 Scott Kennedy, welcome to CSIS. I'm Deputy Director of the Freeman Chair in China Studies and Director of the Project on Chinese Business and Political Economy here at CSIS, and we're delighted that all of you are here today, and today's event is about the Seventh Strategic and Economic Dialogue which was held June 22nd, 24th, a little over two weeks ago. The purpose of today's event is to hear from the administration their readout of how things went, how the process is going, and where we're heading, particularly with Xi Jinping's state visit just on the horizon. We waited two weeks to hold this event to give the administration a chance to catch their breath and rest and let the dust settle. Of course in the past week the dust has done anything but settle as China's stock markets have fallen by over 30 percent. And even with today's substantial recovery, the correction raises questions about the trajectory of China's economic policies, the effect on the U.S. and global economy and the implications for China's foreign policy more generally, all issues that were at the center of the S&ED. Let me introduce our speakers today and then turn to the agenda and to the rest of the program. Robert Doner is the Deputy Assistant Secretary of Treasury for Asia. He covers the largest swath of territory and largest population for any Deputy Assistant Secretary of the U.S. government, I believe. Part of his responsibility is providing the analytical and staff work for the S&ED. To his left is Chris Adams. Chris is the Senior Coordinator for China Affairs and the Strategic and Economic Dialogue at the Treasury Department. He manages the economic track of the S&ED. He arrived at Treasury at the beginning of this year after spending several years at USTR, including being their point man in the embassy in Beijing. We have a third guest who will be with us shortly, Susan Thornton, who is the Deputy Assistant Secretary of State for Asia to Pacific Affairs, who will be in that chair right there. She's on her way from the White House. And when you have meetings at the White House, you get a little break in terms of arriving late at events, so we're going to cut her a little bit of slack. But I'll just say a little bit about her right now, so we don't need to do that after she arrives. And, of course, the bios for everybody are in the materials that you have in front of you. She's a career foreign service officer served in Central Asia, Russia, in Beijing, in Chengdu, in Yerevan, and Almaty. She's got the breadth and depth you need to be Deputy Assistant Secretary for such a large region, even if it's slightly smaller than the area that Robert's responsible for. So let me say a little bit about the agenda today. We're going to allow each of them to say a little bit about that part of the S&ED that they're responsible for and help manage with opening remarks about 10 or 12 minutes each. I'll then offer a few thoughts and questions and hopefully get the reactions to these. And then we'll open things up to all of you. So even though the stock market will come up today and the market is still open, I hope all of you will mute your phones. And if you want to buy, that's okay. But if you want to sell, we ask that you do that outside because CSIS doesn't want to get accused of supporting irrational shorting of the Chinese market because we now understand that that's against the law. So with that, let me turn things over to our guests. And again, thank you all for coming today. Okay, well, thanks very much, Scott, for that introduction. I'll just say that my salary when measured on a per capita basis is outrageously low. It's really a pleasure to be here. I've been asked to talk about the U.S.-China relationship and about the strategic economic dialogue and its importance. That's easy to do and I'm not going to spend a lot of time on it. I will come back and talk about the macroeconomic and financial aspects of the dialogue. We are the two largest economies, a third of global GDP, almost 40% of recent growth. We have an enormous stake in the continued success of each other. And in developing an economic relationship that is of mutual benefit to both countries. With a bilateral relationship as extensive and detailed as the one that we have with China, there are inevitably issues and tensions that arise. And it's important to face those and address them squarely and frankly in the dialogues that we have. But there's also a very large sphere of overlapping interests that the United States and China has in the health of the global economy, climate finance, and in maintaining and supporting the international economic and financial architecture. There are numerous dialogues between the United States and China, dialogues, working groups, meetings that we have bilaterally and multilaterally. But we've recognized over the past years the value of having a single overarching dialogue that brings together the most senior officials across the governments of both countries in the SDD. And finally, I'll say it because I know my colleagues won't. It takes a tremendous amount of effort to organize and pull off each strategic and economic dialogue. That falls squarely on Chris Adams and on my colleague to arrive, Susan Thornton, much more than it does on me. It also falls squarely on the shoulders of numerous Chinese officials with whom we worked very closely and we frankly got to know much better because of the shared pain of organizing and executing these dialogues. Relationships that are valued of both countries and without a. Okay, thank you for getting things started. Why don't we turn things over to Chris and you can give us a rundown of the economic track? Certainly, let me start by correcting slightly something that Bob said. A lot of the burden also fell on Bob's shoulders and he was a great contributor to the SDD. And I think several people in this room also contributed. So I just want to thank everybody from both the Chinese government and the US government, all of the other agencies, state, USTR commerce that contributed, I totally appreciate it. I think one thing to keep in mind about the SDD is that it functioned throughout the year, which does not augur well for vacation plans for any of us. But it is an ongoing mechanism and one of the strengths, and I think Bob alluded to this a little bit, is that unique among all of our dialogues, all of our bilateral dialogues, whether the China or with other countries, is that the chairs of both the strategic track and the economic track are designated by our respective presidents as special representatives and so what does that mean? That means that they have the authority to coordinate and convene members of our respective governments across our governments. And that's particularly important because a lot of the issues in this complex relationship that Bob just briefly discussed fall into the portfolios of a range of senior leaders and so getting the right people to the table is very important and this is one way that this dialogue does that. A second thing I would mention about the structure of it, having both the strategic track and economic track allows us to address issues that cut across both, that have both an economic element and as well as a foreign policy element. One example is climate change. So that's I think the value of the way it's structured and the way it's been empowered by our leaders. I think what I'd say about this year's dialogue, Bob mentioned that we don't shy away from areas where we disagree. So it was a very candid discussion across the full range of issues in our economic relationship. And we're able to do that because over time through this dialogue, we've developed relationships and a channels of communication that are quite durable. And so we can call on these channels in these relationships. For example, during the financial crisis or when a new policy threatens to disrupt our trade relationship. Having those relationships in place that have been developed over time in pursuit of a common objective is very helpful. The discussions this year I think centered on, I would say four elements. First, trading benefits for both of our country's citizens by expanding opportunities for trading investment. And this includes market access for products and services, creating a predictable and transparent regulatory environment and leveling the playing field for competition. Second, implementing China's economic reforms to ensure sustained balanced growth in China and a more rapidly growing Chinese market for goods and services from the United States and the rest of the