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### Viewing cable 07BEIJING6978, Strategic Economic Dialogue Meeting on

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
07BEIJING6978 | 2007-11-05 23:52 | 2011-08-23 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Beijing

`

    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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