Beijing, China - S&ED Opening Session Remarks:

SECRETARY KERRY: Well, good morning, everybody, Ni hao. I’m happy to be here. We’re very grateful to President Xi for coming this morning and for opening up this Strategic and Economic Dialogue, and to all of his designated representatives – Vice Premier Liu, Vice Premier Wang, and State Councilor Yang, and to Secretary Lew, my colleague in this mischief. And to all of our American colleagues and to distinguished guests, to all of those of you who are here from civil society, please accept the greetings of President Obama and the American people, and our openness to the full measure of what can be accomplished in these next two days. We are very, very pleased to be here and we very much look forward to the hopes of both of our peoples that these two days of discussions will move our relationship forward.

I want to especially express my gratitude for the warm welcome that I received on my arrival yesterday. State Councilor Yang and I were able to engage in a series of frank discussions over the course of the wonderful dinner last night in – I think it’s Meeting House Number 18 if I’m correct – beautiful view and good, solid conversation. And I think we got the strategic track of this dialogue off on a good start.

Vice Premier Liu gave me a very special treat, which was a personal tour of part of the Forbidden City, the garden – the Qianlong Garden that has been under restoration, 230 years old, and I understand that it is a partnership between the Chinese Palace Museum and the New York-based World Monuments Fund that has helped to restore the elegance and the extraordinary beauty of this place. Frankly, I think our whole team interpreted the privilege of visiting that old palace and garden as an expression – a symbol, if you will, of the important development which is represented in the growing eagerness of Americans and Chinese to join forces for the benefit of both of our countries.

And I hope that in that same spirit, we will be able to reach new milestones in our discussions in as many areas as possible. I’m also confident that that can be the case because both of our leaders – President Xi and President Obama – have shown a very steady determination over these years to broaden our bilateral agenda with very practical and positive outcomes in mind. And President Xi just shared with us his sense of that progress beginning with his own important meeting with all of us at Sunnylands in California.

Climate change is a very clear example of the benefit of this dialogue we’ve been having. Seven years ago – and I was there as were some of you – at the Conference of the Parties in Copenhagen, the United States and China were on exactly opposite ends of key issues, and as a result, the entire negotiation failed. It literally crashed. But over the last three years, because we took the time to work together, because we opened our minds up to the possibilities, because we spent a lot of hours together working through the details, we were able to build up our climate cooperation. And in the end, we were able to reach a landmark joint announcement from our two presidents on our emissions reduction targets last December as a result of that. And you have no idea how many people came up to me and said – and I’m sure they said the same thing to Minister Xie – that if it weren’t for China and the United States coming together, Paris probably couldn’t have happened. So we came together behind strong action and virtually every major country joined us in adopting an historic agreement that will reduce greenhouse gases, curb the harmful effects of climate change, and most importantly, move the private sector with a major message that has come from 196 countries – that this is the direction we need to move in. That signal to the marketplace will unleash enormous amounts of capital investment that will produce new jobs, new opportunities. It would not have happened without our leadership and our cooperation.

Nuclear nonproliferation is another example. Together, we helped to negotiate the Joint Comprehensive Plan of Action and resolved the international community’s 10-year-long concern about Iran’s nuclear program, and we together removed a major threat to the stability of the Middle East and to the danger of proliferation. That example stands as a stark message to us about what is happening in the DPRK and the necessity of China and the United States to stand firmly and strongly together in the same way.

As you know, we recently worked together to adopt the strongest UN Security Council sanctions ever on North Korea in response to that country’s continued violation of past resolutions. And we believe it is imperative to keep the pressure on North Korea in order to halt any and all actions that threaten its neighbors and threaten the peace and security of the region. We were able to be successful with Iran. We’ve set the model. We can be successful ultimately with North Korea. There is no reason that any country in the world today, given the disposition of nations around the world, given the attitude of the Security Council, that any country needs to move to create nuclear weapons. The world is moving in the opposite direction and we need to show the same leadership we showed on climate change and Iran in order to succeed.

In 2014, we worked together to help stop the spread of the Ebola virus and end what could have become a global crisis where people were predicting that a million people were going to die by the Christmas of two years ago. Last year, we formally agreed to synchronize our actions on global development policy and on health policy. Now, we are working with the African Union to launch the Africa Center for Disease Control and Prevention at the beginning of next month.

So, together, my friends, we have made the protection and the conservation of our oceans a major priority, and we are going forward with measures to designate additional marine-protected areas and to fight pollution. Many people have asked me and said, “Why does the Secretary of State – why are two big countries working on something like the oceans?” And the answer is that life itself on Earth depends on the oxygen that comes from the oceans, the food that comes from the oceans, on the health of the oceans, and our climate is set by the currents and the movements of the ocean. So later today, State Councilor Yang and I will meet a group of “Blue Pioneers,” as we call them – students of conservation supported by a partnership between the Chinese and American foundations, and that is another sign of increasing collaboration between our countries.