world. And this also includes steps to shift a greater share of income to households which can help address issues such as excess production capacity and over investment which eventually become our fuel trade distortions which impact workers here in the United States. I think Bob will touch a little bit more on that. Thirdly, we discussed ways to cooperate and support and strengthen the international financial system. And this includes constructive discussions that we had on our joint responsibilities to uphold the high standards of governance in the international financial system. And also how we can strengthen our cooperation on financial sector regulation. And finally, how we can come together to tackle the most pressing global challenges of our day, including climate change and development. It was clear from our discussions that China's leaders are indeed working to reform the economy and reshape its growth model. The ambitious set of reforms that is needed to reorient the economy towards domestic consumption and away from investment heavy industry and exports is underway but with the slowdown and growth that faces, this transition faces challenges. But nevertheless we do see some progress. So Bob and I in the areas that we just laid out, Bob will tackle macroeconomic and financial. I will say a few words about the outcomes in the area of trade and investment and global issues before turning back to Bob. So on the trade investment side, I would say this, first of all, taking a step back, we see a remarkable complementary, complementarity between China's stated reform goals and our own agenda. For example, I think many of you know that one of the core principles of the current reform program is to make the market, give the market a decisive role in the economy. And China is also seeking new sources of growth, which includes developing the service sector. And moreover, China sees our bilateral investment treaty negotiations as a way to reform its foreign investment regime towards a negative list posture where openness is the default and exceptions are narrowly defined. And so at the SMED we held in-depth discussions on this shared agenda. And some of the outcomes that we're able to produce included announcements on specific reforms which Bob will highlight. On the bilateral investment treaty, we reaffirmed that these negotiations of a high standard bit are indeed a high priority in our economic relationship. And we also committed to intensify the negotiations and exchange improved negative lists in early September in advance of the presidential visit. We also made it clear to China that to successfully include the negotiations, it'll be critical for China's negative list to be very limited and narrow and to represent substantial globalization. And so what we're seeking is a bit that will further open China's restrictive system to foreign investment and create a wider range of opportunities for U.S. firms to participate. So that's our shared agenda. But we also use the SMED to address Chinese policies that we believe run counter to the shared agenda. And these channels of engagement do serve a very effective purpose in this regard. For example, I think many of you know at the end of last year, China issued regulations that to a large extent shut foreign information communications technology products out of China's banking sector. And the U.S. government, coordinating through the SMED channel, engaged intensively on this particular regulation as well as provisions related to ICT in draft laws. And we appreciated China's willingness to engage with us on this. And in April, China suspended the banking regulations, banking sector regulations, and we recognized this as short-term progress and we continued to push for more systemic resolution. And at the SMED meeting a couple of weeks ago, China committed to ensure that regulations in the commercial banking sector will be non-discriminatory. Well, hi Susan, welcome. Secret entrance. You're on time, well, that's good. Well, not that these regulations will not impose nationality-based requirements in the commercial banking sector ICT space. And China also committed to enhance policy trans transparency in its ICT regulations more broadly. And this was a significant outcome, but we know that we have a lot more work to do. And I should add that regulatory transparency was a key element of the progress that we made in our efforts to address this issue. You know, for example, the banking sector regulation in question was issued without any opportunity for the public to comment on a draft. And so now China is committed to take into account the opinions of foreign and domestic stakeholders before issuing such regulations. So, you know, transparency has been, has long been a focal point of the SMED. In fact, the SMED gave birth to a bilateral dialogue on transparency that has been quite useful over the years. And this year, a number of our outcomes, if you look through our fact sheet, you'll notice that a number of our outcomes include a transparency element, including, for example, in China's industry development plans. Another element that for providing a fair and predictable regulatory environment is in the area of enforcement of competition law. And again, this has been a long-standing area of our engagement with China, both in the SMED and the JCCT. And this year we made further incremental progress in clarifying which courts are responsible for handling appeals of anti-monopoly law enforcement decisions, as well as a commitment to discuss procedures for administrative reconsiderations. Another important issue we held, we held candid discussions on China's national security review for foreign investment. And this involves our concerns regarding the extremely broad scope of China's review and also its lack of regulatory certainty that would prevent a transaction from being reviewed again once it's completed a review, as well as the role of third parties in these reviews. And we're hearing concerns from stakeholders. I would assume, perhaps some of you in this room, that the potential for such a broad national security review could block investments on grounds that frankly go beyond genuine national security considerations. And what we're hearing is a concern that this could potentially negate some of the benefits that are promised in the Bilateral Investment Treaty negotiations. So even though we didn't make sufficient progress to announce an outcome on this issue, our discussions were in fact very long and quite productive, and they will continue. Moving beyond the Bilateral Issues to the global marketplace, we also made progress in our discussions on establishing new guidelines for export financing. Some of you may know that China is the world's largest provider of export financing or export credits. And so including export financing by China and other emerging markets in these new international guidelines that are being negotiated is critical to creating effective rules as well as to creating more level playing field for US exporters. And to this end, the administration recently secured commitments from China and other members of the International Working Group that is part of the members that are negotiating these guidelines to begin a significant new phase of this work. And that involves negotiating what we call horizontal guidelines that include all sectors of the economy rather than just a few specific sectors. Before I turn back to Bob, let me just conclude by saying a few words on the commitments that we made to work together and tackle global issues. On climate change and energy cooperation, both sides agreed to use our public resources to finance and encourage the transition towards low carbon technologies, for example, in funding for overseas power generation projects. And we also determined to work constructively together to support the effective operation of the Green Climate Fund and which we both recognized as the main dedicated multilateral fund to finance work on climate change and the poorest countries of the world. We also agreed to finalize our G20 peer reviews on fossil fuel subsidies by the end of this year and to publish the results. And we reaffirmed our commitment to rationalize and phase out inefficient fossil fuel subsidies that encourage wasteful consumption. And finally, we agreed to strengthen cooperation on development financing through the World Bank and other multilateral development institutions. And we believe this cooperation will promote transparent, effective and accountable development assistance to achieve sustainable