U.S.-CHINA LATIN AMERICA SUBDIALOGUE: A/S

C O N F I D E N T I A L SECTION 01 OF 05 BEIJING 007118

SIPDIS

SIPDIS

STATE FOR WHA/FO, WHA/EPSC

E.O. 12958: DECL: 04/14/2026
TAGS: PREL ETRD ECON CH
SUBJECT: U.S.-CHINA LATIN AMERICA SUBDIALOGUE: A/S
SHANNON'S DISCUSSIONS WITH DG ZENG GANG

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Classified By: Political Minister Counselor Daniel
Shields. Reasons 1.4 (b/d).

Summary
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1. (C) China attaches great importance to U.S.-China
bilateral cooperation on Western Hemispheric affairs,
MFA Director General for Latin American and Caribbean
Affairs Zeng Gang told A/S Shannon at the commencement
of the first U.S.-China Subdialogue on Latin America
under the U.S.-China Senior/Strategic Dialogue. DG
Zeng said U.S.-China cooperation can facilitate
relations between the United States, China and Latin
America. The PRC agrees that peaceful development,
market-oriented reforms and democratic governance
contribute to Latin America's current stability.
Latin America is gaining clout in the international
community but faces key development and social justice
challenges. China's involvement in Latin America is
not a threat to U.S. security interests. China seeks
to greatly increase trade and investment with Latin
America in the years ahead. The PRC seeks assurances
the United States will not block PRC efforts to
establish diplomatic relations with Latin American
countries that now recognize Taiwan. China is keen to
expand U.S.-China business cooperation in Latin
America. China appreciated U.S. support for China's
observer status in the Organization of American States
and seeks U.S. support for Inter-American Development
Bank observer status. China supports MINUSTAH and
looks forward to continued close cooperation on Haiti,
DG Zeng added. A/S Shannon underscored strong U.S.
and Latin American commitment to the democratic and
market-oriented reforms that have brought stability to
the region. He highlighted U.S. efforts to increase
access to economic opportunity and promote social
development in Latin America. End Summary.


2. (C) WHA A/S Thomas A. Shannon met Zeng Gang, MFA
Director General for Latin American and Caribbean
Affairs, on April 14 at the commencement of the first
U.S.-China Subdialogue on Latin America under the
U.S.-China Senior/Strategic Dialogue. See para 17 for
list of participants. DG Zeng briefed A/S Shannon on
China's perspectives on the current Latin American
polity, regional goals and Chinese policies. In
China's view, Latin America has witnessed relative
stability with some economic development in recent
years. In the eighties Latin American countries
returned their governments to the people and thereby
enhanced stability, although many political structures
are not yet matured. China's overarching regional
goals are to support continued peace, stability and
democratic rule in Latin America. Latin American
countries have made the decision to join the
globalization trend, which means that in addition to
their traditional relationship with the United States,
they are exploring new relationships within the region
and countries outside the region. While these
trends are positive, challenges remain due to an
imbalance between economic growth and social
development that can cause instability and social
turmoil. As such, addressing social injustice has
become a top priority for many Latin American
governments, DG Zeng noted.


3. (C) According to DG Zeng, China has no
geopolitical ambitions in the Western Hemispheric
region. China neither exports ideology nor poses a
threat to the regional interests of other countries.
China will pursue regional peace and staility by
strengthening political, economi and cultural
cooperation and enhancing its relationships with Latin
American government officials and political parties.
The PRC has diplomatic relations with 21 of 33
countries in Latin America and the Caribbean. Latin
America cooperates closely with China on United
Nations reform and assisted China's accession to the
World Trade Organization (WTO). In return, China
supported the entry of Latin American countries into
the WTO as well, DG Zeng said.

