

Currently released so far... 12648 / 251,287
Browse latest releases
2010/12/01
2010/12/02
2010/12/03
2010/12/04
2010/12/05
2010/12/06
2010/12/07
2010/12/08
2010/12/09
2010/12/10
2010/12/11
2010/12/12
2010/12/13
2010/12/14
2010/12/15
2010/12/16
2010/12/17
2010/12/18
2010/12/19
2010/12/20
2010/12/21
2010/12/22
2010/12/23
2010/12/24
2010/12/25
2010/12/26
2010/12/27
2010/12/28
2010/12/29
2010/12/30
2011/01/01
2011/01/02
2011/01/04
2011/01/05
2011/01/07
2011/01/09
2011/01/10
2011/01/11
2011/01/12
2011/01/13
2011/01/14
2011/01/15
2011/01/16
2011/01/17
2011/01/18
2011/01/19
2011/01/20
2011/01/21
2011/01/22
2011/01/23
2011/01/24
2011/01/25
2011/01/26
2011/01/27
2011/01/28
2011/01/29
2011/01/30
2011/01/31
2011/02/01
2011/02/02
2011/02/03
2011/02/04
2011/02/05
2011/02/06
2011/02/07
2011/02/08
2011/02/09
2011/02/10
2011/02/11
2011/02/12
2011/02/13
2011/02/14
2011/02/15
2011/02/16
2011/02/17
2011/02/18
2011/02/19
2011/02/20
2011/02/21
2011/02/22
2011/02/23
2011/02/24
2011/02/25
2011/02/26
2011/02/27
2011/02/28
2011/03/01
2011/03/02
2011/03/03
2011/03/04
2011/03/05
2011/03/06
2011/03/07
2011/03/08
2011/03/09
2011/03/10
2011/03/11
2011/03/13
2011/03/14
2011/03/15
2011/03/16
2011/03/17
2011/03/18
2011/03/19
2011/03/20
2011/03/21
2011/03/22
2011/03/23
2011/03/24
2011/03/25
2011/03/26
2011/03/27
2011/03/28
2011/03/29
2011/03/30
2011/03/31
2011/04/01
2011/04/02
2011/04/03
2011/04/04
2011/04/05
2011/04/06
2011/04/07
2011/04/08
2011/04/09
2011/04/10
2011/04/11
2011/04/12
2011/04/13
2011/04/14
2011/04/15
2011/04/16
2011/04/17
2011/04/18
2011/04/19
2011/04/20
2011/04/21
2011/04/22
2011/04/23
2011/04/24
2011/04/25
2011/04/26
2011/04/27
2011/04/28
2011/04/29
2011/04/30
2011/05/01
2011/05/02
2011/05/03
2011/05/04
2011/05/05
2011/05/06
2011/05/07
2011/05/08
2011/05/09
2011/05/10
2011/05/11
2011/05/12
2011/05/13
2011/05/14
2011/05/15
2011/05/16
2011/05/17
Browse by creation date
Browse by origin
Embassy Athens
Embassy Asuncion
Embassy Astana
Embassy Asmara
Embassy Ashgabat
Embassy Apia
Embassy Ankara
Embassy Amman
Embassy Algiers
Embassy Addis Ababa
Embassy Accra
Embassy Abuja
Embassy Abu Dhabi
Embassy Abidjan
Consulate Auckland
Consulate Amsterdam
Consulate Adana
American Institute Taiwan, Taipei
Embassy Bujumbura
Embassy Buenos Aires
Embassy Budapest
Embassy Bucharest
Embassy Brussels
Embassy Bridgetown
Embassy Bratislava
Embassy Brasilia
Embassy Bogota
Embassy Bishkek
Embassy Bern
Embassy Berlin
