Background Briefing on the U.S.-China Strategic & Economic Dialogue

Special Briefing
Senior State Department Official and Senior Treasury Official
Via Teleconference
Washington, DC
June 23, 2015


MODERATOR: All right, thank you very much, Operator. And thanks to all of you for calling in. This call is on background. We’ve got (inaudible) of the Strategic & Economic Dialogue today. We have two officials here who will give you an update and take a couple of questions on today’s proceedings. By the way, I think (inaudible) live line there, so if someone could mute the phone, that would be appreciated. All right, thank you.

So again, today’s call is on background. But for your information, let me explain who we have with us. We have with us [names and titles withheld]. But as I said, this is on background so from here on out, they will be Senior Treasury Official Number One and Senior State Department Official Number One. And with that, I will hand it over to our senior Treasury official for a few opening remarks.

SENIOR TREASURY OFFICIAL: Thank you, and good afternoon, everybody. And thank you for everybody that’s been on the scene covering the S&ED. I’ll just briefly update you on the discussions today, and then turn it over to [Senior State Department Official]. So, as you know, the economic track of the S&ED is a vital channel for the world’s two largest economies to engage on the full breadth of issues in our economies and in the global economy, and how we can unlock more opportunities for American workers and businesses. We held a series of candid discussions today on pressing issues like cyber security, currency policy, and how to create a level playing field for American companies that trade with and invest in China. And specifically today, we discussed with our Chinese counterparts the macroeconomic outlook in both countries and the need for continued reforms in China and the pathway for those reforms.

And one of the focus of that discussion was the complementarity between China’s reform agenda and our agenda with China – for example, addressing distortions in the Chinese economy and balances that ultimately lead to overinvestment, overcapacity and show up in trade distortions that affect American workers here. We also discussed how to further open China’s markets by liberalizing trade and investment rules and how to address market access barriers, including through a high-standard bilateral investment treaty.

Finally, we discussed how our two nations can cooperate to address climate change.

I think I’ll leave at that and turn it over to [Senior State Department Official].

SENIOR STATE DEPARTMENT OFFICIAL: Okay. Hi, everybody; good to be with you again. The end of a long day. Sorry it’s so late. But I just want to go over a little bit the – some of the sessions that happened today at the State Department, which were both joint sessions this morning and then we started the strategic track also here at the State Department at about noontime following the opening.

At the opening session, in case you missed it, of course, we had opening speeches by the Vice President and the co-chairs of the various tracks, including Secretary Kerry, Secretary Lew, and then Vice Premier Wang Yang, who’s the head of the economic track from the Chinese side. We had Vice Premier Liu Yandong, who’s the Chinese chair of the Consultation on People-to-People Exchange which is also going on today and tomorrow here at the State Department. And then, of course, we had State Councilor Yang Jiechi make opening remarks.

Following the opening, we had our public event, called the Act on Climate event, which was moderated by former Treasury Secretary Hank Paulson and which sort of told the story of the joint climate change announcement that we were able to reach with the Chinese last November, and the story of how we’re continuing to cooperate in order to implement that agreement, and how we’re working to build on that agreement in order to reach a climate change agreement in Paris in December at the end of this year.

Following the Act on Climate public session, we had a private closed-door joint session with both the economic and strategic track participants on climate change here at the State Department. This session was a chance for the United States and China to try to identify new potential areas where we can deepen our cooperation on climate change, and we are already working to continue to support a wide range of concrete projects highlighted across the more than 50 climate and clean energy Strategic & Economic Dialogue outcomes that we’re going to have this year.

While that joint session on climate change was going on, we were convening another joint session or cross-cutting session on development cooperation, which was led by Deputy Secretary Tony Blinken here at the State Department with his counterparts on the Chinese side, including the vice minister of commerce and a number of other officials from the Chinese side. And in that meeting, we – it provided a great opportunity to take stock of experiences in working together on development in places like West Africa and Afghanistan and East Timor and also to explore areas for future potential cooperation on development between the U.S. and China.

