Staffdel Halpin: Thoughts on Chen Shuibian, Social

UNCLAS SECTION 01 OF 03 GUANGZHOU 006981

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/CM
USDOC FOR 4420/ITA/MAC/MCQUEEN, CELICO, DAS LEVINE
STATE FOR USTR
USPACOM FOR FPA

E.O. 12958: N/A
TAGS: ECON PHUM PGOV KCRM PREL CH TW KN
SUBJECT: Staffdel Halpin: Thoughts on Chen Shuibian, Social
Stability, and Kim Jong-Il

REFERENCE: 05 GUANGZHOU 32000

THIS DOCUMENT IS SENSITIVE BUT UNCLASSIFIED. PLEASE PROTECT
ACCORDINGLY. NOT FOR RELEASE OUTSIDE U.S. GOVERNMENT
CHANNELS. NOT FOR INTERNET PUBLICATION.


1. (SBU) SUMMARY: Chen Shuibian's pledge to abolish the
national unification council and guidelines was the first
step in a dangerous political game and has outraged mainland
academics, said scholars at China's largest Taiwan Research
Institute during a recent visit by Dennis Halpin,
professional staff member of the U.S. House International
Relations Committee. Taiwanese businessmen in Xiamen are
also united in their disapproval of Chen's actions and would
like to see the U.S. government publicly reprimand him.
Separately, NGO representatives said the roots of social
instability in China lie in corruption by rural officials.
Kim Jong-Il's reasons for visiting Guangzhou, Shenzhen, and
Zhuhai in January 2006 are still unclear, though it seems
likely he is planning a gradual economic reform program,
according to a contact at the South Korean consulate in
Guangzhou. Another possible motive to visit Zhuhai may have
been to establish a new banking network following the recent
U.S. crackdown on a Macau bank that held illicit North
Korean funds. END SUMMARY

Scholars See Chen's Actions as Self-Serving
--------------


2. (SBU) During a February 23-25 visit to Guangzhou and
Xiamen, located on the mainland side of the Taiwan Straits,
Halpin discussed cross-straits relations at Xiamen
University's Taiwan Research Institute. Scholars at the
institute, which is the first and largest of its kind in
China, discussed Chen Shuibian's pledge to abolish the
unification council and guidelines (the visit took place
just prior to Chen's February 28 approval of a decision by
the National Unification Council that calls for the National
Unification Guidelines to "cease to apply"). According to
Assistant Director Li Peng, Chen's statements should be seen
in the context of Taiwan's recent municipal and county
elections, in which Chen's party (DPP) suffered losses.
Chen is a lame-duck president and is unlikely to have any
significant impact over the next two years, and is therefore
looking to increase his political profile and take on the
mantle of the independence movement, said Li. Chen has
three likely intentions: begin a radical reversal of his
"Four Nos" pledge in 2000; provoke a strong reaction from
the mainland in order to gain political supporters in
Taiwan; and force the United States to side with Taiwan
during U.S.-China negotiations ahead of PRC President Hu
Jintao's planned April visit to the United States.


3. (SBU) Halpin and Li agreed that Chinese leaders have
become more subtle in their dealings with Taiwan in recent
years, and Li said China's reaction in this case would not
be aggressive. Li expects that Chinese leaders are closely
watching the reaction of the United States, with the hope
that high-level U.S. leaders -- Secretary Rice in particular
-- will publicly condemn Chen's statements. Professor Lin
Jing said Chinese leaders need to fashion two separate
messages for Taiwan: a strong condemnation for Chen and a
more accommodating response for the Taiwanese people.
Another scholar equated Chen's comments to former Taiwan
President Lee Tenghui's 1999 remarks that cross-straits
relations should be "state-to-state," to which the Chinese
government responded with military exercises. Lin remarked
that Chen has learned from Kim Jong-Il's handling of its
relations with the United States, Japan, and South Korea and
has implemented a similar policy with regard to Taiwan: a
stable cross-strait relationship does not benefit Taiwan,
and tensions work to focus international attention on the
region. Li added that he planned to visit Taiwan in March
and would speak with politicians and scholars on this issue.
At the end of the meeting he gave Halpin a letter from the
director of the institute, Liu Guoshen, that called on the
United States to maintain the status quo and not give
Taiwanese politicians "unrealistic expectations." During a
separate visit to the Guangzhou Party School, President Wang
Yongping said Chen's comments were regrettable but should be
handled peacefully. He stated that Chinese people should
not shed the blood of Chinese people.

GUANGZHOU 00006981 002 OF 003



Taiwanese Businessmen Disapprove As Well
--------------


4. (SBU) During a dinner in Xiamen with Halpin and
Congenoffs, four Taiwanese businessmen who live and work in
Xiamen not unexpectedly showed little sympathy for Chen and
echoed the scholars in their views of Chen's intentions.
One of businessmen said Chen was stirring up trouble for
political advantage. Three of the businessmen said the
United States should "do something." When asked how the
United States should respond, one of them said the United
States should withdraw the director of the American
Institute of Taiwan as a symbolic and high-profile gesture.
Another likened Taiwan's largely symbolic National
Unification Council to a person's appendix -- one does not
notice it until it causes trouble. The businessmen
estimated that of the 600 members of Xiamen's Taiwan
Business Association, only 10 to 20 are Chen supporters, and
they keep their opinions to themselves. One of them added
that mainland officials probably keep track of the political
attitudes of prominent Taiwanese businessmen. (Pro-Chen
business supporters in China have faced difficulties in the
past after their views have been made public.)

