CHINESE ACADEMICS DISCUSS DPRK LAUNCH, MILITARY

C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 000951

SIPDIS

E.O. 12958: DECL: 04/09/2034
TAGS: PARM PGOV PREL ECON EFIN CH KN
SUBJECT: CHINESE ACADEMICS DISCUSS DPRK LAUNCH, MILITARY
ISSUES AND NATIONALISM

REF: BEIJING 702

Classified By: Acting Minister-Counselor for Political Affairs Ben Moel
ing. Reasons 1.4 (b) and (d).

SUMMARY
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1. (C) Senior Chinese foreign policy scholars March 31
predicted to visiting EAP DAS John Norris that the PRC would
be unable to support a UN Security Council resolution
condemning North Korea's "satellite" launch. Based on the
"surprising" timing of the USNS Impeccable incident in the
South China Sea and the China Military Power Report's
release, many Chinese academics believe some parts of the
U.S. government intend to slow the development of U.S.-China
relations. While critical of China's Central Bank Governor
Zhou Xiaochuan's proposals for the IMF to issue bonds and for
Special Drawing Rights (SDRs) to replace dollars as the
international reserve currency, the scholars echoed official
calls for China to have a greater say in IMF decision-making
in exchange for increasing the country's IMF contributions.
Secretary Clinton's Asia trip and Foreign Minister Yang
Jiechi's U.S. trip were both widely perceived to have been
successful in developing U.S.-China relations. Chinese
leaders are "rational" and will prevent rising nationalism
from becoming too extreme, the scholars said, though
anti-foreign sentiment exists. That sentiment, and concerns
over domestic food security, contributed to the denial of
Coca-Cola's purchase of Huiyuan Juice Group. End Summary.

CRITICISM OF POSSIBLE UN RESOLUTION CONDEMNING DPRK LAUNCH
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2. (C) In a March 31 roundtable discussion with visiting EAP
Deputy Assistant Secretary John Norris in Beijing, China
Institute of Contemporary International Relations (CICIR)
Vice President Wang Zaibang maintained China would be unable
to support a UN Security Council resolution condemning the
North Korean missile launch, as long as "we can verify it's a
satellite" because no international law forbids a satellite
launch. (Note: This discussion took place five days before
the April 5 DPRK launch.) DAS Norris presented the U.S.
position, noting a launch would be in violation of UNSC
Resolution 1718. Yuan Peng, Director of CICIR's Institute of
American Studies, said that China and the United States have
"different interpretations" of Resolution 1718, adding that
DPRK has repeatedly emphasized that a satellite, and not a
missile, will be launched.

"SURPRISING" TIMING: USNS IMPECCABLE, MILITARY POWER REPORT
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3. (C) Yuan asserted that Chinese scholars interpreted the
"surprising" timing of the March 8 USNS Impeccable incident
in the South China Sea, which occurred between the
Secretary's Asia visit and Foreign Minister Yang's U.S. trip,
and the March 25 China Military Power Report, which was
released before the G-20 summit, as "aggressive actions."
Combined with Congress celebrating the Taiwan Relations Act's
30 year anniversary, Yuan said, those scholars had concluded
some parts of the U.S. government "wanted to remind President
Obama and Secretary Clinton to go slowly on U.S.-China
relations". When DAS Norris pointed out that the DOD
response was necessitated by the Chinese ships' dangerous
actions, Yuan replied that such maritime encounters were
common, but the Pentagon's public response was unexpected.
In response to DAS Norris' statement that Congress mandated
the issuance and timing of the China Military Power Report,
Yuan asserted Congress was set "in Cold War thinking," and
claimed DOD could have delayed the report's release to
facilitate bilateral relations. CICIR Professor Da Wei took
this one step further and suggested that the Pentagon issue
only an unpublicized, classified report. Though Yuan said he
found nothing surprising in the report's conclusions, he
alleged that the United States was concerned about new
competition from countries other than Russia and Europe in
the areas of space development, blue water naval capabilities
and cyber security.

