Identifier
Created
Classification
Origin
08HONGKONG259
2008-02-12 08:21:00
CONFIDENTIAL
Consulate Hong Kong
Cable title:  

PRC CENTRAL GOVERNMENT COMFORTABLE WITH U.S.

Tags:  KCRM SMIG SOCI PGOV PHUM CACS CH MC MG HK 
pdf how-to read a cable
VZCZCXRO5640
OO RUEHCN RUEHGH RUEHVC
DE RUEHHK #0259/01 0430821
ZNY CCCCC ZZH
O 120821Z FEB 08
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4109
INFO RUEHOO/CHINA POSTS COLLECTIVE IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE
C O N F I D E N T I A L SECTION 01 OF 03 HONG KONG 000259 

SIPDIS

SIPDIS

DEPT FOR G/TIP AND EAP/CM
NSC FOR DENNIS WILDER

E.O. 12958: DECL: 02/12/2033
TAGS: KCRM SMIG SOCI PGOV PHUM CACS CH MC MG HK
SUBJECT: PRC CENTRAL GOVERNMENT COMFORTABLE WITH U.S.
PRESENCE IN MACAU -- BUT LIFT SANCTIONS ON BDA!

REF: A. 07 HONG KONG 2775

B. HONG KONG 255

Classified By: Consul General James B. Cunningham, for reasons 1.4 (b)
and (d)

C O N F I D E N T I A L SECTION 01 OF 03 HONG KONG 000259

SIPDIS

SIPDIS

DEPT FOR G/TIP AND EAP/CM
NSC FOR DENNIS WILDER

E.O. 12958: DECL: 02/12/2033
TAGS: KCRM SMIG SOCI PGOV PHUM CACS CH MC MG HK
SUBJECT: PRC CENTRAL GOVERNMENT COMFORTABLE WITH U.S.
PRESENCE IN MACAU -- BUT LIFT SANCTIONS ON BDA!

REF: A. 07 HONG KONG 2775

B. HONG KONG 255

Classified By: Consul General James B. Cunningham, for reasons 1.4 (b)
and (d)


1. (C) SUMMARY: PRC Ministry of Foreign Affairs Commissioner
to Macau Wan Yongxiang told Consul General Cunningham on
January 30 that Beijing was comfortable with the rapid rise
of U.S. and other foreign investment in Macau's gaming and
tourism industry and, despite some stresses as Macau society
deals with explosive economic growth, Beijing believes that
the Macau government has the capacity and will to deal with
the new challenges. Commissioner Wan told the CG that the
central government welcomed the U.S. gaming investors and
that mainland China was doing a lot to support the growth in
Macau's gaming and tourism sectors -- the large majority of
Macau's 27 million tourists in 2007 came from mainland China,
he noted. Wan also welcomed and encouraged the Consul
General's efforts to improve services to and support for the
U.S. business community in Macau and to work more closely
with the Macau government to set up better coordination
channels to deal with potential large-scale accidents or
emergencies involving American citizens. Wan's only caution
was a quiet reference to President Hu Jintao's comments at
the recent Party Congress that China supported Macau and Hong
Kong's engaging external exchanges, though it would firmly
oppose the "interference" in Hong Kong and Macau affairs by
external forces. Emphasizing that he was speaking only
"personally," Wan made a clear request that the U.S.
recognize the significant contributions Macau made to the Six
Party Talks in helping to resolve the BDA case, and claimed
that strict regulation and management reforms are now in
place at BDA. The United States should consider lifting the
sanctions against this popular and long-established local

bank, said Wan. END SUMMARY.


2. (C) COMMENT: The chain-smoking Wan spent a full hour in
conversation with the CG, at all times keeping his remarks
calmly up-beat, confident and low-key. Significantly, he at
no time gave credence to the sometimes shrill anti-American
invective which occasionally finds its way into Macau's
press. (Note: These anti-American rants seem to be coming
specifically from a very small number of business people
allied with former gambling monopoly kingpin Stanley Ho, who
now is getting a run for his money from the big, new American
gaming investors. They do not seem to be gaining any
traction in Macau society at large.) Wan emphasized the
positive effects that the influx of foreign investment had on
Macau, but indicated the Macau government and Beijing were
keenly aware of the need to take practical measures to ensure
that Macau's economy remain somewhat diversified and that
Macau's more vulnerable citizens were adequately taken care
of. He in no way tried to assign blame for social stresses
on the American companies and he welcomed, rather than warned
against, the Consulate General's playing a more active role
with the U.S. community in Macau. His "personal" request for
us to lift sanctions against BDA was presented as a possible
friendly gesture we could make in the interest of winning
approval from the Macau public. END COMMENT.


