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
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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
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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

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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
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6. (C/NF) Huang commented that, ironically, former Deputy
Secretary Zoellick's call for China to become a "responsible

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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
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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