Cable Viewer

Currently released so far... 12648 / 251,287

### Browse latest releases

2010/11 2010/12 2011/01 2011/02 2011/03 2011/04 2011/05
2010/11/28 2010/11/29 2010/11/30
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

66 72 73 75 79 85 86 87 88 89 90 91 92 93 94 96 97 00 01 02 03 04 05 06 07 08 09 10
1966/12
1972/02 1972/08
1973/04
1975/03
1979/08
1985/03 1985/05 1985/06
1986/05
1987/06
1988/01 1988/03 1988/07
1989/12
1990/01 1990/07 1990/08 1990/10
1991/05
1992/01 1992/03 1992/06 1992/09 1992/12
1993/01 1993/10
1994/12
1996/11
1997/06 1997/12
2000/05 2000/06 2000/09 2000/11
2001/02 2001/03 2001/06 2001/07 2001/09 2001/10 2001/11
2002/01 2002/02 2002/03 2002/04 2002/07 2002/08 2002/09 2002/11 2002/12
2003/01 2003/02 2003/03 2003/04 2003/05 2003/06 2003/07 2003/08 2003/09 2003/10 2003/11 2003/12
2004/01 2004/02 2004/03 2004/04 2004/05 2004/06 2004/07 2004/08 2004/09 2004/10 2004/11 2004/12
2005/01 2005/02 2005/03 2005/04 2005/05 2005/06 2005/07 2005/08 2005/09 2005/10 2005/11 2005/12
2006/01 2006/02 2006/03 2006/04 2006/05 2006/06 2006/07 2006/08 2006/09 2006/10 2006/11 2006/12
2007/01 2007/02 2007/03 2007/04 2007/05 2007/06 2007/07 2007/08 2007/09 2007/10 2007/11 2007/12
2008/01 2008/02 2008/03 2008/04 2008/05 2008/06 2008/07 2008/08 2008/09 2008/10 2008/11 2008/12
2009/01 2009/02 2009/03 2009/04 2009/05 2009/06 2009/07 2009/08 2009/09 2009/10 2009/11 2009/12
2010/01 2010/02

### Browse by origin

A B C D F G H I J K L M N O P Q R S T U V W Y Z
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 Freetown Consulate Fukuoka
Embassy Guatemala Embassy Gaborone Consulate Guayaquil Consulate Guadalajara
Embassy Helsinki Embassy Harare Embassy Hanoi Consulate Ho Chi Minh City Consulate Hermosillo Consulate Hamilton Consulate Hamburg Consulate Halifax
Iran RPO Dubai Embassy Islamabad Consulate Istanbul
Embassy Jakarta Consulate Jerusalem Consulate Jeddah
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 Ouagadougou Embassy Ottawa Embassy Oslo
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
Embassy Quito Consulate Quebec
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
Embassy Windhoek Embassy Wellington Embassy Warsaw
Embassy Yerevan Embassy Yaounde
Embassy Zagreb

### Browse by tag

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
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
DA DEA DR DEAX DHS DAO DCM DJ DOD DOMESTIC DO DK DPRK DEPT DISENGAGEMENT DOE DTRA DS DEFENSE DE
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
FI FJ FR FDA FBI FTAA FAC FARC FTA FAO FMLN FO FAS FOREIGN FM FREEDOM FISO FOR FINR FINANCE FOI
GG GM GOI GT GR GH GTIP GV GA GAERC GE GCC GOV GZ GY GANGS GERARD GTMO GL GF GAZA GLOBAL
HR HA HU HO HURI HILLARY HYMPSK HSTC HK HEBRON HUMOR HI HUMAN
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
JA JO JM JOSEPH JP JUS JOHNNIE JOHN JAMES
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
LH LY LE LI LG LO LA LU LTTE LAB LOG LT LABOR
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
QA
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
VE VAT VZ VN VC VT VM VI VTPREL VTIZ VTEG
WMO WHO WHA WA WI WWARD WHTI WTRO WS WTO WTRQ WBG WMD WFP WIPO WZ WB WITH WEU
XK XF XY XG XB XV XR XA XZ XL XW XS XM XD XX XU XI XT XH XQ XE XTAG XC
YE YM YI YMCS
ZB ZI ZEALAND ZF ZK ZR ZP ZU ZO ZL ZOELLICK ZJ ZN ZA ZANU