Embassy Belmopan
Embassy Belgrade
Embassy Beirut
Embassy Beijing
Embassy Banjul
Embassy Bangkok
Embassy Bandar Seri Begawan
Embassy Bamako
Embassy Baku
Embassy Baghdad
Consulate Barcelona
Embassy Copenhagen
Embassy Conakry
Embassy Colombo
Embassy Chisinau
Embassy Caracas
Embassy Canberra
Embassy Cairo
Consulate Curacao
Consulate Ciudad Juarez
Consulate Chennai
Consulate Casablanca
Consulate Cape Town
Consulate Calgary
Embassy Dushanbe
Embassy Dublin
Embassy Doha
Embassy Djibouti
Embassy Dili
Embassy Dhaka
Embassy Dar Es Salaam
Embassy Damascus
Embassy Dakar
Consulate Dubai
Embassy Helsinki
Embassy Harare
Embassy Hanoi
Consulate Ho Chi Minh City
Consulate Hermosillo
Consulate Hamilton
Consulate Hamburg
Consulate Halifax
Embassy Kyiv
Embassy Kuwait
Embassy Kuala Lumpur
Embassy Kinshasa
Embassy Kingston
Embassy Kigali
Embassy Khartoum
Embassy Kathmandu
Embassy Kampala
Embassy Kabul
Consulate Kolkata
Embassy Luxembourg
Embassy Luanda
Embassy London
Embassy Ljubljana
Embassy Lisbon
Embassy Lima
Embassy Lilongwe
Embassy La Paz
Consulate Lahore
Consulate Lagos
Mission USOSCE
Mission USNATO
Mission UNESCO
Embassy Muscat
Embassy Moscow
Embassy Montevideo
Embassy Monrovia
Embassy Minsk
Embassy Mexico
Embassy Mbabane
Embassy Maputo
Embassy Manila
Embassy Manama
Embassy Managua
Embassy Malabo
Embassy Madrid
Consulate Munich
Consulate Mumbai
Consulate Montreal
Consulate Monterrey
Consulate Milan
Consulate Melbourne
Embassy Nicosia
Embassy Niamey
Embassy New Delhi
Embassy Ndjamena
Embassy Nassau
Embassy Nairobi
Consulate Naples
Consulate Naha
Embassy Pristina
Embassy Pretoria
Embassy Prague
Embassy Port Of Spain
Embassy Port Louis
Embassy Port Au Prince
Embassy Phnom Penh
Embassy Paris
Embassy Paramaribo
Embassy Panama
Consulate Peshawar
REO Basrah
Embassy Rome
Embassy Riyadh
Embassy Riga
Embassy Reykjavik
Embassy Rangoon
Embassy Rabat
Consulate Rio De Janeiro
Consulate Recife
Secretary of State
Embassy Suva
Embassy Stockholm
Embassy Sofia
Embassy Skopje
Embassy Singapore
Embassy Seoul
Embassy Sarajevo
Embassy Santo Domingo
Embassy Santiago
Embassy Sanaa
Embassy San Salvador
Embassy San Jose
Consulate Strasbourg
Consulate St Petersburg
Consulate Shenyang
Consulate Shanghai
Consulate Sapporo
Consulate Sao Paulo
Embassy Tunis
Embassy Tripoli
Embassy Tokyo
Embassy The Hague
Embassy Tel Aviv
Embassy Tehran
Embassy Tegucigalpa
Embassy Tbilisi
Embassy Tashkent
Embassy Tallinn
Consulate Toronto
