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### Viewing cable 09SHANGHAI160, CHINA AND AFRICA: SHANGHAI VIEWS ON EXPANDING TRADE AND

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
09SHANGHAI160 | 2009-04-10 01:01 | 2010-12-08 21:09 | CONFIDENTIAL | Consulate Shanghai
Appears in these articles: http://www.spiegel.de/

`

    VZCZCXRO4847
    RR RUEHCN RUEHDU RUEHGH RUEHJO
    DE RUEHGH #0160/01 1000132
    ZNY CCCCC ZZH
    R 100132Z APR 09
    FM AMCONSUL SHANGHAI
    TO RUEHC/SECSTATE WASHDC 7813
    INFO RUEHSA/AMEMBASSY PRETORIA 0004
    RUEHJO/AMCONSUL JOHANNESBURG 0001
    RUEHTN/AMCONSUL CAPE TOWN 0001
    RUEHDU/AMCONSUL DURBAN 0001
    RUEHDS/AMEMBASSY ADDIS ABABA 0001
    AMEMBASSY ABIDJAN 0001
    RUEHOR/AMEMBASSY GABORONE 0011
    RUEHLS/AMEMBASSY LUSAKA 0001
    RUEHKI/AMEMBASSY KINSHASA 0005
    RHEHAAA/NSC WASHINGTON DC
    RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
    RUCNDT/USMISSION USUN NEW YORK 0065
    RUEHGH/AMCONSUL SHANGHAI 8452
    RUEHBJ/AMEMBASSY BEIJING 2678
    RUEHIN/AIT TAIPEI 1676
    RUEHHK/AMCONSUL HONG KONG 2056
    RUEHSH/AMCONSUL SHENYANG 1880
    RUEHCN/AMCONSUL CHENGDU 1889
    RUEHGZ/AMCONSUL GUANGZHOU 0345
    RUEHEG/AMEMBASSY CAIRO 0001
    RUEHKH/AMEMBASSY KHARTOUM 0004
    RUEHUJA/AMEMBASSY ABUJA 0001
    RUEHOS/AMCONSUL LAGOS 0001

` `

    <<201778>>
    04.10.2009 01:32
    09SHANGHAI160
    Consulate Shanghai
    CONFIDENTIAL
    06BEIJING23548|08SHANGHAI283|09SHANGHAI5|09SHANGHAI80
    VZCZCXRO4847
    RR RUEHCN RUEHDU RUEHGH RUEHJO
    DE RUEHGH #0160/01 1000132
    ZNY CCCCC ZZH
    R 100132Z APR 09
    FM AMCONSUL SHANGHAI
    TO RUEHC/SECSTATE WASHDC 7813
    INFO RUEHSA/AMEMBASSY PRETORIA 0004
    RUEHJO/AMCONSUL JOHANNESBURG 0001
    RUEHTN/AMCONSUL CAPE TOWN 0001
    RUEHDU/AMCONSUL DURBAN 0001
    RUEHDS/AMEMBASSY ADDIS ABABA 0001
    AMEMBASSY ABIDJAN 0001
    RUEHOR/AMEMBASSY GABORONE 0011
    RUEHLS/AMEMBASSY LUSAKA 0001
    RUEHKI/AMEMBASSY KINSHASA 0005
    RHEHAAA/NSC WASHINGTON DC
    RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
    RUCNDT/USMISSION USUN NEW YORK 0065
    RUEHGH/AMCONSUL SHANGHAI 8452
    RUEHBJ/AMEMBASSY BEIJING 2678
    RUEHIN/AIT TAIPEI 1676
    RUEHHK/AMCONSUL HONG KONG 2056
    RUEHSH/AMCONSUL SHENYANG 1880
    RUEHCN/AMCONSUL CHENGDU 1889
    RUEHGZ/AMCONSUL GUANGZHOU 0345
    RUEHEG/AMEMBASSY CAIRO 0001
    RUEHKH/AMEMBASSY KHARTOUM 0004
    RUEHUJA/AMEMBASSY ABUJA 0001
    RUEHOS/AMCONSUL LAGOS 0001
    TAGS: PREL ETRD EINV CH XA TW
    SUBJECT: CHINA AND AFRICA: SHANGHAI VIEWS ON EXPANDING TRADE AND
    REF: A) SHANGHAI 80; B) 06 BEIJING 23548; C) 08 SHANGHAI 283

