US embassy cable - 09BEIJING22 (original version)


Identifier: 09BEIJING22
Wikileaks: View 09BEIJING22 at
Origin: Embassy Beijing
Created: 2009-01-06 08:41:00
Classification: CONFIDENTIAL
Redacted: This cable was redacted by Wikileaks. [Show redacted version] [Compare redacted and unredacted version]
DE RUEHBJ #0022/01 0060841
O 060841Z JAN 09
C O N F I D E N T I A L SECTION 01 OF 07 BEIJING 000022 
E.O. 12958: DECL: 01/05/2034 
Classified By: Ambassador Clark T. Randt.  Reasons 1.4 (b/d) 
1. (C) January 1, 2009, marked the 30th Anniversary of the 
establishment of diplomatic relations between the United 
States and the People's Republic of China.  This anniversary 
followed the PRC commemoration of roughly 30 years of China's 
"reform and opening" policy under Deng Xiaoping, which led to 
China's staggering economic growth. 
2. (C) Thirty years ago, China was just emerging from the 
nightmare of the Cultural Revolution and 30 years of 
fratricidal misrule.  China's economy was crippled by years 
of disastrous policies like the Great Leap Forward.  The 
population was coming to terms with the world's most 
draconian population controls enacted in 1976 after decades 
of Maoist state-subsidies encouraging large families. 
Chinese foreign relations tended to be more influenced by 
ideological yardsticks than economic links since China had 
very few commercial links with the outside world.  In 1979, 
Chinese urbanites on average made the equivalent of five 
dollars per month. 
3. (C) Just as no one in 1979 would have predicted that China 
would become the United States' most important relationship 
in thirty years, no one today can predict with certainty 
where our relations with Beijing will be thirty years hence. 
However, given the current significance of the bilateral 
relationship and the risk of missing opportunities to jointly 
address ongoing and predictable future challenges, below we 
look at trends currently affecting China with an eye to how 
those trends might affect relations.  Several issues leap 
out, including China' insatiable resource needs, our growing 
economic interdependence, China's rapid military 
modernization, a surge in Chinese nationalism, China's 
demographic challenges, and the PRC's increasing influence 
and confidence on the world stage. 
4. (C) China has been plagued over the millennia by 
unforeseen events that devastated formerly prosperous 
regimes.  Mongol invasion, the Black Death, uncountable 
peasant uprisings, warlords, tax revolts, communist 
dictatorship, colonialism, famine, earthquakes and other 
plagues were largely unforeseen by the China watchers of the 
past.  This report focuses generally on more optimistic 
projections.  Given China's history, however, the United 
States should also gird itself for the possibility that China 
will fall short of today's mostly sanguine forecasts. 
Resource Consumption 
5. (C) Popular and scholarly works in recent years highlight 
China's growing demand for natural resources and the possible 
impact that China's pursuit of resources will have on its 
foreign policy.   Since economic reforms began in the late 
1970s, industrial and exchange rate policies have fueled 
investment in resource-intensive heavy industries in China's 
coastal region, which currently account for approximately 55 
percent of the country's total energy consumption today.  A 
construction boom over the past decade has also stimulated 
growth in heavy industries.  China is now a leading steel 
producer and currently accounts for 50 percent of the world's 
annual cement production.  Reflecting China's emphasis on 
resource-intensive industries, China's energy utilization 
rate grew faster than its GDP between 2002 and 2006.  In 
1990, China consumed 27 quadrillion British Thermal Units 
(BTUs) of energy, accounting for 7.8 percent of global 
consumption.  In 2006, it consumed 68.6 quadrillion BTUs or 
15.6 percent of the global total.  According to U.S. 