growth and poverty reduction in third countries. So in closing, you know, we recognize that these commitments at this year's S&ED, they do not resolve all of our concerns nor China's, but they did represent real progress and they will, in fact, create new opportunities for U.S. workers and companies in the Chinese market. And we also, finally, I would just say that we discussed the need to lay a strong foundation of economic cooperation and economic reforms for the coming visit later this year by China's president, Xi Jinping. And we'll continue to discuss these issues in preparation for that visit. So let me now turn to Bob to provide a little bit more detail on the macroeconomic and financial outcomes. Right. Now, thanks, and I'll try to do this quickly. I mean, from the beginning, there's been a very large macroeconomic and financial component to the strategic and economic dialogue. And also, the exchange rate issue, exchange rate policy, has played a central role in our discussions. Realizing the G20 commitment to move more rapidly to a more determined exchange rate is absolutely crucial to Chinese growth and to balance growth of the global economy. This means allowing the exchange rate to adjust, reducing intervention and increasing transparency and disclosure of China's exchange rate policy. Chris mentioned, I've mentioned the importance of reorienting the global economy and the major economies in it to a pattern of growth that will produce strong sustained and balanced global growth. For China, this means greater reliance on household consumption as a source of growth, less emphasis on investment and on exports. It also means shifting to a balance of production that depends more on productivity growth and not simply adding more labor and adding more capital to production. As Chris mentioned, the Chinese have announced in the third party plan a very ambitious and extensive set of reforms to rebalance the economy, to develop, liberalize and reform the financial system, to reform SOEs and create a level playing field with private enterprises, including foreign enterprises and also market opening measures across the economy to encourage greater competition and higher economic performance. On exchange rates, last year we had a commitment from the Chinese to reduce foreign exchange market intervention as conditions permit. The first time China had ever made an explicit commitment to foreign exchange intervention. And in fact, intervention by the Chinese authorities has been greatly reduced in the time since the last S&ED. This year the Chinese committed to intervene only when necessitated by disorderly market conditions, which is a stronger standard and also to actively consider additional measures to transition to a market oriented exchange rate. In terms of transparency, last year President Xi announced at the APEC meeting in November that China would adopt the IMF's data dissemination standard template for economic data across the board but also for foreign exchange reserves, which is the standard by which reserve holdings, both current reserves and in the forward market are measured. This year's S&ED, China went beyond that in recognizing the importance to renminbi internationalization of meeting the transparency standards of other major reserve currencies. I'm a macroeconomist and I love the macroeconomic negotiations. Much of the rebalancing efforts involve efforts to boost the income of Chinese households and increase their sense of income security to give them greater ability and greater confidence to spend. Then this year's S&ED, the Chinese announced explicit timetables for very important reforms, including establishing universal coverage of social insurance by 2020. We've also worked, or at least discussed in the dialogue, efforts to strengthen the rights of rural residents over land use and the ability to assign, sell, collateralize and trade these rights. And this year China committed to establishing a real estate registration regime and also the ability to assign sell rights to certain types of agricultural land. Financial markets outcomes have also been very important to the dialogue and also are critical to both the rebalancing and the continued growth of the Chinese economy as it moves towards smaller, private, new and more innovative firms. The United States is pressed for liberalization of the financial market, in particular liberalization of interest rates to allow capital investment resources to be allocated on market basis. This year the Chinese announced that they would offer negotiable certificates of deposit to individual investors and enterprises the first time that a market-oriented bank investment instrument had been offered to the general public and committed to take additional steps to give banks additional flexibility to set interest rates. I'll mention them because they're important to our constituents. We also got specific detail to their constituents, very important commitments to allow wholly owned foreign ventures in the private fund management business to allow US and other foreign banks to obtain licenses to be bond market settlement agents and also licenses for bond underwriting and also to increase the ability of foreign portfolio investors to invest in the Chinese bond market, both the interbank and the listed bond market. A lot is going on in the financial sector and this is just one of a number of steps that have taken place over the past few years. Terrific, Bob. And Chris, thanks both of you very much for a lot of detail. It's a lot of ground because it's a broad dialogue. We're happy to have Susan here now. Thanks for participating today. I've already given a wonderful stupendous introduction and everyone also has it in the materials that they have as well. But I just want to again say thank you for participating and would love to hear your thoughts on the strategic track of the dialogue. And then we'll take things from there. Thank you very much and sorry for my stealth entrance. I was actually with a bunch of people working on a lot of the follow up from the meeting that we had at the SNED and the SSD and also we had the consultation on people to people exchange this year. So since I missed the introduction, Bob or Chris or both of them may have said something about the broad overview of the approach to the meeting and what we generally see as the virtues of this process. And it's hard to even call it the SNED process because we always add a couple of extra or a bunch of extra elements to it each year. And each year the extra elements seem to grow. But so, for example, we had the consultation on people to people exchange which brought Vice Premier Liu Yandong also to Washington for this meeting this year. Of course, the main interactions that we had were with state Councilor Yang Jiechi on the strategic track of the of the SNED. But we also had the strategic security dialogue on the day before the SNED started. And that is led by Deputy Secretary Tony Blinken and the Executive Vice Foreign Minister from China, Zhang Yesui, which allows us to really dig deep into the details of the thorny security issues between the US and China to sort of set up for the higher level discussions between Secretary Kerry and his counterparts and other counterparts in the USG on the first day and the second day of the SNED. So I think in looking at it now in hindsight with all of the logistics finished and all of the delegations out of town, I was reminded again of the of the virtues of the SNED process. And I just like to lay those out in case we missed them at the beginning. First of all, of course, this is a very high level interaction that we have with the Chinese government. And it's not that easy in their governing system, which doesn't match exactly with ours to get high level sustained access to Chinese government leaders in the way that we're able to do through this process over several days. And they often it's very unusual that they all come together in the same place and you have access to a range of them at the same time. So I just like to again stress that that is a unique feature of this of this arrangement and it's and it's been very productive and important for us to have that. Why is it important because the government is very stovepiped and, you know, despite the fact that we have a strategic and an economic track, the State Department, the Treasury, the White House, the Defense Department and all of the agencies in the U.S. government are always in lockstep and on message together. And we feel that sometimes we don't see the same kind of unity