CHINA WADES MORE DEEPLY INTO THE PACIFIC

C O N F I D E N T I A L SECTION 01 OF 05 SUVA 000156

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/21/2016
TAGS: PREL EAID ECIN ETRD FJ CH TW
SUBJECT: CHINA WADES MORE DEEPLY INTO THE PACIFIC

REF: A. SUVA 123

B. BEIJING 5362

C. SUVA 055

D. SUVA 139

Classified By: AMBASSADOR DINGER. SECTIONS 1.4 (B) AND (D).

Summary
--------------

1. (C) Chinese Premier Wen Jiabao and his delegation met with
many Pacific Island leaders and businesses during an April
4-5 visit to Fiji. The leader of each of the eight Pacific
Island nations with which China has relations held private
discussions with Premier Wen, at the conclusion of which they
signed bilateral communiques. Each nation also signed the
China-drafted "Guiding Framework" for regional cooperation.
The bilateral initiatives are diverse and potentially
substantive, while the Framework is more aspirational.
Several contacts report that Premier Wen's visit signifies a
strong intent by China to strengthen its political influence
in the region. According to the Taiwan representative in
Fiji, Taiwan is under increasing pressure to increase aid
flows to the region to keep pace with China's escalating
involvement. End Summary.

China's Presence in Pacific: a "Strategic Decision"
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2. (SBU) On April 4-5 the leaders of the eight Pacific
nations holding diplomatic relations with China attended the
first China-Pacific Island Countries Economic Development and
Cooperation Forum in Nadi, Fiji. None of the six Pacific
nations recognizing Taiwan attended the Forum. Premier Wen's
visit was the highest ranking ever by a PRC official to the
South Pacific. Around 300 business-people from China and the
region reportedly attended the two-day event.


3. (SBU) In his keynote speech to the Forum's participants,
Premier Wen characterized China's relationship with the
region not as "diplomatic expediency...(rather) it is a
strategic decision." Premier Wen stated that the economies
of China and the Pacific are "mutually complementary. China
has funding and technical expertise. The island countries
are rich in natural resources. Herein lie huge potentials
for bilateral cooperation." Fiji PM Qarase responded that,
"China defines a new and compelling reality, politically and
economically...China's influence spreads internationally. We
feel it here in the region. And we say, welcome China."
But, Qarase made clear, Fiji is interested in trade as much
as aid: "The message we deliver...is that we aim to be as
self-reliant as possible. We want to limit, or remove
completely, our dependency on aid and stand on our two feet."


4. (SBU) Premier Wen announced a wide-ranging package
designed to strengthen relations and increase China's
political and economic presence in the region. Besides $375
million in preferential loans over the next three years,
China will grant zero-tariff status to imports from the
nations recognizing China, will cancel any bilateral debt
that had matured by the end of 2005 for less-developed
partners, and will extend payback dates by ten years for any
matured debt for more-developed partners. Wen said China
would provide free anti-malarial medicines for the next three
years. Wen also promised to create a special government fund
to encourage Chinese investment in the Pacific. Finally, he
promised Chinese assistance in building an earthquake/tsunami
early warning network in the region.

Regional Economic "Framework" Signed
--------------

5. (SBU) One of the centerpieces of the Forum was the signing
by ministers of China and the Pacific Island nations in
attendance (except New Zealand and Australia) of the
"China-Pacific Island Countries Economic Development and
Cooperation Guiding Framework" (Refs A-C). In his remarks to
the Forum, PM Qarase pointed to the regular consultations
already taking place between Japan's PM and the heads of the

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Pacific nations as a model for the Framework's future.
(Note: The Framework is substantially unchanged from the
draft we forwarded to Washington in February (Ref C). We
will e-mail the final text to EAP/ANP and Embassy Beijing.
End note.)

Joint Communique Reiterates Fiji
Support of "One China" Policy
--------------

6. (SBU) China and Fiji signed a Joint Communique during the
Forum. Fiji reiterated its commitment to the one-China
policy, recognizing the PRC as the only legal government
representing the whole of China and Taiwan as an inalienable
part of China. In the Communique, Fiji states it opposes any
attempt to create "two Chinas," "One China, One Taiwan,"
"Taiwan independence" or the inclusion of Taiwan in
international or regional organizations that are only open to
sovereign states. China and Fiji agreed their relationship
should be guided by the nations' 1975 Joint Communique
establishing diplomatic relations, the 2002 Joint Statement
on Consolidating and Promoting Friendly Relations, and the
Joint Press Communique.