    C o n f i d e n t i a l section 01 of 06 shanghai 000160

    Sipdis

    Dept for af/e, af/c, af/w, af/s, af/eps
    usdoc for ita mac das kasoff, melcher, szymanski
    nsc for loi

    E.o. 12958: decl: 4/9/2024
    Tags: prel, etrd, einv, ch, xa, tw
    Subject: china and africa: shanghai views on expanding trade and
    investment ties

    Ref: a) shanghai 80; b) 06 beijing 23548; c) 08 shanghai 283

    CLASSIFIED BY: Christopher Beede, Pol/Econ Section Chief, U.S.
    Consulate, Shanghai, U.S. Department of State.
    REASON: 1.4 (b), (d), (e)

    ¶1. (C) Summary: During March 2009 meetings with four
    Shanghai-based Africa scholars, the largest Chinese investor in
    Africa, and officials from the Egyptian and South African
    Consulates General in Shanghai, Congenoffs examined the evolving
    state of China-Africa relations. The upcoming Forum on
    China-Africa Cooperation in Egypt, on which the Shanghai
    Institutes for International Studies (SIIS) is an advisor, will
    showcase rapid progress in bilateral economic relations. Though
    private Chinese investors have made significant headway
    expanding exports to Africa, resource and commodity extraction
    remains dominated by large state-owned enterprises (SOEs). Lack
    of communication between the Chinese Ministry of Commerce
    (MOFCOM) and Ministry of Foreign Affairs (MFA) makes it
    difficult to keep track of Chinese private investment in Africa,
    said one interlocutor. Scholars believe that while the Chinese
    Government is increasingly concerned about its image, government
    policy will continue to be driven by core economic and political
    interests, including securing access to natural resources,
    developing markets for Chinese exports, and achieving greater
    influence in international institutions. Egypt and South Africa
    are concerned about the growing "imbalance" in their bilateral
    trade with China. End Summary.

    Upcoming Forum on China-Africa Cooperation (FOCAC)
    --------------------------------------------- ------
    ¶2. (C) Currently planned for November 2009 in Cairo, Egypt, the
    4th Ministerial Conference of FOCAC will be led by Chinese
    President Hu Jintao and the political leaders of 49 African
    nations. On this visit to Africa, his seventh in the past 10
    years, Hu will attempt to deepen China's relationship with all
    African countries while exploring further investment
    opportunities, according to xxxxxxxxxxxx. Hu will also
    try to counter media perceptions that China is only interested
    in the resource-rich nations of Africa, and one topic for
    discussion will be evaluating progress in the China-Africa
    relationship since the 3rd FOCAC Ministerial Conference hosted
    by Beijing in 2006. Since then, trade between China and Africa
    has increased sharply, with total trade volume rising 32 percent
    in 2007 and an estimated 50 percent in 2008, to over USD 106.8
    billion, indicating that the goal proposed by the 2006 summit
    "to push China-Africa trade volume to USD 100 billion by 2010"
    was realized two years ahead of schedule. (Note: According to
    Ministry of Commerce (MOFCOM) trade statistics, Africa maintains
    a slight overall surplus due to strong commodity exports in oil,
    minerals, wood, cotton, iron-ore, diamonds, and copper, among
    others. China's exports to Africa consist largely of light
    industrial products, textiles, electronics, and consumer goods.
    MOFCOM statistics, however, indicate that bilateral trade is not
    equitably balanced throughout the continent. In 2008, just five
    countries (Angola, South Africa, Sudan, Nigeria, and Egypt)
    accounted for 61 percent of total bilateral trade. End note.)