### Browse by classification

CONFIDENTIAL CONFIDENTIAL//NOFORN SECRET SECRET//NOFORN UNCLASSIFIED UNCLASSIFIED//FOR OFFICIAL USE ONLY

### Community resources

Follow us on Twitter Check our Reddit Twitter this Digg this page Contact us on IRC

courage is contagious

### Viewing cable 09BEIJING728, PREMIER WEN'S COMMENTS ON U.S. TREASURIES: PROTECT

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.

To understand the justification used for the classification of each cable, please use this WikiSource article as reference.
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. #09BEIJING728.

Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09BEIJING728 | 2009-03-20 11:10 | 2010-12-26 21:30 | CONFIDENTIAL | Embassy Beijing

`

    VZCZCXRO5318
    OO RUEHCN RUEHGH RUEHVC
    DE RUEHBJ #0728/01 0791110
    ZNY CCCCC ZZH
    O 201110Z MAR 09
    FM AMEMBASSY BEIJING
    TO RUEHC/SECSTATE WASHDC IMMEDIATE 2993
    INFO RUEHOO/CHINA POSTS COLLECTIVE 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 000728

    SIPDIS

    STATE FOR E, EAP, EAP/CM, S/P
    TREASURY FOR OASIA/DOHNER/WINSHIP
    NSC FOR LOI

    E.O. 12958: DECL: 03/20/2034
    TAGS: ECON EFIN PREL PGOV CH
    SUBJECT: PREMIER WEN'S COMMENTS ON U.S. TREASURIES: PROTECT
    CHINA'S INVESTMENTS

    REF: BEIJING 0666

    Classified By: Economic Minister Counselor Robert Luke; Reasons 1.4 (b,
    d)

    Summary
    -------
    ¶1. (C) Since Premier Wen Jiabao's March 13 remarks at a press
    conference that China was "concerned" regarding the security
    of its U.S. Treasury holdings and other investments (ref),
    other Chinese contacts have clarified and interpreted his
    comments. At the G-20 ministerial meeting in London, the
    head of the State Administration of Foreign Exchange (SAFE)
    and Deputy Central Bank Governor noted continued Chinese
    concerns about the inflationary implications of the expansion
    of the Fed's balance sheet. In a meeting that preceded Wen's
    remarks, SAFE Director General (DG) Yin Yong noted SAFE's
    concerns about the potential for U.S. dollar depreciation and
    U.S. inflation, as both would erode the renminbi (RMB) value
    of their assets. On March 19, DG Yin told us that Premier
    Wen and other senior leaders believe it is important to avoid
    actions that could be perceived as adversely impacting the
    claims of senior creditors to systemically large financial
    institutions and to avoid a repeat of "(the) Lehman
    (situation)" in 2008. MOF Assistant Minister Zhu Guangyao
    said that enhancing confidence and trust should be an
    important theme of the next Economic Dialogue. Other Chinese
    contacts have offered similar versions of their Government's
    concerns, with one noting that there has been a "huge debate"
    within the government about China's holdings of U.S.
    Treasuries. See comments in paragraphs 8-10. End Summary.

    ¶2. (U) At the March 13 closing press conference of the
    National People's Congress (NPC) in Beijing, Premier Wen
    Jiabao was asked about U.S. measures to counteract the global
    financial crisis in light of China's large holdings of U.S.
    debt, and also about China's strategy to spread investment
    risk if the USD depreciated. In response, Wen said China was
    "paying close attention" to the U.S. economic situation and
    the USG's measures to address the crisis. He then added that
    "we are certainly concerned about the security of our assets"
    and "I am a little concerned." Following the press
    conference, coverage of Wen's remarks by China's official
    Xinhua news agency acknowledged the Premier's "worries" while
    also reporting that Wen expected U.S. measures would
    "counter" the crisis. Xinhua also noted that China's
    reserves were "generally safe" (ref).

