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Cablegate: Biden Staffer Meets Chinese Ministry of Finance

VZCZCXRO9210
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #3513/01 2540659
ZNR UUUUU ZZH
P 100659Z SEP 08
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 9832
INFO RUEHOO/CHINA POSTS COLLECTIVE

UNCLAS SECTION 01 OF 02 BEIJING 003513

SIPDIS

STATE FOR EEB/CM
STATE FOR H/PASS SENATE FOREIGN RELATIONS OFFICE
STATE PASS USTR STRATFORD/WINTERS
DEPT OF THE TREASURY FOR TAIYA SMITH/HOLMER/WRIGHT/OASIA
DEPT OF COMMERCE/ITA DAS KASOFF
NSC FOR HAENLE/LOI/WINTER
INFO DEPT OF LABOR

E.O. 12958: N/A
TAGS: CM ECON PREL
SUBJECT: BIDEN STAFFER MEETS CHINESE MINISTRY OF FINANCE

1. (SBU) SUMMARY: On September 9, Frank Januzzi, from the
staff of Senator Biden (D-DE) and the Senate Foreign
Relations Committee, met with China's Vice Minister of
Finance Zhu Guangyao. The two discussed the U.S.-China
Strategic Economic Dialogue (SED) as a forum for bilateral
cooperation and confidence building. The discussion affirmed
the mutual value of the SED and touched upon the U.S.
presidential election. Vice Minister Zhu began by describing
the substance of the previous four rounds of the SED, and
explained that the SED has a high degree of support all the
way to the top of China's leadership. END SUMMARY.

How the SED is Viewed in Washington and Beijing
--------------------------------------------- --
2. (SBU) Januzzi explained how the Senate Foreign Relations
Committee views the Strategic Economic Dialogue. To maintain
strong bilateral political ties, China and the U.S. must
control economic problems, whether related to intellectual
property rights or the trade surplus. He said that the
Senate regards the SED as a channel to manage these issues,
and it has proven that by doing so, it can also protect the
bilateral relationship from political volatility. Januzzi
stated that in the U.S., there is broad support for bilateral
dialogue with China, and that China could expect to have the
interest of the new administration, no matter who wins the
election. Januzzi added that in Washington, there is
bipartisan support for negotiating a bilateral investment
treaty (BIT) with China.

Vice Minister Zhu added that likewise, the SED has enabled
China's leadership to focus on matters of bilateral interest.
He emphasized that in China, all matters of great importance
are decided by the president, and therefore, the SED is a
forum in which the U.S. should present its foremost
interests. The SED has been instrumental in addressing 140
separate issues that were included in previous outcomes
documents, ranging from environmental protection to managing
macroeconomic cycles, said Zhu.

China's Interests during the Post-Election Period
--------------------------------------------- -----
3. (SBU) Januzzi emphasized the importance of the SED and
raised the possibility that after the coming election, the
SED might have a new lead on the U.S. side, for example the
office of the vice president or perhaps the State Department.
This will create an opportunity re-examine priorities for
cooperation, he said. Januzzi agreed with Zhu that the
critical elements of the SED, namely high-level political
support, capable working level staff, and a skillful ability
to cut cross bureaucratic stovepipes, must all be maintained
in the future. Januzzi asked what priorities China has for
future rounds of the SED.

4. (SBU) Zhu said that at this time, China is highly focused
on two issues: the investment climate abroad and managing
China's financial assets. Zhu noted the investment problems
of the telecom company Huawei in the U.S., which have roiled
decision-makers in China. More importantly, said Zhu, and a
matter of urgent concern, is the recently-announced
conservatorship of Freddie Mac and Fannie Mae. Zhu said that
an orderly and deft management of this problem is in China's
direct interests, and China will place an emphasis on
financial cooperation in SED-V. Because the government faces
a public opinion backlash associated with a loss in value of
its foreign assets, China wants to minimize the political
costs of this crisis, said Zhu.

The Democratic Party and China - Interests
------------------------------------------
5. (SBU) Januzzi said that if Democrats win the coming
election, the U.S. side is likely to place a stronger
emphasis on labor, energy and the environment. Januzzi noted
that Senator Biden has also been active in the area of IPR
protection in the Senate. Januzzi noted that China's laws on
IPR have improved, and that enforcement is an outstanding
area for improvement. He added that when dialogue with China
is not fruitful, the U.S. will continue to use the WTO
dispute settlement mechanism, which is regarded as a valuable
alternative to bilateral dialogue.

6. (SBU) Januzzi said it will be important for the next
president to balance the macroeconomic situation in order to
reduce America's debt level. However, this will be a
long-term endeavor, and China should not expect any major
upset of the economic status quo characterized by robust

BEIJING 00003513 002 OF 002


trade ties and financial interdependence. Jannuzi said it is
important to keep the SED on track, and that due to the
two-year congressional cycle, agreements need to be reached
and closed in a timely fashion. Lastly, Januzzi noted that
there is broad bilateral support for further integration of
China into the global economic system and related
multilateral organizations. The two sides closed with a
friendly note of mutual appreciation and stated they hope to
work together for the benefit of the public.

Note: This cable was cleared by Frank Januzzi, Senate Foreign
Relations office.
RANDT

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