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RUEHSH/AMCONSUL SHENYANG 0005
RUEHDN/AMCONSUL SYDNEY 0599
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RHHJJAA/JICPAC HONOLULU HI
RHHMUNA/HQ USPACOM HONOLULU HI

C O N F I D E N T I A L SECTION 01 OF 05 SUVA 000156 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 04/21/2016 
TAGS: PREL EAID ECIN ETRD FJ CH TW
SUBJECT: CHINA WADES MORE DEEPLY INTO THE PACIFIC 
 
REF: A. SUVA 123 
     ¶B. BEIJING 5362 
     ¶C. SUVA 055 
     ¶D. SUVA 139 
 
Classified By: AMBASSADOR DINGER.  SECTIONS 1.4 (B) AND (D). 
 
Summary 
------- 
¶1. (C) Chinese Premier Wen Jiabao and his delegation met with 
many Pacific Island leaders and businesses during an April 
4-5 visit to Fiji.  The leader of each of the eight Pacific 
Island nations with which China has relations held private 
discussions with Premier Wen, at the conclusion of which they 
signed bilateral communiques.  Each nation also signed the 
China-drafted "Guiding Framework" for regional cooperation. 
The bilateral initiatives are diverse and potentially 
substantive, while the Framework is more aspirational. 
Several contacts report that Premier Wen's visit signifies a 
strong intent by China to strengthen its political influence 
in the region.  According to the Taiwan representative in 
Fiji, Taiwan is under increasing pressure to increase aid 
flows to the region to keep pace with China's escalating 
involvement.  End Summary. 
 
China's Presence in Pacific: a "Strategic Decision" 
--------------------------------------------- ----- 
¶2. (SBU)  On April 4-5 the leaders of the eight Pacific 
nations holding diplomatic relations with China attended the 
first China-Pacific Island Countries Economic Development and 
Cooperation Forum in Nadi, Fiji.  None of the six Pacific 
nations recognizing Taiwan attended the Forum.  Premier Wen's 
visit was the highest ranking ever by a PRC official to the 
South Pacific.  Around 300 business-people from China and the 
region reportedly attended the two-day event. 
 
¶3. (SBU)  In his keynote speech to the Forum's participants, 
Premier Wen characterized China's relationship with the 
region not as "diplomatic expediency...(rather) it is a 
strategic decision."  Premier Wen stated that the economies 
of China and the Pacific are "mutually complementary.  China 
has funding and technical expertise.  The island countries 
are rich in natural resources.  Herein lie huge potentials 
for bilateral cooperation."  Fiji PM Qarase responded that, 
"China defines a new and compelling reality, politically and 
economically...China's influence spreads internationally.  We 
feel it here in the region.  And we say, welcome China." 
But, Qarase made clear, Fiji is interested in trade as much 
as aid: "The message we deliver...is that we aim to be as 
self-reliant as possible.  We want to limit, or remove 
completely, our dependency on aid and stand on our two feet." 
 
¶4. (SBU) Premier Wen announced a wide-ranging package 
designed to strengthen relations and increase China's 
political and economic presence in the region.  Besides $375 
million in preferential loans over the next three years, 
China will grant zero-tariff status to imports from the 
nations recognizing China, will cancel any bilateral debt 
that had matured by the end of 2005 for less-developed 
partners, and will extend payback dates by ten years for any 
matured debt for more-developed partners.  Wen said China 
would provide free anti-malarial medicines for the next three 
years.  Wen also promised to create a special government fund 
to encourage Chinese investment in the Pacific.  Finally, he 
promised Chinese assistance in building an earthquake/tsunami 
early warning network in the region. 
 