    What Did Wen Mean?
    ------------------
    ¶3. (C) Wen's remarks immediately generated intense
    speculation that China might be contemplating some adjustment
    in its foreign reserve management policy. Shortly after
    reports of the Premier's remarks became public, U.S. Treasury
    Department Acting Assistant Secretary Sobel raised the issue
    with State Administration of Foreign Exchange (SAFE) Director
    (and People's Bank of China Deputy Governor) Hu Xiaolian.
    (Note: SAFE is the Chinese government agency responsible for
    managing China's reserves.) In response, Hu noted China's
    continued concerns about the inflationary implications of the
    expansion of the Fed's balance sheet; her comments closely
    paralleled those conveyed by SAFE Director General (DG) for
    Reserve Management Yin Yong during a February 26 meeting in
    Beijing with visiting U.S. Treasury DAS Dohner. On that
    occasion, Yin had observed that SAFE was concerned about the
    risks of U.S. dollar depreciation and U.S. inflation, as both
    would erode the RMB value of their U.S. dollar denominated
    assets. Yin called President Obama's announced intention to
    cut the federal budget deficit by the end of his first term a
    wise step, and said he would like to see measures by the
    Federal Reserve to unwind its injection of liquidity after
    the financial crisis ends.

    Stabilize the Economy, and Protect the Investors
    --------------------------------------------- ---
    ¶4. (C) In a March 19 follow-up conversation with Finatt, SAFE
    DG Yin, who clearly had deferred meeting with us until he
    received approval and guidance from his superiors, said the
    Premier had been "worrying" about all of China's investments
    in the U.S., including U.S. Treasury securities. Wen also
    had "noticed" the policies promulgated by the administration
    of President Obama, and hoped that the measures taken to
    address the global economic crisis would help to stabilize
    the financial systems and promote economic recovery. Yin
    also said his "understanding" of Premier Wen's message was,
    in addition to the above objectives, that U.S. policy should

    BEIJING 00000728 002 OF 003

    focus on protecting the interests of investors, as both
    financial stability and protecting investor rights were
    important for strengthening the confidence of domestic and
    foreign investors.

    ¶5. (C) Continuing, DG Yin said he believed the USG measures
    taken thus far are "responsible" and he hoped any future
    interventions in systemically large financial institutions
    also would be responsible and consistent. Ensuring that
    would be vital for maintaining investor confidence, while
    anything harmful to confidence would also undermine financial
    stability. Yin noted concern about "voices" in the U.S. --
    but not in the Obama Administration - that were recommending
    "sacrificing" the interests of some senior creditors' claims
    on systemically large financial institutions. (Comment: Some
    U.S. commentators have suggested that the U.S. government
    require that senior creditors take "haircuts" as a condition
    for intervening in U.S. financial institutions. In previous
    cases where the FDIC took over insolvent banks, not all
    creditor claims were honored in full). After Finatt observed
    that USG interventions taken to date in large financial
    institutions have for the most part been designed to maintain
    the confidence of holders of senior debt, Yin replied that
    U.S. policies should be consistent, "not like Lehman" in
    ¶2008. (Comment: Several interlocutors have told us that
    Lehman was a counterparty to SAFE in financial transactions
    and as a result SAFE suffered large losses when Lehman
    collapsed.)

    Huge Internal Debate
    --------------------
    ¶6. (C) Other Chinese contacts have offered us similar
    versions of their Government's concerns about its U.S.
    investments in recent weeks. In a February 27 meeting with
    visiting Treasury DAS Dohner, senior economist Shen Minggao
    of the respected "Caijing" magazine said there has been a
    "huge debate" within the government about China's holdings of
    U.S. Treasuries. Some officials are concerned about the
    risks of future U.S. inflation due to excess liquidity
    creation and USD depreciation. Furthermore, if China buys
    more, the risk grows. He understood that SAFE has been
    shifting its portfolio toward shorter-term assets to reduce
    the risk of capital losses from higher inflation. Shen also
    recommended the USG consider entering a bilateral agreement
    with China under which China would continue providing funds
    to the U.S. in exchange for some sort of hedging scheme.