and we don't know that our messages are always getting through to every part of the Chinese government the way that we would like them to. So I think that's another virtue of the SNAD process. We're able to reach lots of different agencies, lots of different actors and get our messages across and ensure that we're not being blocked somewhere in the system. Of course, the mix of actors that we have in each of the meetings is also a huge advantage where you're able to sort of talk both to the foreign ministry, to the PLA and to some other agencies of the Chinese government like the Ministry of Commerce, all in the same meeting. We don't normally get that mix. I think, as I said, this year we added the consultation on people-to-people exchange, which gave us another kind of venue for talking about some of our not only positive issues with the exchange and our follow-up on our visa extension validity from last year's summit meeting in November, but also to talk about some of the tougher issues where we have problems on access for people, access for programs, some of the problems that some American organizations may see in trying to work their exchanges in light of, for example, the new NGO law that the Chinese are considering. So I think that added another element. We also had a number of side meetings. We had side meetings on health. We had side meetings on international organizations. We had regional side meetings, for example, on Afghanistan and on South Sudan, and there were a number of other meetings that counterparts were able to have just by the fact that all of the Chinese interlocutors were in town at the same time. So I think it's a time when I'm a diplomat, so I appreciate the craft of diplomacy and engaging with your counterparts from other countries, and this is an extremely intense period of diplomatic activity where you're really able to scratch beneath the surface and drill down on things with a range of very high-level actors in China. I think that that is very important, and I just wanna sort of set that out at the beginning. In the strategic track, of course, we were able to have detailed discussions on the full range of issues with China. Of course, another thing about the S&ED process and on the economic side you've just heard, we have a long list of outcomes that we try to negotiate in the run-up to the meetings, and sometimes we're negotiating through the meetings, and on the strategic track side, our list tends to be very long because we are trying to incorporate all of the U.S. agencies that have counterpart cooperation with the Chinese government. The S&ED also provides a nice way for them to get access and pursue their technical cooperation with Chinese agencies. We put out a fact sheet on the 127, I think it was, outcomes from the strategic track, but to make it easier for you, you can look that up, but to make it easier for you, the outcomes that we were pursuing in the strategic track, we kind of bundled into groups of cooperative areas that we wanna pursue. The biggest one, and Chris already talked about the climate change on the financing side, but of course, climate change is one of the very prominent kind of areas of cooperation that we've had with the Chinese starting from the genesis of the climate change working group with China last year, and then through the summit meeting in November, of course, we had our joint announcement. We have the Paris climate change negotiations on the UN framework coming at the end of the year in December, so this is a crucial year for climate change for the entire world, and we have been successful in getting the US and China to be early announcers and early leaders of the rest of the community in moving toward Paris in December. At the S&ED this year, we had a public event that sort of memorialized the commitments that were made by the US and China last year and also laid out kind of a roadmap of implementation what we've been doing to make sure that we're tracking those commitments and then setting out kind of a futuristic path from now until December for how the US and China are gonna work together to get a successful agreement in Paris in December. We also had a private negotiating session to work on those outcomes, and so I think the climate change cooperation continues to be very important. We started a couple of new areas of cooperation this year that we featured at separate breakout sessions. One was on maritime and oceans cooperation. This is an effort to enlist China, which is one of the biggest polluters in the maritime space and the United States with our sort of experience and leadership in this area to try to come together and address maritime pollution issues and other problems with like overfishing, problems with Coast Guard cooperation, law enforcement problems on the high seas and in maritime spaces. So we held a separate session on that which Secretary Kerry and Yang Jiechi, the state counselor attended, and we're going to use that as a launch pad to continue our efforts to make progress on things like marine litter, marine pollution and illegal and unregulated fishing. And the Chinese were quite enthusiastic about this, so we are working now to develop the detailed cooperation. We also had a separate session on development cooperation for the first time with China. This is an area that we think is ripe for more cooperation, but which is kind of an untapped area. And this was the first meeting that we've had with China, the assistance efforts in China are run by the Ministry of Commerce and they do not have an agency for international development like we do, but this was the first chance we had to sit down with the Ministry of Commerce and kind of lay out from their perspective what their interest is in cooperation and our interest in cooperation and try to find where those overlap and where we can come together and between the two efforts produce a better outcome in development assistance areas. So we're working on a number of follow-ups, but we agreed to follow up on the health system recovery in West Africa and the post Ebola environment. We're gonna work on disaster response coordination, which was pointed out by the disaster, the earthquake in Nepal and the various responses to that and sort of left open opportunities that we discovered in that process for where we could coordinate better and do better international donor coordination on disasters and we have a number of other projects including expansion of cooperation on training in Afghanistan. So those are kind of the big areas that we sort of started this year that were separate efforts. Of course we had a long list of outcomes in other areas we're continuing to cooperate on regional hotspots. So we talked about Afghanistan and efforts to bring stability and prosperity to that area. Of course we've been working closely with the Chinese. I think you saw there was a reconciliation process meeting last week. So we've been working to try to, with the Chinese and the Afghans and others to try to push that forward and they've been quite cooperative there on Iran. Obviously the negotiation is still going on. The Chinese foreign minister is in Vienna. So there was discussion on continuing to work together to try to get a successful outcome in Vienna. And then sort of South Sudan was another topic and humanitarian response in Africa. So we're working sort of to push all those issues forward. There's a long list of other outcomes that we managed to negotiate in the law enforcement area, in the non-proliferation area, et cetera. But I think the thing that people probably most want to hear about is the conversation on the tough areas, the problem areas where we didn't get outcomes. And there was a lot of discussion both at the time of the meetings and after the meetings about some of those. Of course, South China Sea focus has been overtaken by the stock market crash, which I'm happy to have my treasury colleagues here today to address those questions. But of course, discussions on the South China Sea were very extensive. And I would say there's not any question that we agreed to disagree on this. We pressed China very hard that they need to get the South China Sea issue with the claimants in the region into some kind of a diplomatic process in order to ratchet down the tensions in that region that's not in anybody's interest. The Chinese have been thinking that they are going to be able to, I think, sort of, modify people by the approaches that they've had on announcement about the halt of reclamation, et cetera. And they were quite surprised that people were not