CHINA'S GROWING ECONOMIC INFLUENCE IN MOROCCO

UNCLAS SECTION 01 OF 02 CASABLANCA 000107 SIPDIS SENSITIVE E.O. 12958: N/A TAGS: ECON ETRD PGOV XA CH MO SUBJECT: CHINA'S GROWING ECONOMIC INFLUENCE IN MOROCCO REF: A) CASABLANCA 50 B) RABAT 252 ¶1. (SBU) Summary: Strong bilateral ties between China and Morocco have been bolstered in recent years by state and official visits. Commercial exchanges between the two countries have increased, and Chinese traders have begun to set up shop in Casablanca's largest commercial district. Although bilateral trade has risen 30 percent per year since 2005, Moroccan business leaders complain that it remains largely unbalanced in China's favor. To improve results, Morocco seeks to leverage its position as a Mediterranean production and export platform for China, as well as a bridge to sub-Saharan Africa. Promoting Chinese tourism in Morocco and exporting foodstuffs such as olive oil and citrus are seen as other ways to improve the trade imbalance. While some Moroccans are apprehensive about China's presence in Morocco, it has aroused less concern than in other more resource-rich countries. End Summary. -------------- GROWING TIES BETWEEN MOROCCO & CHINA -------------- ¶2. (U) For the past several years, China and Morocco have made efforts to strengthen their ties. In February 2002, King Mohammed VI conducted a state visit to China. Chinese President Hu Jintao reciprocated in April 2006. In June 2007, a delegation of 200 Chinese businesspeople from Guangdong came to Casablanca for the Morocco-China Business Forum. In March 2008, a high-ranking Chinese Communist Party official, Li Changchun, and Vice Minister of Commerce Wei Jianguo led a delegation to Morocco that included representatives from 60 Chinese companies. Chinese officials met with Prime Minister Abbas El Fassi during the visit, and the General Federation of Moroccan Businesses (CGEM) organized a business forum that was attended by Moroccan Minister of Foreign Trade Abdellatif Maazouz. ¶3. (SBU) Commercial exchanges between Morocco and China also indicate a growing relationship. In 2007, Maroc Telecom, Morocco's largest telecommunications operator, selected the Chinese company Huawei Technologies Company, Ltd. to provide a nationwide communications network. On a smaller scale, numerous businessmen in Casablanca report importing goods from China. Abdelmalek Kettani, CEO of the Moroccan electronics company Galaxy, has been importing products from China for several years. Recently, he designed a television model, which a Chinese firm produces for his brand according to his specifications. Similar stories abound. Finding it simpler and more lucrative to design merchandise for production in China and sale on the local market, some businessmen have shifted from running factories in Morocco to importing goods and wholesaling them from a warehouse. Kettani orders about USD one million worth of merchandise per shipment, selling his goods to local chains such as Marjane. Econoff spoke with a satellite technician/importer who said that his goods are all sold before they even arrive from China. ¶4. (SBU) Not only are Moroccans importing from China, but Chinese traders are setting up shop in Morocco. In Derb Omar, one of Casablanca's largest commercial districts, Chinese merchants can be found in significant numbers, earning the area the nickname "Morocco's Chinatown." On a recent trip to the area, a Casablanca resident pointed out a long, narrow shop that a Moroccan had sold to a Chinese buyer. The buyer had divided the space into ten or twelve stalls using plywood separators, and had then rented them to Chinese merchants - a move that apparently infuriated the original Moroccan owner. Nonetheless, the approach seems increasingly common. While Moroccan retailers purchase most of the goods, ranging from shoes to kitchenware, in bulk for sale in towns and rural areas outside of Casablanca, individual shoppers also frequent the Chinese shops. One long-time resident of Casablanca said he and other lower-income earners appreciate the ability that Chinese imports give them to buy previously-unattainable goods cheaply. He projects that in a matter of years, most of Derb Omar will be Chinese-owned. -------------- TRADE STATS SHOW IMBALANCE -------------- ¶5. (U) Trade figures for China highlight increasing economic links between the two countries. China's primary exports to Morocco, in descending order of dollar value, are: textiles, industrial thread and electric