VZCZCXRO1020
PP RUEHCHI RUEHCN RUEHDT RUEHGH RUEHHM RUEHNH RUEHVC
DE RUEHBJ #0908/01 0970123
ZNR UUUUU ZZH
P 070123Z APR 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 3284
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY
RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEHNE/AMEMBASSY NEW DELHI PRIORITY 4801
RUEHGO/AMEMBASSY RANGOON PRIORITY 4755
RUEHKO/AMEMBASSY TOKYO PRIORITY 2494

UNCLAS SECTION 01 OF 03 BEIJING 000908 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG BM CH
SUBJECT: SINO-BURMESE ECONOMIC RELATIONS - PIPELINES NOT 
IMMINENT 
 
REF: A. 2007 RANGOON 706 
     ¶B. 2007 RANGOON 313 
     ¶C. 2008 RANGOON 609 
     ¶D. SINGAPORE 228 
 
Summary 
 
¶1. (SBU0 Chinese scholars seemed unconcerned with the 
political situation in Burma and focused primarily on the 
economic relationship between the two countries during recent 
meetings with EmbOffs.  The high cost of food and energy in 
Burma is inflaming 
the country's volatile political situation and only economic 
development 
can bring stability, according to one Chinese scholar. 
Another 
scholar cited "mutually beneficial" hydroelectric power 
projects being built by Chinese firms as examples of 
economic cooperation between China and Burma.  Scholars 
dismissed press reports about Chinese participation in the 
construction of an oil 
pipeline between the Bay of Bengal and Yunnan province, 
questioning 
the feasibility of such a project. Sino-Burmese bilateral 
trade grew by 
over thirty percent in 2007 to USD 1.2 billion, according to 
a Chinese study published in Fall 2008.  China reportedly 
made a 
major investment in Burma,s mining sector last year as well. 
End Summary. 
 
¶2. (SBU) The best way to address social and political 
instability in Burma is by first stabilizing the economy, 
China Institute of International Studies (CIIS) 
Asia-Pacific Security and Cooperation Department Director 
Shen Shishun told EmbOffs March 25.  Shen suggested that 
the turmoil Burma experienced in August and September of 
2008 was precipitated by both political issues, including 
popular desire for democratic reform, and economic factors, 
such as the sudden increase in gasoline prices immediately 
prior to the unrest.  The continuing high costs of both food 
and energy in Burma are exacerbating an already volatile 
political situation, he maintained. 
 
Building Dams in Burma "Mutually Beneficial" 
--------------------------------------------- - 
 
¶3. (SBU) China has deep political and economic ties with 
Burma despite the country's "rogue status" in the 
international community, Beijing University Center for 
Asian-Pacific Studies Deputy Director Yang Baoyun told 
Econoff March 23.  Yang cited the many dam projects 
underway in Burma as examples of economic cooperation, 
saying such projects are "mutually beneficial" - Burma gets 
much needed capital and China gets electricity.  Press 
reports stating 15,000 Chinese workers will construct the 
Irrawady river hydropower plant are likely true as Burma 
has very few skilled laborers, Yang said.  Still, the 
project, which press reports say is a collaboration between 
the Burma-Asia World Corporation and the China Power 
Investment Corporation (CPI) will employ "many" local 
workers.  Yang said CPI also provides informal training to 
the Burmese workers. 
 
¶4. (U) Sino-Burmese economic ties were on display during a 
March 28 visit to Burma by Li Changchun, a member of the 
Standing Committee of the Central Party Committee's Political 
Bureau.  Press reports state Li inspected the Burma third 
generation mobile communication network project in Rangoon 
which was built by China's ZTE Corporation.  He also visited 
the Mandalay Industrial Training Center which, according to 
those reports, was built with Chinese aid.  Li lauded the 
"mutually beneficial" economic and trade ties and urged the 
two governments to find more "win-win" areas of cooperation. 
 
Pipelines Still a Pipe Dream? 
----------------------------- 
¶5. (SBU) Discussions on the construction of an oil 
pipeline connecting Yunnan province to the Bay of Bengal 
(and thus bypassing the Strait of Malacca maritime choke 
point) 
and natural gas pipelines from Burmese gas fields to Yunnan 
have been under way for several years, but little visible 
progress has been made toward commencing construction.  The 
two countries signed an MOU on oil and gas pipeline 
construction in June 2007 (ref A).  In November 2008, 
following another round of bilateral talks, Chinese media 
 
BEIJING 00000908  002 OF 003 
 
 
reported that pipeline construction would likely begin in 
¶2009.  The week of March 23, the two countries announced 
they had signed a joint agreement on oil and natural gas 
pipeline construction. 
 
