VZCZCXRO3816
RR RUEHCN RUEHGH
DE RUEHGH #0428/01 2731144
ZNY CCCCC ZZH
R 291144Z SEP 08
FM AMCONSUL SHANGHAI
TO RUEHC/SECSTATE WASHDC
INFO RUEHGH/AMCONSUL SHANGHAI 7806
RUEHBJ/AMEMBASSY BEIJING 2173
RUEHHK/AMCONSUL HONG KONG 1606
RUEHGZ/AMCONSUL GUANGZHOU 1422
RUEHCN/AMCONSUL CHENGDU 1451
RUEHSH/AMCONSUL SHENYANG 1445
RHEHAAA/NSC WASHINGTON DC
RUEHCV/AMEMBASSY CARACAS 0002
RUCNDT/USMISSION USUN NEW YORK 0032

C O N F I D E N T I A L SECTION 01 OF 03 SHANGHAI 000428 
 
SIPDIS 
 
STATE FOR EAP/CM 
NSC FOR LOI 
 
E.O. 12958: DECL:  9/29/2033 
TAGS: PREL ENRG ETRD CH VE BR TW XM
SUBJECT: SHANGHAI ACADEMICS COMMENT ON CHINA'S RELATIONS WITH LATIN 
AMERICA: CHAVEZ VISIT, TAIWAN, INVESTMENT CLIMATE 
 
REF: A) SHANGHAI 397; B) BEIJING 3760 
 
CLASSIFIED BY: CHRISTOPHER BEEDE, POL/ECON CHIEF, US CONSULATE 
SHANGHAI, DEPT OF STATE. 
REASON: 1.4 (b), (d) 
 
 
 
(U) CLASSIFIED BY POL/ECON SECTION CHIEF CHRISTOPHER BEEDE FOR 
REASONS 1.4 (B) and (D). 
 
 
 
¶1.  (C) Summary: China's strategy in Latin America is shaped by 
its desire for natural resources and not by any geopolitical 
ambitions, according to Shanghai scholars, and China does not 
want to raise U.S. suspicion about China's motives in the 
region.  Political competition with Taiwan in Latin America has 
dissipated, and China is more interested in establishing 
pragmatic economic relations with Latin American countries 
rather than continuing the "cash diplomacy" of the past. 
Venezuelan President Hugo Chavez is actively courting China as a 
potential political and economic ally, but China is taking a 
cautious approach, mainly out of consideration for its relations 
with the United States.  The scholars thought the Chinese media 
was more low-key about the visit than expected.  China's 
relations with other Latin American countries have been mixed, 
as Chinese investment has been short of recipient countries' 
expectations.  Chinese companies are cautious about investing in 
Latin America due to concerns over political instability, rising 
nationalism, and strong trade unions.  Many Chinese companies 
find it easier to invest in Africa.  End summary. 
 
 
 
¶2.  (C) Poloff met with Niu Haibin, Deputy Director of the 
Center for Latin America Studies, Shanghai Institute for 
International Studies (SIIS), and Zhang Jiazhe, Director of the 
Center for Developing Countries Studies, Shanghai Academy of 
Social Sciences (SASS) in late September to discuss China's 
relations with Latin America. 
 
 
Strategic Interests on Both Sides 
--------------------------------- 
¶3.  (C) China is primarily interested in accessing Latin 
America's natural resources - oil, minerals (especially copper 
and iron), and agricultural products (primarily soy) - according 
to Niu and Zhang.  Bilateral trade increased from about US$70 
billion in 2006 to over US$100 billion in 2007.  The growing 
focus on Latin America is part of China's overall goal to secure 
natural resources from diverse parts of the world.  Latin 
American countries are also looking to diversify their economic 
ties and reduce their dependence on the United States.  They see 
China as a potential source of investment, especially in 
infrastructure, said Niu. 
 
¶4.  (C) China's actions in Latin America must be viewed within 
the context of China's relations with the United States, 
according to the scholars.  China acknowledges U.S. strategic 
interests in the region and will avoid doing anything that would 
raise U.S. suspicions about China's motives.  Unlike Russia, 
China harbors no geopolitical ambitions in the region, they 
stated. 
 
Pragmatic Approach to Taiwan Issue 
---------------------------------- 
¶5.  (C) Taiwan President Ma Ying-jeou's "diplomatic truce" 
initiative helped dissipate some of the political competition 
between the PRC and Taiwan in Latin America.  Both scholars 
believe the "cash diplomacy" of the past benefited neither side, 
and the PRC wants to take a more pragmatic approach in building 
economic relations with Latin American countries, even those 
with which it has no official relations. 
 
