Western China Woos Burma Trade

UNCLAS SECTION 01 OF 03 RANGOON 000886 SIPDIS SENSITIVE STATE FOR EAP/BCLTV, EAP/CM, EB COMMERCE FOR ITA JEAN KELLY TREASURY FOR OASIA JEFF NEIL USPACOM FOR PFA E.O. 12356: N/A TAGS: ETRD PREL ECON BM CH SUBJECT: Western China Woos Burma Trade REF: Chengdu 305 ¶1. (SBU) Summary: The largest-ever business delegation to travel to Burma from Southwest China's Sichuan province visited Rangoon in late June for a Chinese-export trade fair. Ironically, many Chinese goods exhibited at the fair are on Burma's list of items restricted or banned for import. Burmese businessmen share a desire to increase bilateral trade, and have traveled to Sichuan to drum up interest in Burma's raw materials and other exports. Reported trade between Burma and Sichuan/Chongqing is one- sided: exports from Sichuan and Chongqing to Burma totaled over USD 100 million in 2003, while imports from Burma to Chongqing were under USD 400,000 and imports to Sichuan totaled zero. The fair was part of a broader effort by local governments in Southwest China to promote trade with Southeast Asian nations and of the GOB to showcase its increasingly close ties to China. End Summary. ¶2. (U) This cable is a joint report by Embassy Rangoon and Consulate General Chengdu. Motorbikes, Pesticides, and Other Delights -------------- ¶3. (U) The largest-ever business delegation to travel to Burma from Southwest China's Sichuan province attended a trade fair organized in Rangoon June 29-July 1 by the Sichuan and Chongqing offices of the China Council for the Promotion of International Trade (CCPIT). Embassy Rangoon EconOff visited the fair, which featured 43 Chinese exhibitors displaying an array of motorcycles, generators, light agricultural machinery, pesticides, traditional medicines, consumer goods, and foodstuffs. CCPIT officials in Sichuan told ConGen Chengdu that they were emphasizing exports to Burma of agricultural products, medicine, and "infrastructure projects," which include equipment and engineering services. High-Level Connections -------------- ¶4. (SBU) According to Sichuan trade promotion officials, the Burmese government gave high-level attention to the event. Five Burmese ministers attended the exhibit and each had one- on-one meetings with Chinese companies. The impetus for organizing the trade fair reportedly came from the new Commercial Officer at the Chinese Embassy in Rangoon, Mr. Tang Hai, who previously served as Vice-Director of Sichuan's Commerce Bureau (formerly known as the Foreign Trade Bureau). Tang may be hoping to use his new position to help out old friends back in Sichuan. Just "Window Shopping" -------------- ¶5. (SBU) Ironically, the vast majority of Chinese goods exhibited at the trade fair (such as vehicles and all consumer goods) are on Burma's list of items restricted or banned for import for protectionist or foreign exchange conservation reasons. In addition, few of the Chinese attendees spoke English or Burmese, and those that did admitted that they had not made any deals -- nor did they expect to -- and that they had not been given permission by the GOB to import any more of their products than they could display. Despite heavy promotion in Burma's state- controlled media, Rangoon EconOff observed that the fair was poorly attended by local businessmen and the only booths drawing attention were those giving away freebies. Legal or Underground Market? -------------- ¶6. (SBU) One ethnic Chinese businessman told Rangoon EconOff before the fair that he recently led a group of top Burmese executives on a promotional tour of Sichuan province trying to drum up demand for Burmese raw materials and other export goods. A parallel goal of the trip was to seek suppliers for Burma's vast import needs. The businessman spoke encouragingly of expanding future ties between Burma and Sichuan, saying that to date most trade ties with China have been with Yunnan province, which shares a long border with Northern Burma. He was not clear, though, on whether new trade ties with inland areas such as Sichuan and Chongqing would be conducted through official channels ("white") or by smugglers ("black"). ¶7. (U) There are signs that Sichuan-based companies are already seizing better business opportunities in Burma. According to sources in Rangoon, Sichuan Machinery Import and Export Company has inked a deal with Myanmar Electric Power Enterprise to provide electric transmission infrastructure -- probably using a massive supplier's credit China granted to Burma over the past few years -- for a new hydropower project under construction along the Burma-China border. One-Sided Trade -------------- ¶8. (U) Official Chinese government statistics indicate that trade between Burma and Sichuan/Chongqing is extremely one- sided. China recorded no imports from Burma to Sichuan in 2003, and in 2002 imports from Burma totaled only USD 40,000. Similarly, Chongqing authorities reported importing nothing from Burma in 2002, and only USD 380,000 worth of goods in 2003, mostly minerals and other raw materials. Chongqing's exports to Burma spiked in 2003, surpassing USD 95 million, as the city increased the number of motorcycles it shipped to Burma - despite official GOB restrictions on such imports. This was nearly double the almost USD 50 million in exports Chongqing sent to Burma in 2002. Sichuan's exports to Burma fell in 2003, dropping to USD 13.4 million compared to USD 21.2 million in 2002. ¶9. (U) China's trade figures show that about one-third of China's total reported commerce with Burma is conducted through Yunnan province (Ref A),which borders Burma, Laos and Vietnam. Sichuan province is located north of Yunnan, and does not border any foreign country. Reported exports from Yunnan to Burma rose 20.6 percent in 2003 and another 40 percent in the first four months of 2004, while imports rose 27.2 percent and 20.4 percent in the same time periods. These figures likely do not take into account significant smuggling activity in both directions. From Burma come gems, illegal narcotics, and teak; from China come a wide array of consumer goods and vehicles. Comment -------------- ¶10. (SBU) Officials in Southwest China are under pressure to maintain high rates of GDP growth and have thus adopted export promotion strategies that include aggressively reaching out to Southeast Asian nations. Chinese contacts have told ConGen Chengdu that the recent Sichuan/Chongqing trade fair in Rangoon was an effort to build on Chongqing's recent success in selling motorcycles to Burma, though we doubt that it will do much to expand legal exports. The personal connection between the Chinese Embassy's new Commercial Officer and Sichuan foreign trade officials was another important factor. More broadly, Southwest China has a clear interest in promoting exports to Southeast Asian markets as well as in acquiring more raw materials for use by its manufacturers. The GOB is always keen to use trade fairs to showcase its increasingly close ties with the PRC as a counterweight to deteriorating relations with the United States and Europe. However, it appears to see such trade fairs as nothing more than a PR opportunity. End comment. Martinez