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P 180900Z APR 06
FM AMEMBASSY BEIJING
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UNCLAS SECTION 01 OF 04 BEIJING 007349 
 
SIPDIS 
 
USINT HAVANA PRIORITY 
AMEMBASSY SEOUL 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL ECON EIND ETRD CH CU TW VE XM
SUBJECT: WHA A/S SHANNON DISCUSSES LATIN AMERICA WITH 
CHINESE BUSINESSMEN AND SCHOLARS 
 
REF: BEIJING 6849 AND BEIJING 01810 
 
 
 
SUMMARY 
------- 
 
¶1. (SBU) Over dinner with Chinese businessmen and academics 
on April 13, WHA Assistant Secretary Thomas A. Shannon 
explained that the United States is launching consultations 
with China on Latin America as part of a broader dialogue. 
The Chinese executives explained that their firms operate in 
Latin America on a commercial basis and do not engage in 
politics.  China,s technology and need for natural resources 
complement Latin America,s rich resource base, and lay the 
basis for economic cooperation.  The executives said they 
could not stop President Chavez from playing the &China 
card,8 but they did not like it.  A Chinese oil executive 
noted that his firm received no special treatment from the 
Venezuelan authorities.  End Summary. 
 
Consulting with China 
--------------------- 
 
¶2. (SBU) Chinese Academy of Social Science (CASS) Institute 
of Latin American Studies Deputy Director Professor Jiang 
Shixue reported that Americans he encounters are intensely 
interested about China's relationship with Latin America. 
Jiang said he was mobbed by U.S. reporters during a 
conference at which he spoke in Miami in late 2005, and his 
picture featured prominently in the Miami press.  China 
Institute of Contemporary International Relations (CICIR) 
Division of Latin American Studies Director Professor Dr. Wu 
Hongying welcomed A/S Shannon's visit as a milestone. 
 
¶3. (SBU) A/S Shannon explained that his trip, which 
represents the first USG/China consultation on Latin America, 
is part of the larger strategic dialogue with the Chinese led 
by Deputy Secretary of State Robert Zoellick.  The purpose of 
the consultations is to identify areas of shared interests, 
and solicit China's cooperation in promoting trade, political 
stability, and open markets at a time when Latin America is 
undergoing significant political changes.  Such cooperation 
will help dispel suspicions about China,s intentions in the 
area. 
 
Chinese Firms Focus on Finding Profitable Ventures 
--------------------------------------------- ----- 
 
¶4. (SBU) China National Petroleum Corporation (CNPC) Vice 
President Zhou Jiping stressed the global nature of CNPC's 
operations, with offices in 22 countries and 58 international 
projects including Venezuela, Ecuador, Peru and Mexico.  Zhou 
 
BEIJING 00007349  002 OF 004 
 
 
explained that since U.S. and other large western oil firms 
have little interest in "marginal" oil fields, CNPC was able 
to secure such a small field in Venezuela in 1998.  Using 
Chinese technology, CNPC was able to increase production from 
4,000 barrels per day (bpd) to 40,000 bpd.  In Peru, CNPC 
took over a 120-year old field that U.S. firms had abandoned 
and increased production from 600 bpd to 7,000 bpd (See 
Beijing 1810).  He voiced some concern about political 
stability in Latin America, but said Chinese firms like CNPC 
have to go where the resources are.  CNPC's discussions with 
interlocutors in Latin America focus on trade, not politics. 
 
¶5. (SBU) Baosteel Group Corporation Business Development 
Department Director Dr. Lin Li said Baosteel has interests in 
Brazil and Venezuela.  China imports about 10 million tons of 
iron ore from Brazil, but demand in China is great. Baosteel 
would like to expand its operations.  Baosteel echoed CNPC,s 
view that its interaction with Latin America focuses on 
business, not politics. 
 
