yuan (LY) elections in Taiwan, he
worried that President Chen would do something radical to push
independence in the next two months. Yang was pessimistic that
North Korea would be able to de-nuclearize in the next year. He
said that China is trying to play a positive role in Burma, but
its main concern is stability. DAS Christensen warned that
China's efforts to "squeeze" Taiwan's international space were
counterproductive. He urged that China take a more moderate
stance towards Taiwan and stressed that democratic constraints
will stop President Chen from implementing radical policy
initiatives unless the mainland provides him with the emergency
conditions that might allow him to break out of those
constraints. DAS Christensen urged that China be more active on
Burma and North Korea. He stressed that as the world becomes
more integrated and China's influence increases, it should no
longer maintain its non-interference principle. End Summary.


2. (U) EAP DAS Thomas Christensen met with SIIS President Yang
Jiemian to discuss overall U.S.-China relations on January 22.
Yang is the brother of Chinese Foreign Minister Yang Jiechi and
an influential academic in his own right. SIIS Vice President
Chen Dongxiao, Consul General, Political/Economic Section Chief
and Poloff (notetaker) also participated in the meeting.

Senior Dialogue and Strategic Economic Dialogue
-------------- --


3. (C) Yang expressed support for the Senior Dialogue and
Strategic Economic Dialogue (SED). He asserted that the two
dialogues provide a means of stabilizing U.S.-China relations
and give a vision and "road map" for the relationship. China is
very serious and energized to push forward the SED process.
During the week of January 14, the Ministry of Finance (MOF),
the coordinating body on the Chinese side for the SED, held a
conference on the process. According to the MOF, Yang said the
American side sends a group to China to work on SED issues every
month. China certainly understands that it is not in its
interest to have USD 1.5 trillion in foreign exchange reserves
and will continue to gradually, but surely, re-evaluate the RMB.
China also wants to work with the United States on climate
change and environmental protection issues. He urged that the
United States also act as a "responsible stakeholder" and take
measures to stabilize the USD.


4. (C) The Chinese are happy to hold the two dialogues every
six months, but Yang suggested that they be spaced better, since
the January Senior Dialogue occurred so close to the December
SED. Yang suggested a staggered calendar of one high-level
meeting per quarter. There was also the challenge of avoiding
too close an overlap with respective political calendars, when
the possibility of positive movement on issues would be
affected. Yang worried about the next round of the SED in June.
Vice Premier Wu Yi will likely be succeeded by Zhang Dejiang,
who is more conservative. During the transition period when Wu
steps down and Zhang takes over and the immediate period
afterward, there will not likely be much progress on the SED.
Outgoing officials usually do not do anything because they are
leaving and incoming officials will not do anything because they
do not want to be seen as being impatient. During this time
period, he suggested that it was better to make heavier use of
"second track" discussions and have a Chinese think-tank such as
the Institute of Economic Studies or Institute of Financial
Studies in Beijing hold academic discussions on SED issues.
These think-tanks are quasi-governmental organizations. Also,
the Chinese Government pays great attention to think-tanks.

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There is a rule that for each round of the SED or Senior
Dialogue, the government must seek input from think-tanks. SIIS
is the only think-tank in Shanghai tasked with providing such
input to the government.


5. (C) Yang noted that the United States and China have
different emphasis for the dialogues. The United States is
focused on getting China to take concrete actions to prove that
the dialogues are useful, while China wants to use the dialogues
to discuss the "vision" or future of the overall relationship.
A Senior Chinese official recently gave a talk at SIIS in which
he said that of all of China's bilateral dialogues, the dialogue
with the United States goes the deepest, is the widest and has
the most results. The China-Russia dialogue is not very deep
because the two sides want to maintain good relations and,
therefore, do not argue. The China-EU dialogue has problems
because the EU's 27 members are always arguing and cannot come
up with a clear cut policy. The China-India dialogue suffers
because India is very proud of being a big power. Just like
China during the Cultural Revolution, India insists that
everyone acknowledge that it is a great power. The China-Japan
dialogue does not deal with big issues. The Japanese have no
strategy and they let the United States take care of the big
issues and focus their efforts on the details or small matters.
Yang hoped that the SED and Senior Dialogue not only survive the
U.S. elections, but are also upgraded. He noted that Vice
Premier Wu Yi outranks her U.S. counterpart. He urged that the
newly-elected U.S. President promptly promise continuation of
strategic dialogues with China.


6. (C) Yang suggested that in the remaining year of the Bush
Administration, both sides should take the following three
actions. First, there should be continued cooperation on
economic and financial services issues. China wants to spend
the USD 1.5 trillion in foreign reserves but does not have the
expertise on how best to use the money. Second, the two sides
should work on one or two areas of mutual concerns in the
international arena such as Iran and North Korea. Third, the
United States and China should continue to coordinate on Taiwan
and the Olympics. DAS Christensen stressed the need for the
dialogues to lead to real progress, especially on economic
issues as the economy is a major issue in U.S. domestic politics
during a Presidential campaign. It is also important to have
progress on security issues. One of the best ways
Administration officials can fend off domestic criticism of the
relationship is by pointing to progress on issues such as North
Korea, Burma, Sudan, and Iran.

