CHINA/EITI: CHINESE ACADEMIC STRESSES NEED TO BUILD

UNCLAS SECTION 01 OF 02 BEIJING 000903

STATE FOR OES, OES/EGC, OES/ENV, EAP/CM/HABJAN/FLATT,
EEB/ESC/HENGEL, EEB/ESC/IEC/ENR/HENRY/KOPP/SECOR
TREASURY FOR OASIA/ISA

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ENRG SENV EPET EMIN KCOR CH

SUBJECT: CHINA/EITI: CHINESE ACADEMIC STRESSES NEED TO BUILD
AWARENESS OF EITI

REFTEL A: 08 BEIJING 4394
REFTEL B: 08 BEIJING 4602

Summary
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1. (SBU) Summary. Chinese officials and academics lack a clear
understanding of the Extractive Industries Transparency Initiative
(EITI),according to Dr. He Wenping, of the Chinese Academy of
Social Sciences (CASS). In He's view, Chinese officials will not
support the EITI unless they can be convinced of its effectiveness
in implementing countries where Chinese companies operate. He
predicted that Chinese officials will wait for other developing
countries to take the lead in becoming EITI supporting countries and
noted that encouraging fiscal transparency abroad may be difficult
for China, which faces its own challenges in this area. He
suggested that the EITI Secretariat and EITI supporting countries
coordinate with Chinese think tanks to create opportunities to
inform policymakers and influential academics about the EITI. End
Summary.

Chinese officials need evidence of EITI's utility
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2. (SBU) Dr. He Wenping, Director of the African Studies Section,
Institute of West Asian and African Studies, Chinese Academy of
Social Sciences (CASS),told Econoff that Chinese officials lack an
understanding of the Extractive Industries Transparency Initiative
(EITI) and will remain hesitant to support it without clear evidence
of its effectiveness in EITI implementing countries where Chinese
companies operate. In He's view, Chinese policymakers are focused
on ensuring stable trade and investment environments for Chinese
companies operating overseas. Chinese leaders would likely be more
inclined to support the EITI if a clear connection could be drawn
between stability in the implementing countries and EITI
implementation.

Few officials, academics familiar with EITI
--------------

3. (SBU) As a relatively new international organization, the EITI
remains largely unfamiliar to Chinese officials and the academic
community. Dr. He claimed she is one of a handful -- if not the
only -- Chinese scholar familiar with the structure and purpose of
the EITI. (Note: Dr. He learned about the EITI during an academic
exchange program in Norway and was the only Chinese national in
attendance at the EITI's annual conference in Doha in mid-February.)
She pointed out that not a single academic paper has been written
in China on the EITI and concluded that "if Chinese academics are
uninformed about the EITI, Chinese leaders are also uninformed," as
think tanks play an important role in advising policymakers.

China will wait to follow other developing countries
-------------- --------------

4. (SBU) Dr. He argued that China considers itself a developing
country and that Chinese leaders could be uncomfortable with
economic distinctions between "supporting" and "implementing"
countries. Most EITI supporting countries belong to the OECD, while
most implementing countries are part of the developing world, she
noted. China could be misperceived if it were to join developed
countries by becoming an EITI supporting country and it would not
want to take the lead in becoming the first developing country to do
so. He noted that China would likely wait for countries like India,
Brazil, and Mexico to make the first move in this regard. She also
pointed out that many developed countries have yet to support the
EITI, noting that Japan only recently announced its intentions to
become a supporting country.

China has its own fiscal transparency problems
-------------- -

5. (SBU) Dr. He noted that although the central government has
placed a greater emphasis on fiscal transparency in recent years,
implementation of measures aimed at enhancing fiscal transparency
and accountability among state-owned enterprises (SOEs),including
in the domestic extractive industries, continues to be a challenge.
Given China's challenges in achieving fiscal transparency at home,
China would not be well-positioned to promote such requirements
abroad through the EITI, He asserted.

Next steps: Raise awareness of EITI in China

BEIJING 00000903 002 OF 002


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6. (SBU) Dr. He suggested that the EITI Secretariat and EITI
supporting countries coordinate with Chinese think tanks to create
opportunities to inform policymakers and influential academics about
the EITI, including through conferences, travel by think tank
officials to implementing countries, and by providing funding to
conduct assessments on the impact of the EITI in implementing
countries. Inviting officials from implementing countries to China
to discuss the EITI's impact on economic and political stability
would be particularly useful, He noted. He reported that her
institute is currently working with the United Kingdom's Department
for International Development (DFID) to organize a conference that
would include discussions on the EITI, tentatively scheduled for
late September, 2009. Emboffs will follow up with DFID's Beijing
office to seek more detailed information about these plans.

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

7. (SBU) China has not designated a specific ministry to handle EITI
issues. Officials from agencies that could have a stake in EITI
matters, including the Ministry of Foreign Affairs (MFA),the
National Energy Administration (NEA),and the Ministry of Land and
Resources (MOLAR),have been reluctant to discuss the EITI with
Emboffs (reftel A, B). China's MFA and NEA decided not to send
observers to the EITI's annual conference in Doha in February this
year and in December 2008, China declined to include language in the
Strategic Economic Dialogue (SED) outcomes document that would have
linked bilateral energy cooperation to language welcoming efforts by
EITI implementing countries to strengthen transparency and
accountability in the extractive sector. As future discussions with
Chinese officials on the EITI are likely to move ahead at a slow
pace, engaging Chinese think tanks -- which play an important policy
advisory role -- may be the most effective means of raising the
EITI's profile in China in the near-term.

PICCUTA