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Cablegate: Codel Skelton Addresses Military Transparency,

VZCZCXRO2691
OO RUEHCN RUEHGH RUEHVC
DE RUEHBJ #5655/01 2410416
ZNR UUUUU ZZH
O 290416Z AUG 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1313
INFO RUEHOO/CHINA POSTS COLLECTIVE

UNCLAS SECTION 01 OF 02 BEIJING 005655

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PREL PGOV KIRF ETRD PARM CH
SUBJECT: CODEL SKELTON ADDRESSES MILITARY TRANSPARENCY,
TRADE WITH NPC CHAIR WU BANGGUO

Summary
-------

1. (SBU) The United States and China share a long history and
have many common interests that will only grow deeper and
more plentiful, National People's Congress Standing Committee
Chairman Wu Bangguo told CODEL Skelton August 27. The
delegation raised tough questions concerning military
exchanges, China's military budget and transparency and the
U.S. trade deficit with China. Wu said Chinese military
expenditures are relatively modest and consistent with
China's needs, predicted that transparency will gradually
improve and offered suggestions for improving the trade
balance, including reducing U.S. restrictions on high-tech
exports to China. End Summary.

A Warm Welcome
--------------

2. (U) A delegation led by House Armed Services Committee
Chairman Ike Skelton (D-MO) and including Representatives
Randy Forbes (R-VA), John Spratt (R-SC), Robin Hayes (R-NC),
Jeff Flake (R-AZ), Carol Shea-Porter (D-NH), Delegate
Madeleine Bordallo (D-GU) and Rear Admiral Mark Ferguson,
accompanied by the Ambassador, met with NPC Standing
Committee Chairman Wu Bangguo at the Great Hall of the People
August 27.

3. (U) Wu welcomed Chairman Skelton and his delegation to
Beijing, and noted that he had seen press reports of the
delegation's visit to the Flying Tigers memorial in Yunnan.
The "Flying Tigers period" is worth remembering, Chairman Wu
said, because at that time U.S. and Chinese soldiers fought
side by side, and the United States made huge sacrifices on
China's behalf. Today, China and the United States need to
increase mutual understanding and trust. Chairman Skelton
expressed pleasure at returning to China after two years, and
noted that the visit to the Flying Tigers memorial was
moving, especially the experience of meeting Chinese veterans
who had worked with the U.S. military during the war. The
more the United States and China work together, the more the
two sides' common interests become clear, and with that
clarity comes the opportunity to build stronger relations.

4. (SBU) Representative Randy Forbes (R-VA) noted that he
appreciated the opportunity to attend a church service in
China and appreciated the flexibility of the Chinese
government in permitting its people to worship. He hoped
that the Chinese people would have the freedom and
opportunity to worship as they wished. Chairman Wu declared
"seeing is believing" and said that through their visit to
China, the members of the delegation would get a "clear
picture" of current conditions. The United States'
relationship is China's most important, he emphasized, and
the strategic content of that relationship is more and more
robust.

Favorable Assessment of Current Relations
-----------------------------------------

5. (U) 2007 marks the 35th anniversary of the visit of
President Nixon and the Shanghai Communique, Wu continued.
Though the bilateral relationship has experienced "twists and
turns and contradictions" in the ensuing decades, the current
state of relations is "so remarkable it could not have been
imagined 35 years ago." He highlighted U.S. and Chinese
common interests, including bilateral trade and student
exchanges, and said it is in the interest of both countries
to continue down the path of growing relations.

6. (U) Chairman Wu said that interparliamentary exchanges are
valuable tools for advancing the bilateral relationship, and
noted that China views the House Armed Services Committee as
one of the three most important committees in the U.S.
Congress. "We can cover areas where we agree and areas where
we disagree and thus increase understanding," he said. The
two countries need to take a strategic view, Chairman Wu
said, and understand that common U.S. and Chinese interests
are growing in number. He noted the upcoming meeting between
President Bush and President Hu Jintao (at APEC), and said he
is looking forward to his own visit to the United States in
late October/early November.

Military Expenditures, Exchanges and Transparency
--------------------------------------------- ----

7. (SBU) Chairman Skelton said it had been an honor and a
privilege to be the first CODEL to visit the Second Artillery
headquarters (septel). Military-to-military visits are
"hugely important" because there is no better way to improve
transparency than to have military officers become friends

BEIJING 00005655 002 OF 002


and build understanding. He thanked Chairman Wu for working
with the United States on mil-mil exchange. He highlighted
the House Armed Services Committee's bipartisan nature, and
said it reflects the fact that the U.S. military is
nonpartisan.

8. (SBU) China "vigorously promotes" mil-mil exchanges,
Chairman Wu said, and transparency will increase with more
exchanges. The Chinese military budget has increased, he
acknowledged, but in absolute terms it remains very low.
China's military spending is ten percent of U.S. military
spending, and on a per-capita basis, it is even lower.
Increases in the military budget are no more than 17 percent,
he said, while education expenditures are up 80 percent and
health expenditures up 40 percent. Most of the increase in
military spending goes for welfare of the troops; in
addition, China has 22,000 kilometers of land borders to
defend and over 18,000 kilometers of coastline. The money
China spends on its army goes to raising military salaries
and buying new uniforms. In addition, he continued, China is
concerned about U.S. involvement in the Taiwan issue. China
seeks peaceful options for reunification, but also requires a
military deterrent to separatist forces. China needs
improved military personnel policies and practices, and its
budget will grow to accommodate those, but there is no need
to exaggerate, he said. The United States has far more
advanced equipment, such as next-generation naval vessels.

Trade
-----

9. (U) Representative Spratt (R-SC) noted that trade with
China is a concern of the Congress, and said that trade
should be an engine of positive development of relations.
The lack of balance in the U.S.-China trade relationship is
causing problems, and we need to restore some balance to the
trade relationship, he said. Chairman Wu acknowledged
China's large trade surplus with the United States, but
highlighted efforts to address the issue, including
high-level economic dialogue. The designation of Vice
Premier Wu Yi to meet with Treasury Secretary Paulson to
discuss the problem is indicative of the seriousness with
which China takes these issues, he said.

10. (SBU) The trade surplus problem is structural, Wu
explained. U.S. trade deficits with Korea, Japan and Taiwan
have all moved to China as those economies' industrial bases
relocated to China. This is a natural side effect of
globalization, and the United States and China need to work
together to demonstrate how businesses and consumers benefit
from the high trade volume. China is eager to import more
and procure more from the United States, especially in the
technology sector. U.S. efforts to relax restrictions on
high-technology exports to China would go a long way to
improve the trade picture. Wu cited telecommunications as an
example. China's import market for high technology is worth
USD 100 billion, Wu explained. However, the U.S. share of
that is only six percent because of export restrictions. In
telecommunications, the United States has only two percent of
the market. European and Japanese firms are "grabbing" U.S.
market share because of unreasonable U.S. government attempts
to restrict a "natural effect of globalization."

11. (U) Restricting imports from China to the United States
would not be an effective way to reduce the deficit, he
continued. The United States and China have such
complementary economies that restricting Chinese exports
would only shift production and procurement to other
producers in the region without affecting the overall U.S.
current account deficit.

Wu's Message to the Delegation's Constituents
---------------------------------------------

12. (U) Chairman Wu asked the delegation to pass a message
along to their constituents: China and the United States
fought side-by-side in the Second World War; almost a hundred
thousand Chinese students study at U.S. universities;
friendly contact between the two parliaments is evidence of
good relations; and China values the practical benefits of
relations (including trade relations) and believes they can
only get better.

13. (U) The delegation cleared this cable.
Randt

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