We continue to work together to advance efforts to curb illegal wildlife trafficking, including a nearly complete ban on trade in ivory.

My friends, the list goes on, and I won’t go through all of it. But I really look forward with our team to joining you in our sessions in the next two days in order to work on that list.

Now, we all know there are, as President Xi just said to everybody – and he was very upfront about it and we appreciate that, and very reasonable in the way in which he suggested we should deal with it – and that is there are areas of disagreement or lack of resolution on one issue or another that exist between us. And it is absolutely vital that we use this meeting in good spirit, in good faith, constructively, to work on those differences – whether they are on human rights or on maritime security or fair trade or cyber or government transparency. The S&ED is one of the best opportunities that we have to discuss our differences and to seek creative ways to narrow them or to eliminate them altogether. That is how we turned climate change from something we were opposed to together to something we worked on together into a remarkable partnership. And that is how we can fulfill our mutual duty as the world’s two largest economies – nations with very high global expectations and responsibilities.

In that vein, the United States will make it clear that we are looking for a peaceful resolution to the dispute – the disputes of the South China Sea. We are not a claimant. We have taken no position on any of the claims of any claimant. The only position we’ve taken is let’s not resolve this by unilateral action; let’s resolve this through rule of law, through diplomacy, through negotiation. And we urge all nations to find a diplomatic solution, rooted in international standards and rule of law.

Finally, we should bear in mind that nothing does more to assist our official deliberations than the involvement of our people – your people, our people, as they are represented through grassroots organizations in the United States and in China. After all, that’s the purpose of government – to represent the people and to meet the needs of our people, both of us – even though, as President Xi said, we have different systems, different culture, different history. We acknowledge that. We respect that. But the value of our ties is most clearly respected and reflected in outside-of-government meeting rooms – in busy work places, academic settings, scientific laboratories, music halls, athletic fields, and in the freedom of daily communication between our people, which President Xi referred to, and the numbers of people who are going back and forth between our countries. That is where the health and security of our future relationship will find its truest measure, and that is where the most telling of our official policies is ultimately going to be played out.

During our dialogue last year, Vice Premier Liu referred to a Chinese saying that “even a thousand-story tower starts with small piles of Earth.” My message today is that we should be ambitious in building that tower.

I know President Obama shares that ambition and he understands the stakes of this dialogue and exchange. As he wrote in a letter to President Xi on the occasion of this S&ED, he said, “I am committed to cultivating a relationship that improves the lives of both of our nations’ citizens by making the air they breathe cleaner, the energy they consume more sustainable, the economic opportunities they reach for more abundant, and the world in which their children grow up safer.”

As diplomats, we all know that it is always very easy to just repeat the past statements of others rather than try to address the hard questions and resolve areas of tension. But the reason our leaders initiated this dialogue is because of the incredible potential for further growth and cooperation between China and the United States. Sustained growth, however, requires a willingness to constantly ask ourselves whether or not there is more that we could do or there’s something we could do differently, to ask ourselves whether obstacles to progress can be overcome, or fresh opportunities – with a little more daring – that we might be able to explore them together.

Above all, let me say this: It is vital that we do not allow old thinking – the vestiges of the Cold War and rigid ideological doctrine – to force us in the wrong direction, either of us, or to stand in the way of 21st century possibilities and realities. I just heard President Xi tell us how the globalized world is one that is moving more rapidly than ever before. Yes, it is. He is absolutely correct. And that makes governing more complicated. It also makes the relationship between two strong nations and strong economies like ours more important. The globalized world of this era requires cooperation, not conflict.

And all through its long history, China has contributed in so many ways – in the arts, in the sciences, in literature, in philosophy, and most recently, obviously, for decades now, in the workings of the UN Security Council in global politics. I am proud to say that in a much shorter span time – because we are a younger nation – the United States has worked hard to similarly contribute to the global order and structure, and to bear the burden of responsibility.

Now, we have a chance – we really do – to define a new relationship. We have an inescapable responsibility – a shared duty – to lead in the direction of stability, prosperity, and peace. And it is up to us and to our successors to ensure that America and China are more partners than rivals, more in agreement than disagreement about the rule of law, more in harmony than at odds over priorities, and more confident with each passing year in each other’s intentions. That’s how you build trust.

This dialogue can help us to fulfill that responsibility through a candid exchange of views, an explanation of the positions we hold, and a good faith search for additional areas of common ground and common effort. And I look forward to very fruitful and productive conversations.

