A/S SHANNON LUNCH MEETING WITH DG ZENG ON CHINA-LATIN AMERICA RELATIONS

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06BEIJING7119 14 April 2006 Confidencial Embassy Beijing

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INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RUEHWH/WHA DIPLOMATIC POSTS COLLECTIVE
RUEAIIA/CIA WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
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RUEKJCS/SECDEF WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 03 BEIJING 007119

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/14/2016
TAGS: PREL, PINR, PGOV, CH, CU, VE, XM
SUBJECT: A/S SHANNON LUNCH MEETING WITH DG ZENG ON
CHINA-LATIN AMERICA RELATIONS

BEIJING 00007119 001.2 OF 003

Classified By: Deputy Political Minister Counselor
Robert Griffiths. Reasons 1.4 (b/d).

Summary


1. (C) Chinese companies have not been spared from
the political and economic turmoil in Venezuela, MFA
Latin American and Caribbean Affairs Director General
Zeng Gang told A/S Shannon during their April 14
working lunch. Despite the "severe protectionism"
that has hurt the bottom line of PRC interests, Zeng
said China will continue to build upon its
relationship with Venezuela while encouraging Chavez
to build better relations with the United States. A/S
Shannon pointed out Venezuela’s erratic, unreliable
and disturbing behavior has caused the United States
to halt sales of military equipment and oppose
Venezuela’s bid for a UNSC seat. Zeng showed interest
in US investment and economic relations in Latin
America, while lamenting that China has found the
markets to be not as open as they had expected.
Beijing has responded to increasing interest in Latin
America by Japan, ROK and the EU by increasing its
dialogue with those countries regarding the region.
A/S Shannon invited Zeng to Washington DC for the next
round of the Sub-Dialogue. End Summary.

2. (C) MFA Director General for Latin America Affairs
Zeng Gang and A/S Shannon continued their April 14
morning discussions on Latin America over a working
lunch.

Venezuela


3. (C) A/S Shannon briefed Zeng on the U.S.-Venezuela
relationship, pointing out that Venezuela has a
substantial economic relationship with the United
States that one would not imagine by listening to the
harsh political rhetoric coming out of Caracas.
Venezuela’s oil industry is tightly integrated with
the U.S. economy; Venezela owns refineries and a
network of gas stations throughout the United States.
Caracas controls the flow of its oil from the fields
in Venezuela to the gas pumps in the United States.
Venezuela sells 1.5 million barrels of oil per day to
the United States and has $7 billion invested in the
United States. Its trade surplus with the United
States, as a percentage of trade, is the largest in
Latin America.

4. (C) Zeng said political turmoil that has afflicted
Venezuela is not good for Venezuela, the region or
PRC-Venezuela relations. Zeng complained that China’s
projects in Venezuela were complicated by Venezuela’s
political situation. With the revival of Venezuela’s
economy, China-Venezuela trade links have begun to
recover. Still, growing Venezuelan protectionism is a
problem. Venezuela is forcing PRC companies, even
those with long-established operations, to partner
with local companies and establish joint ventures.
Zeng also complained that PRC corporations have never
enjoyed any "privileged and special treatment" from
the Government of Venezuela, like others have.
Nevertheless, Venezuela is an important and resource-
rich country, and China and Venezuela have many areas
of shared interest. Zeng said that China has advised
and encouraged Chavez, as well as new Bolivian
President Morales, to build better relations with the
United States and countries in the region.

5. (C) A/S Shannon responded that the United States
appreciates China’s message to the two leaders. The
United States wants to increase its cooperation with
Venezuela in energy, counter-terrorism, counter-
narcotic and commercial areas. However, each time the
United States has reached out to Venezuela, it has
found Chavez’s government to be erratic and
unreliable. He cited the recent attack on the U.S.
Ambassador to Venezuela only two days after A/S
Shannon had met with his Venezuelan counterpart.
These actions, and others like the very-public
Venezuelan military exercises premised on a U.S.

BEIJING 00007119 002.2 OF 003

invasion, are very disturbing to the U.S. Government.

