ASSISTANT FINMIN ZHU GUANGYAO SUGGESTS FORMAT FOR

C O N F I D E N T I A L BEIJING 003272

SIPDIS

STATE ALSO PASS USTR
TREASURY FOR DAVID LOEVINGER
NSC FOR EVAN MEDEIROS

E.O. 12958: DECL: 12/07/2019
TAGS: EFIN ETRD EINV PREL CN
SUBJECT: ASSISTANT FINMIN ZHU GUANGYAO SUGGESTS FORMAT FOR
S&ED II, DEFENDS INDIGENOUS INNOVATION

REF: BEIJING 3209

Classified By: Deputy Chief of Mission Robert Goldberg. Reasons 1.4 (b
, d)


1. (C) Summary: At a December 4 meeting with DCM, Assistant
Minister of Finance Zhu Guangyao said there is broad
consensus in the PRC that the United States and China must
move beyond purely bilateral concerns to focus on regional
and global issues. He proposed the S&ED II economic track
discuss post-financial crisis issues, international financial
market stability, international financial architecture
reform, and trade and protectionism. He noted MOF DG Zou
Jiayi will visit Washington January 6-8 to review
implementation of S&ED I outcomes and to discuss the S&ED II
economic track agenda. Zhu defended the PRC's new
accreditation system for national indigenous innovation
products, arguing it is an IPR issue that does not violate
S&ED commitments. End summary.


2. (C) Assistant Minister of Finance Zhu Guangyao, at a
December 4 meeting with DCM, said Vice Premier Wang Qishan
believes the United States and China should move beyond
bilateral concerns. Zhu said there is now a broad consensus
in the PRC that our two governments should engage each other
on regional and global issues.


3. (C) Zhu proposed four main topics for the economic track
of S&ED II: post-financial crisis issues, including the G20,
macroeconomic policy, foreign direct investment, and exchange
rates (the latter to be discussed privately); international
financial market stability in the wake of the Dubai debt
crisis; reform of the international financial architecture;
and trade and protectionism, including the investment
climate. Zhu said MOF awaits a USG response to its initial
S&ED II recommendations. Zhu suggested we coordinate with
MFA on dates for S&ED II.


4. (C) Zhu noted the importance of monitoring outcomes agreed
at S&ED I as a foundation for a strong S&ED II. We need a
framework on energy and environment and in other areas,
similar to the Ten Year Framework, in order to lift S&ED
beyond a talk shop, Zhu said. Zhu agreed that we should hold
the third Investment Forum soon but did not propose dates.


5. (C) Zhu agreed that that a visit by Treasury Secretary
Geithner would add momentum to S&ED II preparations and to
the bilateral relationship. He said we should work out in
advance the substantive issues both sides will raise during
the visit, including climate change finance,
anti-protectionism, and the exchange rate. Zhu said the
January 6-8 visit of MOF DG Zou Jiayi to Washington will be
an opportunity to continue these preparations. DCM warned we
must not over-script the Geithner visit if we want it to be
successful.


6. (C) DCM raised the PRC's new accreditation system for
national indigenous innovation products (reftel),noting that
it undermines S&ED and JCCT commitments, is protectionist, is
bad for innovation, is a step backward from accession to the
WTO Government Procurement Agreement, is not transparent, and
harms the bilateral relationship. Zhu did not agree with the
USG interpretation of China's S&ED commitments regarding
treatment of foreign invested enterprises and government
procurement, arguing that the accreditation system is an IPR
issue and not a trade nor a government procurement issue.
Zhu said the PRC must encourage indigenous IPR for the
economy to continue to grow.
HUNTSMAN