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Viewing cable 09BEIJING559, PRESS BRIEFING: DEFENSE SPENDING, FISCAL STIMULUS
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| Reference ID | Created | Released | Classification | Origin |
|---|---|---|---|---|
| 09BEIJING559 | 2009-03-04 12:00 | 2011-08-23 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Beijing |
VZCZCXRO9051
OO RUEHCN RUEHGH RUEHVC
DE RUEHBJ #0559/01 0631200
ZNR UUUUU ZZH
O 041200Z MAR 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2651
INFO RUEHOO/CHINA POSTS COLLECTIVE
RHEHNSC/NSC WASHDC
UNCLAS SECTION 01 OF 04 BEIJING 000559
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: PGOV PREL ECON EFIN CH TW
SUBJECT: PRESS BRIEFING: DEFENSE SPENDING, FISCAL STIMULUS
PACKAGE, TAIWAN, LABOR LAW, POLITICAL REFORM
REF: BEIJING 531
Summary
-------
¶1. (SBU) At a March 4 press conference designed to preview
the March 5 opening session of the National People's Congress
(NPC), NPC Spokesman Li Zhaoxing commented on the following
issues:
-- Defense Spending: China's defense spending in 2009 will
increase by 62.4 billion RMB (approximately 9.2 billion USD),
or 14.9 percent, which was less than last year's jump of 17.6
percent. The PLA's sole mission is to "defend China's
sovereignty and territorial integrity" and is "no threat" to
any country.
-- Global Financial Crisis: The global financial crisis has
had a severe impact on China's economy, but China is using
the occasion to effect major changes in fiscal policy,
including boosts to consumption and social welfare, and plans
to reduce the tax burden.
-- Stimulus Package: The four-trillion-RMB (USD 585 billion)
fiscal stimulus package approved November 2008 will include
1.18 trillion RMB of central funding over the next two years,
with local governments and others responsible for the
remainder.
-- Taiwan: Cross-Strait relations are improving, economic
relations should be standardized and consultations should
begin on a cross-Strait economic cooperation agreement.
-- Foreign Assistance: China's assistance to developing
countries will continue in spite of economic pressure from
the global financial crisis.
-- Political Reform: Political reform is moving at a pace
consistent with Chinese conditions, and China's political
structure suits its society and economy.
-- Labor Contract Law: The Labor Contract Law is not the
cause of enterprises' difficulties, and proper implementation
of the law is the right long-term strategy to respond to the
economic crisis.
-- NPC Procedures: The NPC session is shorter this year
(eight days, March 5-13) because there are no personnel
decisions to be made and to save money.
-- France: China "deeply values" PRC-French relations. End
Summary.
NPC PREPARATIONS Complete
-------------------------
¶2. (SBU) NPC Spokesman Li Zhaoxing, who is China's former
Foreign Minister and current Chairman of the NPC Foreign
Affairs Committee, began the March 4 initial NPC press
conference by summarizing several procedural issues resolved
at that morning's "preparatory meeting" of NPC deputies. Li
said the meeting had approved the agenda for the NPC session
that will open tomorrow, March 5 (ref A), elected a
171-member NPC Presidium and again elected Politburo member
and NPC Vice Chairman Wang Zhaoguo as "Secretary General" of
this year's NPC. As was the case last year, Li said
interviews would be arranged for the press with NPC delegates
and Government officials. Li previewed the official reports,
legislation to be considered and this year's NPC press
conferences -- noting in particular that there would be a
press conference devoted to the global financial crisis --
and then opened the floor to questions. Li received no tough
questions this year but appeared well prepared. (Comment:
Li's years of experience were evident in his laid-back
demeanor and grasp of the issues. His confidence, however,
may also have been due to his apparently having received the
questions from journalists in advance. AP Bureau Chief
Charles Hutzler (protect) told PolOff that all of the
questions appeared to have been "planted," revealing that AP
had been requested to ask questions at Foreign Minister
Yang's press conference on Saturday, March 7, and at Premier
Wen Jiabao's concluding press conference on March 13.
Hutzler concluded that NPC authorities apparently want to
"control everything" at this year's press events.)