3. (C) In a January 30 meeting with Wan Yongxiang, the PRC
Ministry of Foreign Affairs' commissioner in Macau, Consul
General Cunningham opened by briefing Wan on the Consulate
General's efforts to: assist the growing U.S. community in
Macau, establish a distinct American Chamber of Commerce
(AmCham),ensure Macau society viewed the U.S. presence
positively, and work with the Macau government to establish
effective communication and coordination in case of
large-scale accident or emergency. The CG noted that the
U.S. community has more than doubled in the last couple of
years and probably numbers about 2,000 now, a number which is
likely to continue to grow. The Consulate must make sure we
are actively serving the American community, particularly in
the provision of emergency and non-emergency consular
services. It is difficult to do this only from our base in
Hong Kong, said the CG, so we were having to find ways to
engage the American community, and Macau's government and
society, more than we had in the past. The CG noted that
ideally he would like to be able to have an officer located
in Macau full-time, but within the U.S. government system
that is not easy to do. Thus we have to find other ways to
better serve the community.


4. (C) Citing as an example the January 11 ferry collision in
Macau, in which 19 passengers were seriously injured and more
than a hundred less seriously injured, the CG told
Commissioner Wan that we had discovered that, if Americans

HONG KONG 00000259 002 OF 003


had been among those injured (they were not) there would have
been no way for Consulate General officials to get over to
Macau in a timely way -- both the ferry and helicopter
services were suspended after the accident, because of heavy
fog.


5. (C) The chain-smoking Wan told the CG that governments
need to assist and support their nationals overseas, the
Macau government does the same thing, as does the Chinese
government. It was understandable that we would seek to do
this. He welcomed the CG's reaching out to the Macau
government to establish good coordination and communication,
particularly for emergencies. Wan asked the CG how the new
American Chamber of Commerce in Macau was doing; the CG
replied with a quick overview of the chamber's growth in the
last year, the structure of work committees focused on
particular business issues of interest to members and the
desire of the AmCham to play a role in organizing the U.S.
business community to ensure that Macau society at large
benefited from the large inflows of American investment and
very rapid economic growth Macau was experiencing.
Commissioner Wan indicated he saw these as positive
developments.


6. (C) Wan gave his own assessment of the current economic
and political situation in Macau, which he judged to be good
and moving in a positive direction, despite some stresses.
Macau government statistics indicated GDP growth of about
26%, "extremely fast, and a big change from the past." He
acknowledged that U.S. investment in the gaming industry was
a key driver of this growth, which had brought a lot of good
to Macau: government revenues and personal incomes were both
rising. Most Macau citizens were satisfied with the Macau
government's performance and the foreign investment. Wan
noted that when he first arrived in Macau five years ago, the
Macau government only provided nine years of public
education; now, they have raised it to 15. The government
has lowered the age at which citizens can receive retirement
benefits from 65 to 60, and medical and other government
support can now reach many more citizens.


7. (C) Some downsides existed, however, and "a small number
of citizens are complaining." The rate of growth is too fast
and imbalances are arising. "Some have gained more, some
have gained less from the growth." In some sectors, new
balance points would be established, in others, maybe not.
But this is normal in developing economies, said Wan. One
issue of concern to both the Macau and central governments
was the growing disequilibrium between different economic
sectors, and the stresses that a booming gaming sector was
causing for businesses in other sectors. For instance, the
well-funded and highly profitable gaming enterprises were
expanding very rapidly and bidding up prices of salaries for
workers and managers. Small and medium size enterprises
(SMEs) and manufacturing simply could not match the new
salaries offered by the casinos and hotels and were losing
workers. This was causing the Macau economy to become overly
reliant on the gaming/tourism sector and this increasing lack
of diversification was a concern. For instance, said Wan,
should there be another pandemic like SARS, the flow of
tourists might dry up dramatically, and the Macau economy
would have no other productive sectors to cushion the blow.