Fiji MFA: Forum a Success; Onus on Fiji To Take Next Steps
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7. (SBU) In an April 20 meeting with DCM and Poloffs, Fiji
Acting Deputy Secretary for International Economic Affairs,
Amena Yauvoli, expressed satisfaction with the Forum,
particularly in light of the state visit by Premier Wen.
Yauvoli believes the most concrete economic achievements
arising from the Forum will be in the areas of technical
assistance and tourism, but the "onus is on (Fiji) to take
advantage of all the MOUs signed." China, he said, appears
ready and willing to deepen the economic relationship.


8. (SBU) Yauvoli said Fiji signed the most MOUs with China
of the Pacific nations which attended the Forum. He
confirmed the signing of the following bilateral agreements:

--a quarantine technical assistance agreement, in which there
would be an exchange of experts;
--a Chinese $20 million "soft loan" to the Fiji government
for the development of an extensive e-government program;
--Chinese development of Taveuni Island's first hydro-power
plant in Somosomo.

Yauvoli also said various commercial agreements were signed:

--a port agreement regarding fisheries;
--Fiji Telecom's agreement to purchase various telecom
hardware; and
--Air Fiji's purchase of one Y12IV twin-propellor aircraft.

Yauvoli hopes that an umbrella cooperation agreement can be
created, whereby each MOU signed by the two sides would be
further developed. Yauvoli stated such a framework would
allow Fiji and China to more comprehensively advance existing
economic agreements and widen cooperation.

Debate Over Communique Language:
"China Can't Chose Who Our Friends Will Be"
--------------

9. (C) Yauvoli said there was considerable back and forth
in the run-up to the Forum over Communique language. China
insisted on the following particular language: "The Fiji side
considered China a WTO member committed to market economy and
recognized China's full market economy status." The Chinese
asked PM Qarase to express similar language in his remarks at
the Forum. As Qarase did not object, the language was
inserted into his speech. However, Fiji did not accept all
of China's requests. China objected to proposed language on
Fiji's unofficial relations with Taiwan, but ultimately
accepted Fiji's suggested formulation, "The only relations
Fiji will maintain with Taiwan are in the promotion of
unofficial economic and commercial ties." Yauvoli said Fiji
insisted on that because "they (the PRC) can't choose who our

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friends will be." Fiji also succeeded in toning down
language on multilateral cooperation. The final paragraph
expresses satisfaction with the two side's coordination and
cooperation in international and regional organizations.
According to Yauvoni, the Chinese had attempted to introduce
much stronger language that would have expressed Fiji's
agreement to more rigorously support China's various
positions in the UN and other multilateral fora.

China Ambassador: Aid with No Strings Attached, But...
-------------- --------------

10. (C) During a lunch with the Ambassador and emboffs April
20, Chinese Ambassador to Fiji Cai Jinbiao described the
Forum and Premier Wen's visit as productive and successful.
In discussing particular iniatives, Cai invariably described
the results as modest. For example, that China's decision to
cancel debt for LDCs in the region would probably have very
little impact. Fiji currently has no matured debt, and in
any case is not a "least developed country." Similarly,
other Pacific partners either had little or no debt maturing
by 2005, or were ineligible for the gesture because they were
not LDCs. Cai downplayed Chinese tourism to the region. For
the near term, most Chinese will find travel to the South
Pacific to be expensive, and Chinese airlines are not likely
to establish direct flights to Fiji or other Pacific states.
Cai said a proposal for cooperation on an earthquake
early-warning system was offered to gauge interest. If the
region wants, the Chinese would be happy to talk about it.


11. (C) Turning to Taiwan-PRC rivalry in the region, Cai
said Taiwan's "dollar diplomacy" is partly to blame for
instability in the Pacific. On the other hand, China's
assistance to the region is with "no strings attached," as
the Premier stated in his speech at the Forum. Of course,
continued Cai, the PRC expects nations to adhere to the One
China Policy. China's aid, however, is a tool China uses to
increase economic and political regional stability, not to
"buy support."

Tonga PM: Loans "Like Elections,
Details Will be Worked Out Later"
--------------

12. (SBU) Tonga PM Fred Sevele expressed lukewarm feelings
about the Forum when he met with Ambassador, DCM and Poloff
April 5. When asked if he found the conference valuable, he
replied, "I guess." He said no new initiatives resulted from
his bilateral meeting with Premier Wen, but he noted
continuation of Chinese-funded projects such as the
construction of Tonga High School, loans to renovate the
Dateline Hotel, and a soft loan to the Crown Prince's
Shoreline Electric Company. The PM disparaged the Chinese
decision to forgive debt, saying the amounts were likely very
small and that the gesture was an "easy one." When asked
about the actual details of the preferential loans China is
offering, Sevele stated there were none yet: "It's like an
election," he stated, "the details will be worked out later."
He speculated, however, that PNG would receive the bulk of
loans doled out. Note: we heard separately that Sevele
lobbied for a large Chinese grant to help Tonga ride out a
current fiscal crisis.