Department of Energy statistics, by 2030 China will account 
for 145.5 quadrillion BTUs or 20.7 percent of global energy 
6. (C) China's oil demand has grown substantially over the 
last 30 years.  In 1980, China consumed 1.7 million barrels 
of oil per day, almost all of which was produced 
domestically.  In 2006, China consumed 7.4 million barrels 
per day, second only to the United States.  According to the 
International Energy Agency (IEA), China's oil consumption 
will reach 16.5 million barrels per day in 2030.  More than 
two thirds of the increased demand will come from the 
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transport sector as vehicle ownership rates rise.  China 
became a net importer of oil in 1993, and it now relies on 
imports to meet a growing portion of its fossil fuel needs. 
The IEA forecasts that China's oil import dependence will 
rise from 50 percent this year to 80 percent by 2030, as 
domestic oil production peaks early in the next decade.  To 
strengthen the country's future energy security, the Chinese 
Government has adopted a "go out" policy that encourages 
national oil companies (NOCs) to acquire equity stakes in 
foreign oil and gas production.  Today, state-owned Chinese 
oil giants CNPC/PetroChina, CNOOC, and Sinopec can be found 
in Sudan, Iran, Kazakhstan, Venezuela, Angola, and the 
Caspian Basin. 
7. (C) China has also increased its reliance on imported 
minerals, and many analysts have attributed the global 
commodities boom of recent years in part to China's growing 
demand.  Between 1980 and 2006, China became the world's 
largest consumer of iron, copper and aluminum.  Chinese 
conglomerates are ubiquitous in sub-Saharan Africa exploiting 
mineral wealth there, and Chinese multinationals have 
significant investments in Australian mineral and uranium 
8. (C) China's reliance on coal has come at an appalling 
environmental cost.  This year, China surpassed the United 
States in carbon emissions, and it will soon become the 
world's biggest energy consumer.  Between now and 2030, the 
IEA estimates, China will need to add 1,312 gigawatts of 
power generating capacity, more than the total current 
installed capacity in the United States.  Coal-fired power 
generation, a major source of air pollution, accounts for 
approximately 78 percent of China's total electricity supply, 
and it will likely remain the predominant fuel in electricity 
generation for at least the next 20 years.  Analysts predict 
that domestic coal production will peak in the next 15 to 25 
years.   China already became a net importer of coal in 2007, 
and coal imports are expected to grow in the coming decades 
to meet growing demand in China's coastal provinces. 
9. (C) The Chinese Government recognizes the need to reduce 
dependence on coal, and it is pursuing policies to diversify 
its energy mix.  China is already the largest producer of 
renewable energy in the world, with major investments in 
large-scale hydro and wind power projects.  Nuclear and 
natural gas power will also account for a greater proportion 
of energy production, but under current projections, efforts 
to diversify China's energy mix will not have a large enough 
impact to curb greenhouse gas emissions growth. 
10. (C) China's energy intensive growth has also had tragic 
consequences for public health.  By most measurements, at 
least half of the world's most polluted major cities are in 
China.  Rural residents, in particular farmers, have been 
affected by water pollution and dwindling water supplies, 
which are frequently redirected for industrial use. 
Respiratory disease, water-borne illness and tainted food 
scares are facts of modern life in the country.  According to 
a recent WHO study, diseases caused by indoor and outdoor air 
pollution kill 656,000 Chinese citizens every year.  Another 
95,600 deaths are attributed annually to polluted drinking 
11. (C) China's increasing reliance on imported natural 
resources has foreign policy ramifications and provides 
opportunities for the United States.  A China that is 
increasingly dependent on Middle Eastern oil might be more 
likely to support policies that do not destabilize the Middle 
East.  Take Iran, for instance.  We have long been frustrated 
that China has resisted (with Russia) tough sanctions aimed 
at curbing Iran's nuclear program.  In the future, a China 
increasingly dependent on foreign energy supplies may 
recalculate the risk a nuclear Iran would pose to the greater 
Persian Gulf region's capacity to export oil. 
12. (C) Another opportunity presented by China's increasing 
resource consumption is in the joint development of 
technological responses to reduce carbon emissions and to 
diminish the public health impact of industrial growth. 