Following the development and climate change sessions, we had a series of small sessions with our Chinese strategic track counterparts here at the State Department. We discussed the full range of global and regional issues and hotspots. We also talked about a number of bilateral concerns. We discussed concerns and principles on working together in the Asia Pacific region. And of course, while all this was going on, the Consultation on People-to-People Exchange working groups in various areas like culture and health and education, et cetera, were meeting here at the State Department, putting together their action plans for the next year.

Just to give you a quick preview of tomorrow, and then I’ll turn it over to questions: Tomorrow morning here at the State Department we’re going to have a special session on preserving our oceans, where Secretary Kerry and State Councilor Yang will make remarks. That session will be chaired by our Under Secretary for Economic Affairs Cathy Novelli and the Chinese head of the state oceanographic administration. In addition to the formal S&ED sessions involving the Secretary, there are going to be numerous side meetings and sessions throughout the week on topics like wildlife trafficking, South Sudan, UN and multilateral issues, refugees, and the Arctic.

The oceans session tomorrow morning will be followed by the strategic track plenary session at the State Department, where we have reporting out from a number of these various side meetings. And after that we’ll have the Consultation on People-to-People Exchange with Vice Premier Liu Yandong here at the State Department. The program will conclude here at the State Department and then the three co-chairs of the various events on the Chinese side plus Secretary Kerry and Secretary Lew will be going over to the White House for a meeting with the President on Wednesday afternoon. And then, of course, we have the joint press conferences here back at the State Department on Wednesday evening following that meeting.

So with that, I think I’ll turn it over to our moderator for the questions.

MODERATOR: Okay. Operator, if you could remind folks how to get in the queue to ask a question.

OPERATOR: If you wish to ask a question, please press * followed by 1. To remove yourself from queue, press the # key. *1 for any questions.

Our first question will come from --

MODERATOR: All right. So thank you very much. And I think we’re ready to go to the first question.

OPERATOR: We’ll go to Kasia with Bloomberg News. Please go ahead.

QUESTION: Hi, thank you for taking my question. I want to ask about the economic track. Was China’s yuan joining SDR discussed at all? And has the U.S. made any commitments whether it will support a vote in favor of China joining SDR? Thank you.

SENIOR TREASURY OFFICIAL: Sure. It was discussed, and I think China and the U.S. both recognize the importance of the IMF’s technical evaluation and the application of the existing standards, the 2015 SDR review. And I would add that China’s desire to include the RMB in the SDR basket has become an important driver for financial reform, and financial sector reform is critically important to China, and as China reforms and liberalizes in a prudent yet thorough manner, RMB internationalization can be constructive for China and the world.

MODERATOR: All right, thank you very much. We’re ready for the next question, Operator.

OPERATOR: We’ll go to the line of David Brunnstrom with Reuters. Please go ahead.

QUESTION: Oh, sorry, I was on mute. Can you hear me? I just wondered if you – on the OPM hacking issue, was that specifically raised and discussed? And is there any discussion or any possibility of the – of a revival of the cyber working group? Many thanks.

SENIOR STATE DEPARTMENT OFFICIAL: Hi, David. I think I heard you on this topic yesterday perhaps. (Laughter.) But yeah, I just – I don’t want to add too much to what I said yesterday. I mean, certainly the issue of cyber came up in discussions with the Chinese. We’re not going to have a lot to say about the content of those discussions. And I think I’ll just leave it at that for today.

MODERATOR: All right, thank you. Ready for the next question.

OPERATOR: Peter Barnes with Fox Business. Please go ahead.

QUESTION: Thank you, guys, but David asked my question. (Laughter.) Thank you.

MODERATOR: All right then. If you don’t have another one, then we’ll move on to the next.

OPERATOR: Jason Lange with Reuters. Please go ahead.

QUESTION: Hi, thanks for taking my question. The Treasury Secretary this morning mentioned that the Chinese Government-sponsored hacking of U.S. companies was of particular concern, and he said this at the opening of the economic track. But then the Chinese finance minister said that talks of discussing cyber security had no place in the economic track. So I’m wondering: Were there tensions about this, about even bringing up the matter of cyber security? And could you comment on whether it – the U.S. sort of pushing of this issue may have – is leading to perhaps less progress on other economic issues? Thanks.

