MEDIA REACTION: GEITHNER VISIT, NORTH KOREA, U.S.-CHINA

UNCLAS SECTION 01 OF 02 BEIJING 001464

DEPARTMENT FOR INR/R/MR, EAP/CM, EAP/PA, EAP/PD, C
HQ PACOM FOR PUBLIC DIPLOMACY ADVISOR (J007)
SIPDIS

E.O. 12958: N/A
TAGS: OPRC KMDR CH PREL ECON

SUBJECT: MEDIA REACTION: GEITHNER VISIT, NORTH KOREA, U.S.-CHINA
RELATIONS

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Editorial Quotes
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1. GEITHNER VISIT

a. "Geithner explains the prospects of the fiscal deficit; while
speaking, he made a concerted effort to speak in Chinese"

The Shanghai-based Shanghai Media Group (SMG) publication, China
Business News (Diyi Caijing)(06/02): "An expert suggests that
Geithner's visit is to convince China not to sell its U.S. T-bills.
His goal is not to ask China to purchase more bonds, but to hold
their existing bonds. If China were to sell the bonds that it
currently holds, the interest rate on the existing bonds will rise.
The U.S. could not take this rise.

In the future there are two ways for the U.S. to retain their money,
first they could find another economic growth model, such as the
1990s boom of the internet, or second, they could continue to print
more notes. Geithner's visit has had a larger meaning of hoping
China will not sell American bonds.

During Geithner's Peking University speech, he mentioned that the
Sino-U.S. Strategic and Economic Dialogue will begin in July. A
Peking University expert expressed that U.S.-China relations have
changed. In the current crisis, the U.S. believes that China has
more favorite conditions to walk out of the crisis than the U.S.
Other experts indicate that Geithner's visit has hard tasks to
fulfill.

Though ensuring China the safety of U.S.-dollar assets, the
weakening trend of U.S. dollars has shown the increasing yield of
U.S. bonds. The direct cause of the recent fall of American bonds
is the U.S. is issuing a large amount of new bonds and the market's
concerns about inflation caused by the Federal Reserve's relaxed
currency policy. China is the biggest creditor of the U.S., if the
U.S. dollar continues to depreciate, China will become the biggest
victim. Facing a larger pressure to issue bonds, Geithner's visit
to sell bonds seems more urgent. China is happy to hear his promise
of the safety of U.S. bond assets, but promises can't always be
fulfilled."

b. "U.S. Treasury Secretary tells China not to worry"

The official Communist Party international news publication Global
Times (Huanqiu Shibao)(06/02): "On June 1st, U.S. Secretary of the
Treasury began his visit to China in Beijing. For American trade
protectionists, Geithner's omission of the RMB exchange rate issue
is disappointing. What he did discuss was the continued power of
the U.S. and China's continued purchase of T-bills. 87% of
netizens, when polled, expressed worry over the American bonds that
China holds. Geithner's earlier comment about setting up U.S.-China
relations similar to those of the U.S. and the G-7, has also aroused
broad concern. It shows Obama finally has treated China as an equal
partner.

Geithner did not mention the human rights issue and RMB exchange
rate issue on his visit, which was carefully planned. Like Pelosi
and Hillary, who did not mention the topics either, Geithner now
advocates enhancing cooperation and minimizing divergences. But it
doesn't mean that the U.S.-China negotiation will also have such a
relaxed and comfortable environment. In a real negotiation, the
U.S. and China will both bring forward requests. It is possible
that Geithner's visit will make it possible to build up a new system
between the two countries."


2. NORTH KOREA

"North Korea's logic when developing nuclear weapons"

The official Communist Party international news publication Global
Times (Huanqiu Shibao)(06/02): "Even if the UN Security Council
passes a new sanctions resolution, the DPRK will not change their
strategic determination to develop nuclear weapons. North Korea
develops nuclear weapons for domestic political reasons as well as
to build up their defense capabilities. Because of the war in Iraq,
the whole world is facing serious threats from the U.S. How can the
world feel safe? Remembering its own experience of developing
nuclear weapons to fight against suppression, China can understand
the logic of other countries hoping to walk the similar road. The
nuclear proliferation in China's history, helped by Soviet Union,
finally has led the improvement of foreign relations in the east.
Though the era has changed, if China advocates non-proliferation in
North Korea it may create a moral problem.

Non-proliferation of nuclear programs is not always the most
important interest of the U.S. When more sincere challenges arise

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than non-proliferation, the U.S. will compromise on it, even give it
up to contain China. China's ability is limited, unable to protect
the world's security, especially when the U.S. requests China to be
responsible and meanwhile it is not quite responsible for China.
Though North Korea's coercively developing nuclear weapons have
impacted on the regional situation, finally the world will think
about developing normal relations with the country (North Korea) who
has developed nuclear weapons."


3. U.S.-CHINA RELATIONS

"Washington needs to hear more voices from ordinary Chinese people"

The official Communist Party international news publication Global
Times (Huanqiu Shibao)(06/02): "Looking at the frequent visits to
China by America Senior Leaders, many people have discovered that
the old way of 'U.S. pressures on China and China passively reacts
to it' has changed. This time, Secretary Geithner is hoping to gain
China's support through promises instead of pressure and warnings.
Based on the comparative strength of the U.S. and China, if the U.S.
needs China's cooperation and support, the U.S. must first
understand China and listen to China's requests. The U.S. officials
start to look at China at an equal basis. Washington gradually
realized the increasing influence of ordinary people's opinion.
U.S. senior official's coming to China not only means having more
dialogue with Chinese officials, but also means listening more
opinions of Chinese ordinary people. To listen to their requests
has been especially emphasized on the issue of China purchasing
American bonds. Many netizens have brought forward their requests
directly to Geithner on the internet: maintaining the stability of
the U.S. dollar, relaxing high-tech export restrictions on China,
ensuring China's investment security in the U.S., admitting China's
position as marketing economy and cancelling trade protectionism
measures aimed at China."

PICCUTA