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### Viewing cable 06BEIJING24654, LABOR SECRETARY CHAO'S LUNCHEON WITH CHINESE LABOR

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06BEIJING24654 | 2006-12-20 00:44 | 2011-08-23 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Beijing

`

    VZCZCXRO2212
    RR RUEHCN
    DE RUEHBJ #4654/01 5400144
    ZNR UUUUU ZZH
    R 200044Z DEC 06 ZDS
    FM AMEMBASSY BEIJING
    TO RUEH/DEPT OF LABOR WASHDC
    RUEHC/SECSTATE WASHDC 3164
    RUCPDOC/DEPT OF COMMERCE WASHDC
    RUEATRS/DEPT OF TREASURY WASHINGTON DC
    RHMFIUU/DEPT OF ENERGY WASHINGTON DC
    RUEAUSA/DEPT OF HHS WASHINGTON DC
    RUEAEPA/HQ EPA WASHDC
    RHEHNSC/NSC WASHDC
    INFO RUEHUL/AMEMBASSY SEOUL 9777
    RUEHKO/AMEMBASSY TOKYO 1097
    RUEHCN/AMCONSUL CHENGDU 7655
    RUEHGZ/AMCONSUL GUANGZHOU 2036
    RUEHHK/AMCONSUL HONG KONG 8637
    RUEHGH/AMCONSUL SHANGHAI 6646
    RUEHSH/AMCONSUL SHENYANG 7317
    RUEHGV/USMISSION GENEVA 1510
    RUEHIN/AIT TAIPEI 6174

` `

    UNCLAS SECTION 01 OF 03 BEIJING 024654

    SIPDIS

    C O R R E C T E D  C O P Y -- PARA 9 - TEXT

    SENSITIVE
    SIPDIS

    STATE PASS CEQ FOR CONNAUGHTON
    STATE PASS CEA FOR BLOCK
    STATE PASS USTR FOR STRATFORD/ALTBACH/CELICO/ROSENBERG
    STATE PASS FEDERAL RESERIVE BOARD FOR JOHNSON/SCHINDLER
    NSC FOR HUNTER/SHRIER/TONG
    COMMERCE FOR 4420/MCQUEEN
    TREASURY FOR SMITH/DOHNER/HAARSAGER/BAKER/CUSHMAN
    GENEVA FOR CHAMBERLIN AND USTR
    DOE FOR INTERNATIONAL/PUMPHREY/GEBERT
    EPA FOR INTERNATIONAL/AYRES, FIDLER, MCCASKILL
    HHS FOR STEIGER, ELVANDER AND BHAT
    LABOR FOR OSEC-HUI, OSHA-DEMESME-GRAY AND ILAB

    E.O. 12958: N/A
    TAGS: ELAB EFIN ECON PREL CH
    SUBJECT: LABOR SECRETARY CHAO'S LUNCHEON WITH CHINESE LABOR
    MINISTER TIAN CHENGPING

    REF: A. A) BEIJING 9677
         ¶B. B) BEIJING 22277

    BEIJING 00024654  001.2 OF 003

    SUMMARY
    -------

    ¶1. (SBU) Summary:  Ministry of Labor and Social Security
    (MOLSS) Minister Tian Chengping hosted Labor Secretary Elaine
    Chao for lunch on December 15.  (Participants list in para.
    9)  Secretary Chao said the SED was a historic occasion and
    very important to both the United States and China.  Tian
    said the first SED was highly successful.  Secretary Chao
    said she hoped to continue the cooperation between the United
    States Department of Labor (USDOL) and MOLSS on pension
    issues.  There was no discussion of new projects.  The
    Minister and the Secretary described some of the challenges
    each country faces in perfecting pensions systems comprised
    of government pensions, employer-funded pension accounts, and
    personal savings.  Tian indicated that the draft Labor
    Contract Law (ref A) will get a third reading in China,s
    legislature no December 25.  He said the All China Federation
    of Trade Unions, (ACFTU) campaign to organize unions in
    foreign-invested enterprises (FIEs - ref B) is not a new
    policy, but that it received a lot of attention because of
    the successful creation of unions in China,s Wal-Mart
    stores.  End Summary.

    ¶2. (SBU)  MOLSS Minister Tian Chengping hosted Secretary Chao
    and her delegation for lunch at the Great Hall of the People
    on December 15.  Minister Tian said he believed the first
    meeting of the SED was highly successful, and said he was
    also pleased to have a chance to reciprocate Secretary
    Chao,s hospitality during his September 2006 visit to
    Washington.  Secretary Chao said the SED was a historic
    occasion and very important to both the United States and
    China.  She thanked the Chinese side for its hospitality and
    complimented China on the meticulous arrangements for the
    SED.