SENIOR TREASURY OFFICIAL: I don’t think so. I think the co-chairs on the economic track side – Secretary Lew and Vice Premier Wang – have been discussing a full range of issues and have built a relationship based on candid discussions for quite some time. And so I think they fully expect that they’ll be able to discuss the most pressing and challenging issues with each other. And so, as you noted, we do raise the issue of cyber theft with China. China is not surprised by that. And we also raise a number of other economic issues, including market access for U.S. technologies. And so I think there are a number of challenging issues that we have with China, and we use this channel to raise them in a candid manner, and I think they have a relationship where they can do that.

SENIOR STATE DEPARTMENT OFFICIAL: And I’ll just – if I could add on to that since this question came up in a way yesterday, I mean, this is one of the reasons why the Strategic & Economic Dialogue has proven so valuable, is that we’ve made it a forum in which we can raise all kinds of issues with a whole range of interlocutors on the Chinese side, and we’re trying through those conversations to avoid the kind of stovepiping or compartmentalization that you allude to in your question. So I think it’s proven to be a pretty effective way of addressing it, and the Chinese expect us to raise hard questions and don’t shy away.

MODERATOR: Okay, thank you. We’re ready for the next question.

OPERATOR: Matthew Pennington with AP, please go ahead.

QUESTION: Yeah, hello. Thanks for doing the call. In your discussions on cyber security, have you actually made any progress, do you think? And you mentioned that you’ve had some discussions about regional hotspots. Have you been discussing China’s island building in the South China Sea, and what was the upshot of those discussions? Thanks.

SENIOR STATE DEPARTMENT OFFICIAL: Yes, so I can go into a little bit more detail on some of the topics that came up today in the Small Sessions on the Strategic Track on global and regional issues and hotspots. Of course, one of the topics that came up was the Iran negotiations, which is not unexpected given the timing and the close cooperation that we’ve had with China on those negotiations. We talked about the Middle East more broadly – a number of crises that both U.S. and China are concerned about in that region. We also talked about cooperation in – on Afghanistan, Pakistan, and how we can move forward to ensure that there’s continued stability and moving toward prosperity in Afghanistan.

In – the South China Sea issue did come up. Secretary Kerry emphasized that the United States interest is in peaceful resolution of disputes in the South China Sea. It’s not about whether or not we take sides; it should be about reducing tensions in that region. And we mentioned that we’ve been particularly concerned about reclamation and possible militarization, and focused on the need for more diplomacy and not coercion. We’d like China to focus on more diplomacy between itself and the other claimants.

Other topics that came up – of course, we always raise the topic of human rights in our discussions with China, and that was the case again today in the Strategic Dialogue. And we continue to raise a whole range of concerns in that regard.

MODERATOR: All right, thank you. Ready for the next question.

OPERATOR: Jo Biddle with AFP, please go ahead.

QUESTION: Thank you very much indeed. Obviously, these are talks, but I’m wondering if there is anything that’s concrete that is going to come out of these two days or three days of intense negotiation – or talks. And I just wondered if you could describe a little bit what the temperature is in the room, particularly when you’re talking about things like cyber space and particularly after President – Vice President Biden’s quite strong comments this morning about keeping the sea lanes free for trade. Thank you.

SENIOR TREASURY OFFICIAL: Keeping the what?

SENIOR STATE DEPARTMENT OFFICIAL: Sea lanes.

SENIOR TREASURY OFFICIAL: Oh, the sea lanes. Sea lanes, okay. I’ll talk on the economic side first. We are hopeful that we’ll have concrete outcomes, as we always do in every S&ED. The discussions are ongoing, so I won’t characterize what those might be. As you know, we always negotiate a joint fact sheet, and that’s the tool for us to not only achieve clarity on the results of our discussions, but also to make sure that the results are implemented. And those discussions, as I mentioned at the top, cover the full range of issues affecting our economic relationship, including investment, including market access for U.S technology and intellectual property, including setting disciplines for providing export credits to exporters in overseas markets, so – and also how we can cooperate on the – in the area of climate, including in climate finance. So I think we will see a number of concrete outcomes and – but the discussions are still ongoing. Thank you.

