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UNCLAS SECTION 01 OF 03 GUANGZHOU 006981 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM 
USDOC FOR 4420/ITA/MAC/MCQUEEN, CELICO, DAS LEVINE 
STATE FOR USTR 
USPACOM FOR FPA 
 
E.O. 12958: N/A 
TAGS: ECON PHUM PGOV KCRM PREL CH TW KN
SUBJECT: Staffdel Halpin: Thoughts on Chen Shuibian, Social 
Stability, and Kim Jong-Il 
 
REFERENCE: 05 GUANGZHOU 32000 
 
THIS DOCUMENT IS SENSITIVE BUT UNCLASSIFIED.  PLEASE PROTECT 
ACCORDINGLY.  NOT FOR RELEASE OUTSIDE U.S. GOVERNMENT 
CHANNELS.  NOT FOR INTERNET PUBLICATION. 
 
¶1. (SBU) SUMMARY: Chen Shuibian's pledge to abolish the 
national unification council and guidelines was the first 
step in a dangerous political game and has outraged mainland 
academics, said scholars at China's largest Taiwan Research 
Institute during a recent visit by Dennis Halpin, 
professional staff member of the U.S. House International 
Relations Committee.  Taiwanese businessmen in Xiamen are 
also united in their disapproval of Chen's actions and would 
like to see the U.S. government publicly reprimand him. 
Separately, NGO representatives said the roots of social 
instability in China lie in corruption by rural officials. 
Kim Jong-Il's reasons for visiting Guangzhou, Shenzhen, and 
Zhuhai in January 2006 are still unclear, though it seems 
likely he is planning a gradual economic reform program, 
according to a contact at the South Korean consulate in 
Guangzhou.  Another possible motive to visit Zhuhai may have 
been to establish a new banking network following the recent 
U.S. crackdown on a Macau bank that held illicit North 
Korean funds.  END SUMMARY 
 
Scholars See Chen's Actions as Self-Serving 
------------------------------------------- 
 
¶2. (SBU) During a February 23-25 visit to Guangzhou and 
Xiamen, located on the mainland side of the Taiwan Straits, 
Halpin discussed cross-straits relations at Xiamen 
University's Taiwan Research Institute.  Scholars at the 
institute, which is the first and largest of its kind in 
China, discussed Chen Shuibian's pledge to abolish the 
unification council and guidelines (the visit took place 
just prior to Chen's February 28 approval of a decision by 
the National Unification Council that calls for the National 
Unification Guidelines to "cease to apply").  According to 
Assistant Director Li Peng, Chen's statements should be seen 
in the context of Taiwan's recent municipal and county 
elections, in which Chen's party (DPP) suffered losses. 
Chen is a lame-duck president and is unlikely to have any 
significant impact over the next two years, and is therefore 
looking to increase his political profile and take on the 
mantle of the independence movement, said Li.  Chen has 
three likely intentions: begin a radical reversal of his 
"Four Nos" pledge in 2000; provoke a strong reaction from 
the mainland in order to gain political supporters in 
Taiwan; and force the United States to side with Taiwan 
during U.S.-China negotiations ahead of PRC President Hu 
Jintao's planned April visit to the United States. 
 