satisfied by that announcement and wanted to push them further. So I think we've got now follow-up work to do, but the idea that we can't have pointed discussions and that we can't try to move these areas of difference and narrow them down and push them in a direction that's a more prospective one is not true. And I think that this S&ED process helps very much in that and having, of course, the PLA and other agencies at the table to hear about our messages on this and what our concerns are is also very important and I think we'll be continuing to work and follow-up on this. But on the other sort of problem areas at the time of the S&ED, of course, one of the top stories was about the cyber intrusions and I think there was a lot of press at the time about the conversations that we had with the Chinese about cyber issues. We had a much more kind of a detailed conversation about these issues than we could have had without this session going on. I think we understand each other's positions much more clearly for having had this discussion and it was not an easy discussion. We have also just concluded now a week-long session of negotiations in New York in the group of governmental experts on cyber security issues. That's a multilateral event but I think it's also was a timely that that negotiation was going on at the same time we had the S&ED going on here and having these conversations about cyber were reflecting also in the negotiations in New York. So we were able to sort of move the Chinese a little bit closer to some of our positions in the multilateral discussions. So I think all in all, not an easy discussion, very pointed but definitely useful and we can't solve everything with one meeting but again, I'm a diplomat and this is the kind of work that you do day in, day out, negotiations, discussions and we tried to move closer to narrowing those differences where we have them. On human rights, which is the other tough area, as I said, we had two vice-premiers and a state counselor and a whole lot of other ministers and high-ranking people. We had very tough conversations also on the e-contract on some of these new national security laws which are worrisome not only for their economic ramifications but also for their, well, people-to-people ramifications but especially for the human rights ramifications that they may have and we're able to have very detailed conversations with very high-level people about all of our concerns there. We're told that there's comment periods for some of these laws that they're gonna take into consideration some of the feedback that they've gotten so we're gonna, of course, continue to raise our concerns and see if that comes to fruition but again, it's a terrific opportunity for us to make known to the very top of the leadership our concerns and press for a response. So I think I'll end it there because I know we wanna get to Q&A but thank you very much all of you for coming and again, sorry to be a little bit late off the top. Terrific, thank you very much. You did a terrific job and it was worth the wait so we really appreciate it. Before we turn things over to the audience I wanted to offer a few comments which are also slash questions. Get your feedback on them as well and you can take whatever question you want so for the hard questions just tap the person on the shoulder next to you and so Chris gets a double barrel because he's got on both sides. I guess the first thing that I notice is how broad and deep the dialogue is and it's as broad and deep as the relationship. It's just amazing, the number of issues that are covered that couldn't possibly fit in the Joint Commission on Commerce and Trade, the JCCT process you're just expanding that way beyond and it's important to have a place at one time to do that in addition it's beyond border we're talking about a lot of things that are beyond borders we're talking not only within China and within the United States a lot of detail about macroeconomic policies, human rights, et cetera but we're also going beyond borders and going beyond the bilateral relationship to talk about global issues which are also critical parts of the relationship now they're not just supplemental, they're central and so that's important that this is also part of the process. The other thing that I notice is how much work goes into this and how difficult it is to bring so many different agencies together both on both sides but within each government and that from what I understand there were three to 400 Chinese as part of the delegations and probably just as many American officials plus the experts in industry representatives so after five SEDs and seven SNEDs I guess my question would be has it gotten any easier? It built up habits of intra-governmental coordination that now is just like pushing an automatic button or now that you have so many participants is it getting even more and more difficult? So I'm gonna go through the comments and then you all can sort of pick and choose as we go. In terms of thinking also about the broader framework as I mentioned the first five meetings in the Bush administration what's the strategic economic dialogue and then beginning with the Obama administration we added the and in the middle to be the strategic and economic dialogue and what that did is it changed the meaning of strategic, strategic used to mean big think, broad issues strategic now means security, right? It's a synonym and we fundamentally changed the meaning and in addition to broadening the conversation some people have suggested that what we've done is we've shifted from big think to small talk. We've gone from very broad conceptions to fact sheets with 127 points and deliverables and should we mourn that transition? Should we applaud that transition? Was it inevitable? Do we need some other kind of dialogue that gets back to the original meeting of what strategic used to be about in that title in the earlier years? That's one question that I think is on a lot of people's minds when they think about this process. Another way to think about it is this week the general secretary of the Vietnam Communist Party was in Washington for meetings with our government met the president, many officials yesterday gave a very important speech here at CSIS and we don't have a broad set of dialogues with the Vietnamese but through that just through this visit and meetings before it appears that we developed strategic trust and as was stated by both sides trying to develop a long-term partnership. In some ways I felt a little bit like Deng Xiaoping's 1979 visit. I know it's a different type of person, different country but there was a lot of sort of at least outwardly looking from the outside, a lot of warm and fuzzy feelings on that and it makes one think, is there an inverse relationship between the number of dialogues and the number of people in the room and the coziness of the relationship? And so I was just wondering maybe you could think about sort of the similarity or contrast between our experience with the Chinese over the year and the trajectory our relationship with Vietnam is moving in. Another thing that I noticed from this past meeting is some texts that wasn't in previous years. There's a phrase, the new type of great power relations that the Chinese have been emphasizing and hoping that both countries would subscribe to as a new way to orient how rising power and the world's current dominant power would be able to interact with each other and avoid conflict. But there was very few references to that term or parallels of it on the military side this time and I'm just curious why is, why was there less discussion of that at least as it reached the documents? I was a professor for a long time and you could actually just go ask my mom when I was five years old. I just had questions galore. So then on one on economics and security and then I'll be quiet, the stock market. I don't want you to predict the direction of the Chinese stock market. I don't think we're looking for advice on that today but it does impinge on the direction of economic reform in China which was a huge part of the dialogue. Another component of that is China's goal by the end of this year having the rem in B become part of the IMF's SDR basket and to do so to qualify that requires by most people's estimations a continuation of a pathway of reform of opening the capital account that they need to complete and the stock market crisis raises questions about that and I was just wondering through the dialogue process of the S&ED not just in the two days but leading up to it