Scientific publications around the world conclude that the 
projected rate of global energy and natural resource 
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consumption is unsustainable.  Experts warn that we must find 
alternative forms of energy in order to avert calamities 
posed by global climate change.  International efforts to 
develop and significantly utilize renewable energy, clean up 
our shared global environment, and conserve our remaining raw 
materials will not be effective without meaningful Chinese 
participation.  As the world's preeminent technological power 
and as a leader in multilateral energy and scientific 
organizations, the United States is in a unique position to 
work with China to overcome these challenges. 
Economic Interdependence and Chinese Demographics 
--------------------------------------------- ---- 
13. (C) In the next fifteen years, while China's overall 
population is predicted to stabilize, its urban population 
will likely grow to almost 1 billion, an increase (of 300 
million people) equal to the entire current population of the 
United States.  China plans to build 20,000 to 50,000 new 
skyscrapers over the next two decades -- as many as ten New 
York cities.  More than 170 Chinese cities will need mass 
transit systems by 2025, more than twice the number now 
present in all of Europe.  China is now surpassing Germany as 
the world's third largest economy and is projected to 
overtake Japan within the next five years.  By the end of the 
next thirty years, China's economy could rival the United 
States in overall scale (although its per capita income will 
likely only be one quarter of the United States'). 
14. (C) Behind these outward symbols of success will be an 
increasingly complicated economic picture.  Since 1979, by 
reversing the misguided economic policies of the Mao era, 
liberalizing labor markets and prices, opening to foreign 
investment, and taking advantage of the West's 
consumer-driven policies, China has maintained fast growth. 
However, the set of circumstances that allowed such 
impressive growth rates will no longer exist in the future. 
15. (C) Many speculate that China has reached the limit to 
easy productivity gains by rationalizing the state-planned 
economy.  The Economist Intelligence Unit expects China's 
annual growth to slow from around 10 percent in the last 30 
years to 4.5 percent by 2020.  After 2015 when the labor 
force peaks as a share of the population, labor costs will 
rise faster.  This will increasingly make other countries 
like India and Vietnam more attractive for labor-intensive 
investment.  In addition, workers will have to support a 
growing number of retirees.  Early retirement ages combined 
with the urban one-child limits creates the so-called "4-2-1" 
social dilemma:  each worker will have to support four 
grandparents, two parents and one child.  Savings rates will 
start falling as the elderly draw down their retirement 
16. (C) China will have to manage an economy increasingly 
dependent on domestic consumption and service industries for 
growth.  Already, urbanites are buying 1,000 new cars per 
day, making China the world's largest Internet and luxury 
goods market, and traveling abroad in growing numbers.  By 
2025, China will have the world's largest middle class, and 
China will likely have completed the transition from the 
majority rural population of today to a majority urban 
population.  These consumers of tomorrow will likely flock to 
products from around the world as their North American, 
European and Japanese counterparts do today, providing new 
opportunities for American business.  If incomes continue to 
grow, it is likely that the Chinese middle class will react 
like educated urbanites in other countries by exerting 
pressure on the Government to improve its dismal performance 
on environmental protection, food and product safety.  We are 
already seeing increased public activism over such issues 
17. (C) China will face a challenge in the next thirty years 
encouraging this urban consumption while dealing with the 
social equality issues inherent in a rural population where 
over 200 million people still live on less than a dollar a 
day.  China will also have to find a way to improve the lot 
of between 150 and 230 million migrant workers who today must 
leave their children and aging parents behind in their home 
villages to travel to the industrial centers of the 
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relatively developed coastal regions to work in factories or 
on construction projects. 
18. (C) With China's phenomenal growth has come increased 
economic interdependence.  This will likely increase, 
although some of the less-balanced elements of China's 
economic interactions should be mitigated.  Rising 
consumption rates should work to lower China's trade surplus 
as well as its overabundance of foreign exchange reserves. 