6. (C) A/S Shannon said that because of Venezuela’s
continued disturbing and erratic behavior, the United
States has been forced to take certain actions such as
stopping sales of military equipment and opposing
Venezuela’s efforts to win a UNSC seat. A/S Shannon
reinforced with Zeng that this is not U.S. hostility
towards Venezuela but rather the result of Venezuelan
policy towards the United States.

7. (C) Zeng stated that while China noted the U.S.
request to not sell military equipment to Venezuela,
PRC companies had already sold three radar systems to
Venezuela. These are defensive in nature, not
offensive weapons, and would help Venezuela’s anti-
drug efforts. China had complied with relevant
international laws and norms in making the sale.

PRC Interest in U.S. Investment and Economic Relations


---------

8. (C) Zeng asked about the trend of U.S. investment
in Latin America, and whether it was still focused on
manufacturing or had moved more into the service
sector. A/S Shannon said investment has steadily
increased, although not always consistently as
investors reacted to changing market conditions in
each country. While investment in manufacturing of
autos and appliances continues, in the future
investment will increasingly be in financial,
insurance and telecommunication services.

Frustrations with Brazil


9. (C) Zeng lamented that Chinese investors had also
not found the Latin America markets as open as they
had expected. Even a relatively rich country like
Brazil insists on restricting the activities of
foreign investors. A/S Shannon pointed out that
Brazil has only recently become a trading nation, and
that there is a split within the country between
exporters favoring trade and those benefiting from the
protected local companies. An FTAA among Latin
American countries and the United States would not only
open U.S.-Latin American markets, but would create
more dynamic and beneficial trading relationships
among Latin America economies themselves.

Dialogues on Latin America


10. (C) Zeng observed that more and more countries,
such as Russia, Spain, Japan and South Korea, have
their eye on Latin America. The MFA is working to
establish mechanisms for regular dialogues with these
countries. Zeng confirmed that there would be a
trilateral dialogue on Latin America between China,
Japan and the ROK later in April. Latin American also
came up during Spanish PM Zapatero’s recent
discussions in Beijing and during a PRC-Spain forum
last month. Spain wants to enhance its dialogue with
Beijing on Latin America by starting a China-Spain-
Latin America "trilateral" dialogue. Zeng said China
is open to any form of consultations and dialogues
with Latin American and non-Latin American countries.

11. (C) Zeng asked A/S Shannon if the United States
engaged in formal dialogues on Latin America with
other countries, like Japan, the ROK and the EU. A/S
Shannon reported that there have been 25 senior-level
meetings with Japan on Latin America, while his recent
trip to Seoul represented the first dialogue with the
ROK. The United States has regular consultations with
the EU and policy planning talks with Canada and
Brazil.

Growth i PRC-Latin America Relations


12. (C) Zeng said that there were only one or two
Latin America countries that recognized the PRC in the
late 1970’s when he was first posted to Latin America.

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Between 1977 and 1979, the King of Spain was the only
leader of a Spanish-speaking country to visit China,
but last year alone Beijing welcomed the presidents of
Colombia and Chile, the vice-president of Peru, four
prime Ministers and nine foreign ministers and vice
foreign ministers from Latin America.

Fruitful Results/Regular Meetings Proposed


13. (C) Characterizing this first sub-dialogue on
Latin American affairs as candid, friendly,
transparent and constructive, Zeng said the morning
and lunch time conversations allowed both sides to
enhance their mutual understanding of each other’s
policy objectives and areas of major concern. These
fruitful discussions will help prevent unwise policy
move that could hurt mutual interests. A/S Shannon
agreed, pointing out that the wide-ranging discussions
indicated a large potential for deepening U.S.-China
relations. He said he looks forward to hosting Zeng
in Washington DC for the next round of talks.

Participants


14. (U) United States:

WHA Assistant Secretary Thomas Shannon
WHA Senior Executive Assistant John Creamer
Deputy Political Minister Counselor
Embassy Notetaker
Interpreter
Embassy Control Officer

China:

MFA Latin American and Caribbean Affairs DG Zeng Gang
MFA Counselor Wei Qiang
MFA Division Director Liang Yu
MFA Deputy Division Director Fu Xinrong
MFA Third Secretary Nie Quan
Interpreter

15. (U) The delegation cleared this cable.
RANDT