Thank you all. (Applause.)

SECRETARY LEW: (In progress) – shared belief that it’s vital to create tangible results for the citizens of our two countries. The benefits of partnerships like these were apparent since the inception of this dialogue. And although this will be the last S&ED of the Obama Administration, I believe our record demonstrates why it’s so important that such bilateral – productive bilateral engagement continues. Working closely together has enabled us to better understand our differences and to identify areas where we can expand cooperation, where common ground on compatible interests can be found. Equally important, our interactions have built a strong foundation so we’re better able to narrow our differences and make progress even on the more difficult issues where we disagree.

Our discussions over the next two days will cover a range of issues important to both the American and the Chinese people. We’ll discuss ways to promote strong, sustainable, and balanced growth; how we can improve financial sector function and stability; create opportunities for our companies and workers in each other’s – to compete in each other’s markets; and uphold our joint responsibility of strengthening the international economic system and its high standards of governance. We also look forward to efforts by the Chinese authorities to make progress on a number of priorities of the United States, including to reduce Chinese excess industrial capacity, improve data and regulatory transparency, and lower barriers to trade and investment.

Together, the United States and China account for a third of global GDP and nearly 40 percent of recent economical growth. Our countries have an enormous stake in each other’s economic success. And as the world’s two largest economies, our policies and economic management will not only shape the prosperity of our own people; they will structurally shape the health and development of the global economy as well.

The American economy continues on a path of steady growth. After seven years of sustained growth, key underlying economic indicators show that this positive trajectory will continue going forward. With the unemployment rate near an eight-year low, improved labor market conditions are boosting household incomes, and consumer confidence is near record levels that prevail – near levels that prevailed prior to the Great Recession, but with considerably lower levels of household debt.

While slowing, China’s economy continues to be among the fastest-growing in the world. The successful implementation of China’s economic reform agenda – which we will be discussing – will be essential to continued growth. As China undergoes a challenging economic transition, implementing reforms that lead to greater openness and give the market the decisive role in allocating resources will support a successful shift towards a more sustainable economic model and a better medium and long-term economic outlook.

As China charts its course, we recognize our shared interest in the pursuit of policies that support sustainable growth. We see China’s stated reform goals as complementary to the agenda for our bilateral economic engagement. And we hope to focus our plans to implement those reforms to achieve the potential benefit they promise for the future.

Consistent with China’s reform agenda, the United States supports efforts to reduce excess capacity and leverage in the economy and allow market forces to determine the allocation of resources. Excess capacity has a distorting and damaging effect on global markets and implementing policies to substantially reduce production in a range of sectors suffering from overcapacity – including steel and aluminum – is critical to the function and stability of international markets.

We were pleased to see the reforms made last year and the recognition of that progress in the IMF decision to include the RNB in the SDR basket. Again, in line with China’s reform agenda, we also support development of Chinese capital markets which create conditions to move further toward a market-determined exchange rate and the adoption of prudent bankruptcy resolution standards. And as a broad policy matter, it’s also important that China use its fiscal and lending policies to support stronger consumer demand since growing consumer demand is essential for a successful economic transition.

China has benefited enormously from opening up to and integrating with the world economy. All sectors were instrumental in this successful integration, including nongovernmental organizations. NGOs have served to strengthen our bilateral relationship and it made new forms of cooperation possible. They helped to nurture innovations, to address critical human needs, and their work allows for larger economic success.

We’ve been concerned that China’s recently passed foreign NGO management law will weaken that foundation by creating an unwelcome environment for foreign NGOs. President Obama and President Xi have discussed this issue, and addressing it will be important for our bilateral relationship.

China’s G20 presidency this year symbolizes its growing global economic standing. We support a greater role for China in the existing international economic architecture and expect that China will continue to take on more responsibility in maintaining and advancing the high standards of existing multilateral institutions. To those important ends, continued cooperation between the United States and China on the diverse set of issues covered in the S&ED is crucial.

Over the past 10 years of this dialogue, through candid engagement and debate, we’ve demonstrated and reaffirmed our ability to manage our differences effectively and make progress toward improving the livelihood of American and Chinese citizens. I’m proud that we’ve made concrete progress with China in areas like promoting the rule of law, strengthening exchange rate transparency and regulatory transparency, upholding the high standards of the international financial architecture, opening markets and technology and environmental sectors, and furthering economic and financial reforms. It’s important that such progress continues in this eighth round of the S&ED and beyond.

And I’d like to thank Vice Premier Wang for his partnership on these issues. We look forward to productive discussions over the next two days as we work together to tackle the mutual challenges that we face.

Thank you very much. (Applause.)