Consulate Tijuana
USUN New York
USEU Brussels
US Office Almaty
US Mission Geneva
US Interests Section Havana
US Delegation, Secretary
UNVIE
Embassy Ulaanbaatar
Embassy Vilnius
Embassy Vienna
Embassy Vatican
Embassy Valletta
Consulate Vladivostok
Consulate Vancouver
Browse by tag
AORC
AF
AU
ASEC
AMGT
AS
APER
AR
AG
ARF
AJ
AA
AINF
APECO
AODE
ABLD
AMG
ATPDEA
AE
AEMR
AMED
AGAO
AFIN
AL
ASUP
ASECKFRDCVISKIRFPHUMSMIGEG
AID
ASCH
AM
AORL
ASEAN
APEC
ADM
AFSI
AFSN
ADCO
ABUD
AN
AY
AIT
AGR
ACOA
ANET
ASIG
AMCHAMS
AGMT
AADP
ADPM
ATRN
ALOW
ACS
APCS
AFFAIRS
ADANA
AECL
ACAO
AORG
AROC
AO
ACABQ
AX
AMEX
AFGHANISTAN
AZ
AND
ARM
AQ
ATFN
AMBASSADOR
ACBAQ
AC
AUC
ASEX
AER
AVERY
AGRICULTURE
AFU
BR
BTIO
BY
BO
BA
BU
BL
BN
BM
BF
BEXP
BK
BG
BB
BTIU
BBSR
BRUSSELS
BD
BIDEN
BE
BH
BILAT
BC
BX
BT
BP
BMGT
BWC
CS
CA
CH
CD
CO
CE
CU
CVIS
CASC
CJAN
CI
CPAS
CMGT
CDG
CIC
CAC
CBW
CWC
COUNTER
CW
CT
CY
CNARC
CACM
CG
CB
CM
CV
CIDA
CLINTON
CHR
COE
CR
CIS
CDC
CONS
CF
CODEL
COPUOS
CIA
CFED
CARSON
CL
CROS
CAPC
CTR
CACS
CN
CBSA
CEUDA
COM
CONDOLEEZZA
CICTE
COUNTRY
CBE
CKGR
CVR
COUNTERTERRORISM
CITEL
CLEARANCE
CARICOM
CSW
CITT
CDB
CJUS
CTM
CAN
CLMT
CBC
EAID
ECON
EFIS
ETRD
EC
ENRG
EINV
EFIN
EAGR
ETTC
ECPS
EINT
ES
EIND
EAIR
EU
EUN
EG
EPET
ELAB
EWWT
EMIN
ECIN
ESA
ER
ETRDEINVECINPGOVCS
EAIG
ET
ETRO
ELTN
EI
EN
EUR
EK
EUMEM
EPA
ENGR
EXTERNAL
EUREM
ELN
EUC
ENERG
ENIV
EZ
ERD
EFTA
ETRC
ETRN
EINVECONSENVCSJA
EEPET
EUNCH
ESENV
ENNP
ENVI
ETRDECONWTOCS
ECINECONCS
EFINECONCS
ELECTIONS
ENVR
EXIM
ERNG
ECA
EINVEFIN
ETC
EAP
ECONOMY
EINN
ECONOMIC
EXBS
ECUN
ENGY
ECONOMICS
EIAR
EINDETRD
ECONEFIN
EURN
EDU
ETRDEINVTINTCS
ECIP
EFIM
EAIDS
EREL
EINVETC
ECONCS
ETRA
IC
IV
IAEA
IR
IO
IT
IN
IS
IZ
IMO
IPR
IWC
ICAO
ILO
ID
ICTY
ICJ
INMARSAT
INDO
IL
IMF
IRS
IQ
IA
ICRC
IDA
IAHRC
IBRD
ISLAMISTS
IGAD
ILC
ITU
ITF
INRA
INRO
IDP
ICTR
IEFIN
IRC
ITRA
ITALY
INRB
INTELSAT
IBET
IRAQI
ISRAELI
IIP
ITPGOV
ITALIAN
INTERNAL
INTERPOL
IEA
INR
IZPREL
IRAJ
IF
ITPHUM
ISRAEL
IACI
KBTR
KPAO
KOMC
KCRM
KDEM
KHIV
KBIO
KTIA
KMDR
KNNP
KSCA
KTIP
KWMN
KIPR
KCOR
KRVC
KFRD
KPAL
KWBG
KE
KTDB
KUNR
KSPR
KJUS
KGHG
KAWC
KCFE
KGCC
KOLY
KSUM
KACT
KISL
KTFN
KFLU
KSTH
KMPI
KHDP
KS
KHLS
KMRS
KID
KN
KU
KAWK
KSAC
KCOM
KAID
KIRC
KWMNCS
KMCA
KNEI
KCRS
KPKO
KICC
KPOA
KV
KDRG
KIRF
KSEO
KVPR
KSEP
KTER
KBCT
KFIN
KGIC
KCIP
KZ
KG
KWAC
KRAD
KPRP
KTEX
KNAR
KPLS
KPAK
KSTC
KFLO
KSCI
KIDE
KOMS
KHSA
KSAF
KPWR
KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG
KFSC
KRIM
KVRP
KENV
KNSD
KCGC
KDDG
KPRV
KTBT
KWMM
KMFO
KMOC
KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG
KPAI
KO
KVIR
KREC
KX
KR
KCRCM
KBTS
KOCI
KGIT
KNUP
KPAONZ
KNUC
KNNPMNUC
KERG
KTLA
KCSY
KTRD
KNPP
KJUST
KCMR
KRCM
KCFC
KCHG
KREL
KFTFN
KLIG
KDEMAF
KICA
KHUM
KSEC
KPIN
KESS
KDEV
KWWMN
KOM
KWNM
KRFD
KMIG
KRGY
KIFR
MARR
MOPS
MASS
MX
MNUC
MCAP
MO
MR
MEPP
MTCRE
MAPP
MEPN
MZ
MT
ML
MA
MY
MIL
MD
MASSMNUC
MU
MK
MTCR
MUCN
MAS
MEDIA
MAR
MC
MI
MQADHAFI
MPOS
MTRE
MASC
MG
MARAD
MRCRE
MW
MP
MOPPS
MTS
MLS
MILI
MEPI
MEETINGS
MERCOSUR
MCC
MIK
MAPS
MV
MILITARY
MDC
NATO
NZ
NL
NO
NK
NU
NPT
NI
NG
NEW
NSF
NA
NPG
NSG
NE
NSSP
NS
NDP
NSC
NAFTA
NH
NV
NP
NPA
NSFO
NT
NW
NASA
NORAD
NATIONAL
NGO
NR
NIPP
NZUS
NC
NRR
NAR
NATOPREL
OEXC
OTRA
OPRC
OVIP
OAS
OIIP
OSCE
OREP
OPIC
OFDP
OMIG
ODIP
OVP
OSCI
OIC
OECD
OIE
OPDC
ON
OCII
OPAD
OBSP
OFFICIALS
OPCW
OHUM
OES
OCS
OTR
OSAC
OFDA
PGOV
PREL
PM
PHUM
PTER
PINR
PINS
PREF
PARM
PL
PK
PU
PBTS
PBIO
PHSA
PE
PO
PROP
PA
PNAT
POL
PLN
POLITICAL
PARTIES
PCUL
PAK
PGGV
PAO
PSA
PGOVSMIGKCRMKWMNPHUMCVISKFRDCA
PAS
PGIV
PHUMPREL
PCI
PG
POGOV
PHUMPGOV
PEL
POLITICS
POLICY
PINL
PP
PREO
PAHO
PBT
PMIL
POV
PRL
PDOV
PTBS
PRAM
PREFA
PSI
PAIGH
POSTS
PALESTINIAN
PARMS
PROG
PTERE
PRGOV
PORG
PS
PGOF
PKFK
PSOE
PEPR
PPA
PINT
PMAR
PRELP
PINF
PNG
PFOR
PUNE
PGOVLO
PHUMBA
PSEPC
PNR
POLINT
PGOVE
PHALANAGE
PARTY
PDEM
PECON
PROV
PGOC
PY
PHUH
PF
PHUS
RU
RS
RO
RW
RP
RFE
REGION
REACTION
REPORT
ROOD
RCMP
RM
RSO
ROBERT
RICE
RSP
RF
RIGHTS
RIGHTSPOLMIL
RUPREL
RELATIONS
SENV
SU
SCUL
SOCI
SNAR
SL
SW
SMIG
SP
SY
SA
SHUM
SZ
SYRIA
SF
SR
SO
SARS
SN
SC
SIPRS
SI
SYR
SEVN
SG
SPCE
SK
STEINBERG
SH
SNARCS
SAARC
SCRS
SENVKGHG
SAN
ST
SIPDIS
SNARIZ
SNARN
SSA
SPCVIS
SOFA
SEN
SANC
SWE
SHI
TW
TU
TBIO
TSPL
TPHY
TRGY
TC
TT
TSPA
TINT
TERRORISM
TX
TR
TS
TN
TD
TH
TIP
TNGD
TI
TZ
THPY
TP
TBID
TF
TL
TV
TK
TO
TRSY
TURKEY
TFIN
TAGS
UN
UK
UNSC
UNGA
US
UNESCO
UP
UNHRC
UNAUS
USTR
UNDP
UNEP
UY
UNCHR
UG
UZ
UNPUOS
USEU
UNMIK
UNDC
UNICEF
UV
UNHCR
UNCHC
UNCSD
USOAS
UNFCYP
USUN
USNC
UNIDROIT
UNO
UNCND
USPS
USAID
UE
UNVIE
UAE
UNODC
UNCHS
UNFICYP
UNDESCO
UNC
Browse by classification
Community resources
courage is contagious
Viewing cable 09BEIJING3122, U/S HORMATS’ MEETINGS WITH BEIJING ECONOMISTS:
If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
Understanding cables
Every cable message consists of three parts:
- The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
- The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
- The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #09BEIJING3122.
Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
09BEIJING3122 | 2009-11-16 09:53 | 2010-12-04 21:30 | CONFIDENTIAL | Embassy Beijing |
VZCZCXRO8811
OO RUEHCN RUEHGH RUEHVC
DE RUEHBJ #3122/01 3200953
ZNY CCCCC ZZH
O 160953Z NOV 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6850
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 03 BEIJING 003122
SIPDIS
STATE FOR E, EAP, EAP/CM
TREASURY FOR OASIA/DOHNER, WINSHIP AND LOEVINGER
NSC FOR LOI
EO 12958 DECL: 11/16/2034
TAGS OVIP, ECON, ETRD, EFIN, PREL, PGOV, CH
SUBJECT: U/S HORMATS’ MEETINGS WITH BEIJING ECONOMISTS:
REBALANCING, TRADE FRICTIONS, AND EXCHANGE RATES
REF: A. BEIJING 3090 B. BEIJING 3102
Classified By: Economic Minister Counselor William Weinstein; Reasons 1 .4 (b, d)
¶1. (C) Summary. Vice Minister Liu He of the Central Leading Group on Financial and Economic Affairs (CLGFEA) told Under Secretary for Economic, Energy, and Agricultural Affairs Hormats on November 9 that the small number of bilateral trade conflicts generates disproportionate political and social impact in both countries. The Chinese Government understands the need to resolve these conflicts and to build mutual trust. On rebalancing, Liu agreed that U.S. savings and Chinese consumption both need to rise, with both sides having “a long way to go.” Liu is involved in preparation of China’s next Five-Year Plan (covering 2011-15), two core elements of which will be boosting domestic demand, especially consumption, and promoting urbanization. Other policies, including those related to education, social safety net, low-income housing, and infrastructure would flow from these rebalancing themes.
¶2. (C) Summary, continued. Both Liu and Chinese Academy of Social Sciences (CASS), Institute of World Economics and Politics Director Zhang Yuyan voiced concerns about possible future inflation in the United States, which could erode the value of China’s USD-denominated investments, and about USG and Federal Reserve exit strategies from stimulus programs. On exchange rates, Zhang acknowledged the need for China to alter its system and said several options are under consideration, including return to the July 2005-August 2008 peg system, using either the SDR or a trade-weighted basket of currencies rather than the USD as the peg. He said two arguments in favor of RMB appreciation were that an undervalued currency caused China effectively to subsidize foreign consumers, and that pressure on China from the rest of the world was rising. On the other hand, China feared currency appreciation would cause more bankruptcies in China’s exporting coastal regions. End Summary.
¶3. (C) In his separate meetings with Liu and Zhang, U/S Hormats emphasized that his goal was not to use this visit to negotiate, but to get a sense of what was on the minds of Chinese policy makers as they considered future plans and strategies. The conversations were remarkably candid. U/S Hormats’ other meetings are reported in reftels.
Trade Frictions: Small Numbers, Large Impact
--------------------------------------------
¶4. (C) Noting the need for a strategic approach to bilateral relations, U/S Hormats told Vice Minister Liu the most complicated current issues are trade and rebalancing. On trade, the areas of friction actually are very small as a percentage of overall trade, but the disputes sometimes get blown out of proportion. Liu described the trade conflicts as “terrible,” with the small number of disputes having huge political and social impact in both countries. He believed U.S. labor unions and upcoming mid-term (2010) U.S. elections both increase pressure for trade protectionism in the U.S. In China, Liu said local governments want to protect their own tax bases and industries. The two sides need to work together to resolve these problems for the good of both countries and the rest of the world.
¶5. (C) U/S Hormats observed that the upcoming visit of President Obama to China presents an opportunity to conclude agreements on clean energy and/or climate change. These are very high priorities for the United States and would benefit our overall relationship. He also stressed the need to have further talks led by USTR Ambassador Kirk and Secretary of Commerce Locke. The U.S. aims to resolve trade issues if possible through discussion and negotiation, Hormats emphasized. Liu said the Chinese Government understands the need to resolve the trade disputes. He also agreed on the need to maintain dialogue on major strategic issues for the medium and long terms, observing that “we need each other” but at the same time distrust each other in many ways.
