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RR RUEHKN RUEHMJ
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ZNY CCCCC ZZH
R 100646Z OCT 08
FM AMEMBASSY KOLONIA
TO RUEHC/SECSTATE WASHDC 2128
INFO RUEHBJ/AMEMBASSY BEIJING 0069
RUEHMJ/AMEMBASSY MAJURO 0370
RHMFISS/CDR USPACOM HONOLULU HI
RUEHKN/AMEMBASSY KOLONIA 2484

C O N F I D E N T I A L SECTION 01 OF 03 KOLONIA 000152 
 
SIPDIS 
 
E.O. 12958: DECL:  10/10/2018 
TAGS: PREL PGOV CH FM
SUBJECT: CHINA AND THE FSM EXTOL ACCOMPLISHMENTS AND FRIENDSHIP 
 
CLASSIFIED BY: Miriam K. Hughes, Ambassador, Amembassy Kolonia, 
State. 
REASON: 1.4 (b), (d) 
 
 
 
¶1.  (C)  Summary.  As frustration with the Compact of Free 
Association has mounted, FSM leaders have cautiously turned to 
China for material assistance.  Privately, Micronesians have 
expressed misgivings about China's growing influence.  On 
Independence Day of the Peoples Republic of China October 1, 
Vice President of the Federated States of Micronesia (FSM) Alik 
Alik heaped unusually strong and lengthy praise on China's 
strengthening ties with his country.  He emphasized the FSM's 
commitment to a One China policy.  The Chinese Ambssador 
enumerated a long list of accomplishments, highlighting many of 
the friendship and familiarization visits that the PRC has 
funded for Micronesians.  End Summary. 
 
COMMERCIAL INROADS 
 
¶2.  (C)  A celebration of  the 59th anniversary of the founding 
of the People's Republic China on October 1 highlighted the 
intensity of PRC engagement in the Federated States of 
Micronesia (FSM).  China has energetically targeted and engaged 
almost every Micronesian leader and opinion setter at the state 
and national levels to travel on Government of China (GOC) 
sponsored trips to China.  Many leaders have made more than one 
trip.  One frequent traveler to China, Secretary of Resources 
and Development Peter Christian, announced he has applied to 
China for a loan to support the new FSM national petroleum 
corporation.  (Note:  While China has urged the FSM to accept a 
variety of preferential loans at a rate of 2 percent interest, 
it is unclear whether the Micronesians, who lack collateral, 
have committed.  Such loans, if they are transparent, would 
require FSM Congressional approval.)  Meantime, Secretary 
Christian has advocated for Chinese flights to the FSM to bypass 
U.S. border controls by flying through the Philippines.  In 
June, Christian signed a memorandum of understanding with China 
that establishes the FSM as an official tourist destination for 
Chinese citizens. 
 
¶3.  (SBU)  At the FSM state level, GOC affiliated Luen Thai 
Corporation operates a fish processing plant in Pohnpei and 
recently opened a dry dock facility at the Kosrae port, which 
will service some 70 Luen Thai fishing vessels that operate in 
the FSM and Republic of the Marshall Islands (RMI). 
Negotiations are also in progress for Luen Thai to open a large 
'super frozen' fish loin processing plant in Kosrae, which the 
Governor said would export fish on Luen Thai vessels and employ 
some 150 Micronesians.  However, the contract is contingent upon 
a package deal in which Kosrae would have to accept a $3 million 
loan from China in order to upgrade an existing fish plant, 
which is dilapidated and abandoned.  The Kosrae Governor 
confirmed that the FSM Congress would need to approve such a 
foreign loan. 
 
A FRIENDSHIP OF NECESSITY 
 
¶4.  (C)  Privately, many Micronesians have expressed misgivings 
about China's surge of generous attention.  During his September 
trip to Xiamen, Secretary Christian stated in the presence of a 
journalist, "FSM's relationship with China was established 
because of a dire need and not by choice."  Several leaders have 
quietly remonstrated at the ban imposed by the FSMNG on opening 
business contacts with Taiwan.  In the meantime, frustration 
with implementation of the Compact, a bureaucratic bottleneck on 
Compact infrastructure projects, and FSM failure to stimulate 
business and revenue have all  positioned the nation to 
acquiesce to China's largesse. 
 
¶5.  (C)  Not all of China's gifts are welcome.  For example, 
President Mori has remarked that he detests the solar street 
lights that adorn FSMNG headquarters.  Micronesians have failed 
to maintain the batteries.  The lavish housing compound that 
China erected for the President, Vice President, Speaker of the 
Congress and Supreme Court Justice lacks adequate ventilation; 
air conditioning expenses for the houses have become an item of 
controversy in the national budget.  China's offer to build a 
new high school in Kosrae was initially rejected by the state 
cabinet.  Kosrae's Education Director told Embassy officers that 
the current high school remained adequate; demolition (at state 
expense) would displace all the students for up to one year. 
Finally, President Mori reportedly called the Governor and said, 
"You have to accept this project.  China wants it."  Demolition 
of the current high school has begun. 
 