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PRC Seeks Increased Trade
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4. (C) Seeking increased trade with Latin American
countries is a natural outgrowth of China's market
reforms and Latin America's embrace of globalization
and economic development, DG Zeng noted. It is a
"win-win" situation. China's economic footprint in
Latin America remains comparatively light. In 2005,
China-Latin America trade totaled USD 50.457 billion.
China ran a USD 3.1 billion trade deficit with Latin
America, with exports of USD 23.68 billion against
imports of USD 26.78 billion. Although China-Latin
America trade doubled since 2000, it accounted for
only 3.54 percent of China's total 2005 trade volume
and only 5.25 percent of Latin America's global trade.
In 2005, China's exports accounted for only 5.19
percent of Latin America's total imports and China's
foreign direct investment (FDI) totaled only USD 4
billion, or 7.7 percent of China's total overseas
investment. China's FDI is a fraction of U.S. FDI in
Latin America. The PRC expects Latin American
bilateral trade to continue growing despite such
impediments as geographic distance, DG Zeng added.


5. (C) DG Zeng downplayed China's energy ambitions in
the region. China's long-term policy is to rely on
domestic sources for energy, minimally supplemented by
external sources, DG Zeng said. 90 percent of China's
energy consumption is provided by domestic sources.
China imports only 5-6 percent of the oil on the
global market and only 2.4 percent of China's oil
comes from Latin America. Geographic distance and the
limited financial and technical strength of Chinese
oil companies, along with latecomer status, deter
China's entry into Latin American oil and gas markets.
China believes exploration and development of new oil
reserves in Latin America will increase world oil
output and thereby ease pressure on prices, help
create new jobs in Latin America and bring associated
benefits to the region, DG Zeng noted.

PRC Says Military Ties Not A Threat
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6. (C) As for military cooperation, DG Zeng said
China's actions do not pose a threat to third party
interests. China has never stationed troops overseas
and remains committed to nonalignment (i.e. no multi-
lateral military organizations) and non-confrontation.
China's military cooperation with Latin America is
strictly controlled and undertaken with the goal of
strengthening underlying relations. China's military
cooperation with 19 Latin American countries includes
visits at various levels and academic exchanges
between military academies. Typical military support
and assistance covers logistics, medical and office
supplies and sports equipment. Chinese military
assistance is unconditional and does not involve
offensive weapons. In pursuing military cooperation,
China considers regional sensitivities. The PRC does
not interfere in internal affairs and seeks only to
improve countries' defensive capabilities. PRC
assistance therefore will not destabilize the region.
Charges by some that China's military cooperation with
Latin America poses a threat to U.S. military
interests is "unfounded" and "absurd," DG Zeng said.

A/S Shannon Stresses Democracy and Trade
--------------


7. (C) DG Zeng concluded his prepared remarks by
noting the PRC seeks deeper U.S.-China cooperation on
Latin America, which is in the interest of continued
Latin American growth and stability. In response, A/S
Shannon outlined U.S. policies and objectives in the
Western Hemisphere. He noted that while U.S. policy
is based on U.S. interests, it also comports with
goals identified through considerable multilateral
discussions with regional partners, particularly in
the Summit of the Americas (SOA) and Organization of

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American States (OAS). Both mechanisms represent the
fundamental commitment of the region's leaders to
democratic governance, which is a requirement for
participation. U.S. policy has four objectives: to
strengthen democratic institutions; to bolster
regional security; to promote prosperity and to invest
in people. A/S Shannon elaborated on each point,
stressing that the USG believes that democratic
governance, free trade and economic integration are
the best means of addressing the region's socio-
economic chllenges.


8. (C) A/S Shannon stressed the priary security
threats to the Western Hemispheric region are
nontraditional. Terrorism, organized crime and narco-
trafficking weaken states, demoralize people and
perpetuate corruption and violence. U.S. policy
therefore emphasizes not only mil-mil contacts, but
also intelligence and law enforcement cooperation.
Security must be addressed multilaterally. The USG
seeks to promote prosperity through free trade
agreements that open markets to U.S. direct investment
and encourage competition, flexibility and efficiency
to meet the challenges of globalization. Finally, the
United States is committed to ensuring that people
have meaningful access to economic opportunity. The
Administration doubled development assistance since
2001 to USD 1.6 billion and has Millennium Challenge
Account compacts with three countries in the region,
with two more under discussion, that will assist
national infrastructure projects designed to increase
market access, A/S Shannon noted.

