KMT-CCP TALKS: VIEWS OF SHANGHAI ACADEMICS

C O N F I D E N T I A L SECTION 01 OF 03 SHANGHAI 000578

SIPDIS

STATE FOR EAP/CM
TREASURY FOR AMB HOLMER, WRIGHT, TSMITH, AND
OASIA - DOHNER, HAARSAGER, CUSHMAN
USDOC FOR ITA MAC DAS KASOFF, MELCHER, MCQUEEN
NSC FOR LOI

E.O. 12958: DECL: 12/24/2033
TAGS: PREL PGOV ETRD ECON EFIN EINV CH TW
SUBJECT: KMT-CCP TALKS: VIEWS OF SHANGHAI ACADEMICS

REF: A) 08 TAIPEI 1759; B) 08 TAIPEI 1778

CLASSIFIED BY: Simon Schuchat, Deputy Principal Officer, U.S.
Consulate, Shanghai, U.S. Department of State.
REASON: 1.4 (b),(d)




1. (C) Summary: Poloff spoke with several Shanghai academics
about the 4th annual KMT-CCP forum which took place in Shanghai
December 20-21. One academic who participated in the forum said
the talks proceeded "smoothly" and "without big surprises." The
forum focused on enhancing cross-Strait economic cooperation,
producing several joint recommendations which, our interlocutors
emphasized, are non-binding and may face difficulty gaining
official approval in Taiwan. The academics believe the forum's
recommendations laid the groundwork for the next round of
SEF-ARATS talks. Forum participants expressed a desire to
eventually move the forum "beyond party-to-party" dialogue and
make it more inclusive, though the academics doubt Taiwan's
pro-independence parties will join future talks. There was
almost no discussion of Taiwan's "international space" at the
forum. Though the forum helped maintain the positive momentum
of cross-Strait relations, the academics echoed widely-heard
complaints in the Mainland that Beijing has done much to help
Taiwan with very little in return. End summary.

Participants
--------------

2. (C) According to Yan Anlin, Senior Fellow at the Shanghai
Institutes for International Studies (SIIS),there were over 400
participants at the 4th annual KMT-CCP forum, which took place
in Shanghai December 20-21. Yan, who participated in the forum,
described this as a significant increase from the previous
meeting, which had 300 participants. Yan noted there were more
government officials from both sides compared to previous
forums. There were 20 "high-level" officials from various
Mainland government departments, including the National
Development and Reform Commission, the State-Owned Assets
Supervision and Administration Commission, and the China Banking
Regulatory Commission, according to Yan. From the Taiwan side
there were five officials, including Council for Economic
Planning and Development Vice Chairman San Gee, as well as
officials from the Ministry of Transportation and Communications
and Ministry of Economic Affairs. Yan said the Taiwan officials
were invited as "special guests" and traveled to the Mainland in
their private capacity "using personal leave."


3. (C) Businesspeople constituted the bulk of participants,
said Yan. He observed that, compared with the last meeting,
there were more representatives from Mainland banks and fewer
representatives from airline and shipping companies. Yan thinks
this is because the SEF-ARATS talks in November had already
established direct air and shipping links, so the focus of this
meeting was more on financial and investment issues. Many
owners of Taiwan businesses in the Mainland, particularly small
and medium-sized enterprises (SMEs),also attended the meeting
as well as representatives of several branches of the Taiwan
Compatriot Investment Enterprises Association (Taixiehui),a
trade association with branches in many major cities across
China representing the interests of Taiwan companies operating
in the Mainland. Yan said the Taiwan businesspeople were very
active in the talks. Academics were the "third tier" of
participants, about 20 from the Mainland and 8 from Taiwan, said
Yan.

Lien Chan Passing the Baton?
--------------

4. (C) Yan said the forum proceeded "smoothly" and "without any
big surprises." He said Politburo Standing Committee member Jia
Qinglin gave an opening speech for the Mainland side, while the
Taiwan side had two opening speeches, one by KMT Chairman Wu
Poh-hsiung and another by KMT Honorary Chairman Lien Chan. Yan
thinks it was clear that Wu was the leader of the Taiwan
delegation, as he led the discussions. (Note: Lien Chan led the
Taiwan delegation at previous KMT-CCP forums. End note.) Yan
noted that during the closing ceremony on December 21, Jia and
Wu gave closing speeches but Lien left without giving a speech.

SHANGHAI 00000578 002 OF 003


Yan saw this as a sign that Lien was "passing the baton."