and since what sense do you have about where Chinese economic policy is going? The last question again and I'm sorry for so many on these frank issues that Susan brought up. I feel like looking from the outside that we have a lot of frankness that occurs but the S&ED is essentially cataloging or documenting this gradual slide and erosion of the relationship on those types of issues and instead of arresting the negative downturn in them or solving them, are we what type of and besides sort of laying out both sides positions where do you feel we're turning the corner with on any of these difficult types of issues like for example with the South China Seas we've got it's been difficult to understand sort of to have the Chinese clarify their positions. What does that nine dash line mean? What type of claims are they wanna make around these reefs that seem to be turning into islands? Do we have a greater understanding of what their positions are? And that would be progress even if we didn't meet eye to eye. So what I've done is I've done the professor's job or a lawyerly job of throwing a whole lot in front of you all. Why don't I just sort of go in this direction get your initial reactions. Whatever you don't wanna answer don't that's always an excellent response just leave it alone. And whatever you don't get we have a great audience here they will pick it up and they will ask it again. I'm certain so we'll stop with Bob. Okay so I'll pick up one question. I'm actually the SED veteran on the podium. I can say that it is not got easier. It has gotten more extensive. It's gotten more important. I think it's gotten better. I think we've gotten better at doing it both on the US side and on the Chinese side. Both of us throw ourselves into the dialogue with all the capacity and a bit more than we have. One thing that I can say is that over the course of the time that I've been working on the Big China Dialogue the extent of our relationship the ability to call people up on the phone to ask questions to make arguments to just find things out it's night and day difference. I think we have the kind of relationship at least a treasury with Chinese officials that we have with G7 officials in terms of frequent interaction and sort of not always relaxed but regular information exchange. So it's been a huge benefit in that regard. Let me pick up where Bob started. So Scott you mentioned depth versus breadth. I think if you tried to create a dialogue with this breadth without having the depth that would be a recipe for disaster. And the depth comes from what Bob was talking about that we've been doing this for a while. It may not feel like it's getting easier but I worked on the SED as well. And I think over time, over time developing not only relationships but just the way of doing it. How do you go about getting all of the relevant agencies together on an issue? What is the channel? What is the mechanism to do that? And it may not work so well the first time but over time you get better and it's a mechanism that you kind of build like a machine over time. And if you didn't have that and you had a dialogue of this breadth I think you would run the risk of either having chaos or just a lot of superficial conversations. And I think Scott to your point about are we just cataloging our differences or cataloging the erosion in the relationship? I think because we have that depth in that these channels of communication that have been functioning for quite some time you're able, we're seeking resolution. We're not just agreeing to disagree and leaving it at that. And I think that's, we may not always reach those resolutions but I think because of the mechanism we have we're able to do that a lot more than otherwise might be the case with the dialogue that tries to cover so much territory. Yeah I was just gonna, so I'll just take up on that last point which is I mean cataloging a slide in some areas may be what it looks like to some on the outside but if you'll notice the areas of difference in this S&ED that were prominently featured are not necessarily the ones that we had in the last seven so on many issues that we were talking about as problem areas much previously we've actually made quite a bit of progress in resolving some of them have faded completely. So I think we are gonna have areas of difference with China. It's a very complicated relationship. They have a very complicated set of interests and a very complicated set of challenges that they're trying to address internally and externally. And so it would be pretty naive to think that we're not gonna have differences but to be able to talk about those problems in this level of I agree with Bob too candor, frankness across so many different interlocutors is really something that we've been developing over a long time but I think we've reached a new level with the Chinese through not just this mechanism but certainly and people always joke every time the S&ED comes around like how difficult it is, how complicated it is but if we didn't have it we would have to create it. And I think there is a difference between China and Vietnam in that respect which is that the number of issues and the number of agencies and the number of cooperative programs and technical areas where China is a player are so numerous that we have to have a very extensive number of dialogues. It's also a function of their bureaucratic system and the dialogue meeting is an action forcing event in their system whereas otherwise nothing might happen. So I think from all of that I think it, I mean it's not easy but it's gotten more easy as we have all sort of adopted it and seen the benefits of it and are sort of put behind it. We've got structures now, we've got ways to bring our interagency together that we didn't have before which is also very important in managing the China relationship. So I think all in all it's a positive thing. Super, super I really appreciate you all letting me ask all those questions and responding in the way you did because it meant to elicit comments on a variety of things. I think now we want to turn to our audience. When I call on you if you would please just identify yourself and your organization and if you would ask a question that is both brief and a question. I would really appreciate that. So we'll start right here, yes. And the third mic is coming your way. Thanks for your discussion. Jennifer Chen reporter with Shenzhen Media Group China. My question is to Miss Susan. So you mentioned the cyber security issues. When yesterday's Secretary Johnson said here, he encouraged both countries to share, to find the common ground in terms of information sharing. So as far as your concern, what will be the common ground? And in the press conference of SED, Chinese officials stressed that international community should set up a set of rules to regulate the actions in cyber space to which China has put forward some initiative to the US and US also proposed some initiative to China. So what are the initiatives from US perspectives? Are those initiatives both countries mutually accepted? Is there anything else we'll have done to ease the tensions before President Xi's visit? Thanks. She got her rapid fire questions in and much shorter in a more efficient way. Ooh. Oh, just kidding. I'm learning. No, no, no. So, no, I mean, I appreciate the question. So we have agreed as the two biggest users of the internet in the world that the US and China definitely have an interest in coming up with a better framework both between the two of us and also globally to manage internet and cybersecurity and other related issues. And so we've been working, it hasn't just started at the S&ED, we were working on this previously. As I said, this group of governmental experts effort that was ongoing at the same time that we were meeting here in Washington has been working US and China are both very active. We've had a number of interactions and conferences over the years and they're increasing in intensity and frequency. So there's definitely agreement on both sides that we need to come up with a better way of managing and working together. We've made a number of proposals. Some of them are involving multilateral stakeholders and some of them are bilateral. One of the things that I think both countries are interested in is pursuing a set of so-called peacetime norms that would set out a kind of a framework of rules of the road of behavior and cyberspace for governments in peacetime. And so we're working with that with the Chinese directly on that but we're also working multilaterally together on