Taiwan
--------------


9. (C) DG Zeng said that China's vital national
interests include seeking to establish diplomatic
relations with countries in the Western Hemisphere
that now have "so-called" diplomatic relations with
Taiwan. The PRC seeks U.S. support, or at least a
commitment that the U.S. will not oppose, China's
efforts to develop diplomatic ties in the region.
Currently 12 Latin American and Caribbean countries
have yet to establish diplomatic relations with the
PRC. Taiwan's authorities use relations with these
countries as tools to further their secessionist
activities and damage China's core national interests.
China and the United States share a common interest in
reducing political corruption. Taiwan is the greatest
contributor to political corruption through its so-
called "dollar diplomacy" that essentially bribes
Latin American officials for support. The media has
exposed Taiwan's bribes to top officials in Costa
Rica, Nicaragua, Panama and Honduras. DG Zeng
contended that former Costa Rican President Rodriguez
was forced to resign as OAS Secretary over one such
scandal, adding that these public disclosures only
represented the tip of the iceberg.


10. (C) Even where the PRC does not have diplomatic
relations with the governments, the PRC Government and
people maintain good relations with the people and
countries, DG Zeng said. The PRC is prepared to work
on the basis of United Nations resolutions and the
one-China principle to establish state-to-state
relations with all countries in Latin America and the
Caribbean. Such relations will bring mutual benefit
to both sides, especially in light of rapid economic
globalization. Establishing diplomatic relations is a
necessary and inevitable trend. Most of the countries
that do not recognize the PRC are small and poor.
Formal diplomatic relations will enhance development
and stability. This is in the interests of both China
and the United States. The PRC hopes the United
States will cooperate to stop support in the region
for Taiwan's secessionist tendencies. Most Latin
American countries with relations with Taiwan realize
they are being used and that relations with Taiwan are
not the way forward and will tarnish their
international images. However, Zeng contended, some
of the leaders of these countries have told the PRC

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that they must take U.S. concerns into account when
deciding whether to establish relations with the PRC.
Because China has relations with the United States,
the PRC Government has every reason to believe the
United States has no reason to oppose other countries'
pursuing this course. The PRC seeks clarification of
U.S. views and hopes the USG will play a constructive
role, or at least not stand in the way of PRC
objectives, Zeng said.


11. (C) In response, A/S Shannon said the United
States is not in a position to dictate to other
countries with whom they can establish and maintain
diplomatic relations. Each country determines its own
diplomatic relations. Even in the Western Hemisphere,
one country does not have ties with the United States.
The United States does not encourage or discourage
countries on establishing or maintaining diplomatic
relations with the PRC, A/S Shannon said. Polmincouns
added that the U.S. one China policy remains based on
the Three Joint Communiques and the Taiwan Relations
Act.

PRC: Ready To Cooperate
--------------


12. (C) DG Zeng offered the PRC's initial views on
areas for potential U.S.-China cooperation in the
Western Hemisphere. China and the United States both
attach great importance to relations with Latin
America, DG Zeng noted. China has an open and
constructive attitude on close exchanges and
cooperation for relations between China, the United
States and other countries in the Western Hemisphere.
With respect to U.S. regional policy objectives of
strengthening democratic institutions, bolstering
regional security, promoting prosperity and investing
in people, the PRC is ready to cooperate and
coordinate with the United States, DG Zeng said.