    Pension Issues
    --------------

    ¶3. (SBU)  Secretary Chao said she hoped to continue the
    cooperation between the United States Department of Labor
    (USDOL) and MOLSS on pension issues, as retirement issues are
    important to citizens of both countries.  There was no
    discussion of new projects.  Minister Tian asked about
    prospects for pension reform in the United States.  Secretary
    Chao told him that the Pension Protection Act was passed this
    year and that USDOL is in the process of writing implementing
    regulations.  Minister Tian said he took interest in
    President Bush,s 2005 State of the Union Address, in which
    he discussed proposals to reform Social Security.  Secretary
    Chao described the issue as highly politicized.  She
    explained that everyone in the United States knows that the
    Social Security system faces serious problems, and she
    described President Bush,s proposal to create individual
    accounts to help make up for Social Security benefits cuts
    that may be necessary in the future.  She explained some of
    the dynamics of Social Security reform between America,s
    political parties, and between Congress and the White House,

    BEIJING 00024654  002.2 OF 003

    and how it all relates to the election cycle.  Minister Tian
    said he did not understand the &subtle politics8 of the
    two-party system, but that he thought the future of Social
    Security would be a very serious problem.

    ¶4.  (SBU)  Minister Tian explained that the Chinese
    Government has just issued a policy White Paper on the Aging
    Society last week.  He said China,s aged populatin would
    peak around 2030, so China needs to aopt good policies on
    pensions and elder care nw.  If China waits until 2030 to
    deal with the issue of an aging society, he said, it would be
    impossible to find solutions.

    ¶5.  (SBU)  Minister Tian described a conversation he had with
    an American expert on the margins of a recent international
    conference on pensions, who said that the United States'
    experience suggests that the government should avoid taking
    greater responsibility for pensions, and leave a bigger role
    for markets.  Minister Tian noted that governments which take
    a direct role in pensions, such as the UK and some Nordic
    countries, face a very heavy burden.  Minister Tian told the
    Secretary that while in the United States in September, he

    SIPDIS
    met with the Principal Group, a private manager of pension
    funds.  He said the company has formed a joint-venture with
    China Construction Bank and has contacted MOLSS about future
    participation in managing Chinese pension accounts.

    ¶6.  (SBU)  Secretary Chao said the ideal pension system had
    three elements: a government pension system, employer-funded
    pensions, and private savings.  Minister Tian said he saw
    this as the right approach.  Chao described the United States
    system in which pension management was largely a private
    sector issue, but where there are strong regulations to
    prevent the misuse of pension funds, which the Government
    enforces aggressively.  Minister Tian said Chinese Government
    policies envision a similar system, but so far it was mainly
    state-owned enterprises (SOEs) participating, and this does
    not reduce the fiscal burden on the government.  He said
    MOLSS,s challenge is to find a way to encourage non-SOEs and
    foreign-invested enterprises (FIEs) to participate in the
    pension system.

    The Labor Contract Law
    ----------------------

    ¶7. (SBU)  Minister Tian said the National People,s Congress
    will have a second reading of the draft Labor Contract Law
    (ref A) on December 25, and will have at least one more
    reading after that.  Tian said the legislative process in
    China can take as little as a year, but can be very time
    consuming during the drafting phase.

    Efforts by Chinese Union to Organize in Foreign Invested
    Enterprises
    --------------------------------------------- -----------

    ¶8. (SBU)  Secretary Chao asked about ACFTU,s recent campaign
    to organize unions in all FIEs.  She said there seemed to be
    confusion about this campaign in the business community (ref
    B).  Tian said MOLSS has no direct involvement in the
    activities of ACFTU, but that all enterprises, whether SOEs

    BEIJING 00024654  003.2 OF 003

    or privately owned, domestic or FIEs, were supposed to have
    unions.  Jiang Mohui, Deputy Director General of the MOLSS
    international department clarified that it is not mandatory
    for any enterprise to have a union, but that if workers wish
    to form one, employers have no right to obstruct them.  Tian
    said almost all SOEs have unions, but many privately owned
    businesses and FIEs do not.  Minister Tian said ACFTU,s
    interest in organizing unions in FIEs was not a new policy.
    Unions were necessary, he said, for Chinese workers to
    bargain collectively with employers.  The reason the issue
    has gotten so much attention this year, Tian said, was
    because, after several years of trying, ACFTU established
    unions in Chinese Wal-Mart stores.  Minister Tian said ACFTU
    unions collect dues equal to two percent of the wages of
    union members, and added that ACFTU has &a lot of money.8
     (Note:  By law, ACFTU dues are two percent of the
    enterprise,s total payroll, not just the wages of union
    members.  End note.)

    Participants List
    -----------------

    ¶9. (U) United States Participants
      --------------------------

    --Elaine L. Chao, Secretary of Labor
    --Laura Genero, Associate Deputy Secretary of Labor
    --Randolph Clerihue, Assistant Secretary of Labor
    --Anna Hui, Special Assistant to the Secretary of Labor
    --Bruce Levine, Labor Officer, United States Embassy
    (notetaker)
    --Interpreter

    Chinese Participants
    --------------------

    -- Tian Chengping, Minister of Labor and Social Security
    -- Xin Changxing, DG General Affairs Office (MOLSS)
    -- Liu Xu, DG MOLSS International Department
    -- Jiang Mohui, Deputy DG MOLSS International Department
    -- Interpreter

    ¶10.  (U)  Associate Deputy Secretary of Labor Laura Genero
    cleared this message.
    Randt

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