that making some progress I think. The other proposals focus on information sharing on incidents like hacking and intrusions where we can ask for investigative help and have a better understanding of how that should work and what kinds of information should flow back and forth. So we're working on that. I think that was a proposal that we were able to push forward and we're developing the details now. And I mean the other area is sort of making sure that our response teams when we have problems in cyberspace are communicating and that the capacity of both of our, they're called CERTs, Cyber Emergency Response Teams can work together properly. And so we are having also, I mean I think Secretary Johnson that's, he's the under DHS is where the CERT is housed and so he's been involved in counterpart conversations with the Chinese but also we've had other conversations about moving that forward. So I think those are all areas where we're pushing forward on trying to improve the cyber communication and cooperation information sharing with China. We're gonna go right in the front row here. Hi, my name is Sean Kim and I'm a high school student. So there's a, so the Chinese government is banning Muslims in Western autonomous regions from fasting right now during the month of Ramadan. What's the expansion at all during your discussions with the Chinese counterpart about human rights issues in China and if yes, could you talk about some of the details that you discussed? Thank you. I guess that's for me. So yeah, we don't normally read out the details of our discussions in diplomatic meetings but I can say that this, the topic of human rights of course was raised and one of the things that we have continuously discussed and urged and talked about with the Chinese colleagues is our work and our global effort to counter violent extremism and to have, make sure that local governments and security forces are working in communities in a way that does not promote a reaction that leads to violence and so on specific human rights violations like some of the ones you mentioned, we have raised those directly with the Chinese but we're also trying to and Secretary J. Johnson was in China earlier this year and had conversations with the Chinese to try to point out the policies that are repressive toward minorities tend to have counterproductive effects and that the entire globe right now is working toward countering violent extremism through smarter policies working with communities to try to stem this kind of antagonism between authorities and local communities. So those are two areas in which these issues come up generally in our conversations with China. Perfect, we're gonna go in the back and the gentleman's standing up. Thank you very much. John's end with CTI TV of Taiwan. I also have a question for Susan, which means you need to come here more often. How was the issue of Taiwan discussed or was it discussed at all? I know it's probably an issue that's coming off the front burner but it is an issue that the Chinese side usually puts some emphasis on. How was it discussed but did you discuss the possibility of the DPP taking over the presidency? The possibility of that taking over the presidency early next year, the dialogue between the DPP and the mainland, thank you very much. Yeah, so again, I don't wanna get too much into the details of the conversation but you are right, the Chinese are always very insistent on raising the Taiwan issue. They have so-called core interests that center on a lot of the territorial and sovereignty issues that China views as very important to its national interests and so Taiwan is usually raised and we do not make efforts to put it on agendas or anything like that. It's not something that we necessarily schedule a lot of time for a discussion but of course China has strong feelings on this and we are having this dialogue in order to hear their concerns and they have a number of concerns with regard to Taiwan. Primarily the concerns that they raise with us have to do with the Taiwan arms sales but they also raise other concerns that they may have. I mean with regard to the specific issue that you raise I think we know that there is concern but I wouldn't say that there was any specific kind of long discussion about that topic. Why don't we see if there's, so we spread the wealth a little bit here. Some questions on economic issues, so generally. So as long as the second row here, this gentleman. I do have an economic issue. Terrific. Yeah, my question for two treasury officers and you didn't answer the Scots question. Did you contact with your Chinese counterpart on Chinese stock market in the past two days? Because yesterday Secretary Liu has expressed his concerns that this stock market crisis could slow down the pace of the Chinese economic reform but many Chinese are accusing American investment banks of manipulating the market. So did you contact with them and explain or talk about the situation over there and a follow up question on Taiwan for Susan. Did you believe your Chinese counterpart about a recent visit by Dr. Tsai? If Ms. Hong Xiu Zhu could be the former candidate of KMT, will the US government intend to invite her to Washington DC? Thank you. Sorry, so I came here to talk about the S&ED and the E-track and not to comment on markets. I won't comment on markets. You're right, Secretary Liu was asked this question yesterday about the Chinese stock market. I think on the charge or the allegation, well, let me put it this way. The one thing that the secretary did mention yesterday is that the amount of integration of the Chinese financial market, including the Chinese stock market, with the rest of the world is very small and the role of foreign investors in the Chinese market is very small to the extent that this is a sell-off of Chinese equities. It's a domestic sell-off of Chinese equities. Secretary Liu did comment on the Chinese stock market yesterday. His interview is up on our website. Fortuitously, Scott was on the Diane Reem show today talking about the Chinese stock market. I'll re-broadcast that later today. I think he wants to listen to me. The Taiwan question is easy. So we have already said publicly that we welcome other candidates to visit the United States. So in answer to the response on the potential visit, I mean, we've already said we welcome publicly other candidates to visit. We're gonna come right here in front. Thank you. Being with Hong Kong Phoenix TV, my question is for three of you. When both China and the US emphasize that this run of SED is paving the way for prison issues to visit, what exactly does it mean? Which kind of preparation are you working on? And another area you barely mentioned is the anti-corruption corporation. But in the outcome list, actually this year, you put more words on the anti-corruption campaign, the corporation. Is there anything new? Or which kind of obstacles do you think is preventing the corporation? Thank you. Sure. I'll start with that. Yeah, so I think as we mentioned, a lot of these issues are not issues that are brand new and not issues that can be solved overnight. And so our discussions will continue. And the S&ED, I think in some ways was kind of a way station or help prepare the way to make progress that puts the economic relationship on a better footing. In other areas, it may be exploring new areas of cooperation that may take further shape as we approach the visit of presidency. So I think there are two elements of that is addressing the really most important issues that I'll just speak on the economic side that may be undermining that relationship and make sure that we have a good approach to resolving them in advance of this visit. That was one thing that we tried to do. And the second area is looking at areas how we can cooperate and beginning to explore cooperation that will maybe develop further as we approach the visit. So I think those are two aspects. Yeah, and speaking from the strategic track, I would just echo the same thing. We really want to use the S&ED to dig down deep on areas of potential cooperation that have been undeveloped and try to develop those with a view toward having them in some substantive form by the time of the visit so that we can demonstrate to both the Chinese and the American people that the benefits of this relationship for both of those audiences are significant. So that's the main idea behind that. I mean, when Scott was asking me about coming here and we were talking a little bit, he suggested we need another meeting in the year, a high level strategic meeting