¶3. (SBU) Halpin and Li agreed that Chinese leaders have 
become more subtle in their dealings with Taiwan in recent 
years, and Li said China's reaction in this case would not 
be aggressive.  Li expects that Chinese leaders are closely 
watching the reaction of the United States, with the hope 
that high-level U.S. leaders -- Secretary Rice in particular 
-- will publicly condemn Chen's statements.  Professor Lin 
Jing said Chinese leaders need to fashion two separate 
messages for Taiwan: a strong condemnation for Chen and a 
more accommodating response for the Taiwanese people. 
Another scholar equated Chen's comments to former Taiwan 
President Lee Tenghui's 1999 remarks that cross-straits 
relations should be "state-to-state," to which the Chinese 
government responded with military exercises.  Lin remarked 
that Chen has learned from Kim Jong-Il's handling of its 
relations with the United States, Japan, and South Korea and 
has implemented a similar policy with regard to Taiwan: a 
stable cross-strait relationship does not benefit Taiwan, 
and tensions work to focus international attention on the 
region.  Li added that he planned to visit Taiwan in March 
and would speak with politicians and scholars on this issue. 
At the end of the meeting he gave Halpin a letter from the 
director of the institute, Liu Guoshen, that called on the 
United States to maintain the status quo and not give 
Taiwanese politicians "unrealistic expectations." During a 
separate visit to the Guangzhou Party School, President Wang 
Yongping said Chen's comments were regrettable but should be 
handled peacefully.  He stated that Chinese people should 
not shed the blood of Chinese people. 
 
GUANGZHOU 00006981  002 OF 003 
 
 
 
Taiwanese Businessmen Disapprove As Well 
---------------------------------------- 
 
¶4. (SBU) During a dinner in Xiamen with Halpin and 
Congenoffs, four Taiwanese businessmen who live and work in 
Xiamen not unexpectedly showed little sympathy for Chen and 
echoed the scholars in their views of Chen's intentions. 
One of businessmen said Chen was stirring up trouble for 
political advantage.  Three of the businessmen said the 
United States should "do something."  When asked how the 
United States should respond, one of them said the United 
States should withdraw the director of the American 
Institute of Taiwan as a symbolic and high-profile gesture. 
Another likened Taiwan's largely symbolic National 
Unification Council to a person's appendix -- one does not 
notice it until it causes trouble.  The businessmen 
estimated that of the 600 members of Xiamen's Taiwan 
Business Association, only 10 to 20 are Chen supporters, and 
they keep their opinions to themselves.  One of them added 
that mainland officials probably keep track of the political 
attitudes of prominent Taiwanese businessmen.  (Pro-Chen 
business supporters in China have faced difficulties in the 
past after their views have been made public.) 
 
Taiwanese Businesses Are Still Welcome Here 
------------------------------------------- 
 
¶5. (SBU) In a subsequent meeting with Xiamen's Taiwan 
Affairs Office, Deputy Director Wang Mingshui said Chen's 
statements were "dangerous" and expressed hope that the 
United States would pressure Chen to moderate his actions. 
Wang said his office has an excellent working relationship 
with the 60,000 Taiwanese who live and work in Xiamen. 
Xiamen has three of China's four "Taiwan investment zones", 
which offer inexpensive land and tax breaks to Taiwanese 
investors (Shanghai has a fourth).  The industrial output of 
the city's 2,300 Taiwanese businesses account for 45 percent 
of Xiamen's total industrial output.  Wang said Xiamen has a 
law that guarantees the rights of Taiwanese investors and 
mandates a special office to provide services such as 
information on regulations and area schooling.  To 
illustrate the city's good will toward Taiwanese 
businessmen, he said that during an energy shortage in 2004 
the city exempted Taiwanese businesses from energy-saving 
measures. 
 
The Roots of Rural Unrest in South China 
---------------------------------------- 
 
¶6. (SBU) Four NGO leaders and academics discussed with 
Halpin and Congenoffs the effect of corruption and poor 
government management on social stability in South China. 
Liu Wenjing, associate professor, Jinan University, said 
NGO's in Guangdong primarily focus on one of two issues: 
migrant labor and charitable giving.  Guangdong is home to 
more than 30 million long-term migrant laborers, many of 
which live in the factory-intensive Pearl River Delta.  Yao 
Yuanguang, who runs an NGO that provides information on how 
to establish other NGOs, said creating a truly grass-roots 
organization is a difficult and frustrating endeavor.  He 
said most NGO's are semi-official and therefore vulnerable 
to government meddling.  On the subject of social stability, 
Wang Yunxiang, professor and NGO researcher at the Guangdong 
University of Foreign Studies, said one of the causes of 
rural unrest is wealthy families that accumulate power and 
use hired thugs to put down opposition.  In addition, 
factory owners sometimes bribe local officials to ignore 
environmental damage that hurts citizens.  The participants 
noted a law that is currently before the National People's 
Congress that would for the first time allow prosecutors to 
sue companies for environmental damage. 
 