The View from the Forum Secretariat
--------------

13. (SBU) Jim Gosselin, economic and trade advisor at the
Pacific Island Forum (PIF) Secretariat, told DCM and Poloff
that he hopes the Guiding Framework signed by leaders will
evolve into something substantial over the next few years, so
that by 2009, when the China-Pacific Economic Forum takes
place in Beijing, nations would have "something to report."
Gosselin said that, despite the Guiding Framework's regional
platitudes, China's relations in the region remain almost
exclusively focused on bilateral relationships.


14. (SBU) Gosselin said little discussion of substance
occurred during open sessions of the Forum, but he was struck
by comments of a minister from the Federated States of

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Micronesia, who said that Pacific Island nations are looking
for more than aid: "We want joint venture projects, not just
licensing agreements." Gosselin said the Fiji Commerce
Minister's comments at the Conference were also quite
striking. He initially complimented the Chinese as an
emerging "super power in trade" and stated that Fiji benefits
"immensely from its strong diplomatic ties with China."
"However," he continued, "as a friendly reminder, let me also
emphasize the importance of understanding our various
cultures. The greater the understanding that we have of each
other's way of doing business, the more advantages we can
generate out of this type of encounter...This is important in
order to avoid the untimely termination of key projects and
withdrawal from projects tagged with high development
potential that will give us greater job opportunities to
improve our standards of living." The Minister's comments
were a clear, if indirect, criticism of a Chinese company
which contracted to modernize the King's Road in eastern Viti
Levu but then, after several years and much expenditure,
failed to carry through.

Taiwan Trade Rep: China's Presence Not Just About Taiwan
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15. (C) Sherman Kuo, Taiwan's Trade Mission Representative to
Fiji told the DCM and Conoff in an April 12 meeting that the
PRC's objective in sponsoring the Forum was more than just
about countering Taiwan influence in the Pacific. "If this
were only about Taiwan, there would be no need to spend so
much money." Kuo said China always "talked big" and financed
certain high-profile projects, but never before had he seen
China so serious about expanding its presence in the region.
Kuo noted that his office closely followed Forum events and
in fact "placed a man" there to monitor developments.


16. (C) Kuo said China's actions increased "pressure" on
Taiwan from the countries in the region with which it has
diplomatic ties. Kuo relayed a recent chance encounter with
the Tuvalu PM, who semi-jokingly said that as a result of the
Forum, he no longer feels Taiwan's aid is enough. "If China
is offering (nations holding diplomatic relations with China)
$100, we need Taiwan to offer us $200-300," he said. Kuo
highlighted China's $20 million preferential loan to develop
Fiji's e-government system as an example of the pressure
being put on. "Taiwan will not spend this kind of money,"
Kuo said. Kuo said Taiwan's Pacific policy is currently
"under review." He suggested only two options: either invest
more and more resources in the region, or start pulling back.
Kuo did not indicate which policy he prefers.


17. (C) Kuo was particularly concerned about the Fiji-China
Communique's language opposing Taiwan's presence in
sovereign-state organizations. He noted that Fiji supported
Taiwan's bid last year to have observor status in the World
Health Organization (WHO). But Fiji has yet to reiterate
that support, and Kuo worries that the Communique's language
may be a sign Fiji will drop its effort.


18. (C) Kuo said he was not aware of any plans for a
Taiwan-sponsored conference in response to the PRC-sponsored
Forum. (Note: The PIF Secretariat's Gosselin told us that
when the China-Pacific Forum was first announced, Taiwan
protested strongly, and stated it planned to ask for the
PIF's help in facilitating a similar conference. Gosselin
said there was been no follow-up from Taiwan since. On the
other hand, Chinese Ambassador Cai has heard, as we have,
that Taiwan may plan to host its conference in Palau this
summer.)

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

19. (C) The recent conference confirms that China believes it
should play an important role in the South Pacific. Although
the fervent intention to isolate Taiwan diplomatically looms
large, China's strategy seems broader. The search for
natural resources, including fish, factors in, as most likely
do desires to gain influence over Pacific-island votes in

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international fora and, more generally, to demonstrate
big-power status in the region. Still, China' path may not
be smooth. Island leaders have observed that some big-ticket
offers, like debt relief, are basically smoke and mirrors.
The region chafes at sometimes crude Chinese efforts to turn
off any dealings with Taiwan. Other relationships, including
with Australia, New Zealand, the EU, and the U.S., are longer
lasting and remain productive. Nonetheless, China did
illustrate quite vividly it has a seat at the Pacific table,
and all other players must factor that into future bets.
DINGER