UNCLAS SECTION 01 OF 03 BEIJING 000908
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ENRG, BM, CH
SUBJECT: SINO-BURMESE ECONOMIC RELATIONS - PIPELINES NOT
IMMINENT
REF: A. 2007 RANGOON 706
B. 2007 RANGOON 313
C. 2008 RANGOON 609
D. SINGAPORE 228
Summary
1. (SBU0 Chinese scholars seemed unconcerned with the
political situation in Burma and focused primarily on the
economic relationship between the two countries during recent
meetings with EmbOffs. The high cost of food and energy in
Burma is inflaming
the country's volatile political situation and only economic
development
can bring stability, according to one Chinese scholar.
Another
scholar cited "mutually beneficial" hydroelectric power
projects being built by Chinese firms as examples of
economic cooperation between China and Burma. Scholars
dismissed press reports about Chinese participation in the
construction of an oil
pipeline between the Bay of Bengal and Yunnan province,
questioning
the feasibility of such a project. Sino-Burmese bilateral
trade grew by
over thirty percent in 2007 to USD 1.2 billion, according to
a Chinese study published in Fall 2008. China reportedly
made a
major investment in Burma,s mining sector last year as well.
End Summary.
2. (SBU) The best way to address social and political
instability in Burma is by first stabilizing the economy,
China Institute of International Studies (CIIS)
Asia-Pacific Security and Cooperation Department Director
Shen Shishun told EmbOffs March 25. Shen suggested that
the turmoil Burma experienced in August and September of
2008 was precipitated by both political issues, including
popular desire for democratic reform, and economic factors,
such as the sudden increase in gasoline prices immediately
prior to the unrest. The continuing high costs of both food
and energy in Burma are exacerbating an already volatile
political situation, he maintained.
Building Dams in Burma "Mutually Beneficial"
--------------------------------------------- -
3. (SBU) China has deep political and economic ties with
Burma despite the country's "rogue status" in the
international community, Beijing University Center for
Asian-Pacific Studies Deputy Director Yang Baoyun told
Econoff March 23. Yang cited the many dam projects
underway in Burma as examples of economic cooperation,
saying such projects are "mutually beneficial" - Burma gets
much needed capital and China gets electricity. Press
reports stating 15,000 Chinese workers will construct the
Irrawady river hydropower plant are likely true as Burma
has very few skilled laborers, Yang said. Still, the
project, which press reports say is a collaboration between
the Burma-Asia World Corporation and the China Power
Investment Corporation (CPI) will employ "many" local
workers. Yang said CPI also provides informal training to
the Burmese workers.
4. (U) Sino-Burmese economic ties were on display during a
March 28 visit to Burma by Li Changchun, a member of the
Standing Committee of the Central Party Committee's Political
Bureau. Press reports state Li inspected the Burma third
generation mobile communication network project in Rangoon
which was built by China's ZTE Corporation. He also visited
the Mandalay Industrial Training Center which, according to
those reports, was built with Chinese aid. Li lauded the
"mutually beneficial" economic and trade ties and urged the
two governments to find more "win-win" areas of cooperation.
Pipelines Still a Pipe Dream?
-----------------------------
5. (SBU) Discussions on the construction of an oil
pipeline connecting Yunnan province to the Bay of Bengal
(and thus bypassing the Strait of Malacca maritime choke
point)
and natural gas pipelines from Burmese gas fields to Yunnan
have been under way for several years, but little visible
progress has been made toward commencing construction. The
two countries signed an MOU on oil and gas pipeline
construction in June 2007 (ref A). In November 2008,
following another round of bilateral talks, Chinese media
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reported that pipeline construction would likely begin in
2009. The week of March 23, the two countries announced
they had signed a joint agreement on oil and natural gas
pipeline construction.
6. (SBU) Dr. Zhao Hongtu, research professor and energy
specialist at the Institute of World Economic Studies at
the China Institutes of Contemporary International
Relations (CICIR), told Econoff in early March that,
contrary to media reporting, China only has plans to
construct a gas pipeline, not an oil pipeline, linking the
two countries. CIIS' Yang similarly dismissed press
reports that claim China and Burma will soon begin
construction of an oil pipeline. He questioned the
feasibility of such a
project given the estimated high construction costs and
the difficulty of laying a pipeline through the mountainous
terrain between the two countries. Chinese Academy of
Social Sciences Institute of Asia-Pacific Studies Research
Fellow Zhao Jianglin concurred, saying a feasibility study
to assess the oil pipeline project has yet to be launched.
(Note: While the two countries have seemingly made more
progress in planning for a gas pipeline, a timeframe for
construction has yet to be determined. In January 2007,
China National Petroleum Corporation (CNPC) and Myanmar Oil
and Gas Enterprise (MOGE) launched a feasibility study on
the project (ref B). CNPC signed an MOU with MOGE and
Korea's Daewoo International in June 2008 under which
Daewoo agreed to sell natural gas from Burma's Shwe gas
fields to CNPC that would be transported to China through
the planned pipeline (ref C).
India "Can't Compete"
---------------------
7. (SBU) Yang also dismissed reports regarding China and
India competing for resources in Burma. India's "Looking
East Policy" seeks to strengthen ties between India and the
ASEAN nations, Yang stated, but China already has close
relations with these countries. Burma and China are "like
relatives," he said, and, as such, India "can't compete."
(Note: ref D seems to confirm Yang's views that India's
approach towards ASEAN countries is less strategic than
China's and its relations are less developed).
China Trade with Burma Continues to Grow
-----------------------------------------
8. (U) Sino-Burmese bilateral trade, while still relatively
small, increased over 30 percent from 2006 to USD 1.21
billion in 2007, according to the China-ASEAN Business and
Investment Development Report published by CIIS (and
authored by CIIS' Shen). China's exports to Burma,
consisting primarily of "machinery equipment, acoustic
products and spare parts," accounted for USD 893 million,
while its imports of "lumber, teak, natural rubber and
minerals" amounted to USD 315 million. The report states
that
in recent years, Sino-Burmese trade has grown in excess of
20 percent annually, making China Burma's second largest
trading partner (behind Thailand).
9. (U) According to Associated Press reports dated March
20, Burma's Ministry of National Planning and Development
claimed foreign direct investment climbed to USD 974.9
million in the first eleven months of 2008, with China
accounting for USD 855.9 million of the total. This was a
93 percent increase over 2007 levels, the report states.
The report suggests the China Nonferrous Metal Group, a
state-owned enterprise, was a major contributor to this spike,
having reportedly signed the largest-ever mining deal with
the
Burmese government. No details on the deal were provided,
however, and the company declined to meet with Embassy
officials.
Comment
-------
10. (SBU) Despite being some of China's leading thinkers on
Sino-Burmese relations, none of the scholars we talked to
seemed to have given any thought to U.S. policy toward Burma,
nor were they aware of
Secretary Clinton's remarks on the need for the USG to
reassess that policy. When asked their views on whether the
United States and China could work together to improve the
situation in Burma, scholars instead turned to well-worn
responses of China's "non-interference" in other countries'
internal affairs or ranted about American "hegemony" in the
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region. One scholar stressed that the U.S. and China would
first need to establish more of a foundation of mutual trust
before they could work together to solve international
issues. End Comment.
WEINSTEIN