    3.xxxxxxxxxxxx
    -------------------------------
    ¶4. (C) Shanghai scholars expect that of Africa's 53 nations,
    only the four that maintain diplomatic relations with Taiwan
    (Burkina Faso, Gambia, Sao Tome and Principe, and Swaziland)
    will not attend the 2009 FOCAC, said the scholars. Forty-eight
    nations attended the 2006 3rd Ministerial Conference of FOCAC.
    Malawi has since switched diplomatic relations from Taiwan to
    the People's Republic of China (PRC). xxxxxxxxxxxx
    diplomatic relations with China could attend the upcoming
    summit. (Note: African countries with diplomatic relations with
    Taiwan were invited as observers to the 2006 FOCAC in Beijing
    but elected not to attend. xxxxxxxxxxxx was not clear whether the four
    African nations currently maintaining diplomatic ties with
    Taiwan will be invited to attend as observers this year. See
    Ref B. End note). xxxxxxxxxxxx also noted that Senegal was
    specifically chosen for Hu Jintao's most recent Africa visit
    because it had recently (2005) dropped diplomatic relations with
    Taiwan and established ties with the PRC. However xxxxxxxxxxxx stated that the
    PRC and Taiwan currently have an unwritten agreement to cease
    the practice of distributing millions of dollars in aid to
    African nations in an attempt to gain diplomatic recognition.

    Educational Exchanges: Confucian Institutes in Africa
    --------------------------------------------- ---------
    ¶5. (C) Another focus of the 4th Ministerial of FOCAC will be to
    increase educational exchanges. xxxxxxxxxxxx noted that currently there
    are "well under 1,000" total African students in Chinese
    institutions in Shanghai, and that a strong push must be made to
    increase this number. However, significant numbers of Chinese
    students are traveling to Africa for the pursuit of advanced
    degrees, and the number of visiting scholars from China has
    increased by double digits each year. xxxxxxxxxxxx
    pointed out that China has already opened ten Confucius
    Institutes throughout Africa, and plans to construct ten more.
    China has also doubled the number of national scholarships
    offered to Chinese students and professors wishing to study or
    research in Africa to 4,000 per year. xxxxxxxxxxxx. Confucius
    Institutes are designed to spread knowledge and understanding of
    the Chinese language and culture. They also serve as
    educational centers for family members of Chinese employees in
    Africa, and offer Chinese language instruction to both African
    and Chinese nationals. xxxxxxxxxxxx said Chinese President Hu will
    make it clear to all conference participants that Chinese aid
    and involvement in Africa, including cultural exchanges, will
    continue to deepen, despite the current difficult economic
    situation. xxxxxxxxxxxx stressed that future bilateral cooperation
    will revolve around natural resources, education, cultural
    exchanges, infrastructure, agriculture, and energy.

    "Incredible Opportunity" for Private Investment in Africa
    --------------------------------------------- -------------

    Shanghai 00000160 003 of 006

    ¶6. xxxxxxxxxxxx

    ¶7. (C) xxxxxxxxxxxx, who currently has xxxxxxxxxxxx employees in Shanghai
    and more than xxxxxxxxxxxx in Africa, said that Africa "reminds him of
    China 30 years ago," and represents an incredible growth
    opportunity, as Africa's consumer markets continue to mature.
    When asked why he currently does not invest in extracting raw
    materials in Africa, he responded that Chinese raw materials
    investments are primarily controlled by large SOEs. His company
    is completely private, and all of his financing is arranged
    through private sources. xxxxxxxxxxxx is currently examining the
    possibility of expanding into resource extraction in Africa, but
    has found the process to be incredibly time consuming and
    difficult. While China recently pledged an additional USD 2
    billion to its China-African Development Fund, xxxxxxxxxxxx said this
    money is completely "off-limits" to private investors. xxxxxxxxxxxx,
    his investments are not seen as "strategic"
    by the Central Government, and thus not a priority for the
    Development Fund.

    ¶8. (C) xxxxxxxxxxxx also expressed a strong preference for hiring
    local African employees for his projects in Africa, xxxxxxxxxxxx
    explained that Chinese employees are
    significantly more costly, and that with proper training,
    African employees perform just as well. xxxxxxxxxxxx said he sends his
    managers to xxxxxxxxxxxx,
    and several universities in South Africa on annual recruiting
    missions. xxxxxxxxxxxx disagrees with scholars such as xxxxxxxxxxxx, who
    feel that Chinese investors usually prefer importing Chinese
    laborers to Africa because of a perception that they are more
    hardworking and easier to train and manage than their African
    counterparts. xxxxxxxxxxxx," travels to Africa
    to manage his investments xxxxxxxxxxxx, and has also
    received acclaim from the Nigerian government for bringing in
    over 100 other Chinese investors to open businesses in the
    country. Finally, he noted that while corruption and
    mismanagement is a constant concern, most African nations have
    adopted free market systems, and he finds it relatively easy to

    Shanghai 00000160 004 of 006

    conduct business there.