Taiwan: Taiwan Politicians Are Not Gentlemen
--------------


7. (C) Yang was pleased with the results of the January
Legislative Yuan (LY) elections in Taiwan and said this shows
that the Taiwan people are fed up and very resentful of Chen
Shui-bian and his policies. In the next two months, he hopes
that the United States can continue to take actions to prevent
Taiwan declaring de jure independence and stop any unexpected
surprises. Yang worried that Chen would try to use the
remaining months in power to do something "insane" or to pass a
referendum or a set of precedents or a framework that would
encourage the pro-independence movement and continue "creeping
de jure independence." Yang warned that Taiwan politicians are
very opportunistic and think in a different way than people in
the United States. There is a saying in China that one should
not ascribe the thinking of a gentlemen to the thinking of a
mean or small minded person. For example, when Chen was elected
eight years ago, U.S. interlocutors told China that Chen could
be like President Nixon. However, only big powers such as
China, Russia and the United States can produce someone like
Nixon. According to one of his friends in the DPP, there are
two theories being spread among DPP members to boost their
morale. First, that since the KMT is now in control of the LY,
the United States wants to see the DPP in control of the
Executive Branch to maintain a balance. Second, if former KMT
Chairman Lien Chan became the KMT candidate, the United States
would be concerned because of his closeness with the Mainland.


8. (C) Yang stressed the importance of President Hu's comments
on Taiwan in the 17th Party Congress report. Hu changed
Beijing's emphasis from peaceful re-unification to peaceful

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development. The report does not mention peaceful
re-unification unless it is necessary and talks more about
peaceful development. However, China is a pluralistic society.
If economic exchanges, people-to-people exchanges and other soft
approaches do not work then there are hardliners in China who
could advocate a tougher policy. He added that Taiwan's
democracy has a positive effect on the Mainland. If there were
no democracy in Taiwan, the Mainland would be slower in opening
up economically and politically. According to Yang, the last
line on Taiwan in Hu Jintao's 17th Party Congress work report
essentially says that if the Mainland wants to solve the Taiwan
problem, the Mainland itself needs to do a better job at home.


9. (C) DAS Christensen disagreed with Yang's notion that the
way the United States deals with Taiwan is linked with Chinese
cooperation on other international issues such as North Korea.
While the United States listens to Beijing's concerns on Taiwan
and shares ideas, it does not coordinate or cooperate with
Beijing on cross-Strait issues. Even if there were no North
Korea, Iran, Burma, or Sudan, the United States would still have
the same policy towards Taiwan, the DPP Referendum, etc. There
are many aspects of the U.S. Taiwan policy that Beijing
disagrees with, such as the need for Taiwan to have a robust
defense and concerns about Beijing's efforts to squeeze Taiwan's
international space. DAS Christensen urged that the Mainland
adopt a more moderate stance not only in the military sphere but
also in the international arena. Beijing's efforts to squeeze
Taiwan's international space increase the popularity of the
pro-independence movement in Taiwan.


10. (C) The U.S. policy towards Taiwan has not changed, DAS
Christensen continued. We continue to target our messages on
the Taiwan people and urge them to think about the consequences
of their leaders' actions. Taiwan democracy is playing a
positive role in constraining President Chen. Because of these
democratic constraints, President Chen will not be able to
achieve any of his radical goals. The only way in which
President Chen could implement radical policy initiatives in his
few remaining months in office is if the Mainland overreacts and
gives him an excuse to enact emergency powers. It is important
for the Mainland to understand its role in Taiwan domestic
politics and adopt a more moderate stance. China's exclusion of
Taiwan from World Health Organization observer status and
actions that slow the flow of health information to Taiwan are
counterproductive. China's proposed new civil aviation route
near the center-line of the Taiwan Strait, reported in the
press, would be bad idea at any time, but especially now. DAS
Christensen also assured Yang that the United States does not
have any favorites among Taiwan politicians. The United States
can work well with any Taiwan politician as long as they are not
advocating radical, unilateral moves in the direction of
independence. Both Hsieh and Ma appear to be more moderate than
President Chen. Christensen urged that the Mainland adjust its
thinking on Taiwan and do a better job at reaching out to the
Taiwan people. No one in Taiwan accepts the pre-conditions set
by the Mainland for renewing talks. A more creative formula is
needed from the Mainland.

North Korea: The Goal is Too High?
--------------


11. (C) Yang said that Beijing will continue to push North
Korea to de-nuclearize. However, he doubted that North Korea
could fully reach this goal before the end of the Bush
Administration. North Korea is waiting for a new administration
in the United States because it believes it will get a better
deal from a President from the Democratic Party. American
politicians are giving the wrong signals to North Korea, that
North Korea can wait until there is a new U.S. President. The
Democratic and Republican parties should coordinate their
messages on North Korea. Yang also asserted that the goal set
by the Six-Party Talks is too high and suggested that it be
lowered or the timeline for de-nuclearization be extended.