Military Spending Up, But Less than Last year
---------------------------------------------
¶3. (U) In response to a question from a Russian journalist,
Li said China's defense spending would increase by 62.4
billion RMB (approximately 9.2 billion USD at 1 USD = 6.8
BEIJING 00000559 002 OF 004
RMB), or 14.9 percent, a decrease over last year's jump of
17.6 percent. (Note: The increases in 2004, 2005, 2006 and
2007, according to statistics released at the NPC in previous
years, were 15.3 percent, 12.5 percent, 14.7 percent, 17.8
and 17.6 percent, respectively. Li said this year's defense
budget of 480.7 billion RMB (70.2 billion USD) accounted for
1.4 percent of GDP (the same as last year) and 6.3 percent of
the total Government budget, a figure slightly lower than
previous years: 7.2 percent in 2008, 7.5 percent in 2007,
7.4 percent in 2006, 7.3 percent in 2005 and 7.7 percent in
¶2004. Defense spending was controlled through the national
budget process, Li said, including stipulations in the budget
law and the national defense law. Li claimed that China
follows UN standards in reporting its defense expenditures,
filing annual reports according to UN procedures, and that
there were no "hidden" expenses in the defense budget.
¶4. (SBU) In what has become a canned response to this annual
question, Li defended the increase by claiming that it was
primarily an effort to keep military spending in line with
economic development and by asserting that China spends
considerably less of its national budget as a percent of GDP
than the United States, Great Britain, France and Russia.
(Note: At last year's press conference, the NPC spokesman
also included figures for India, and the year before for
Japan.) Li provided more detail this year than in the past
on the military budget allocations. As in recent years, he
emphasized that part of the increase will be used to boost
military incomes and quality of life to match the civilian
standard of living. In addition, Li said the money would be
spent on continuing to modernize the PLA's information
technology capabilities, expanding capacity for non-combat
emergency and security response, especially disasters and
terrorism, and to boost support for military units that
remain in Sichuan's earthquake disaster zone to rebuild
infrastructure. As usual, Li reiterated China's claims that
the sole mission of its military is to "defend China's
sovereignty and territorial integrity" and that it is "no
threat" to any country.
Global Financial Crisis: Its Start, PRC Response
--------------------------------------------- ---
¶5. (U) The global financial crisis, Li asserted, had been
triggered mainly by deficiencies in the U.S. financial
regulation system. The crisis has had a "severe impact" on
China's economy, creating "enormous pressure" on Chinese
enterprises. The whole country now was fighting the crisis
and the government hoped to use this "challenge" as an
"opportunity" to effect major changes in fiscal policy,
including boosts to consumption and social welfare. Li
listed some spending categories that would increase in the
2009 budget: infrastructure (particularly in rural areas),
education, health care, employment and re-employment, social
safety net, government-subsidized housing, earthquake zone
reconstruction, energy conservation, pollution control,
technology upgrades, and services. Beyond the new spending
priorities, Li said the government planned reforms to reduce
tax burdens on both individuals and enterprises, and to
promote consumption. Among other measures, he said there
would be more export tax rebates or reductions on certain
products.
Fiscal Stimulus Package: Four Billion RMB
-----------------------------------------
¶6. (U) Several Chinese journalists posed questions about
aspects of the Government's four trillion RMB (USD 585
billion) fiscal stimulus plan announced last November,
including how officials would avoid inefficiency and
duplication and ensure good value for their expenditures. Li
said the central government would provide a total of 1.18
trillion RMB over the next two years, with local governments
and other sources responsible for the remainder. The initial
tranche of 100 billion RMB for the fourth quarter of 2008
included 30 billion from the 2008 budget and another 70
billion from 2009 funds; the second tranche of 130 billion
for the first quarter of 2009 being drawn from the 2009
budget, which must be approved by the NPC. To avoid
duplication and inefficiency, the government was focusing on
priority projects that were selected carefully, with
strengthened supervision and inspection of their
implementation.
Labor Law One Year Later
------------------------
¶7. (U) A reporter from Xinhua News Agency asked whether the
year-old Labor Contract Law (LCL) is responsible for the
financial difficulties some Chinese employers now face, and
BEIJING 00000559 003 OF 004
whether Li agreed that it should be amended or suspended. Li
gave a vigorous defense of the LCL, rejecting various
criticisms raised about it during the past year. He noted
that it passed the NPC with a large majority and after
extensive public consultation. Poor management of the
financial sector in the United States led to the global
financial crisis, and that was the main reason Chinese
companies are facing difficulties. Li said proper
implementation of the LCL was the right long-term strategy to
respond to the crisis, and that this would require better
coordination between workers and employers to protect their
common interests.
China's Foreign Assistance: Standing By Old Friends
--------------------------------------------- ------
¶8. (U) China will not decrease its assistance to other
developing countries because of the global financial crisis,
Li said in response to a Times of India reporter's question.