¶6. (SBU) Dr. Zhao Hongtu, research professor and energy 
specialist at the Institute of World Economic Studies at 
the China Institutes of Contemporary International 
Relations (CICIR), told Econoff in early March that, 
contrary to media reporting, China only has plans to 
construct a gas pipeline, not an oil pipeline, linking the 
two countries.  CIIS' Yang similarly dismissed press 
reports that claim China and Burma will soon begin 
construction of an oil pipeline.  He questioned the 
feasibility of such a 
project given the estimated high construction costs and 
the difficulty of laying a pipeline through the mountainous 
terrain between the two countries.  Chinese Academy of 
Social Sciences Institute of Asia-Pacific Studies Research 
Fellow Zhao Jianglin concurred, saying a feasibility study 
to assess the oil pipeline project has yet to be launched. 
(Note:  While the two countries have seemingly made more 
progress in planning for a gas pipeline, a timeframe for 
construction has yet to be determined.  In January 2007, 
China National Petroleum Corporation (CNPC) and Myanmar Oil 
and Gas Enterprise (MOGE) launched a feasibility study on 
the project (ref B).  CNPC signed an MOU with MOGE and 
Korea's Daewoo International in June 2008 under which 
Daewoo agreed to sell natural gas from Burma's Shwe gas 
fields to CNPC that would be transported to China through 
the planned pipeline (ref C). 
 
India "Can't Compete" 
--------------------- 
¶7. (SBU) Yang also dismissed reports regarding China and 
India competing for resources in Burma.  India's "Looking 
East Policy" seeks to strengthen ties between India and the 
ASEAN nations, Yang stated, but China already has close 
relations with these countries.  Burma and China are "like 
relatives," he said, and, as such, India "can't compete." 
(Note: ref D seems to confirm Yang's views that India's 
approach towards ASEAN countries is less strategic than 
China's and its relations are less developed). 
 
China Trade with Burma Continues to Grow 
----------------------------------------- 
 
¶8. (U) Sino-Burmese bilateral trade, while still relatively 
small, increased over 30 percent from 2006 to USD 1.21 
billion in 2007, according to the China-ASEAN Business and 
Investment Development Report published by CIIS (and 
authored by CIIS' Shen).  China's exports to Burma, 
consisting primarily of "machinery equipment, acoustic 
products and spare parts," accounted for USD 893 million, 
while its imports of "lumber, teak, natural rubber and 
minerals" amounted to USD 315 million.  The report states 
that 
in recent years, Sino-Burmese trade has grown in excess of 
20 percent annually, making China Burma's second largest 
trading partner (behind Thailand). 
 
¶9. (U) According to Associated Press reports dated March 
20, Burma's Ministry of National Planning and Development 
claimed foreign direct investment climbed to USD 974.9 
million in the first eleven months of 2008, with China 
accounting for USD 855.9 million of the total.  This was a 
93 percent increase over 2007 levels, the report states. 
The report suggests the China Nonferrous Metal Group, a 
state-owned enterprise, was a major contributor to this spike, 
having reportedly signed the largest-ever mining deal with 
the 
Burmese government.  No details on the deal were provided, 
however, and the company declined to meet with Embassy 
officials. 
 
Comment 
------- 
¶10. (SBU) Despite being some of China's leading thinkers on 
Sino-Burmese relations, none of the scholars we talked to 
seemed to have given any thought to U.S. policy toward Burma, 
nor were they aware of 
Secretary Clinton's remarks on the need for the USG to 
reassess that policy.  When asked their views on whether the 
United States and China could work together to improve the 
situation in Burma, scholars instead turned to well-worn 
responses of China's "non-interference" in other countries' 
internal affairs or ranted about American "hegemony" in the 
 
BEIJING 00000908  003 OF 003 
 
 
region. One scholar stressed that the U.S. and China would 
first need to establish more of a foundation of mutual trust 
before they could work together to solve international 
issues.  End Comment. 
 
 
WEINSTEIN