Regional Economic "Framework" Signed 
------------------------------------ 
¶5. (SBU) One of the centerpieces of the Forum was the signing 
by ministers of China and the Pacific Island nations in 
attendance (except New Zealand and Australia) of the 
"China-Pacific Island Countries Economic Development and 
Cooperation Guiding Framework" (Refs A-C).  In his remarks to 
the Forum, PM Qarase pointed to the regular consultations 
already taking place between Japan's PM and the heads of the 
 
SUVA 00000156  002 OF 005 
 
 
Pacific nations as a model for the Framework's future. 
(Note:  The Framework is substantially unchanged from the 
draft we forwarded to Washington in February (Ref C).  We 
will e-mail the final text to EAP/ANP and Embassy Beijing. 
End note.) 
 
Joint Communique Reiterates Fiji 
Support of "One China" Policy 
-------------------------------- 
¶6. (SBU) China and Fiji signed a Joint Communique during the 
Forum.  Fiji reiterated its commitment to the one-China 
policy, recognizing the PRC as the only legal government 
representing the whole of China and Taiwan as an inalienable 
part of China.  In the Communique, Fiji states it opposes any 
attempt to create "two Chinas," "One China, One Taiwan," 
"Taiwan independence" or the inclusion of Taiwan in 
international or regional organizations that are only open to 
sovereign states.  China and Fiji agreed their relationship 
should be guided by the nations' 1975 Joint Communique 
establishing diplomatic relations, the 2002 Joint Statement 
on Consolidating and Promoting Friendly Relations, and the 
Joint Press Communique. 
 
Fiji MFA: Forum a Success; Onus on Fiji To Take Next Steps 
--------------------------------------------- -------------- 
¶7. (SBU) In an April 20 meeting with DCM and Poloffs, Fiji 
Acting Deputy Secretary for International Economic Affairs, 
Amena Yauvoli, expressed satisfaction with the Forum, 
particularly in light of the state visit by Premier Wen. 
Yauvoli believes the most concrete economic achievements 
arising from the Forum will be in the areas of technical 
assistance and tourism, but the "onus is on (Fiji) to take 
advantage of all the MOUs signed."  China, he said,  appears 
ready and willing to deepen the economic relationship. 
 
¶8.  (SBU) Yauvoli said Fiji signed the most MOUs with China 
of the Pacific nations which attended the Forum.  He 
confirmed the signing of the following bilateral agreements: 
 
--a quarantine technical assistance agreement, in which there 
would be an exchange of experts; 
--a Chinese $20 million "soft loan" to the Fiji government 
for the development of an extensive e-government program; 
--Chinese development of Taveuni Island's first hydro-power 
plant in Somosomo. 
 
Yauvoli also said various commercial agreements were signed: 
 
--a port agreement regarding fisheries; 
--Fiji Telecom's agreement to purchase various telecom 
hardware; and 
--Air Fiji's purchase of one Y12IV twin-propellor aircraft. 
 
Yauvoli hopes that an umbrella cooperation agreement can be 
created, whereby each MOU signed by the two sides would be 
further developed.  Yauvoli stated such a framework would 
allow Fiji and China to more comprehensively advance existing 
economic agreements and widen cooperation. 
 
Debate Over Communique Language: 
"China Can't Chose Who Our Friends Will Be" 
------------------------------------------- 
¶9.  (C)  Yauvoli said there was considerable back and forth 
in the run-up to the Forum over Communique language.  China 
insisted on the following particular language: "The Fiji side 
considered China a WTO member committed to market economy and 
recognized China's full market economy status."  The Chinese 
asked PM Qarase to express similar language in his remarks at 
the Forum.  As Qarase did not object, the language was 
inserted into his speech.  However, Fiji did not accept all 
of China's requests.  China objected to proposed language on 
Fiji's unofficial relations with Taiwan, but ultimately 
accepted Fiji's suggested formulation, "The only relations 
Fiji will maintain with Taiwan are in the promotion of 
unofficial economic and commercial ties."  Yauvoli said Fiji 
insisted on that because "they (the PRC) can't choose who our 
 
SUVA 00000156  003 OF 005 
 
 
friends will be."  Fiji also succeeded in toning down 
language on multilateral cooperation.  The final paragraph 
expresses satisfaction with the two side's coordination and 
cooperation in international and regional organizations. 
According to Yauvoni, the Chinese had attempted to introduce 
much stronger language that would have expressed Fiji's 
agreement to more rigorously support China's various 
positions in the UN and other multilateral fora. 
 