¶6.  (C) Paraguay's desire to switch recognition presents China 
with a conundrum, but China has been very "cautious" in its 
response, said both scholars.  Zhang mentioned how China did not 
officially respond to the Paraguayan President's request to 
attend the Beijing Olympics in August out of consideration for 
Taiwan.  Having one or two countries switch recognition is "not 
a significant thing" for the PRC.  Rather, Zhang thinks 
 
SHANGHAI 00000428  002 OF 003 
 
 
maintaining the current momentum of positive cross-Strait 
relations is of greater importance to the PRC (Ref A). 
 
Chavez Courting China 
--------------------- 
¶7.  (C) China has been deliberately cautious in its relations 
with Venezuela, mainly out of consideration for the United 
States, according to the scholars.  On the other hand, 
Venezuelan President Hugo Chavez has been actively courting 
China, making his fifth visit to China this month.  He wants to 
form a political alliance and deepen economic ties, particularly 
in the energy sector.  (Note: Chinese President Hu Jintao and 
Chavez announced on September 24 that they would further expand 
their energy cooperation.  End note.)  However, the scholars 
think there are still significant obstacles to increasing oil 
supplies from Venezuela, such as the high cost of shipping and 
difficulty in refining Venezuelan crude oil (Ref B). 
 
¶8.  (C) Zhang thought the local media coverage of Chavez's visit 
this month was more "low-key" than expected, perhaps an 
indication of the Chinese Government's reluctance to place a 
spotlight on this relationship.  Although China supports Chavez' 
socialist ideas in principle, it is perturbed by some of his 
actions internationally, especially towards the United States, 
and shares some concerns with the United States on issues like 
Chavez's calls for higher oil prices.  Venezuela's military 
cooperation with Russia also raises concerns, not so much 
because it poses a direct threat to China, but because it is 
"not helpful for regional harmony," said Zhang. 
 
Mixed Relations with Individual Countries 
----------------------------------------- 
¶9.  (C) Many Latin American countries have mixed relations with 
China, noted the scholars.  Brazil, which is China's most 
important bilateral partner in the region, exports a large 
volume of agricultural products to China.  The two countries 
also cooperate in high-tech development of small planes and 
satellites.  However, Brazil is not happy with China's lack of 
support for its bid for a permanent seat on the United Nations 
Security Council, and it believes China should be investing more 
in Brazil's infrastructure, according to Niu. 
 
¶10. (C) Both scholars believe Argentina has good political 
relations with China but is "disappointed" at the current level 
of Chinese investment, especially in infrastructure.  Niu thinks 
China and Mexico have close political relations but are economic 
competitors rather than partners.  However, Zhang stated that 
economic competition between China and Mexico has soured their 
political relations.  Cuba and China have good political 
relations for ideological reasons, but the relationship is 
becoming less important to China since there is little economic 
benefit for China.  The scholars are optimistic about relations 
with Chile, which has become an increasingly important economic 
partner for China.  The two countries signed a Free Trade 
Agreement in 2006, and China is now Chile's top trading partner. 
 Paraguay and China are developing closer economic ties, but the 
lack of official relations is proving to be an obstacle for 
China's desire for closer relations with MERCOSUR, said Zhang. 
 
Chinese Companies Cautious 
-------------------------- 
¶11.  (C) Most of the Chinese companies (both private and 
state-owned enterprises) invested in Latin America are involved 
in the energy and natural resource sectors, according to the 
scholars.  The Bank of China also has a presence, but its 
clients are mostly Chinese companies in the region.  Aside from 
these sectors, the scholars believe Chinese companies have been 
cautious about investing in the region for various reasons. 
Foremost are concerns about political stability.  Chinese 
companies are concerned that, since most Latin American 
countries are democracies, investment policy could change when 
administrations change.  Rising nationalism in the region is 
also a concern, as some key industries in Venezuela, Bolivia, 
and other countries have been nationalized in recent years. 
Zhang thinks that many Chinese companies find it easier to 
invest in Africa. Both continents have natural resources that 
China covets, but Africa is still willing to accept investments 
without the difficulties associated with rising nationalistic 
sentiment and strong labor unions, characteristics of a "more 
developed" Latin America. 
 
 
SHANGHAI 00000428  003 OF 003 
 
 
 
 
Comment 
------- 
¶12.  (C) There are very few academics in Shanghai who specialize 
in Latin America issues.  According to both Niu and Zhang, there 
are only two or three in Shanghai.  Niu noted that the SIIS 
Latin America Studies Department was established only two years 
ago.  They have not yet found a "suitable" candidate to serve as 
department director.  Zhang of SASS lamented the lack of 
up-and-coming young scholars in this field.  According to him, 
he is the only one at SASS who specializes in Latin America. 
However, he has not been to Latin America in several years due 
to the institution's tight budget and their lack of focus on 
this area.  Although SIIS will add a Latin America research 
fellow next year, SASS has no plans to add new staff for Latin 
America studies. 
CAMP