that could have another focus. And I said, we don't have any more room for negotiations because we already have three high level meetings and we don't have time to start a new outcome stream with a fourth meeting. But I think it was good for, I mean, you mentioned that we had 127 outcomes and maybe there's too much detail and not enough strategy, but the outcome part is very important because without that, we can't demonstrate how we're making progress and showing that where our interests overlap we're actually getting things done and that's very important. Of course, we don't have, we still have the strategic conversation in the high level meetings. The negotiation of 127 outcomes is done by others like us. But anyway, I think so I think that's on the issue of how it prepares us for the upcoming state visit. On the issue of anti-corruption cooperation. I mean, we've been making efforts and having conversations throughout the past couple of years on this and in law enforcement cooperation between the US and China, we have also an annual meeting called the Joint Liaison Group where we try to push forward our law enforcement cooperation. But for us, anti-corruption is a law enforcement matter. And so most of the cooperation would go through our various law enforcement agencies and our agencies have been working together. Again, Secretary Johnson's visit to Beijing in April focused to some extent on this. We're working on evidence-based cases that we've been getting and it's going through the normal law enforcement channels. So that's been very active and there's a lot going on there. But we continue to work at the pace of the sort of law enforcement process. So I think what's new is that there's more activity and more cooperation, more communication going back and forth. What we're hoping for is, yes, some kind of, end to that process that results in a successful case being concluded, but we haven't gotten there yet. So. I come right here front. Yes, Eric Lachica from U.S. Filipinos for Good Governance. May I ask the Secretary, could you expand or give us more detail on the State Department message to the Chinese leaders regarding bringing China to settle diplomatically, as you said, between the parties on the maritime dispute? What is the diplomatic proposal or message is it under the ASEAN framework, under the international tribunal on the loss of the seas or is just bilateral? What was the recommendation or suggestion to the Chinese counterpart? At this point, our pressing for the Chinese to engage in a diplomatic process with the other claimants which would sort of start, have the effect of lowering the tensions and they've got a process going on already, the Code of Conduct discussions. So, I mean, if that were to be activated, we don't really have a prescription for what kind of diplomatic process it should be, but there are a number of vehicles out there for this. The Code of Conduct would be one. We would, I think we've already stated that we would like to see a quick and sort of vibrant process going on on the Code of Conduct. There are a number of meetings coming up, sort of ASEAN regional forum, ministerials, and other EAS, the EAS Summit will be coming in November as well as the APEC Summit in November. So, these are all sort of way stations that are at a very high level diplomatically where all of the players will be there. And, of course, we've also called for a halt by all of the claimants to moves in the region that will push their claims outside of the unclose framework or outside of the diplomatic process. And so, we continue to talk to the Chinese and also others in the region about coming together under some kind of common push to get a diplomatic solution. But really, because of the Chinese behavior and because they're the ones that are basically the proximate cause of the ratcheting up of tensions, we basically submit to them that it's their responsibility to come up with a way of ratcheting down the tensions. And, of course, we'll be continuing to press them very hard on that as we talk with others in the region. But we've got a number of target dates coming up. We've got a number of different possibilities of things they could do. And we're not necessarily pushing any one thing, but we very much want to get the claimants and the Chinese in a diplomatic process, which we think the Chinese should be doing a lot more to move forward. Hi, I'm Lisa Li with the legal and business consulting firm, Ponder International. This question is for Ms. Thornton. You mentioned information sharing earlier, and I was just wondering, in light of the OPM hacks, being actually attributed to Chinese hackers by the press as well as by the House, specifically in the government oversight reform committee, do you think that that has affected your work in promoting information sharing with the Chinese? And has there been, or will there be, political backlash with that? Questions about the OPM intrusions in the wake of the SNED meetings. But up to now, the US government has not officially attributed the OPM intrusion to the Chinese government. But that's not really the core of the issue, because there have been a number of intrusions over the years that have been attributed to the Chinese government. So whether one particular intrusion has attribution, I don't think that that's really going to make that much of a difference. Right here. Hi, Christian Lungarotti, I'm Basio Vitale. I'd like to know if during the meetings there was a discussion about the market status economy of China and there is any evolution from the US perspective on this point. Sorry about what? On the market economy status. Market economy status. That's an issue that China always raises. And they do raise it in our SNED process as well as in other dialogues, including the Joint Commission on Commerce and Trade. And it's an issue that we have a channel for discussion, a working group that discusses the policy issues that are involved and the criteria for market economy status and it allows China to raise any concerns that it has in this regard. So that is continuously an element of our dialogue that China raises. I think he wants to know what happens in December 2016. But I guess none of us know, can know until it happens. But unfortunately, we have time for just one more question. We're going to go as a gentleman at the time. Yes. Yes, yes. I've got a question on the economic side. So in regards to the negative list for the bilateral investment treaty that was discussed at SED, if and when will it be made public? And also, how does this negative list differ from a negative list for the free trade zones? Yeah. Thank you for that question. There was quite a bit of discussion, as I mentioned, about the bit negotiations. And the two sides did exchange negative lists in the most recent round of the bit negotiations. And as I mentioned, we're looking forward to a revised list in early September. And that'll be critical because at the end of the day, we need an agreement that will have enough support to be ratified and implemented so that both countries can benefit. And it'll need to be a high standard agreement. It'll need to have a very narrow negative list that results in substantial liberalization. So we're looking, we've had one milestone, which was the exchange of negative lists. And we understand that for China to undertake the transition to, in its foreign investment regime, towards a negative list approach, did involve a lot of work in the Chinese system. And so it was an important milestone. And we just want to make sure that we continue to make momentum in seeing that there's real liberalization so that we can have a high standard agreement. So this next iteration will be important in that. As for publicizing, we don't talk about the content of these negotiations. I'll refer you to the lead negotiating parties on our side, the US Trade Representative and the State Department for further details on that. And the State Department has no further comment. I want to thank all of you for coming today and for sharing us all the information about the process. I think what it shows to me is that it's impossible to summarize the relationship in just a simple word as partner or rival or as that famous China expert, Stephen Colbert, summarizes it as frenemies. It's much more than that. And we really appreciate your work on a daily basis, day in and day out. We hope there are some day outs. So you get a little bit of rest. So you can gear up for the summit that's coming up and for next year. Everybody, please join me in thanking our guests.