China Ambassador: Aid with No Strings Attached, But... 
--------------------------------------------- --------- 
¶10. (C) During a lunch with the Ambassador and emboffs April 
20, Chinese Ambassador to Fiji Cai Jinbiao described the 
Forum and Premier Wen's visit as productive and successful. 
In discussing particular iniatives, Cai invariably described 
the results as modest.  For example, that China's decision to 
cancel debt for LDCs in the region would probably have very 
little impact.  Fiji currently has no matured debt, and in 
any case is not a "least developed country."  Similarly, 
other Pacific partners either had little or no debt maturing 
by 2005, or were ineligible for the gesture because they were 
not LDCs.  Cai downplayed Chinese tourism to the region.  For 
the near term, most Chinese will find travel to the South 
Pacific to be expensive, and Chinese airlines are not likely 
to establish direct flights to Fiji or other Pacific states. 
Cai said a proposal for cooperation on an earthquake 
early-warning system was offered to gauge interest.  If the 
region wants, the Chinese would be happy to talk about it. 
 
¶11.  (C)  Turning to Taiwan-PRC rivalry in the region, Cai 
said Taiwan's "dollar diplomacy" is partly to blame for 
instability in the Pacific.  On the other hand, China's 
assistance to the region is with "no strings attached," as 
the Premier stated in his speech at the Forum.  Of course, 
continued Cai, the PRC expects nations to adhere to the One 
China Policy.  China's aid, however, is a tool China uses to 
increase economic and political regional stability, not to 
"buy support." 
 
Tonga PM: Loans "Like Elections, 
Details Will be Worked Out Later" 
--------------------------------- 
¶12. (SBU) Tonga PM Fred Sevele expressed lukewarm feelings 
about the Forum when he met with Ambassador, DCM and Poloff 
April 5.  When asked if he found the conference valuable, he 
replied, "I guess."  He said no new initiatives resulted from 
his bilateral meeting with Premier Wen, but he noted 
continuation of Chinese-funded projects such as the 
construction of Tonga High School, loans to renovate the 
Dateline Hotel, and a soft loan to the Crown Prince's 
Shoreline Electric Company.  The PM disparaged the Chinese 
decision to forgive debt, saying the amounts were likely very 
small and that the gesture was an "easy one."  When asked 
about the actual details of the preferential loans China is 
offering, Sevele stated there were none yet: "It's like an 
election," he stated, "the details will be worked out later." 
 He speculated, however, that PNG would receive the bulk of 
loans doled out.  Note: we heard separately that Sevele 
lobbied for a large Chinese grant to help Tonga ride out a 
current fiscal crisis. 
 
The View from the Forum Secretariat 
------------------------------------ 
¶13.  (SBU) Jim Gosselin, economic and trade advisor at the 
Pacific Island Forum (PIF) Secretariat, told DCM and Poloff 
that he hopes the Guiding Framework signed by leaders will 
evolve into something substantial over the next few years, so 
that by 2009, when the China-Pacific Economic Forum takes 
place in Beijing, nations would have "something to report." 
Gosselin said that, despite the Guiding Framework's regional 
platitudes, China's relations in the region remain almost 
exclusively focused on bilateral relationships. 
 
