VZCZCXRO3738
OO RUEHCN RUEHGH
DE RUEHBJ #7119/01 1041304
ZNY CCCCC ZZH
O 141304Z APR 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2997
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RUEHWH/WHA DIPLOMATIC POSTS COLLECTIVE
RUEAIIA/CIA WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RHHMUNA/HQ USPACOM HONOLULU HI
RUEKJCS/SECDEF WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 03 BEIJING 007119 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 04/14/2016 
TAGS: PREL PINR PGOV CH CU VE XM
SUBJECT: A/S SHANNON LUNCH MEETING WITH DG ZENG ON 
CHINA-LATIN AMERICA RELATIONS 
 
 
BEIJING 00007119  001.2 OF 003 
 
 
Classified By: Deputy Political Minister Counselor 
Robert Griffiths.  Reasons 1.4 (b/d). 
 
Summary 
------- 
 
¶1.  (C) Chinese companies have not been spared from 
the political and economic turmoil in Venezuela, MFA 
Latin American and Caribbean Affairs Director General 
Zeng Gang told A/S Shannon during their April 14 
working lunch.  Despite the "severe protectionism" 
that has hurt the bottom line of PRC interests, Zeng 
said China will continue to build upon its 
relationship with Venezuela while encouraging Chavez 
to build better relations with the United States.  A/S 
Shannon pointed out Venezuela's erratic, unreliable 
and disturbing behavior has caused the United States 
to halt sales of military equipment and oppose 
Venezuela's bid for a UNSC seat.  Zeng showed interest 
in US investment and economic relations in Latin 
America, while lamenting that China has found the 
markets to be not as open as they had expected. 
Beijing has responded to increasing interest in Latin 
America by Japan, ROK and the EU by increasing its 
dialogue with those countries regarding the region. 
A/S Shannon invited Zeng to Washington DC for the next 
round of the Sub-Dialogue.  End Summary. 
 
¶2.  (C) MFA Director General for Latin America Affairs 
Zeng Gang and A/S Shannon continued their April 14 
morning discussions on Latin America over a working 
lunch. 
 
Venezuela 
--------- 
 
¶3.  (C) A/S Shannon briefed Zeng on the U.S.-Venezuela 
relationship, pointing out that Venezuela has a 
substantial economic relationship with the United 
States that one would not imagine by listening to the 
harsh political rhetoric coming out of Caracas. 
Venezuela's oil industry is tightly integrated with 
the U.S. economy; Venezela owns refineries and a 
network of gas stations throughout the United States. 
Caracas controls the flow of its oil from the fields 
in Venezuela to the gas pumps in the United States. 
Venezuela sells 1.5 million barrels of oil per day to 
the United States and has $7 billion invested in the 
United States.  Its trade surplus with the United 
States, as a percentage of trade, is the largest in 
Latin America. 
 
¶4.  (C) Zeng said political turmoil that has afflicted 
Venezuela is not good for Venezuela, the region or 
PRC-Venezuela relations.  Zeng complained that China's 
projects in Venezuela were complicated by Venezuela's 
political situation.  With the revival of Venezuela's 
economy, China-Venezuela trade links have begun to 
recover.  Still, growing Venezuelan protectionism is a 
problem.  Venezuela is forcing PRC companies, even 
those with long-established operations, to partner 
with local companies and establish joint ventures. 
Zeng also complained that PRC corporations have never 
enjoyed any "privileged and special treatment" from 
the Government of Venezuela, like others have. 
Nevertheless, Venezuela is an important and resource- 
rich country, and China and Venezuela have many areas 
of shared interest.  Zeng said that China has advised 
and encouraged Chavez, as well as new Bolivian 
President Morales, to build better relations with the 
United States and countries in the region. 
 
¶5.  (C) A/S Shannon responded that the United States 
appreciates China's message to the two leaders.  The 
United States wants to increase its cooperation with 
Venezuela in energy, counter-terrorism, counter- 
narcotic and commercial areas.  However, each time the 
United States has reached out to Venezuela, it has 
found Chavez's government to be erratic and 
unreliable.  He cited the recent attack on the U.S. 
Ambassador to Venezuela only two days after A/S 
Shannon had met with his Venezuelan counterpart. 
These actions, and others like the very-public 
Venezuelan military exercises premised on a U.S. 
 
BEIJING 00007119  002.2 OF 003 
 
 
invasion, are very disturbing to the U.S. Government. 
 
¶6.  (C) A/S Shannon said that because of Venezuela's 
continued disturbing and erratic behavior, the United 
States has been forced to take certain actions such as 
stopping sales of military equipment and opposing 
Venezuela's efforts to win a UNSC seat.  A/S Shannon 
reinforced with Zeng that this is not U.S. hostility 
towards Venezuela but rather the result of Venezuelan 
policy towards the United States. 
 