More assets controlled by corporations and individuals, as 
opposed to the government, will diversify outward investment, 
reducing political control by Beijing, but also the utility 
of political suasion for U.S. policymakers interested in 
effecting the flow of capital to international hotspots. 
Chinese Nationalism and Confidence on the International Stage 
--------------------------------------------- ---------------- 
19. (C) As one of two main pillars of post-Mao Chinese 
Communist Party rule (the other being sustained economic 
growth), Chinese nationalism is growing and should be 
monitored closely.  As witnessed during the 2008 Beijing 
Olympics, Chinese are increasingly proud of the tremendous 
strides their country has made in recent years.  More and 
more young people see China as having "arrived" and might 
possess the confidence and willingness to assume the 
responsibilities of a major power.  However, as was evident 
during protests over the 1999 mistaken bombing of the Chinese 
Embassy in Belgrade, the 2004 protests over Japanese 
textbooks, and more recently the anti-France diatribes that 
followed the roughing-up of a disabled Olympic torch bearer 
in Paris by Free Tibet supporters, this nationalism can also 
lead to jingoism.  Chinese leaders of a system with few 
outlets to express political sentiments are faced with trying 
to give vent to the occasional uprising of nationalistic 
anger without letting it get out of hand or allowing it to 
focus on the failings of the central leadership. 
20. (C) With notable exceptions like Zhou Enlai, Chinese 
foreign policy practitioners thirty years ago had little 
practical experience dealing with the West.  Since then, 
Chinese diplomats and subject matter experts are increasingly 
well-educated, well-traveled and well-respected.  Chinese 
diplomats at international fora such as the UN and the WTO 
have become adept at using procedural rules to attain 
diplomatic or commercial ends.  This trend will likely 
continue in the coming decades, increasing the likelihood of 
American decision makers finding more able adversaries when 
we disagree on issues, but also more able partners where we 
can agree to jointly tackle a problem of mutual concern such 
as nonproliferation, alternative energy or pandemic 
21. (C) While still reluctant to claim China is a global 
leader, Chinese officials are gradually gaining confidence as 
a regional power.  By the end of the next 30 years, China 
should no longer be able to portray itself as the 
representative of lesser developed countries.  This does not 
mean that it will necessarily identify with the more 
developed, mainly Western countries; it well might choose to 
pursue some uniquely Chinese path.  In the coming 30 years, a 
U.S. President might be involved in negotiations with a 
Chinese leader seeking to reshape global financial 
institutions like the IMF or the WTO or establish rival 
institutions for non-Western countries in order to mitigate 
domestic Chinese concerns.  Even so, China's growing position 
as a nation increasingly distinct from the less-developed 
world may expand our common interests and make it easier for 
the United States to convince China to act like a responsible 
global stakeholder. 
22. (C) Foreign assistance coordination is another area of 
opportunity.  China is rapidly ramping up its global economic 
presence, not only via resource extraction ventures and cheap 
exports, but increasingly via direct investment and 
assistance.  This investment and assistance are welcome in 
most less-developed countries, whether in Africa or Southeast 
Asia, and particularly in countries where China's 
longstanding policy of "no strings attached no political 
interference" appeals to democratically-challenged dictators 
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and kleptocrats.  However, China is already facing blowback 
as a result of its more cavalier approach to issues that more 
scrupulous donors have wrestled with for decades.  Scant 
attention paid to worker safety, job opportunities for local 
people, environmental protection, and political legitimacy 
has had negative consequences for China on multiple 
occasions, from a tarnished international image and being 
used as a political whipping boy by opposition groups in 
democratic countries to unpaid loans, expropriated 
investments, and even the deaths of Chinese expatriates.  As 
a result, China is beginning to understand the merits of 
international assistance standards not for altruistic 
reasons, but for achieving China's own bottom-line 
imperatives of a more secure international position and 
better-protected economic interests in third countries.  This 
realization, coupled with China's growing economic clout on 
the world stage, make it quite possible that, in the next 30 
years, China will come to be identified by the average 
citizen in less developed countries not as "one of us" but as 
"one of them." 