PRC Supports Joint Business Projects
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13. (C) China is ready to discuss trade and economic
cooperation with the United States, especially joint
trade and business activities, DG Zeng said. Chinese
companies currently have sound cooperation with U.S.
companies in Latin America. For example, Nutech has
worked with a U.S. company exporting equipment to
Latin America under the Port Security Initiative.
Lenovo and IBM joint products have penetrated markets
in Brazi and a number of other countries. Haier
Elecronics and China's Min Metals have both enjoyed
good cooperation with U.S. companies. U.S. an
Chinese companies could potentially cooperat in the
future on joint exploration and development projects
of oil and gas resources in places like Mexico or
Bolivia. China is willing to help with natural
disasters, which have taken a toll on Latin America.
China helps Latin America to the best of its capacity
and would like to explore further cooperation with the
United States on disaster relief and preventin, DG
Zeng said.

PRC Please With OAS Observer Status
--------------


14. (C) DG Zeng thanked A/S Shannon for U.S. support
for China's OAS observer status. The PRC views the
OAS as a platform for multilateral cooperation. The
PRC permanent observer office has received a great
deal of support from the USG. China is willing to
enhance bilateral cooperation through this and other
multilateral institutions. The People's Bank of China
is prepared to join the Inter-American Development
Bank and believes China's participation will enhance
Latin American socio-economic development. China
seeks active U.S. support for IDB observer status, DG
Zeng said.


15. (C) A/S Shannon noted the IQ will play an
iQreasingly important role matching policies and

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resources and he said he would convey China's interest
in observer status to the Treasury Department. The
OAS can be a significant platform for U.S.-China
cooperation through the various commissions
established to address hemispheric challenges, such as
natural disasters, terrorism and corruption. The OAS
needs funding for the voluntary and specific funds
that help OAS commissions address these challenges.
If the PRC is interested in increasing its
contributions to these funds, the United States can
facilitate a meeting with its OAS permanent
representative, A/S Shannon said. A/S Shannon added
that 2006 will be an active year in Latin American
politics, with elections in Mexico, Venezuela,
Nicaragua, Colombia, Ecuador and Brazil, along with a
second round in Peru. The USG appreciated the fact
that China advised Bolivian President Morales to seek
good relations with the United States. The United
States is prepared to consult with China on
reaffirming positive themes with the new governments
as they come to office, A/S Shannon added.

PRC Proud of MINUSTAH Cooperation
--------------


16. (C) Finally, DG Zeng noted that China supports UN
Resolution 1658 and MINUSTAH peacekeeping operations
(PKO) in Haiti. China sent police units to Haiti and
supported extending MINUSTAH's mandate. China shares
the U.S. position on Haiti and wants to enhance
cooperation in this and other areas, DG Zeng said.
A/S Shannon responded that PRC support for MINUSTAH,
and extending and participating in the PKO, is both
welcome and important. MINUSTAH represents a unique
commitment by Latin America, which has historically
viewed Haiti as a U.S. problem. After the collapse of
the Aristide Government, Latin American governments
recognized the need to participate in stabilizing the
country, signaling a growing Inter-American
solidarity. The challenge now is to move MINUSTAH
from elections to addressing national reconstruction
and development challenges. China's participation in
security operations is important because without
security, it will be hard for the new government to
establish itself. The incoming Preval Government's
May 14 inauguration presents an important opportunity
for the democratic process to take hold and begin task
of rebuilding the nation. The United States looks
forward to further consultations and cooperation with
China on MINUSTAH going forward, A/S Shannon said.


17. (U) Participation:

United States
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WHA A/S Thomas A. Shannon
Mr. John Creamer, WHA Senior Executive Assistant
Polmincouns
Poloff (Control Officer)
Poloff (Notetaker)
Poloff (Notetaker)
Embassy Interpreter

MFA Dept of Lat. Amer. and Carib. Affairs
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Mr. Zeng Gang, Director General
Mr. Wei Qiang, Counselor
Liang Yu, Director
Ms. Fu Xingrong, Deputy Director
Mr. Nie Quan, Third Secretary
Mr. He Yuan, Third Secretary
Ms. Guan Tapei, Third Secretary
Ms. Fang Bing, Interpreter
Mr. Wang Yu, Second Secretary
(Office of Policy Analysis)
RANDT