Taiwanese Businesses Are Still Welcome Here
--------------


5. (SBU) In a subsequent meeting with Xiamen's Taiwan
Affairs Office, Deputy Director Wang Mingshui said Chen's
statements were "dangerous" and expressed hope that the
United States would pressure Chen to moderate his actions.
Wang said his office has an excellent working relationship
with the 60,000 Taiwanese who live and work in Xiamen.
Xiamen has three of China's four "Taiwan investment zones",
which offer inexpensive land and tax breaks to Taiwanese
investors (Shanghai has a fourth). The industrial output of
the city's 2,300 Taiwanese businesses account for 45 percent
of Xiamen's total industrial output. Wang said Xiamen has a
law that guarantees the rights of Taiwanese investors and
mandates a special office to provide services such as
information on regulations and area schooling. To
illustrate the city's good will toward Taiwanese
businessmen, he said that during an energy shortage in 2004
the city exempted Taiwanese businesses from energy-saving
measures.

The Roots of Rural Unrest in South China
--------------


6. (SBU) Four NGO leaders and academics discussed with
Halpin and Congenoffs the effect of corruption and poor
government management on social stability in South China.
Liu Wenjing, associate professor, Jinan University, said
NGO's in Guangdong primarily focus on one of two issues:
migrant labor and charitable giving. Guangdong is home to
more than 30 million long-term migrant laborers, many of
which live in the factory-intensive Pearl River Delta. Yao
Yuanguang, who runs an NGO that provides information on how
to establish other NGOs, said creating a truly grass-roots
organization is a difficult and frustrating endeavor. He
said most NGO's are semi-official and therefore vulnerable
to government meddling. On the subject of social stability,
Wang Yunxiang, professor and NGO researcher at the Guangdong
University of Foreign Studies, said one of the causes of
rural unrest is wealthy families that accumulate power and
use hired thugs to put down opposition. In addition,
factory owners sometimes bribe local officials to ignore
environmental damage that hurts citizens. The participants
noted a law that is currently before the National People's
Congress that would for the first time allow prosecutors to
sue companies for environmental damage.

The Role of the Press
--------------


7. (SBU) In a separate meeting, Deputy Editor Liu Hailing of
the Guangzhou newspaper Yangcheng Evening News said the
Chinese media plays a vital role in shedding light on
government misconduct. He cited his paper's reporting on
coal mine accidents and the subsequent attempts by local
governments to cover up their responsibility. He said the

GUANGZHOU 00006981 003 OF 003


Chinese government has tightened controls on Internet media
during the past two years, and has justified these controls
-- not without reason -- as efforts to reduce pornography
and pyramid schemes. Liu said the Guangdong government has
been forced to take a more sophisticated approach to dealing
with the media and public relations. He cited the December
2005 incident in Dongzhou, Guangdong, in which soldiers
killed approximately 10 townspeople who were protesting
government plans to build a thermal power plant (see
Reftel). The government was initially silent on the matter,
but then decided to hold a press conference to counter
distortions in the international media. In a separate
meeting, Guangzhou Party School President Wang Yongping
brushed aside questions on rural unrest in South China,
saying such incidents are isolated and rare, a surprising
statement in light of the fact that two headlined protests
in China were in Guangdong (Taishi and Dongzhou) and the
Ministry of Public Security announced that China had 87,000
incidents of large-scale protest in China in 2005, an 18
percent increase over 2004. He said economic growth is
built on social stability, and conditions in South China are
stable.

Kim Jong-Il's Opaque Intentions
--------------


8. (SBU) During a meeting at the South Korean Consulate in
Guangzhou, Consul Ku Taehoon said Kim Jong-Il's visit to
Guangdong in January 2006 may indicate that he intends to
initiate gradual economic reform in North Korea. Kim's
visit closely mirrored earlier visits to South China by
former Chinese paramount leader Deng Xiaoping in 1984 and

1992. Ku said reforms would likely occur slowly, beginning
in a few select locations. He remarked that this strategy
may be a sign of desperation on Kim's part, as the economic
situation is North Korea seems to be worsening. Ku cited an
unverified report that recent birthday celebrations for Kim
in North Korea did not include extra food for citizens, as
is typical. Kim also said he has heard rumors that Kim has
a heart condition and may have sought treatment in
Guangzhou. When asked what Kim did in Zhuhai, which is
adjacent to Macau, Ku said he reportedly met with North
Korean businesses. Halpin noted that the trip took place
only a few months after the United States identified Macau's
Banco Delta Asia as a launderer of illicit North Korean
profits generated from the use of counterfeit U.S. currency.
He raised the possibility -- not previously contemplated by
either Ku or Halpin -- that Kim may be interested in
establishing new banking channels in Zhuhai in order to
resume laundering funds.

Comment
--------------


9. (SBU) Scholars at the Taiwan Research Institute are
generally more nuanced in their analysis of cross-straits
relations than other mainland observers and are less
vehement in their denunciations. Thus it is likely that
when they display the clear animosity toward Chen that we
observed, analysts and politicians in other parts of the
country are fuming. The benefits that Taiwan investment
brings to South China add a dose of reality to the issue,
however, and we saw no sign that the relationship between
local officials and Taiwan businesspeople has soured.


10. (U) Mr. Halpin has cleared this cable.

DONG