12. (C) DAS Christensen was adamant that the United States
cannot lower the bar or extend the timeline for North Korea. He
urged that China send envoys to North Korea to explain the
American political system to Pyongyang. It is extremely naove
to believe that a Democratic administration would give North
Korea a better deal then the current administration. In

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addition, President Bush is focused on this issue and dedicated
to the Six Party Talk process while there is no way to predict
what policy the next administration will have towards North
Korea nor how long it will take to coordinate the various
agencies and personnel for engagement on this issue. It is
important to seize this opportunity this year and China has a
unique role to play in bringing about progress.

Iran: An Awkward Time For China
--------------


13. (C) According to Yang, China continues to "see eye-to-eye"
with the United States on preventing Iran from developing
nuclear weapons. However, China feels "sandwiched" between its
American friends and Iranian friends. The timing is also
awkward because China is facing a serious energy situation and
needs to think of energy supply issues. He agreed, however,
that there needs to be more coordination between the United
States and China on this issue. DAS Christensen said it was
difficult to hear Chinese interlocutors use the term "Iranian
friends" alongside references to the United States. Iran is a
destabilizing regime that supports terrorism and flouts the
demands of the international community. China's investment in
Iran at this time and conventional arms sales send the wrong
signals. Iran is involved in many conflicts in the Middle East
and in Afghanistan and is the source of many weapons for
terrorist and insurgent groups. In addition, there is
insufficient enforcement by the Chinese Government when certain
Chinese entities sell technology to Iran. It is also naove and
short-sighted to believe that energy security can be achieved by
entering into "sweetheart" deals with Iran. The best way for
net energy consumers like the United States and China to obtain
energy security is through a combination of strategic petroleum
reserves and free-flowing markets. No one poses a bigger
security threat to those markets now and over the long rum than
Iran's behavior.

Burma: Stability Comes First
--------------


14. (C) Yang stressed the importance of maintaining stability
in Burma. He said that Burma is important to China because it
is a neighboring country which has had good relations with China
for many years. China wants to maintain those good relations.
The Chinese Government is also on alert for "color revolutions"
and does not want the turmoil caused by these revolutions on its
borders. Yang recently went to Singapore and met with ASEAN
officials. They advocated that ASEAN and China work together to
ensure a gradual and orderly transition in Burma. There have
also been discussions about China, India and ASEAN coming
together to work on this issue. The ASEAN officials told Yang
that the U.S. approach to Burma was not the best way. While the
United States and other Western countries that are far away talk
loud about Burma, but they do not bear the responsibility and
would not offer real help if the regime were to collapse and
millions of refugees flee from Burma to ASEAN countries.


15. (C) Yang maintained that China has played a positive role
on Burma. It sent Vice Foreign Minister Wang Yi to Burma to
speak to the government and to urge in a quiet way that it talk
to Aung San Sui kyi and UN Special Envoy Ibrahim Gambari. China
will continue to take this cautious approach and hoped that the
United States can understand that, for China, stability comes
first for China.


16. (C) DAS Christensen noted USG appreciation for the limited
Chinese efforts to date to push reconciliation in Burma, but
insisted that China needed to do much more. He stressed that
there has yet to be real progress in Burma. He noted with
interest Yang's statements about ASEAN and added that recent
statements from ASEAN have been very strong on Burma. Yang's
interlocutors in ASEAN appear to have misperceptions about the
USG position. The United States does not want instant regime
change. The United States wants to see serious reconciliation
and democratic reforms over time, but we have not seen any
positive movement in that direction. Recognizing the Chinese
desire for stability, Christensen argued that the current
situation in Burma is not stable and is leading to instability
throughout the region. Instability serves no one's interests.
U.S. and Chinese goals are, therefore, not different. He hoped

SHANGHAI 00000041 005 OF 005


that both sides can find common ground on this issue.

China's Outdated Non-Interference Principle
--------------


17. (C) According to Yang, Burma, Sudan, and North Korea are
leading many Chinese scholars to re-examine China's
non-interference principle. While this debate continues in
academic circles, the Chinese Government has tried to adjust the
policy here and there. In general, however, Beijing continues
to adhere to the principle of non-interference in the internal
affairs of other countries. In the case of Sudan, the Chinese
Government was at first afraid to intervene, but found out that
through discussions with the government, it was able to make
some progress. DAS Christensen encouraged China to break-out of
the non-interference principle. Security threats stem from
domestic problems, as was demonstrated by 9-11. To fight
threats such as terrorism, China needs to care about good
governance and other domestic issues in other countries. As
China's influence grows and the world becomes more integrated,
China needs to break-out of its outdated non-interference
principle and become more active in managing the world to
promote peace, stability, and development.


18. (U) This report was cleared by DAS Christensen.
JARRETT