CHINESE ENGAGEMENT IN ZIMBABWE

UNCLAS HARARE 000118 SENSITIVE SIPDIS AF/S FOR B. WALCH E.O. 12958: N/A TAGS: ECON PREL EAID CN ZI SUBJECT: CHINESE ENGAGEMENT IN ZIMBABWE REF: 10 STATE 10152 ¶1. (U) Although statistics are not readily available, anecdotal evidence shows increasing Chinese involvement in Zimbabwe's economy. The trend became pronounced with the Government of Zimbabwe's (GOZ) "Look East Policy" in 2003, through which it sought to emphasize new ties with China in place of traditional links to Europe and North America. Chinese enterprises are noticeably active in the retail and construction sectors. One local press report suggests that 80 percent of Chinese-owned enterprises are in the retail sector. But Chinese construction projects receive far more public attention - often negative. For example, an eight-year-old plan involving Chinese contractors to widen the highway between Harare and Bulawayo collapsed after only 20 kilometers of construction amid allegations of poor workmanship and corruption. ¶2. (U) There has been significant Chinese investment in industrial enterprises. In 2007 Sinosteel Corporation bought Zimasco Consolidated Enterprises Limited, Zimbabwe's largest ferrochrome producer. Zimasco suspended production in 2009. In 2004 the China Building Material Industrial Corporation entered into a joint venture with the Industrial Development Corporation of Zimbabwe to establish the Sino-Zimbabwe Cement plant in Midlands Province. Chinese firms also provided agricultural equipment worth millions of dollars under the Reserve Bank of Zimbabwe's farm mechanization program in order to show support for the GOZ's land reform program. In 2009, Zimbabwean officials announced a multi-billion dollar Chinese investment in platinum mining, but there is no evidence of actual investment on this scale. ¶3. (U) The GOZ's severe fiscal constraints have put limits on Chinese engagement. The GOZ is in arrears on its US$400 million in official debt to China, and this has blocked access to lines of credit reportedly worth as much as US$950 million. According to GOZ figures, as of March 2009 Zimbabwe owed US$37.2 million to China in unpaid principal and interest. ¶4. (SBU) There are no concrete examples of U.S.-China collaboration in Zimbabwe. Ambassador Ray met with the Chinese ambassador who indicated his desire to maintain a dialogue with the U.S. and other Western countries. The principal aims of U.S. policy in Zimbabwe are a return to democratic governance, restoration of the rule of law, and protection of human rights. While China has remained silent on these subjects, it has moved from sole support of ZANU-PF to a more balanced approach and now has relationships with both ZANU-PF and MDC-T. The Chinese embassy recently sponsored a golf tournament in honor of Prime Minister Tsvangirai. While China may share an interest with the U.S. in restoring Zimbabwe's investment climate, progress in this area ultimately depends on governance reforms. RAY