cable, shoes, tea, telecommunication equipment, and televisions. In 2007, Chinese exports to Morocco totaled approximately USD 1.8 billion. Morocco exports electronic products, phosphates, frozen fish, cobalt and small volumes of leather and textiles to China for a 2007 total of about USD 171 million. Although China earns many times the amount Morocco does from bilateral trade, commerce in both directions is moving in a positive CASABLANCA 00000107 002 OF 002 direction. China's exports to Morocco went up 38 percent in 2007, while its imports from Morocco rose 18 percent. Bilateral trade has increased 30 percent on average per year since 2005. ¶6. (U) Still, Morocco views its trade with China as unbalanced. Following the March 2008 visit of a Chinese delegation, CGEM President Moulay Hafid Elalamy noted that only one percent of Moroccan exports go to China, and lamented the fact that current commercial exchanges are insufficient. To remedy this situation, Elalamy and other Moroccan business leaders believe the country must do a better job of exploiting its attributes. With its strategic geographic location and trade agreements with Europe and the U.S., Morocco hopes to offer China a Mediterranean production and export platform, using the TangerMed port. ¶7. (U) Morocco also hopes to be a bridge to sub-Saharan Africa, where China has significant interests, particularly in natural resources. Morocco may not offer raw materials on the level of countries such as Congo, which exports billions of dollars of copper to China, or Sudan, where Chinese companies have invested billions in the oil industry. However, as a politically stable, economically viable country on the African continent, Morocco sees itself as ideally placed to provide its African neighbors with services that may be lacking. Morocco's BMCE Bank, for example, seeks to become "the reference bank" for Africa, and this month secured a loan of USD 110 million from the International Finance Corporation to finance its acquisition of a 35 percent stake in the Bank of Africa. Similarly, Royal Air Maroc runs 70 flights per week to 20 destinations in sub-Saharan Africa, including less popular locales such as Kinshasa, Yaounde and Monrovia. Morocco hopes to interest China in the networks it has established in Africa. ¶8. (U) The Moroccan government has other ideas about how to boost trade with China as well, including encouraging Chinese tourists to visit Morocco. To this end, the Moroccan Ministry of Tourism signed a memorandum of understanding with the Chinese Office of Tourism in April 2006, and efforts are underway to establish partnerships with Chinese tour operators. Morocco would also like to export food items such as olive oil, fish and fruit to China. During the March 2008 visit of Communist Party official Li Changchun and Vice Minister of Commerce Wei Jianguo, Moroccan Prime Minister Abbas El Fassi signed a protocol on phytosanitary conditions that allows Morocco to export fruit and citrus to China. -------------- CHINESE AID TO MOROCCO -------------- ¶9. (U) Similar to its approach in other countries on the African continent, China has brought aid to Morocco alongside its economic interests. In February 2008, for example, China donated USD 1.3 million to the Mohammed V Foundation for Solidarity. The donation included furniture and equipment to outfit a 100-bed girls' center. While Morocco receives far less aid from China than its needier neighbors in Africa, it does receive some. (Note: Last week, Morocco granted USD one million in emergency humanitarian aid to Sichuan province, which was struck by an earthquake on May 12.) ¶10. (SBU) Comment: China's influence in Morocco raises mixed feelings among Moroccans. Some Moroccan traders in Derb Omar, for example, fear being displaced by Chinese merchants who undercut them with rock-bottom prices. Similarly, textile retailers feel they cannot compete with cheap Chinese imports (REF A). In addition, concerns about poor quality are common, and many have stories of buying shoes or toys that fall apart in a matter of days. On the whole, however, Moroccans accept China's growing influence, realizing that it is a reality that cannot be ignored. As CGEM's Elalamy commented after the June 2007 business forum with China, "One has to latch onto these economies that are at once dangerous and offer opportunities." With its focus on economic development, Morocco is poised to take advantage of its cooperative relationship with China. End Comment. GREENE