Li asserted that China was either implementing current
agreements and maintaining current levels of assistance and
cooperation or, in some cases, increasing assistance
consistent with China's capabilities. Li emphasized that
China appreciates its "true friends" in the developing world,
particularly in Africa. He said the support of African
countries was key to China's "regaining" its seat at the
United Nations in 1971 as well as its bid for the 2008
Olympics and the 2010 Shanghai World Expo. China would
deliver on the commitments it made at the 2006 Beijing Summit
of the China-African Cooperation Forum, Li said.
Taiwan: It's All About Economics
---------------------------------
¶9. (U) In response to a "softball" question from a Taiwan TV
journalist as to whether the NPC would establish exchanges
with Taiwan counterparts, Li praised the natural beauty of
"this gorgeous island of China's" and said he has long wanted
to visit. Li applauded the "positive changes" in
cross-Strait relations, especially the increase in "friendly
exchanges," but focused primarily on comments made by
President Hu Jintao on cross-Strait economic relations in his
December 31 Taiwan policy speech. Li underscored Hu's
remarks on "normalizing" economic relations and
"institutionalizing" economic cooperation, and he urged
near-term consultations to implement Hu's proposal to
establish a formal "economic cooperation agreement."
Political Reform? Nah!!
------------------------
¶10. (U) In response to a People's Daily reporter's question
about allegations in foreign media that political reform in
China was lagging behind economic reform, Li was careful to
follow the reporter's lead in using the official rhetoric
"political restructuring" versus "political reform." Li
listed the usual Party claims about advances in transparency,
rule of law and democracy and asserted that there would
continue to be "steady progress" in "political
restructuring." As evidence that China's political system
corresponded to its economic system, he cited the current
supposed "stability and harmony of society" and China's
"continued economic growth." Li declared, however, that
China would continue to pursue a political model that fits
China's "national conditions," that is, "socialism with
Chinese characteristics," and warned that China would not
follow any Western models.
Leading Questions About the NPC
-------------------------------
¶11. (U) Li answered seemingly pointed questions from PRC
journalists that appeared critical of NPC operations. In
answer to a Legal Reporter's question about the alleged
difficulty of access by ordinary citizens to their NPC
delegates, Li provided examples of measures being taken to
improve access. For example, Li noted that NPC delegates
serve part-time and had their own jobs, and said the NPC
leadership was organizing "delegates groups" to interact with
constituents. Li also provided information on points of
contact for these sorts of events, to include roundtables and
other outreach programs.
¶12. (U) When asked by Hong Kong's Phoenix TV if the timeframe
of the NPC was shorter this year in order to save money or to
"avoid the distractions" of last year's NPC," Li said the
reason was because, unlike last year when personnel decisions
were made, this year was a "normal" year. (Note: This
year's NPC will only run eight-and-a-half-days, March 5-13
rather than the 10-day norm of recent years. Last year's
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NPC, however, as the first plenary session of the 11th NPC,
ran nearly two weeks due to the "elections" of new Government
leaders to five-year terms. The reporter's mention of
"distractions" appeared to allude to the riots in Tibet last
March which erupted toward the end of last year's NPC.) Li
confirmed that economics was a factor in shortening the NPC
timeframe but denied there was an attempt to avoid
disruptions, claiming that there were no such incidents last
year.
¶13. (U) Li seemed surprised by a question from Phoenix TV
about the propriety and legality of offering NPC delegates
money to "facilitate" their work. (Note: The questioner
stated that Guangdong NPC delegates were subsidized to the
tune of 1000 RMB each by the Guangdong government to help
them "improve the quality" of their legislative proposals.)
Li did not address the ethical or legal question, simply
stating that such measures were a matter for local
authorities to decide.
IMPROVING CHINA-FRANCE RELATIONS
--------------------------------
¶14. (U) In response to a China News Service reporter's
question about the state of China-France relations, Li
avoided specifics but stated that China "deeply values" its
relationship with France, noting the long history of China's
interaction with France and quoting former Foreign Minister
and State Councilor Tang Jiaxuan on the need for good
relations with France. Li dodged the reporter's question on
whether the recent flap over an auction in Paris of stolen
Chinese cultural artifacts would affect relations, stating
that the Foreign Ministry spokesperson and other
spokespersons had amply covered the issue. However, Li spent
considerable time offering his personal views on the moral
aspects of the issue.
PICCUTA