ASSERTING CHINA'S PLACE AT THE IMF
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4. (C) The academics largely echoed official views on
economic policy and IMF reform, calling for China to have a
greater say in IMF decision-making in exchange for increasing
the country's IMF contributions. Wang said many in China
would welcome moves by the United States and Europe to "give
up some of their voice" in the IMF to developing countries,
claiming U.S. influence over the IMF would be unaffected and
that "if President Obama can give a positive response on this

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issue, U.S. soft power will increase." (Note: Many of Wang's
points were previously articulated by PRC Vice Premier Wang
Qishan in a March 27 Times of London newspaper essay that
Wang Zaibang said "signaled Hu's intentions for the G-20.")
The scholars also asserted the need for the U.S. and China to
resist protectionism and "competitive devaluation."

IMF BONDS, "REFORMING" THE DOLLAR-BASED RESERVE SYSTEM
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5. (C) Wang Zaibang was critical of People's Bank of China
Governor Zhou Xiaochuan's proposal that the IMF issue bonds,
saying such bonds could not be guaranteed. Wang also
disagreed with Zhou's call for SDRs to replace the dollar as
the international reserve currency. A transition would be
too complicated and therefore was not feasible, he said, and
so Zhou's plan was "not necessary." Wang added that Zhou's
remarks, in addition to Premier Wen Jiabao's March 13
comments that China was "concerned" about its U.S. Treasury
holdings, were "not challenges" to the United States, but
expressions of concern over maintaining the value of China's
assets.

POSITIVE REACTIONS TO SECRETARY CLINTON'S CHINA TRIP
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6. (C) The scholars praised Secretary Clinton's February trip
to China as a success, noting that many people appreciated
that China was one of the first countries she visited. PRC
officials, said Yuan, were pleased with what they viewed as
her focus on "priority" issues like financial cooperation,
energy cooperation and climate change. PRC officials and
think tankers similarly considered Foreign Minister Yang
Jiechi's trip to the United States to be a positive
development in the bilateral relationship.

INCREASING NATIONALISM, BUT PRC LEADERS "RATIONAL"
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7. (C) In response to DAS Norris' question on the influence
of popular nationalist books such as "Unhappy China"
("Zhongguo Bu Gaoxing"),the scholars said the books do not
reflect the serious thinking of government officials and
"mainstream" scholars. Though Chinese leaders paid
increasing attention to popular opinion, Wang said, they were
still grounded in "rationality" and would take action "to
right the direction" if popular opinion was judged to be
swinging towards the extreme. Wang cited the government's
efforts in 2004 to tamp down anti-Japanese sentiment by
mobilizing scholars, officials and the then-Foreign Minister
to give speeches to dissipate anti-Japanese hostility, while
Yuan added that "Unhappy China" and a recent Global Times
article promoting Chinese "hawkishness" were both widely
criticized. Wang acknowledged the existence of some extreme
opinions within academic circles, but said most scholars
viewed China's participation on the world stage "rationally
and positively."

COCA-COLA DEAL DERAILED BY NATIONALISM?
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8. (C) Wang said the decision by China's mergers and
acquisitions regulator to reject Coca-Cola's bid to purchase
Huiyuan Juice Group was motivated by domestic popular
opinion, which was greatly opposed to the transaction. Yuan
claimed the majority of Chinese strategic industries were
already controlled by foreign companies, and that concerns
over the perceived foreign encroachment on Chinese businesses
prompted the 2008 passage of an anti-monopoly law to defend
China's industries and the development of a fledgling
"capitalist culture." Yuan acknowledged that juice
manufacturing was not a strategic industry, but said that
Huiyuan was the most famous juice company in China and
therefore its proposed sale became a matter of national
pride. Wang claimed China's agriculture sector and the food
processing industry were increasingly dominated by foreign
companies, and that concerns over domestic food security also
contributed to the rejection of the Coca-Cola deal. (Note:
See reftel for further read-out on the demise of the
Coke-Huiyuan deal.)


9. (U) DAS Norris has cleared this cable.
WEINSTEIN