8. (C) Other negative social effects were being felt. Many
students were dropping out of high school to take up
relatively well-paid jobs at the casinos. "Even if they stay
a few more years and complete their education they won't make
any more money, so they quit." Citizens were manifesting
their complaints in recent public demonstrations, Wan said,
citing larger than normal crowds at the traditional May Day
labor rally, as well as large demonstrations on PRC National
Day (October 1) and Macau SAR establishment day, December 20.
Thousands of people took to the streets, said Wan, most of
whom represented the "most vulnerable" members of society.
"A few" of the demonstrators were calling for political
reform, Wan admitted, and, "Frankly, we have the same
problems in mainland China. These problems come with
development. We need to pay attention to them, and deal with
them by reform," he claimed. Wan credited the Macau
government for carefully researching and understanding the
nature of the problems Macau faces and dealing with them in a
frank and direct manner. "The SAR government will resolve
these problems gradually, one by one," said Wan.


9. (C) The Macau government remains open to U.S. investors,
Wan affirmed, and continued to take measures to help the
foreign companies; Wan also indicated the central government
is basically comfortable with the massively increased

HONG KONG 00000259 003 OF 003


presence of the U.S. and other foreign investors. "Any
company is welcome here, so long as they abide by the laws.
The central government and mainland Chinese citizens have
been big supporters of the development of Macau's gaming and
tourism sectors. More than half of Macau's 27 million
tourists come from mainland China, and the individual visitor
scheme has been very successful. The Macau government will
carefully protect the security and the property of foreign
investors in Macau. The central government's policies are
very clear on this, as Hu Jintao said at the recent Party
Congress: The central government supports Hong Kong and Macau
to have interactions with foreigners, so long as there is no
interference."


10. (C) The Consul General remarked that we have welcomed the
willingness of the Macau government to cooperate with us on
important issues, such as money laundering and trafficking in
persons; we think this is in China,s interest as well. Wan
focused quickly on money laundering, noting that it was a
problem which governments around the world are only now
beginning to understand better. The SAR government is paying
a lot of attention to it, he said, pointing to the
anti-money-laundering laws Macau passed in 2006. Wan
affirmed that fighting money laundering is within the
autonomous purview of the Macau SAR government, but when he
has talked to them about it, he found them taking it very
seriously. When the CG noted his interest in seeing Macau
implement the recommendations in the recent Asia Pacific
Group (APG) survey of Macau (reftel),Wan noted that the APG
"had not found big problems here."


11. (C) Commissioner Wan then raised the matter of Banco
Delta Asia. The CG said that from the USG point of view, the
BDA issue is resolved. The owner has decided not to sell it
or put it under new management, and it will thus likely
remain cut off from the international financial system. Wan
nodded but said, "The Macau government understood your
concerns about BDA and helped you get the Six Party Talks
re-opened. The help that Macau provided on this was not easy
-- the way the SAR government resolved the matter of the
(North Korean) funds was not in accordance with normal
financial regulation." "In my personal, not official,
opinion the SAR government took very serious measures to deal
with the problems at BDA. After serious investigation, the
government in fact did not find very compelling evidence of
money laundering at BDA, though it did find evidence of
mismanagement. The government had to give BDA back to the
owner, but the owner has significantly tightened internal
controls and the government has tightened regulation of BDA."


12. (C) Once again emphasizing he was speaking "personally,"
Wan asked, "Since the SAR government and BDA have done so
much to resolve these problems, isn't it time to consider
lifting the sanctions against BDA? BDA is a local bank with
a 70-year history. Keeping it on the list not only affects
the bank, it affects the perceptions of the people of Macau
about the United States. Lifting the sanctions would have a
very positive effect on public opinion here." The CG
repeated that without a change in the management of the bank,
he doubted that the USG would change its view. Wan then
pushed for details about what needed to change within the
management and noted that BDA had cut off all contact with
the North Koreans. The CG deflected discussion of this.
Cunningham