    Shanghai Scholars See Expanded China-Africa Ties
    --------------------------------------------- -----
    ¶9. (C) When asked why President Hu Jintao visited countries
    that do not have extensive natural resource holdings during his
    most recent visit to Africa, xxxxxxxxxxxx stated
    that China's interests are broad, and its leaders seek good
    relations with the entire continent, not only specific
    countries. xxxxxxxxxxxx said Africa has recently moved forward with
    democratic reforms in some countries, but countries such as
    Kenya, Madagascar, and Burkina Faso have struggled with
    political reforms. xxxxxxxxxxxx stated that China's core focus will
    remain peace, stability, and development in Africa in order to
    create an environment conducive to further trade and investment
    from China. xxxxxxxxxxxx, who frequently travels to Africa and
    was a visiting scholar in Zambia in 2008, agreed that China's
    main goal for Africa is the pursuit of "win-win cooperation,"
    especially on the economic front. He believes China will
    continue to increase investments in Africa's energy, raw
    material, and resource industries while developing its
    infrastructure and helping Africa acquire advanced technologies.
    He stated that since 1995, Africa's economy has outperformed
    the rest of the world, and China hopes to deepen its foothold in
    this growing market.

    ¶10. (C) xxxxxxxxxxxx, stated that,
    despite the Chinese Government's longstanding position not to
    interfere in the domestic affairs of other nations, China's
    leaders are increasingly sensitive to external criticism of its
    Africa policies and have made greater effort to address
    humanitarian issues, such as the ethnic violence in Sudan.
    China feels greater "responsibility" for Africa's development
    than other regions such as Latin America, which Chinese
    officials view as "in the United States' backyard, and therefore
    their (the United States') responsibility." Because of China's
    long history with Africa dating back to the 1950s and the
    influence China seeks to cultivate in the continent, African
    development and poverty reduction are major Chinese concerns,
    said xxxxxxxxxxxx. Additionally, xxxxxxxxxxxx foresees the China-Africa
    relationship evolving to where, in another 10 years, a
    significant number of Chinese corporations move some of their
    manufacturing operations to Africa because of rising wages and
    costs in China. However, in order to make this possible, China
    will have to continue escalating investments in infrastructure,
    education, and training, and increase technology transfers to
    Africa.

    Lack of Coordination Between Chinese Government Ministries
    --------------------------------------------- --------------
    ¶11. (C) In light of the global financial crisis and the
    resulting decline in commodity prices, international media have
    recently reported cases of Chinese investors abandoning copper
    mines in Congo and Zambia, leaving local workers with unpaid
    back wages. When asked about these reports, xxxxxxxxxxxx stated
    that the Chinese Government expressly forbids the abandonment of
    investment without paying back wages and meeting other
    obligations, as it causes a "loss of face." xxxxxxxxxxxx
    agreed that such cases represent a small percentage of total
    Chinese investment in Central Africa, and that it was only
    private investors who had fled. They reiterated that China has

    Shanghai 00000160 005 of 006

    a long-term commitment to African development, and that SOEs
    would never be allowed to abandon assets or obligations to local
    employees.

    ¶12. (C) xxxxxxxxxxxx agreed that it was likely private investors
    who had fled, as "many private investors from Zhejiang Province
    are operating small mines in Africa, and the Central Government
    has little knowledge or control of events on the ground." He
    explained that Chinese Government bureaucracy is often to blame,
    with complaints of wrongdoing in Africa always going first to
    the MFA, which often has no knowledge of individual investor
    activities. MOFCOM receives information from local governments
    in China but is often reluctant to share it with the MFA, he
    said. xxxxxxxxxxxx such bureaucratic difficulties diminish
    oversight and accountability, and it is almost impossible for
    the government to track small-scale private investors. African
    nations have recently begun to push back, requesting the MFA
    notify them if investors with bad records in China or elsewhere
    try to enter their countries.

