THAI-TAIWANESE ON CHINA AND CHINA'S NEW PARADIGM

C O N F I D E N T I A L SECTION 01 OF 02 BANGKOK 003743 SIPDIS SIPDIS E.O. 12958: DECL: 06/22/2016 TAGS: PREL PGOV ECON ASEAN TH XE SUBJECT: THAI-TAIWANESE ON CHINA AND CHINA'S NEW PARADIGM Classified By: Political Counselor Susan M. Sutton, Reasons 1.4 (B, D) ¶1. (C) Summary. Thai-Taiwanese business representatives in Bangkok are very cognizant of the growing PRC presence in Thailand yet do not believe their business interests are threatened in the foreseeable term. Taiwan remains the third largest source of Foreign Direct Investment in Thailand, after Japan and the United States. Thai-Taiwanese representatives claim that most PRC business representatives do business in Thailand to work around import quotas aimed at China or to feather their own nests away from anti-corruption watchdogs on the Mainland. Our pro-Taiwan interlocutors acknowledge the effectiveness of political pressure brought to bear by Beijing which makes it impossible for Taiwanese firms to bid on large Thai government contracts. They also see PM Thaksin as facilitating Chinese business interests in Thailand. End Summary. REASONS FOR INVESTING ABROAD -------------- ¶2. (SBU) On June 19, Poloff met with six business leaders in the Thai-Taiwanese community at the Thai-Taiwan Business Association (TTBA),an association consisting of fifteen subsidiary ethnic Taiwanese business associations at the local level. Preston Cheng, Chief Supervisor of TTBA, believes that PRC businesses are investing abroad because: 1) by dealing in other currencies, they can avoid any problems caused by future appreciation of the RMB; 2) they can avoid import quotas imposed on Chinese goods by other countries; and 3) managers of some State-owned enterprises (SOEs) can engage in corrupt practices far from the eyes of mainland watchdogs. WE'RE NOT THREATENED, JUST POLITICALLY MARGINALIZED -------------- -------------- ¶3. (C) For now, PRC investment is primarily focused on large concerns. Vincent Chiu, Secretary General of TTBA, explained that the "biggest difference between us (the Thai-Taiwanese) and China is that we are mainly comprised of small and medium enterprises (SMEs) owned by individuals who have immigrated to Thailand while the Chinese tend to be opportunists within larger enterprises looking to make short-term profit without seriously considering taking up roots in Thailand." Chiu added that even when interests overlap (such as in the manufacturing sector),his group is not concerned because Thai-Taiwanese products adhere to quality while the Mainland Chinese products are "cheap and break easily." ¶4. (C) China is using political pressure to marginalize Taiwan's ability to compete on large projects. Preston Cheng noted that "when big businesses in Taiwan are interested in investing in Thailand, 'political considerations' keep the Thai government from considering their bids. He cited Taiwanese telecommunications giant China Telecom's failed attempt to break into the Thai market as an example. In that case, senior officials in the Royal Thai Government (RTG) "did not even give its chairman a meeting," he said. However, the group unequivocally agreed that the RTG is "extremely supportive of Taiwanese investors" at the SME level, citing that Taiwan remains the third largest source of FDI in Thailand, behind the U.S. and Japan. CONSPIRACY THEORY? -------------- ¶4. (C) Andy Huang, Chief Consultant for TBBA, laid out what he believed to be a new paradigm for the Chinese -- expanding Chinese influence in the region while limiting U.S. participation. He believes that China is seizing the opportunity to expand and cement existing influence in Southeast Asia "while the U.S. is tied up in Iraq and Afghanistan." Since China remains a one-party system under which political, economic and commercial interests are linked, Chinese leaders look at foreign investment as a political tool. Huang warned that "China's objective is more than just business - it's in furthering national interests." ¶5. (C/NF) Huang used China's "keen interest" in Thailand Shin Corp's Telecommunications activities as an example. Huang is convinced that China is "looking to gain access to more base stations" to add to its already growing satellite network elsewhere in Southeast Asia. He suggested that, by investing in the Thai telecommunications sector, China is expanding its influence throughout ASEAN. Huang linked this investment with Chinese diplomatic and political moves in the BANGKOK 00003743 002 OF 002 region. He believes that China's more active and collegial participation in ASEAN in recent years is yet another indicator of China's policy of expanding its influence in the region. He went on to say that China is using international organizations that do not include U.S. membership -- such as the Shanghai Cooperative Organization (SCO) and Conference on Interaction and Confidence Building Measures in Asia (CICA) -- to "act as cells" to politically link and incorporate its members into a "world system" with minimal U.S. involvement. AN OPPORTUNIST THROUGH AND THROUGH -------------- ¶6. (C/NF) Huang commented that, ironically, former Deputy Secretary Zoellick's call for China to become a "responsible SIPDIS stakeholder" in the region gave what he perceived as a "green-light" for Beijing to more actively participate in multi-lateral organizations. Huang also claimed that Caretaker PM Thaksin Shinawatra has facilitated China's policy. By helping to change Thai government policy from one of mistrust to one openly embracing China, Thaksin has helped China reach its goal in Thailand. COMMENT -------------- ¶7. (C) Hearing Taiwanese express fear and mistrust of China's intentions in Thailand and the region is nothing new. Nonetheless, the Taiwanese are uniquely placed to observe PRC business practices and contrast them with their own. Their description of PRC business representatives as "carpet baggers" not interested in remaining in Thailand would seem to fly in the face of their theory that Beijing has a master plan linking business investment with diplomatic and political strategies. We will be visiting pro-Taiwan and pro-PRC businesses in other parts of the country in coming months in the hopes of better analyzing our Taiwanese interlocutor's conclusions. END COMMENT. ARVIZU