¶7.  (C) Zeng stated that while China noted the U.S. 
request to not sell military equipment to Venezuela, 
PRC companies had already sold three radar systems to 
Venezuela.  These are defensive in nature, not 
offensive weapons, and would help Venezuela's anti- 
drug efforts.  China had complied with relevant 
international laws and norms in making the sale. 
 
PRC Interest in U.S. Investment and Economic Relations 
--------------------------------------------- --------- 
 
¶8.  (C) Zeng asked about the trend of U.S. investment 
in Latin America, and whether it was still focused on 
manufacturing or had moved more into the service 
sector.  A/S Shannon said investment has steadily 
increased, although not always consistently as 
investors reacted to changing market conditions in 
each country.  While investment in manufacturing of 
autos and appliances continues, in the future 
investment will increasingly be in financial, 
insurance and telecommunication services. 
 
Frustrations with Brazil 
------------------------ 
 
¶9.  (C) Zeng lamented that Chinese investors had also 
not found the Latin America markets as open as they 
had expected.  Even a relatively rich country like 
Brazil insists on restricting the activities of 
foreign investors.  A/S Shannon pointed out that 
Brazil has only recently become a trading nation, and 
that there is a split within the country between 
exporters favoring trade and those benefiting from the 
protected local companies.  An FTAA among Latin 
American countries and the United States would not only 
open U.S.-Latin American markets, but would create 
more dynamic and beneficial trading relationships 
among Latin America economies themselves. 
 
Dialogues on Latin America 
-------------------------- 
 
¶10.  (C) Zeng observed that more and more countries, 
such as Russia, Spain, Japan and South Korea, have 
their eye on Latin America.  The MFA is working to 
establish mechanisms for regular dialogues with these 
countries.  Zeng confirmed that there would be a 
trilateral dialogue on Latin America between China, 
Japan and the ROK later in April.  Latin American also 
came up during Spanish PM Zapatero's recent 
discussions in Beijing and during a PRC-Spain forum 
last month.  Spain wants to enhance its dialogue with 
Beijing on Latin America by starting a China-Spain- 
Latin America "trilateral" dialogue.   Zeng said China 
is open to any form of consultations and dialogues 
with Latin American and non-Latin American countries. 
 
¶11.  (C) Zeng asked A/S Shannon if the United States 
engaged in formal dialogues on Latin America with 
other countries, like Japan, the ROK and the EU.  A/S 
Shannon reported that there have been 25 senior-level 
meetings with Japan on Latin America, while his recent 
trip to Seoul represented the first dialogue with the 
ROK.  The United States has regular consultations with 
the EU and policy planning talks with Canada and 
Brazil. 
 
Growth i PRC-Latin America Relations 
------------------------------------ 
 
¶12.  (C) Zeng said that there were only one or two 
Latin America countries that recognized the PRC in the 
late 1970's when he was first posted to Latin America. 
 
BEIJING 00007119  003.2 OF 003 
 
 
Between 1977 and 1979, the King of Spain was the only 
leader of a Spanish-speaking country to visit China, 
but last year alone Beijing welcomed the presidents of 
Colombia and Chile, the vice-president of Peru, four 
prime Ministers and nine foreign ministers and vice 
foreign ministers from Latin America. 
 
Fruitful Results/Regular Meetings Proposed 
------------------------------------------ 
 
¶13. (C) Characterizing this first sub-dialogue on 
Latin American affairs as candid, friendly, 
transparent and constructive, Zeng said the morning 
and lunch time conversations allowed both sides to 
enhance their mutual understanding of each other's 
policy objectives and areas of major concern.  These 
fruitful discussions will help prevent unwise policy 
move that could hurt mutual interests.  A/S Shannon 
agreed, pointing out that the wide-ranging discussions 
indicated a large potential for deepening U.S.-China 
relations.  He said he looks forward to hosting Zeng 
in Washington DC for the next round of talks. 
 
Participants 
------------ 
 
¶14. (U) United States: 
 
WHA Assistant Secretary Thomas Shannon 
WHA Senior Executive Assistant John Creamer 
Deputy Political Minister Counselor 
Embassy Notetaker 
Interpreter 
Embassy Control Officer 
 
China: 
 
MFA Latin American and Caribbean Affairs DG Zeng Gang 
MFA Counselor Wei Qiang 
MFA Division Director Liang Yu 
MFA Deputy Division Director Fu Xinrong 
MFA Third Secretary Nie Quan 
Interpreter 
 
¶15.  (U) The delegation cleared this cable. 
RANDT