SECRETARY GEITHNER'S MEETING WITH CHINESE

C O N F I D E N T I A L BEIJING 001586 STATE FOR EAP, EAP/CM, E TREASURY FOR OASIA/DOHNER/WINSHIP TREASURY FOR IMFP/SOBEL NSC FOR LOI E.O. 12958: DECL: 06/12/2029 TAGS: OVIP ECON EFIN PREL CH SUBJECT: SECRETARY GEITHNER'S MEETING WITH CHINESE PRESIDENT HU JINTAO, JUNE 2, 2009 REF: BEIJING 1571 Classified By: Economic Section Deputy Chief Robert Forden; Reasons 1.4 (b, d) Summary -------------- ¶1. (C) Chinese President Hu Jintao told visiting U.S. Treasury Secretary Geithner June 2 that continuing close contacts between China and the U.S. under the Obama administration are building good momentum in the relationship. He cited his April meeting with President Obama in which the two leaders agreed to build a POSITIVE and cooperative relationship and to establish the U.S.-China Strategic and Economic Dialogue (S&ED). With the global crisis still deepening and spreading, Hu stressed, an immediate priority is implementation of previous G20 outcomes to kick-start economic growth, while continuing to oppose trade and investment protectionism, strengthen international financial regulation, and reform the international financial system. For the next G20 summit in September, Hu said China was prepared to increase communication and cooperation with the U.S. to ensure POSITIVE outcomes. He observed that the S&ED provides an important platform for consultation on overarching strategy and long-term issues of mutual interest and balanced outcomes, and should be undertaken in coordination with other bilateral mechanisms. Measures taken by the Chinese Government to boost domestic demand and increase economic growth have begun to produce POSITIVE results, Hu noted, and China will continue to boost domestic demand to promote more rebalanced and sustainable economic development. ¶2. (C) Summary, continued. Secretary Geithner observed that the ability and actions of the U.S. and China to develop a common agenda and build consensus in the G20 will be essential to sustaining a global economic recovery. Three important priorities for cooperation are addressing the global financial crisis to promote economic recovery; laying the foundations for more balanced and sustainable economic growth, including a shift to more domestic demand-led growth in China and other countries with large current account surpluses; and seeking opportunities to reform the international financial system, promote greater energy efficiency, and advance other common interests. He affirmed his support for a greater role for China in governance of international financial institutions. End Summary. ¶3. (U) In the final meeting of Secretary Geithner's June 1-2 visit to Beijing, Chinese President Hu Jintao welcomed him at the Great Hall of the People as the special representative of President Obama. He said he appreciated Secretary Geithner's efforts to establish strong working relationships with his Chinese colleagues to tackle the global financial crisis. In response, Secretary Geithner conveyed the commitment of President Obama to build a strong and cooperative relationship with China, which he said was off to a good start. Secretary Geithner also observed that, in part due to actions by the U.S. and China, we now are seeing early signs of global economic recovery. Bilateral Relationship: Good Momentum -------------- ¶4. (C) After press left the room, President Hu said the continuing close and high level contacts between the U.S. and Chinese Governments under President Obama's new administration are building momentum in the relationship. In particular, he cited his "very good" April meeting with the President in which the two leaders agreed to develop a positive and cooperative relationship and to establish the S&ED. Hu characterized the bilateral relationship as being "in good shape." Both China and the U.S. exert great influence on the world and share extensive common interests as well as heavy responsibilities, including the global financial crisis, economic recovery, international and regional disputes, and global peace. China is willing to work with the U.S., taking a strategic and long-term approach to advance cooperation in various areas. Addressing the Global Crisis -------------- ¶5. (C) Secretary Geithner observed that the ability and actions of the U.S. and China to develop a common agenda and build consensus in the G-20 will be essential to sustaining a global economic recovery. Based on discussions with his Chinese interlocutors, it appears our two countries share a similar strategic, long-term, and forward-looking vision for the dialogue with agreement to achieve progress in concrete areas. More specifically, Geithner noted three very important priorities: first, addressing the global financial crisis to promote economic recovery, the beginnings of which are just appearing; second, while addressing immediate challenges, also laying the foundations for more balanced and sustainable economic growth, including financial reform and fiscal adjustment in the U.S. and a shift to more domestic demand-led growth in China and other countries with large current account surpluses; and third, seeking opportunities to promote international economic and strategic cooperation to reform the international financial system, promote greater energy efficiency, and advance other common interests. He emphasized the U.S. commitment to reform of the international financial institutions (IFIs),including a greater role for China in those organizations, to make them more effective and responsive. ¶6. (C) President Hu agreed that the global crisis is still deepening and spreading, and its impact on the real economy is becoming evident. While the world now is seeing some positive signs, on the whole the global economic situation remains highly challenged. An immediate priority is implementation of the G20 outcomes that can kick-start economic growth. We must continue to oppose trade and investment protectionism, strengthen international financial regulation, reform the international financial system so as to increase the representation of developing countries in the IFIs, and build the foundations for long-term and sustainable world economic recovery. In preparation for the next G20 summit in September in Pittsburgh, President Hu said China was prepared to increase communication and cooperation with the U.S. to ensure POSITIVE outcomes. S&ED -------------- ¶7. (C) President Hu said the S&ED provides an important platform to deepen understanding, trust and cooperation. Noting that he already had discussed the S&ED with Vice Premier Wang Qishan (ref),Hu listed three key areas for cooperation: first, consultation on overarching strategy and long-term issues of mutual interest; second, coordination on equal footing to promote practical cooperation; and third, coordination of the S&ED with other bilateral mechanisms to ensure they are complementary and mutually supportive, and to take advantage of synergies. China's Economy -------------- ¶8. (C) President Hu said the measures adopted by the Chinese Government since November 2008 to boost domestic demand and increase economic growth have begun to produce POSITIVE results. While imports and exports have dropped, domestic demand has increased. China will continue to boost domestic demand to promote rebalancing and sustainable economic development, although these are not easy shifts in an economy of 1.3 billion people. With the U.S. as China's second largest trading partner, the two countries enjoy many economic linkages, and Hu said he repeatedly has stressed that U.S. economic recovery and growth is good for China, the U.S., and the world. Participants -------------- ¶9. (SBU) President Hu was accompanied by Vice Premier Wang Qishan, Minister of Finance (MOF) Xie Xuren, Vice Minister of Foreign Affairs (MFA) He Yafei, Assistant Minister of Finance Zhu Guangyao, and other MOF and MFA officials. Secretary Geithner was accompanied by Charge d'Affaires Piccuta; Minister Counselors Loevinger (Financial Affairs) and Luke (Economic Affairs); and members of the Secretary's delegation. PICCUTA