SENIOR STATE DEPARTMENT OFFICIAL: Yeah, on the issue of Vice President Biden’s comments, et cetera, I think Vice President Biden alluded to the need for healthy competition between the U.S. and China. He also spoke quite clearly and openly about the need for pretty genuine and broad-based cooperation. In the room today in the Strategic Track we talked about difficult issues and issues where we need to manage our differences. We talked about areas where we have been having ongoing, very practical and beneficial cooperation, and how we can expand that cooperation. And I think, again, I would refer back to the sort of opening comments that I made. I mean, more than half the day today was spent on talking about things like how we’re going to move forward on our climate change cooperation, which is going to affect every person on the planet, and also on our cooperation on development assistance, which is going to affect a big chunk of people on the planet.

So we’re, of course, having frank discussions. We always do with the Chinese. I think it’s not correct to say that the temperature in the room is going up or anything like that. We have a pretty mature relationship. We talk about difficult issues, and it’s something that both sides are quite used to at this point. But what we’re also focusing on is trying to expand the areas of cooperation that we can find together.

MODERATOR: All right, thank you. And I think we have time for one last question. So Operator, please go ahead.

OPERATOR: Yes, Elise Labott with CNN, please go ahead.

QUESTION: Thanks. It’s just following up on Jo’s conversation, Jo’s question just about the tone. I mean, is there kind of like a willingness, like an agree to disagree? Is – are these type of things affecting the more productive discussions? Have you agreed to kind of put those – these irritants aside, or would you say that you’re hitting them head on? I think we’re just trying to judge – I mean, obviously, there’s a big effort by both sides to deepen and broaden the relationship, but we also – even you last – yesterday have acknowledged that there are some tensions. So I think we’re all just trying to get a better sense of how these irritants are affecting the talks. Thanks.

SENIOR STATE DEPARTMENT OFFICIAL: Yeah, I mean, I think – I think I just kind of answered the question. But on the issue of agree to disagree, I mean, I think yesterday we talked a little bit about that also. I mean, this Strategic & Economic Dialogue is so useful because you have very high-level officials from many, many ministries on the Chinese side in the room. And so one of the things that we hope to get and that I think we do get is very clear communication and much more in-depth discussion than you can have in just a normal short meeting on a trip here or there, on the margins of a multilateral meeting. So we’re having in-depth discussions both on what more we can do to cooperate together, which is sort of a probing and seeking and seeing, testing each other’s comfort levels; but also, you have deeper discussions about the areas of disagreement so that you can understand better what those are and try to find ways to narrow the differences.

So I don’t think that there is any case here where irritants are getting more or less in the way than they have in previous sessions. It’s a matter of kind of working through them. And the irritants do change over time, so maybe that’s a sign of things do move, things do get resolved, things do change. And I think that that’s what we’re trying to do here as well.

SENIOR TREASURY OFFICIAL: Yeah. I would just add that wherever possible, in addition to discussing our differences, we seek resolution. And it’s a complicated relationship, and that includes in the economic front. There’s areas where we compete. There’s areas where we cooperate. There’s areas where find we have a complementarity of issues, of interests, and areas where we have significant differences. And so we try to find resolution of those areas and try to build cooperation where we can. And I think we have, as [Senior State Department Official] mentioned, a maturity in our relationship where we can go beyond just talking past each other to really getting to the root of some of these problems in the relationship and try to find a path forward, even if there’s – even if immediate solutions are not apparent.

I’d just note in closing that in the economic side, we’re talking about issues to try to put our economic relationship on a good path forward in the run-up to the visit of President Xi in September.

MODERATOR: All right. Well, thank you very much to our speakers. Thank you for all of you who called in and asked questions, and I’d like to conclude here because I know our officials have to get back to more meetings this evening. So once again, this call has been on background – senior Treasury official, senior State Department official. Thanks for calling, and we’ll talk to you again next time. Bye-bye.