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Cablegate: Strategic Economic Dialogue Meeting On

VZCZCXRO8491
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #6978/01 3092352
ZNR UUUUU ZZH
P 052352Z NOV 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 3257
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC
RUEHOO/CHINA POSTS COLLECTIVE

UNCLAS SECTION 01 OF 03 BEIJING 006978

SIPDIS

SENSITIVE
SIPDIS

STATE PASS USTR WASHINGTON DC

E.O. 12958: n/a
TAGS: ECON ETRD CH
SUBJECT: Strategic Economic Dialogue Meeting on
Transparency in Administrative Licensing

(U) Sensitive but unclassified. Not for
dissemination outside USG channels. Not for
Internet distribution.

1. (SBU) Summary: U.S. and Chinese Government
and industry representatives met October 29-30 to
discuss transparency in administrative licensing,
an outcome from the second round of the Strategic
Economic Dialogue (SED) held in May.
The sides exchanged information on general
licensing requirements in each country and on the
conditions, procedures, and timeframes for
obtaining licenses in the construction, design,
engineering, and surety sectors. The meeting
also included a visit to the Tianjin
Administrative Licensing Center, which serves as
a Qone-stop-shopQ for obtaining administrative
licenses from over 70 agencies in Tianjin. End
Summary.

SED Administrative Licensing Seminar
------------------------------------

2. (U) On October 29-30, Department of Commerce
Deputy General Counsel David Bowsher and other
U.S. Government and industry representatives
participated in a meeting with officials from
ChinaQs State Council Legislative Affairs Office
and other government agencies. The meeting,
which focused on exchanging information on the
conditions, procedures, and timeframes for
obtaining administrative licenses, was the first
of two meetings to carryout agreed-upon outcomes
from the second meeting of the Strategic Economic
Dialogue (SED) held in May.

3. (U) During the meeting, experts from both
governments presented on general licensing
requirements in both countries that are
applicable to and guide licensing processes. Mr.
Bowsher presented information on federal
licensing regimes in the United States,
particularly focusing on how the Due Process
Clause of the U.S. Constitution and the
Administrative Procedure Act ensure that federal
licensing regimes are transparent.

4. (SBU) Representatives from the Chinese
Government discussed ChinaQs Law on
Administrative Licensing (Licensing Law) and its
requirements to ensure transparency. The
Licensing Law became effective in July 2004 and
contains provisions that allow administrative
authorities to reduce the number of licensing
regimes and increase transparency of remaining
regimes. The Licensing Law specifically requires
administrative authorities to publish all
requirements and procedures necessary to obtain a
license and forbids decision-making based on
unpublished requirements. In addition, the
Licensing Law requires administrative authorities
to provide written justification for rejecting an
application and provides methods of recourse for
adverse decisions, including administrative
reconsideration and judicial review.

5. (SBU) Officials from both governments
expressed an interest in discussing the
application of general licensing requirements to
non-government organizations -- such as industry
associations -- that administer licensing regimes.
Articles 13 and 21 of the Licensing Law allows
administrative authorities to eliminate licensing
regimes when other methods may better regulate a
specific matter. The U.S. officials specifically
noted that this practice has been implemented in
the freight forwarding sector and has resulted in
a lack of transparency in the licensing process.
U.S. and Chinese officials agreed that this could
serve as a discussion topic in future exchanges
on licensing.

Construction Sector Licensing
-----------------------------
6. (SBU) Government officials and industry

BEIJING 00006978 002 OF 003


representatives also exchanged information on the
licensing regimes for construction, engineering,
design, and surety companies and industryQs
experiences with obtaining licenses in those
areas. Ministry of Construction, Department of
Market Administration Deputy Division Chief Wang
Wei discussed ChinaQs efforts to implement its
WTO commitments in this area through the
development of new regulations and licensing
regimes for the aforementioned sectors.
According to Mr. Wang, the new regimes and
accompanying implementing regulations level the
playing field for foreign-invested construction,
design, and engineering companies. Foreign-
invested companies in these sectors must first
establish themselves as legal entities in China
and may then apply for a license. Mr. Wang
reported that the licensing conditions,
procedures, and timeframes are the same as those
for domestic companies.

7. (SBU) Mr. Wang provided specific information
on Decree 114 and its implementing regulations,
which regulate the design and engineering sector
in China. To apply for a 114 grade A license,
a foreign-invested or domestic company that is
currently applying for a license must establish a
performance record in China that illustrates the
companyQs engineering experience. This is
supposed to be done through operating under a
grade B license. According to Mr. Wang, the new
regime facilitates the process of moving from a
grade B to a grade A license by eliminating
the former requirement to operate under a
grade B license for two years before applying for
a grade A license. However, Mr. Wang did not
specify a timeframe. Additionally, the Ministry
of Construction will also consider the foreign
experience of companies when reviewing an
application for a grade A license.

8. (SBU) Representatives from Bechtel informed
Mr. Wang that they were currently having
difficulties with their 114 grade A license
application. Bechtel sought to apply for a 114
grade A license and was told that they must first
operate under a grade B license because BechtelQs
license under the previous licensing regime,
Decree 32, was only a construction license, not
an engineering license. Mr. Wang agreed to
follow-up with Bechtel on their specific issue.
Note: Bechtel is not interested in a Decree 113
A or Level 1 construction license as this type
of license restricts projects that are at or
below five times registered capital.

9. (SBU) One panelist emphasized that while
several firms are applying for qualification
certificates under Decree 114, the implementation
rules for Decree 155 in relation to construction
supervision have not yet been released so
applications cannot be made by foreign companies
interested in construction supervision. Moreover,
the lack of a licensing regime for project
management and engineering, procurement, and
construction (EPC) projects prevents foreign firms
from providing integrated project solutions -- an
area where foreign experience and expertise is of
the greatest benefit to Chinese construction and
design companies, he argued. Several panelists
stated that Circular 200 which relates to project
management, issued by MCON in December 2004,
prevents foreign firms from competing in China.
Circular 200 requires foreign firms to obtain
qualification certificates based on one or more of
the existing six qualification regimes, namely
design, construction, survey, supervision, cost
advisory and tendering agency qualifications.
This cumbersome process discourages the
development of project management enterprises and
the integrated implementation of projects, they
said.

10. (SBU) Chinese officials asked for the U.S.
Government officials to present information on

BEIJING 00006978 003 OF 003


the U.S. visa policy, asserting that visa
issuance was a form of administrative licensing
that was of great interest to Chinese travelers.
In addition, the officials asserted that the lack
of clarity in the visa issuance standards and
process resulted in confusion and that increasing
transparency could help increase business
relations. U.S. Government officials responded
by noting that if the Chinese Government and
industry wanted additional information on the
visa issuance process, they would relay the
request to the appropriate officials at the U.S.
Embassy and coordinate information sharing on the
policy. The Chinese responded by identifying
this as a possible concrete deliverable to
announce at SED III.

Tianjin Licensing Center
------------------------

11. (U) On October 30, the U.S. and Chinese
delegations visited the Tianjin Administrative
Licensing Center, which serves as a central
location to gather information on administrative
licensing regimes as well as to file applications
under those regimes. The Center administers
licensing regimes from over 70 local
administrative agencies. The Center tracks the
review process to ensure that applications are
reviewed within the specific timeframes
applicable to each licensing regime. To
facilitate transparent review, applicants can
track the status of their applications through
the CenterQs website.

Randt

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