Rebalancing
-----------
¶6. (C) Vice Minister Liu concurred with U/S Hormats that U.S. savings and Chinese consumption need to rise, and said both sides have “a long way to go.” For the first nine months of 2009, China’s GDP growth reached 7.7 percent, including
BEIJING 00003122 002 OF 003
increases of seven percent in domestic investment and four percent in consumption, with negative 3.6 percent growth in net exports; Liu said this demonstrates China’s efforts to boost consumption in the short term.
¶7. (C) Liu said he had met that morning with senior leaders to discuss preparations for the 12th Five-Year Plan (covering 2011-15). Two core elements of the plan will be boosting domestic demand, especially consumption, and promoting urbanization. Other policies, including those related to education, social safety net, low-income housing, and infrastructure would flow from these rebalancing themes. Liu believes the U.S. economy will require 2-3 years to recover from the global crisis, during which time China’s external markets will remain shrunken. He claimed China’s leaders had formulated a new development strategy in 2007, before onset of the global crisis, to promote rebalancing away from exports and industrial investment in favor of technological progress and domestic consumption. (Comment: Liu did not expand upon the urbanization topic, but the next plan presumably will address many of the social needs and consequences generated by China’s relatively rapid and continuing urbanization trend. Expansion of programs to address needs for housing, health care, education, and other social services for recent urban migrants and their families would correlate closely with overall rebalancing initiatives. End Comment.)
U.S. Economy: Watching and Worrying
-----------------------------------
¶8. (C) Vice Minister Liu said he was “a little worried” about the path of the U.S. economy, fearing it might be reverting to the past model: the Fed was “printing lots of money” and the stock market, which “has no memory,” was rising too fast. After hearing assurances from U/S Hormats about the U.S. desire to assure that a strong recovery took hold and ongoing Federal Reserve and USG vigilance to avoid repetition of the financial excesses of the past, Liu appeared reassured about the soundness of the U.S. approach but said both countries needed to pay attention to any future “bubbles.” A return by China to its old ways and traditional growth path would not be good for China or the world, he said. CASS Director Zhang also was concerned about possible future inflation in the United States that could erode the value of China’s USD-denominated investments. He inquired about USG and Fed exit strategies from stimulus programs and progress on health care reform and climate change legislation. (Comment: The concerns of Liu and Zhang about the U.S. economy parallel those expressed by various other economic policy officials in recent meetings. End Comment.)
Exchange Rates
--------------
¶9. (C) CASS Director Zhang said the renminbi (RMB) exchange rate is a current discussion and research topic at CASS and within the government, and there might be “some surprise” in the coming months. As China moved toward more domestic demand-based economic growth, it would need to alter its exchange rate system. One possibility would be return to a system similar to the July 2005-August 2008 peg, using either the SDR or a trade-weighted basket of currencies rather than just the USD as the peg. Zhang observed that his predecessor as CASS Director, Professor Yu Yongding, had been a strong proponent of a sharp appreciation (ten or more percent) of the RMB against the USD. Zhang said two arguments in favor of RMB appreciation were that an undervalued currency caused China effectively to subsidize foreign consumers, and that pressure on China from the rest of the world was rising. On the other hand, the Chinese Government feared currency appreciation would cause more bankruptcies in the exporting coastal regions.
¶10. (C) Zhang said he recently visited Japan for discussion of exchange rates, among other issues. In his opinion, China now is “at a crossroads” and faces two main options: first, moving with other countries in the region to some form of common Asian currency; or second (and more likely), keeping the RMB independent with a view toward playing a greater international role in the future. CASS senior fellow Jie Sun added that two possible currency baskets were under consideration: a more traditional basket of major currencies including the USD, or a regional currency basket, although the latter option would be difficult due to lack of any regional surveillance system. Zhang added that a paper published in March 2009 by People’s Bank of China Governor
BEIJING 00003122 003 OF 003
Zhou Xiaochuan advocating development of another world currency, possibly based on the SDR, represented Zhou’s “personal view” but also reflected dissatisfaction with the existing system among some Chinese officials and economists.
¶11. (SBU) U/S Hormats has cleared this cable.
HUNTSMAN