¶6.  (C)  Ambassador Liu Fei, who is China's hard charging envoy 
to the FSM, has been forthcoming in explaining her volume of 
high-profile activities.  "Taiwan is the threat," she has 
reiterated.  When asked about a recent softening of Taiwan's 
 
KOLONIA 00000152  002 OF 003 
 
 
approach to China, Liu insisted that such overtures were purely 
political gestures, most likely aimed at obtaining economic 
favors.  Taiwan continued to reveal its true intentions in its 
ongoing attempts to gain recognition at the United Nations as an 
independent nation, she said. 
 
A LAUNDRY LIST OF FRIENDSHIP 
 
¶7. (SBU)  On the occasion of PRC Independence Day, Ambassador 
Liu hosted a dinner for some 200 guests.  In a five-page 
address, which Chinese Embassy workers distributed at the dinner 
tables, Liu recalled China's "protracted and hard struggle" for 
liberation.  She described the emergence of a new China in which 
"people became their own masters, laying the foundation for 
China's development and prosperity."  She praised the "strong 
support" of the FSM National Government (FSMNG) for the 
unification of China and adherence to the One China policy. 
 
¶8.  (SBU)  In response, FSM Vice President Alik Alik delivered 
an exceptionally laudatory and lengthy companion address of some 
twenty minutes.  Alik extended congratulations on China's 
successful launch of its recent space-walk mission and then 
praised, ".the gamut of high-profile visits of national and 
state leaders as well as assistance of all sorts in the 
important areas of human resource development and renewable 
energy projects."  He stressed the FSMNG's strong adherence to a 
One China policy, concluding, "The sentiments captured in the 
slogan 'one world, one dream' of the 29th Olympiad can only be 
fulfilled if the world dreams one dream, including FSM and 
China, to work along side each other to make this world a better 
place to live." 
 
¶9.  (SBU)  Most of Ambassador Liu's address was an iteration of 
an intense but only partial list of the many accomplishments 
that Liu has personally engineered during her 18 months of duty 
in the FSM.  The Ambassador mentioned: 
 
--Participation of FSM President Emanuel Mori and key Cabinet 
members in the Beijing Olympics and Mori's breakfast with 
President Hu Jingtao; 
 
--President Mori's trip to Shandong Province, which is a sister 
state to the FSM state of Kosrae.  Mori visited agricultural, 
aquaculture and rural trade markets and encouraged a Chinese 
delegation from the province to visit the FSM; 
 
--A trip last April by Pohnpei State Governor John Ehsa and 
Pohnpei Speaker Nelson Pelep to Zhejian Province, which has 
become a sister state to Pohnpei.  Pohnpei officials visited a 
biogas project and Yiwu Trade City, which Liu described as a 
model for promoting small, private businesses and trade 
expansion; 
 
--Secretary of Resources and Development Peter Christian's 
September trip to Xiamen for a five-day conference of Pacific 
island leaders on trade, tourism and investment.    The FSM's 
sole newspaper editor also attended; 
 
--China's gift of 171 sets of solar street lamps for the FSMNG 
and the four FSM states; 
 
--An extensive pilot farm in Pohnpei, where Chinese agrarian 
specialists demonstrate how to raise 39 kinds of vegetables and 
fruits, as well as pigs and hens; 
 
--A trip this month of FSM national Senators to Xingjian 
Autonomous Region to view a wind power mill and a 
Chinese-Israeli agricultural demonstration farm; 
 
--Voyage of China's 'Chief Milo' cargo ship from Chuuk back to 
China for dry dock repairs and an engine upgrade, with an 
anticipated return to Chuuk to serve as the principal vessel for 
the state's sprawling intra-island transport; 
 
--Sponsorship of five Chinese doctors to work in the Chuuk State 
hospital for two years; 
 
--Entry of over 40 FSM scholarship students to study at 
universities and colleges in China; 
 
--Assignment of a Chinese teacher to the College of Micronesia 
to conduct two Chinese language classes; 
 
--Donation of 2,000 Chinese reading books to the FSM outer 
islands; 
 
--Groundbreaking for construction of a high school in Kosrae 
State; 
 
--Visit of the College of Micronesia President to Zhehian 
University to promote additional sister school exchanges, etc; 
 
KOLONIA 00000152  003 OF 003 
 
 
 
COMMENT 
 
¶10.  (C) China's active ambassador in the FSM has urged the U.S. 
to strive for more effective implementation of the Compact in 
order to provide a more stable base for China's development 
programs, which in the near term appear to be aimed at shutting 
out Taiwan.  At the same time, she has ushered an influential 
cross-section of Micronesians to faraway regions of China to 
witness her nation's rapid progress as a model for economic 
growth, modernization and governance.  China's longer term 
objectives in the FSM may portend broader horizons than 
competing with Taiwan, however, such distant aims are currently 
unclear to the Micronesians. 
HUGHES