    Africa's View: Investment Welcomed, with Reservations
    --------------------------------------------- -------------
    ¶13. (C) With an eye on Shanghai as China's commercial and
    financial capital, two African countries, Egypt and South
    Africa, have Consulates in the city, and Nigeria currently is in
    the process of establishing a Consulate in Shanghai.xxxxxxxxxxxx,
    lamented that of the total USD 6.3 billion in annual
    trade between Egypt and China, Egypt exports a mere USD 420
    million to China. Of that amount, one product (marble)
    constitutes 50 percent of Egypt's exports to China. When asked
    if this imbalance or the growth of Chinese exports to Egypt have
    generated any negative feelings in his country, xxxxxxxxxxxx responded
    that a frequent source of irritation was the heavy use of
    imported Chinese labor and the limited number of joint ventures
    with local Egyptian companies. Egpyt opened its Consulate
    General in Shanghai 5 years ago with the primary purpose of
    finding opportunities for Egyptian businesses in China, but
    xxxxxxxxxxxx acknowledged this effort has had limited success so far.
    One recent sign of Egypt's rising interest in China was the 2008
    opening of a branch of the National Bank of Egypt in Shanghai's
    posh Pudong District, home to much of the international
    financial services industry in China.xxxxxxxxxxxx hopes this bank
    will help facilitate transactions for bilateral trade and
    investment.

    ¶14. (C) xxxxxxxxxxxx,
    relayed similar concerns about their nation's large trade
    deficit with China. xxxxxxxxxxxx told Congenoff that South Africa's
    primary imports from China include machinery, mining equipment,
    industrial tools, textiles, electronics and footwear, while
    exports are mainly raw materials and precious metals, such as
    gold. South Africa hopes to significantly increase the number
    of Chinese tourists to balance this deficit; however, this
    effort is not progressing as quickly as hoped.xxxxxxxxxxxx noted
    that Chinese investment is generally welcomed by African leaders
    because, unlike other investors, China is willing to provide
    money with "no strings attached" and invest in the
    infrastructure necessary to extract and export resources.
    xxxxxxxxxxxx cited Botswana, which obtains almost 70 percent of its
    foreign exchange through diamond sales, and Angola, whose trade

    Shanghai 00000160 006 of 006

    with China accounts for one-fourth of China's trade with the
    entire continent. Chinese SOEs are also willing to "build roads
    and railways through the jungle to otherwise inaccessible areas
    to extract resources," she said.

    ¶15. (C) xxxxxxxxxxxx, however, posited that investments of this
    magnitude were riddled with corruption, and were "preferred by
    African dictators as a way to line their pockets while avoiding
    interference." In the past few years, xxxxxxxxxxxx has also noticed
    a trend of African governments becoming more selective with
    investments, and an increasing willingness to negotiate hard for
    favorable terms, such as the employment of local labor, skills
    development and training, as well as technology transfers. When
    asked whether these advances were threatened by the global
    financial crisis, xxxxxxxxxxxx responded that while Chinese
    investments have yet to dry up (as Western investment has),
    several major projects such as China's proposed USD 9 billion
    investment in the Congo seem likely to unravel. He cited
    falling commodity prices as the major cause, and the most
    serious likely side effect for African economies could be the
    bankruptcy of secondary industries. xxxxxxxxxxxx reiterated that
    while Chinese investments in Africa have provided benefits for
    both sides, the Chinese market remains difficult to penetrate
    for African investors.

    Comment
    --------
    ¶16. (C) Congenoffs' meetings revealed a general optimism about
    the future of Chinese investment in Africa. xxxxxxxxxxxx
    believe that China has developed traction in
    Africa, and that the economic relationship will continue to
    expand despite the global financial crisis. In economically
    focused Shanghai, which hosted the African Development Bank's
    annual meeting in May 2007, businessmen, academics, and African
    diplomats are increasingly interested in expanding China-Africa
    trade and investment ties, and they see the 2009 FOCAC as a
    means to further deepen China's relations with the continent.
    Camp

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