¶6. (SBU) China Minmetals Senior Vice President Xu Siwei 
stressed that Minmetals is in Latin America to maximize 
returns for its investors.  It's a win-win endeavor for both 
China and Latin America.  Minmetals interests in ferrous and 
non-ferrous metals include iron, magnesium, copper, tin, 
aluminum, and antimony.  Minmetals has exported USD200 
million worth of mining equipment to Brazil.  China Minmetals 
Non-ferrous Metals Company, Ltd. Vice President Peng Pugang 
said that Minmetals is a global enterprise with 50 branches. 
Europe, North America, and East Asia are its key markets. 
One third of Minmetals employees have overseas experience, 
Peng said.  Chinese technicians often are able to work well 
with poorly educated or equipped workers, like those in the 
highlands of Bolivia. 
 
United States as Partner, Market for Chinese Firms 
--------------------------------------------- ----- 
 
¶7. (SBU) Minmetals VP Peng said that Minmetals has a 30-year 
relationship with Chevron, with the two firms partnering to 
produce bauxite in Jamaica for the U.S. market.  In Bolivia, 
Minmetals is developing tin and antimony to supply the U.S. 
market.  Such examples show that an important part of 
Minmetals' activities have a North American focus, Peng said. 
 U.S. firms' high technology complements Chinese firms' low 
labor costs. 
 
¶8. (SBU) CNPC VP Zhou reinforced this point,  saying that he 
was meeting with executives from Chevron the following  day 
to discuss cooperation in Latin America.  Zhou recounted how 
Chevron had helped CNPC get established in Papua New Guinea 
in the early 1990's. 
 
 
BEIJING 00007349  003 OF 004 
 
 
¶9. (SBU) A/S Shannon welcomed such news of Sino-American 
cooperation in Latin America.  He encouraged the Chinese 
businessmen to make this cooperation known to audiences in 
North America. 
 
Chinese Comment on Chavez and the "China Card" 
--------------------------------------------- - 
 
¶10. (SBU) CASS Professor Jiang stressed that China had not 
encouraged President Chavez to play the "China card," and did 
not appreciate it. "Gifts" like the F-16s Chavez had at one 
time alluded to passing to China are something the Chinese 
would not accept.  The other Chinese academic and business 
guests concurred.  Jiang asserted that Venezuela spends more 
to win the hearts and minds of Latin Americans with economic 
aid than the United States. 
 
¶11. (SBU) CNPC VP Zhou deplored Venezuela's decision to make 
foreign oil companies change their current servic contracts 
for 30 percent minority stakes in joint venture companies, 
but said foreign oil firms had no choice but to accept. 
Likewise, Venezuela's decision to increase the tax rate from 
25 percent to 30 percent or even to 50 percent was not good 
for the investment climate, but foreign firms had no 
alternative.  U.S. firms had complained, but CNPC resigned 
itself to the new measures as part of a regional trend.  CNPC 
received no special treatment from the Venezuelan Government, 
he noted. 
 
¶12. (SBU) Zhou confirmed that there are discussions between 
CNPC and the Venezuelan authorities about building a pipeline 
across Colombia to the Pacific.  Zhou stressed that CNPC had 
not invited this "China card," and pointed out that the 
economic feasibility of the project and the ability to obtain 
transit rights were open to question. 
 
Participants 
------------ 
 
U.S. Side 
 
¶1. Mr. Thomas A. Shannon, WHA Assistant Secretary 
¶2. Mr. David Sedney, DCM (host) 
¶3. Mr. John S. Creamer, Senior Executive Assistant 
¶4. Mr. Christopher Beede, Acting Economic Minister Counselor 
¶5. Mr. Eric Madison, Econoff (note taker) 
¶6. Mr. Paul Kreutzer, Poloff 
¶7. Mr. James Brown, language officer 
 
Chinese Side 
 
¶1. Mr. Xu Siwei, China Minmetals Senior VP 
¶2. Mr. Peng Pugang, China Minmetals Non-Ferrous Metals VP 
 
BEIJING 00007349  004 OF 004 
 
 
¶3. Mr. Zhou Jiping, China National Petroleum Corp. VP 
¶4. Ms. Wu Hongying, Phd., CICIR Research Professor 
¶5. Mr. Lin Li, Phd., Baosteel Group Corp. Business 
Development Director 
¶6. Mr. Jian Shixue, ILAS CASS Deputy Director 
 
¶13. (U) The WHA delegation has cleared this report. 
 
SEDNEY