The Role of the Press 
--------------------- 
 
¶7. (SBU) In a separate meeting, Deputy Editor Liu Hailing of 
the Guangzhou newspaper Yangcheng Evening News said the 
Chinese media plays a vital role in shedding light on 
government misconduct.  He cited his paper's reporting on 
coal mine accidents and the subsequent attempts by local 
governments to cover up their responsibility.  He said the 
 
GUANGZHOU 00006981  003 OF 003 
 
 
Chinese government has tightened controls on Internet media 
during the past two years, and has justified these controls 
-- not without reason -- as efforts to reduce pornography 
and pyramid schemes.  Liu said the Guangdong government has 
been forced to take a more sophisticated approach to dealing 
with the media and public relations.  He cited the December 
2005 incident in Dongzhou, Guangdong, in which soldiers 
killed approximately 10 townspeople who were protesting 
government plans to build a thermal power plant (see 
Reftel).  The government was initially silent on the matter, 
but then decided to hold a press conference to counter 
distortions in the international media.  In a separate 
meeting, Guangzhou Party School President Wang Yongping 
brushed aside questions on rural unrest in South China, 
saying such incidents are isolated and rare, a surprising 
statement in light of the fact that two headlined protests 
in China were in Guangdong (Taishi and Dongzhou) and the 
Ministry of Public Security announced that China had 87,000 
incidents of large-scale protest in China in 2005, an 18 
percent increase over 2004.  He said economic growth is 
built on social stability, and conditions in South China are 
stable. 
 
Kim Jong-Il's Opaque Intentions 
------------------------------- 
 
¶8. (SBU) During a meeting at the South Korean Consulate in 
Guangzhou, Consul Ku Taehoon said Kim Jong-Il's visit to 
Guangdong in January 2006 may indicate that he intends to 
initiate gradual economic reform in North Korea.  Kim's 
visit closely mirrored earlier visits to South China by 
former Chinese paramount leader Deng Xiaoping in 1984 and 
¶1992.  Ku said reforms would likely occur slowly, beginning 
in a few select locations.  He remarked that this strategy 
may be a sign of desperation on Kim's part, as the economic 
situation is North Korea seems to be worsening.  Ku cited an 
unverified report that recent birthday celebrations for Kim 
in North Korea did not include extra food for citizens, as 
is typical.  Kim also said he has heard rumors that Kim has 
a heart condition and may have sought treatment in 
Guangzhou.  When asked what Kim did in Zhuhai, which is 
adjacent to Macau, Ku said he reportedly met with North 
Korean businesses.  Halpin noted that the trip took place 
only a few months after the United States identified Macau's 
Banco Delta Asia as a launderer of illicit North Korean 
profits generated from the use of counterfeit U.S. currency. 
He raised the possibility -- not previously contemplated by 
either Ku or Halpin -- that Kim may be interested in 
establishing new banking channels in Zhuhai in order to 
resume laundering funds. 
 
Comment 
------- 
 
¶9. (SBU) Scholars at the Taiwan Research Institute are 
generally more nuanced in their analysis of cross-straits 
relations than other mainland observers and are less 
vehement in their denunciations.  Thus it is likely that 
when they display the clear animosity toward Chen that we 
observed, analysts and politicians in other parts of the 
country are fuming.  The benefits that Taiwan investment 
brings to South China add a dose of reality to the issue, 
however, and we saw no sign that the relationship between 
local officials and Taiwan businesspeople has soured. 
 
¶10. (U) Mr. Halpin has cleared this cable. 
 
DONG