CHINESE TIES WITH MOZAMBIQUE

UNCLAS SECTION 01 OF 02 MAPUTO 001297

SIPDIS
SENSITIVE
AF/S - TREGER, AF/RSA - NAY, EAP/CM - CRANE
E.O. 12958: N/A
TAGS: EAID PREF PREL CH MZ
SUBJECT: CHINESE TIES WITH MOZAMBIQUE

REF: A. STATE 153199

B. 2004 MAPUTO 406
Sensitive But Unclassified - Handle Accordingly

1. (U) Summary: China has extensive political, economic, and
military ties with Mozambique, and its visibility appears to
be growing. Mozambique,s President and Prime Minister have
each met with their Chinese counterparts in the last two
months. End Summary.

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Political Relations
--------------

2. (U) China supported FRELIMO in its independence struggle
in the 1960s and 1970s and quickly recognized the new
government after independence. In recent years, China has
financed the construction of a number of high-profile
government buildings, including the Chissano International
Conference Center in 2003 (at a reported cost of USD 5
million) and the Foreign Ministry in 2004 (USD 12 million).


3. (U) On September 14, President Guebuza met with Chinese
President Hu Jin Tao on the margins of the UNGA high-level
event in New York. Both agreed that they would seek to
improve and deepen bilateral relations, according to press
reports. Much of their discussion focused on economic
matters, with Guebuza emphasizing the need for improved
relations in the areas of agriculture, aquaculture, and
infrastructure. Hu pointed to the complementarity of
Mozambique's undeveloped natural resources and China's
experience and technology in these areas. Both said that
they shared the same views on the Millennium Development
Goals and on UN reform, including reform of the UN Security
Council.


4. (U) Prime Minister Luisa Diogo visited China in late
August and in late September received a delegation of the
Chinese Communist Party, led by Political Bureau member Yu
Zhengsheng.

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Trade and Investment
--------------

5. (U) Trade between China and Mozambique is growing rapidly,
according to statements made by Diogo and Chinese Prime
Minister Wen Jia Bao after they met during Diogo's five-day
trip to China. Diogo was in Beijing to attend the tenth
anniversary of the Beijing UN Conference on Women, but
apparently devoted considerable attention during her visit to
encouraging greater Chinese trade and investment in
Mozambique. On September 2, at the close of the visit, Prime
Minister Wen told reporters that trade between the two
countries had increased by 110 percent in the first six
months of 2005 compared with the same period in 2004. While
Wen gave no figures for the six-month period, he said that in
2004, trade between the two countries amounted to USD 205
million, of which USD 120 million was in the export of
Chinese goods and services to Mozambique and USD 85 million
in Mozambican imports. (Comment: These figures are
significantly higher than Mozambican national statistics
institute (INE) figures for 2002 and 2003. The INE cites
approximately usd 46 million in Mozambican imports from China
and Hong Kong combined and usd 11 million in Mozambican
exports to China and Hong Kong combined. We do not know the
composition of trade. We suspect Chinese road construction
work here (see para 8) figures prominently in Chinese
exports, as does clothing. Main Mozambican exports to China
are thought to be seafood (shrimp, sharks) and high-value
timber, but we do not have figures. End comment.)


6. (U) At the same press conference, Wen announced that the
Chinese government had decided that starting in 2005, 187
Mozambican products would receive duty-free entry to China.
The product types were not given, but, according to a
journalist, include raw materials for use in the production
of heavy machinery.


7. (U) For her part Diogo was full of praise for Chinese
products. During the visit she announced that the Mozambican
government would soon purchase 70 Chinese buses for use in
Maputo, and indicated that further bus purchases could
follow. Diogo reportedly called for greater investment in
Mozambique, which she said China "would never regret," in a
meeting with Chinese business representatives. During the
meeting it was mentioned that a recent survey in China of
2,000 small and medium-sized businesses concluded that Ghana,
Tanzania and Mozambique were considered the most attractive
African countries for investment. Also, members of the
Mozambican delegation held talks with China's health ministry
over the importation of health equipment and drugs, and the
possibility of increasing the number of Chinese doctors
working in Mozambique (see ref B for more on Chinese medical
teams).

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Infrastructure
--------------

8. (SBU) A Chinese construction company is resurfacing a
section of the main north-south highway in Inhambane, Sofala,
and Zambezia provinces. The repair work is to be completed
in 2006. Total estimated cost is USD 106 million. Another
Chinese company is working on the water system in Beira, the
country,s second largest city.


9. (U) Martyn Davies, Director of the China Studies Center at
the University of Stellenbosch in South Africa, claims the
Chinese casino magnate Stanley Ho is interested in acquiring
part of Mozambique's giant hydro-electric generating
facility, the Cahora Bassa dam, according to a mid-August
press report. He is said to be awaiting, however, the
outcome of discussions between the Mozambicans and the
Portuguese on sale of the dam to Mozambique. (Note:
Mozambique owns 18 percent of the stock of Hidroelectrica
Cahora Bassa and Portugal 82 percent. The Portuguese say
they are owed USD 1.7 billion in debt for the period when the
facility was not operational during Mozambique,s civil war,
and they have made repayment a condition of any deal with
Mozambique. End note.) In addition, Davies claims that a
group of Chinese investors has expressed interest with the
Mozambican government in developing a large part of the
Zambezi river valley. Incidentally, Davies' figures for
Chinese trade with Africa may be of interest: USD 29.5
billion in 2004, an increase of 59 percent above total trade
with Africa in 2003. Davies states that Chinese trade with
Africa has been growing, on average, by 31.2 percent since

2001. (Comment: We do not know how much of this increase is
due to oil price increases. End comment.)

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Military and Police
--------------

10. (SBU) In June 2005 Defense Minister Tobias Dai announced
the receipt of a grant of USD 1 million worth of Chinese
military assistance. Details of how the aid will be used
have not been fully settled, but some will go to support
50-100 scholarships each year for Mozambican military
officers to study in China, according to press reports.
Defense Minister Dai traveled to China earlier in June on a
seven-day goodwill visit. We also have heard unconfirmed
reports that the Chinese help the military grow rice in Gaza
province,s Chokwe district.


11. (SBU) The Chinese have recently supplied Mozambique,s
police force with 200 or 300 (accounts differ) motorcycles
and outfits that are being used in Maputo and another city.
The motorcycle patrols have significantly increased the
visibility of the police, and we have heard reports that the
Mozambican government is seeking additional motorcycles.

--------------
Perceptions of China and the Chinese
--------------

12. (SBU) One Mozambican newspaper recently carried a glowing
account of China's economic accomplishments by a journalist
who evidently traveled with the Prime Minister on her August
trip to Beijing. The tone of the article is that China is
the model for the future, in contrast the United States,
which will be eclipsed one day. Other reports praising China
as a development success are regularly carried by the local
media. Nonetheless we believe that Mozambicans have more
mixed views toward the increasing numbers of Chinese working
in the country. A recent story about Mozambicans beaten by
their Chinese employers received prominent media coverage.
And many Mozambicans, we understand, resent that Chinese
laborers are used in the construction industry at a time when
only around ten percent of the Mozambican workforce holds
jobs in the formal sector.
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