9 Joint Recommendations, 10 Measures
--------------

5. (C) The forum, which focused on financial and investment
issues, produced 9 joint recommendations, including enhancing
cooperation amid the global economic crisis, promoting
cross-Strait financial cooperation, expanding domestic
consumption and infrastructure development, strengthening
cross-Strait industry and service sector cooperation, enhancing
the protection of investment rights, and normalizing
cross-Strait economic ties. Wang Yi, Chairman of the Mainland's
Taiwan Affairs Office (TAO),also announced 10 measures to be
implemented unilaterally by the Mainland, including supporting
Mainland-based Taiwan enterprises, encouraging cross-Strait
investment, expanding the sale of Taiwan's agricultural products
in the Mainland, and allowing Taiwan residents with appropriate
licenses to practice law in the Mainland. Under the 10
measures, the Mainland also promised 130 billion RMB (USD 19
billion) in loans to Taiwan businesses, particularly SMEs,
operating in the Mainland. According to Hu Lingwei, Research
Fellow at the Shanghai Institute for East Asian Studies, these
loans will be provided by the Bank of China, China Development
Bank, and Industrial and Commercial Bank of China. Yan said
representatives from Taiwan businesses enthusiastically welcomed
this announcement.

Just Recommendations, Nothing Official
--------------

6. (C) Both Hu Lingwei and Yan Anlin emphasized that the joint
recommendations are non-binding since the talks were "between
parties and not between the governments" of both sides. Nothing
official can be signed at these talks, said Yan. Though the
Mainland side will have little trouble implementing the 9
recommendations and 10 measures since the CCP controls the
Chinese Government, Yan believes it will be more difficult for
the Taiwan side to implement all the recommendations because
there is separation between party and government. The
recommendations must undergo scrutiny from various government
entities and political parties in Taiwan, said Yan. Wu Xinbo,
Deputy Director of the Center for American Studies at Fudan
University, thinks the proposals from this meeting, however,
will carry more weight in Taiwan compared with proposals from
previous talks since the KMT is currently in power. Although
Yan does not think Taiwan President Ma Ying-jeou will "accept"
all the recommendations due to domestic political
considerations, Ma will probably push forward most of them, Yan
said.

Laying the Groundwork for SEF-ARATS
--------------

7. (C) Yan Anlin and Hu Lingwei think the joint recommendations
will take some time to implement since they must be officially
approved and signed by SEF and ARATS, the bodies specifically
tasked with handling cross-Strait negotiations. Yan stressed
that the KMT-CCP forum "cannot replace" the SEF-ARATS dialogue
but can serve as a "second track" dialogue, complementing and
laying the foundations for future SEF-ARATS talks. Wu Xinbo
said the purpose of the KMT-CCP forum was not to make any
decisions, but to "throw ideas onto the table and test the
reaction from the outside." Yan said that, for now, both sides
will deliver the recommendations to their respective capitals
and, using the recommendations as a basis, spend several months
preparing the groundwork for the next SEF-ARATS talks in 2009.

Moving Beyond Party-to-Party Talks
--------------

8. (C) According to Yan Anlin, the participants expressed a
desire to eventually move the forum "beyond party-to-party"
dialogue and make it more inclusive and representative of
various interest groups. The participation of many non-KMT
delegates from Taiwan was a move in the right direction, said
Yan. Both Yan and Hu Lingwei noted the absence of Democratic
Progressive Party (DPP) and Taiwan Solidarity Union (TSU)
representatives at the forum. The DPP and TSU were invited but
did not participate as they feel cross-Strait relations are

SHANGHAI 00000578 003 OF 003


progressing too quickly, said both scholars. Future talks will
focus on including the DPP and TSU, but prospects for their
participation are very dim, said Yan. Yan also mentioned there
was discussion of creating something similar to the U.S.-China
Strategic Economic Dialogue (SED) between the Mainland and
Taiwan, but that the idea is "just being talked about" now with
nothing concrete in the works.

Little Mention of International Space
--------------

9. (C) Yan Anlin said there was very little mention of the
international space issue at the forum. One Taiwan scholar
raised the issue during a session, he said, but there was no
further discussion as other participants felt it was not the
right time to discuss the issue. There was no discussion of the
issue on the sidelines, according to Yan. Hu Lingwei believes
now is not the right time to discuss this but that both sides
can look at it on a case by case basis. For example, Hu is
optimistic that Taiwan will be allowed to participate in the
World Health Assembly (WHA) in May 2009 but thinks any
discussion of the broader parameters of Taiwan's participation
in international space should be left for the future.

Comment
--------------

10. (C) The scholars were generally positive about the recent
KMT-CCP forum, saying it helped maintain the positive momentum
of cross-Strait relations. However, they see little tangible
benefits for Mainland businesses. Hu Lingwei said "the Chinese
Government is doing much to help Taiwan businesses, but they
should be doing more to help Chinese (Mainland) businesses."
Despite talk of promoting cross-Strait investment, Hu does not
think many Mainland firms will invest in Taiwan, deterred by
Taiwan's high costs. Yan Anlin similarly thinks there will be
"very limited benefit" for Mainland businesses, at least in the
near future, and very few will invest in Taiwan because of
Taiwan's "strict regulations and restrictions" on investment.
Wu Xinbo also said recent cross-Strait talks have been a "one
way process, with the Mainland delivering more to Taiwan."
These comments are generally in line with what we have heard
from other East China contacts, namely, that the Mainland has
been giving much to Taiwan with very little in return.
CAMP