    ¶7. (C) On March 18 Director Xiao Lian of the Center for
    American Economic Studies at the Chinese Academy of Social
    Sciences (CASS), told us that Premier Wen and the senior
    leadership have been under "strong pressure" to address
    public criticism about recent high profile losses on China's
    overseas investments. Xiao also speculated that Wen may have
    wanted to reiterate China's concerns, perhaps more clearly
    understood by former Secretary Paulson and other now-departed
    U.S. officials, to the new Obama administration. On March
    16, CASS researcher Zhang Ming speculated to us that China
    may want to invest in Treasury Inflation-Protected Securities
    (TIPS) or RMB-denominated assets, to protect its overseas
    investments. Professor Yu Yongding, also of CASS and
    Director Xiao Lian's superior, has long advocated that China
    press the U.S. to issue RMB-denominated debt, and at a recent
    conference Yu opined that China should receive equities in
    U.S. nationalized banks as collateral for its U.S.
    investments. Xiao told us he has proposed that the U.S.
    Government issue convertible bonds that Chinese investors
    could convert into stocks (presumably of financial
    institutions held by the U.S. government).

    Comment
    -------
    ¶8. (C) Regarding Premier Wen's remarks at the NPC press
    conference, comments of this nature by senior Chinese
    leaders, both public and private, are not new, although they
    have not been expressed so directly at such a senior level.
    Last fall on numerous occasions, Vice Premier Wang Qishan
    remarked to then-Secretary Paulson, both privately and during
    the public session of the Strategic Economic Dialogue, on the
    need to "protect" Chinese investments. Since then, officials
    from SAFE have repeatedly noted concerns about the risks of
    an adverse market reaction, in both the fixed income and
    foreign currency markets, to upcoming large gross issuances
    of U.S. Government securities and the Federal Reserve's
    injections of liquidity. (Comment: the U.S. dollar dropped
    significantly against major currencies following the Federal
    Reserve's announcement that it would be increasing

    BEIJING 00000728 003 OF 003

    significantly its purchases of various U.S. fixed income
    instruments, including long-term U.S. Treasury bonds).

    ¶9. (C) Comments of this sort do not imply that China will
    attempt to dump its U.S. Treasury holdings. Rather, they
    indicate that China's leaders are aware that, while they can
    purchase more or fewer USD-denominated assets at their
    margin, their holdings are so enormous that they cannot
    reallocate the currency composition of their portfolio to any
    meaningful extent without leading to large capital losses and
    thus further public -- and internal -- criticism.

    ¶10. (C) We believe Wen's remarks were most likely intended to
    acknowledge rising public criticism over the government's
    losses on its investment of reserves (fueled by high-profile
    losses by the China Investment Corporation (CIC) in
    Blackstone and Morgan Stanley). Wen also probably intended
    to maintain blame for China's current cyclical downturn on
    foreign factors, urge the U.S. and others to act resolutely
    to restore financial stability and to stem the decline in
    financial assets; signal to western governments that when
    intervening in financial institutions not to trample on the
    claims of foreign investors (e.g., as was done to China's
    Ping An insurance company with its investment in Belgium's
    Fortis); and, avoid surprises that could adversely impact the
    claims of senior creditors. Ironically, one of the largest
    USG interventions in financial institutions to date was in
    Freddie Mac and Fannie Mae, where it agreed to inject up to
    USD 400 billion in capital to keep the institutions solvent.
    As former Secretary Paulson noted, this "effectively
    guarantees" claims of senior creditors, the largest of which
    is most likely SAFE.

    PICCUTA

`