CHINESE BANKS ARE GOATS, BUT WON'T BE SLAUGHTERED

C O N F I D E N T I A L RANGOON 000249

SIPDIS

STATE FOR EAP/BCLTV, EB
BEIJING PASS CHENGDU
COMMERCE FOR ITA JEAN KELLY
TREASURY FOR OASIA JEFF NEIL
USPACOM FOR FPA

E.O. 12958: DECL: 02/20/2013
TAGS: EFIN ECON BM
SUBJECT: CHINESE BANKS ARE GOATS, BUT WON'T BE SLAUGHTERED

REF: A. RANGOON 236

B. RANGOON 235

C. RANGOON 225

D. RANGOON 214

E. RANGOON 213

F. RANGOON 30

Classified By: COM Carmen Martinez for Reasons 1.5 (B,D)


1. (C) Summary: Mounting public frustration with the
country's disgraced, largely Chinese-owned, private banks has
led to fears among the Chinese business community and others
of an anti-Chinese backlash. Though this remains a
possibility, particularly if SPDC decides it needs a
convenient scapegoat, the vast majority of depositers appear
thus far more inclined to blame the SPDC, rather than the
Chinese, for their troubles. End summary.

Chinese Dominance in Banking Sector


2. (C) There is no denying the Chinese dominance in the
banking sector. Of the nation's twenty private banks, only
eight are actually owned and operated by private citizens (as
opposed to various government ministries or the military's
economic arms). Of these eight privately held private banks,
six of them have chairmen or primary owners of Chinese
descent. Of the odd banks out, one is run by a Shan crony of
Senior General Than Shwe, the other by a Burman.


3. (C) The Chinese were less prominent in the recently
imploded informal financial institutions as, in those,
Burmans and Muslims also played a large role. Of the 16-17
shadow banks whose ownership we have been able to trace, only
four were Chinese or ethnic Chinese Burmese. Four were
Indian or Muslim, and the rest Burman.

Finger Pointing


4. (C) There is some concern (particularly in the Chinese
business community) that the dominance of ethnic Chinese in
the disgraced banking sector will trigger public resentment
against the Chinese population. There is some history of
this, with anti-Chinese riots occuring in the 1960s. Indeed,
it is not outside the SPDC's bag of tricks to try and divert
political discontent caused by its bungling of the banking
crisis, by surreptitiously feeding the notion that the
"conniving" Chinese are to blame.


5. (C) However, barring some obvious act of provocation, we
don't think this is likely. Commentators here tell us that
while people may have lost faith in the banks, most don't
connect their downfall with the ethnicity of their ownership.
However, the problem may be that people here, consciously or
unconciously, factor enthnicity into their calculations about
the probability of a GOB rescue. In any case, the banks
hardest hit by withdrawals (AWB, Yoma, MUB, MOB, and
Mayflower) have by and large been owned or managed by ethnic
Chinese banks. Finally, the possibility of ethnic strife
remains in the back of many minds. As one economic
journalist warned us, because of residual anti-Chinese
sentiment among Burmans, it would not be too difficult to
stir up ethnic-derived conflict.


6. (C) That all said, our feeling so far is that the public's
ire will fall squarely on the ruling junta. After enduring
fifteen years of economic mismanagement and political
oppression by the SLORC/SPDC regime, the public (at least in
Rangoon) is primed to blame its daily woes on the junta. In
the meantime, the ethnic Chinese chairmen and management of
the private banks are bending over backward to regain their
customers trust -- through notices, advertising, and efforts
to explain the situation and fairly disburse available funds.
Provided these bankers are not caught up in some new
scandal, they should be able to avoid any undue blame for the
current crisis.
Martinez