¶14.  (SBU)  Gosselin said little discussion of substance 
occurred during open sessions of the Forum, but he was struck 
by comments of a minister from the Federated States of 
 
SUVA 00000156  004 OF 005 
 
 
Micronesia, who said that Pacific Island nations are looking 
for more than aid: "We want joint venture projects, not just 
licensing agreements."  Gosselin said the Fiji Commerce 
Minister's comments at the Conference were also quite 
striking.  He initially complimented the Chinese as an 
emerging "super power in trade" and stated that Fiji benefits 
"immensely from its strong diplomatic ties with China." 
"However," he continued, "as a friendly reminder, let me also 
emphasize the importance of understanding our various 
cultures.  The greater the understanding that we have of each 
other's way of doing business, the more advantages we can 
generate out of this type of encounter...This is important in 
order to avoid the untimely termination of key projects and 
withdrawal from projects tagged with high development 
potential that will give us greater job opportunities to 
improve our standards of living."   The Minister's comments 
were a clear, if indirect, criticism of a Chinese company 
which contracted to modernize the King's Road in eastern Viti 
Levu but then, after several years and much expenditure, 
failed to carry through. 
 
Taiwan Trade Rep: China's Presence Not Just About Taiwan 
--------------------------------------------- ----------- 
¶15. (C) Sherman Kuo, Taiwan's Trade Mission Representative to 
Fiji told the DCM and Conoff in an April 12 meeting that the 
PRC's objective in sponsoring the Forum was more than just 
about countering Taiwan influence in the Pacific.  "If this 
were only about Taiwan, there would be no need to spend so 
much money."  Kuo said China always "talked big" and financed 
certain high-profile projects, but never before had he seen 
China so serious about expanding its presence in the region. 
Kuo noted that his office closely followed Forum events and 
in fact "placed a man" there to monitor developments. 
 
¶16. (C) Kuo said China's actions increased "pressure" on 
Taiwan from the countries in the region with which it has 
diplomatic ties.  Kuo relayed a recent chance encounter with 
the Tuvalu PM, who semi-jokingly said that as a result of the 
Forum, he no longer feels Taiwan's aid is enough.  "If China 
is offering (nations holding diplomatic relations with China) 
$100, we need Taiwan to offer us $200-300," he said.  Kuo 
highlighted China's $20 million preferential loan to develop 
Fiji's e-government system as an example of the pressure 
being put on.  "Taiwan will not spend this kind of money," 
Kuo said.  Kuo said Taiwan's Pacific policy is currently 
"under review."  He suggested only two options: either invest 
more and more resources in the region, or start pulling back. 
 Kuo did not indicate which policy he prefers. 
 
¶17. (C) Kuo was particularly concerned about the Fiji-China 
Communique's language opposing Taiwan's presence in 
sovereign-state organizations.  He noted that Fiji supported 
Taiwan's bid last year to have observor status in the World 
Health Organization (WHO).  But Fiji has yet to reiterate 
that support, and Kuo worries that the Communique's language 
may be a sign Fiji will drop its effort. 
 
¶18. (C) Kuo said he was not aware of any plans for a 
Taiwan-sponsored conference in response to the PRC-sponsored 
Forum.  (Note:  The PIF Secretariat's Gosselin told us that 
when the China-Pacific Forum was first announced, Taiwan 
protested strongly, and stated it planned to ask for the 
PIF's help in facilitating a similar conference.  Gosselin 
said there was been no follow-up from Taiwan since.  On the 
other hand, Chinese Ambassador Cai has heard, as we have, 
that Taiwan may plan to host its conference in Palau this 
summer.) 
 
Comment 
------- 
¶19. (C) The recent conference confirms that China believes it 
should play an important role in the South Pacific.  Although 
the fervent intention to isolate Taiwan diplomatically looms 
large, China's strategy seems broader.  The search for 
natural resources, including fish, factors in, as most likely 
do desires to gain influence over Pacific-island votes in 
 
SUVA 00000156  005 OF 005 
 
 
international fora and, more generally, to demonstrate 
big-power status in the region.  Still, China' path may not 
be smooth.  Island leaders have observed that some big-ticket 
offers, like debt relief, are basically smoke and mirrors. 
The region chafes at sometimes crude Chinese efforts to turn 
off any dealings with Taiwan.  Other relationships, including 
with Australia, New Zealand, the EU, and the U.S., are longer 
lasting and remain productive.  Nonetheless, China did 
illustrate quite vividly it has a seat at the Pacific table, 
and all other players must factor that into future bets. 
DINGER