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FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 7812
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
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RUEHKO/AMEMBASSY TOKYO 0659
RUEHGH/AMCONSUL SHANGHAI 4833
RUEHSH/AMCONSUL SHENYANG 6269
RUEHGZ/AMCONSUL GUANGZHOU 0708
RUEHCN/AMCONSUL CHENGDU 6450
RUEHHK/AMCONSUL HONG KONG 7564
RUEHIN/AIT TAIPEI 5672
RUCPDOC/USDOC WASHDC
RUEHGV/USMISSION GENEVA 1136
RUEHFR/AMEMBASSY PARIS 3810

UNCLAS SECTION 01 OF 02 BEIJING 011363 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USDOC FOR DAS LEVINE AND ITA/MAC/AP/MCQUEEN 
MANILA FOR AMBASSADOR SPELTZ 
TREASURY FOR OASIA/ISA KOEPKE AND DOHNER 
STATE PASS CEA FOR BLOCK 
STATE PASS FEDERAL RESERVE BOARD FOR JOHNSON/SCHINDLER; SAN 
FRANCISCO FRB FOR CURRAN; NEW YORK FRB FOR DAGES/CLARK 
STATE PASS USTR STRATFORD/WINTER/MCCARTIN 
PARIS PASS USMISSION OECD 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EPET PREL CH SU XA
SUBJECT: FINATT MEETS CHINA EXIM PRESIDENT ON LENDING TO 
SUDAN AND OTHER POOR DEVELOPING COUNTRIES 
 
 
THIS MESSAGE IS SENSITIVE BUT UNCLASSIFIED.  PLEASE HANDLE 
ACCORDINGLY.  NOT FOR DISTRIBUTION OUTSIDE USG CHANNELS. 
 
¶1.  (SBU) Summary.  On June 1, FinAtt David Loevinger met 
with President Li Ruogu of the China Export-Import Bank 
(China Exim) to discuss export credit policy and China's 
lending to heavily indebted poor countries (HIPCs), 
particularly in Africa.  FinAtt urged China to seek greater 
cooperation with OECD (Organization for Economic 
Cooperation and Development) in this area, and encouraged 
Li to attend its November meeting in Paris.  Li pledged 
further engagement with the United States Government and 
the OECD on export credit policy, and expressed a 
willingness to work within the IMF/World Bank's debt 
sustainability framework, but strongly defended China's 
current lending practices, particularly to Sudan.  End 
Summary. 
 
¶2.  (SBU) In a June 1 meeting between FinAtt Loevinger and 
China Exim Bank President Li, FinAtt began by encouraging 
greater Chinese cooperation with OECD Working Party on 
Export Credits, and urged Li to attend the organization's 
November meeting in Paris.  Li said he would accept the 
invitation, noting that the most effective way to avoid 
misunderstanding is through constant engagement.  Li noted 
the China Exim tries to follow the OECD's export credit 
guidelines, even though China is not a member country. 
 
¶3.  (SBU) FinAtt reaffirmed the United States Government's 
commitment to maintain sustainable debt burdens for HIPCs, 
particularly those who have benefited from multilateral 
debt reduction.  FinAtt then expressed concern about the 
Chinese Government's vigorous lending to countries like 
Sudan, who will need to normalize their relations with 
external creditors and will be seeking eventual debt 
relief.  Li responded that China believes the best method 
to achieve debt sustainability is to promote economic 
growth and exports through financing of commercially viable 
projects.  He contrasted China's approach with the U.S. 
approach, which  focuses on achieving debt sustainability 
by reducing debt.  Li then claimed that past U.S. lending 
practices in HIPCs had been largely politically motivated 
and subject to widespread corruption, whereas China's 
lending was more commercially oriented. 
 
¶4.  (SBU) Li argued that China's lending would boost 
economic growth in the recipient countries, and this along 
with increased production of commodities, would increase 
the likelihood that these countries would be able to fully 
repay their debts.  FinAtt reminded Li that despite the 
best intentions of creditors, HIPCs ended up needing 
multiple cycles of debt relief because they lack strong 
institutions to withstand external shocks and that external 
lending can end up benefiting creditors' exporters or 
contractors, NGOs or aid bureaucracies, which is why the 
United States promotes greater use of grants. 
 
¶5.  (SBU) Li added that China Exim Bank supports the World 
Bank and the International Monetary Fund debt 
sustainability framework, and is prepared to offer more 
concessional terms loans if necessary.  Li also 
acknowledged that new lending to Sudan and other countries 
seeking future debt relief could be subject to Paris Club 
requirements for comparability of treatment.  (Comment: 
Regarding comparability of treatment, Li mentioned flow 
rescheduling.  He did not mention stock reductions. End 
comment.) 
 
¶6.  (SBU) Li differentiated the U.S. approach towards 
countries it views as "bad actors" of trying to cut off 
 
BEIJING 00011363  002 OF 002 
 
 
external financing with the Chinese approach of promoting 
reform by promoting economic growth. 
 
¶7.  (SBU) In response to FinAtt's question on which 
Chinese Government organizations are supplying external 
financing to developing economies, Li noted that China Exim 
Bank provides the concessional lending at low interest 
rates, while the Ministry of Commerce (MOFCOM) offers 
grants and interest-free loans.  To the extent State 
Enterprises provide credits, they tend to on-lend resources 
from China Exim or MOFCOM. 
 
¶8.  (SBU) FinAtt and China Exim Bank President Li agreed 
to continue engaging on this topic and other issues of 
mutual interest. 
 
RANDT