23. (C) In all likelihood, a new-found (if still somewhat 
grudging) PRC interest in internationally accepted donor 
principles such as transparency, good governance, 
environmental and labor protections, and corporate social 
responsibility will have matured in 30 years' time, making 
China a reliable partner for the United States, other donor 
countries, and international organizations in alleviating 
poverty, developing infrastructure, improving education and 
fighting infectious disease.  And as one of the world's 
premier economic powers, China can be expected to have all 
but discarded its over-worn and outdated "non-interference" 
rhetoric in the face of massive Chinese investment assets and 
other economic interests abroad. 
24. (C) As evidenced by Chinese policies toward pariah states 
like Sudan, Zimbabwe, Burma and Iran, China is still willing 
to put its need for markets and raw materials above the need 
to promote internationally accepted norms of behavior. 
However, the possible secession of southern Sudan (where much 
of the country's oil is found) from the repressive 
Khartoum-based Bashir regime, the erratic treatment of 
foreign economic interests in Zimbabwe by Robert Mugabe, the 
dangers to regional safety and stability posed by Burma's 
dysfunctional military junta, and the threat to China's 
energy security that a nuclear-armed Iran would represent 
have given Beijing cause to re-calibrate its previously 
uncritical stance toward these international outlaws.  If 
China's integration into global economic and security 
structures continues apace, we would expect its tolerance for 
these sorts of disruptive players to decrease 
25. (C) China's work in the Six-Party Talks and the Shanghai 
Cooperative Organization may provide guidance as to how to 
accelerate this trend.  China plays a leading and often 
responsible and constructive role in both of these 
multilateral groups.  Future U.S. policy-makers might 
usefully consider additional international mechanisms that 
include both U.S. and Chinese membership such as the proposed 
Northeast Asia Peace and Security Mechanism that may grow out 
of the Six-Party Talks.  The Chinese themselves have 
suggested a Six-Party Talks-like grouping to address the Iran 
nuclear issue, perhaps a P5-plus-1-plus-Iran.  In the future, 
we may wish to consider the United States joining the East 
Asia Summit (EAS). 
26. (C) Likewise, as the Chinese economy takes up a larger 
portion of the global economy, it inevitably will become 
increasingly affected by the decisions of international 
economic and financial institutions.  Similarly, China's 
economic decisions will have global implications, and its 
cooperation will become essential to solving global-scale 
problems.  Drawing China constructively into regional and 
global economic and environmental dialogues and institutions 
will be essential.  More and more experts see the utility of 
establishing an Asia-Pacific G-8, to include China, Japan, 
and the United States plus India, Australia, Indonesia, South 
Korea and Russia; others say the time is ripe to include 
China as a member of a G-9.  Giving China a greater voice is 
seen as a way to encourage China to assume a larger burden in 
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supporting the international economic and financial system. 
Role of the Military 
27. (C) The disparate possibilities exist that in the coming 
decades the PLA will evolve into a major competitor, maintain 
only a regional presence or become a partner capable of 
joining us and others to address peacekeeping, 
peace-enforcing, humanitarian relief and disaster mitigation 
roles around the world.  China may be content to remain only 
a regional power, but Deng Xiaoping's maxim urging China to 
hide its capabilities while biding its time should caution us 
against predicting that the PLA's long-term objectives are 
modest.  In the years to come, our defense experts will need 
to closely monitor China's contingency plans and we will need 
to use every diplomatic and strategic tool we have to prevent 
intimidating moves toward Taiwan.  In the coming years, 
Chinese defense capabilities will continue to improve.  The 
PLA thirty years from today will likely have sophisticated 
anti-satellite weapons, state-of-the-art aircraft, aircraft 
carriers and an ability to project force into strategic sea 
28. (C) Thirty years ago the PLA was a bloated political 
organization with antiquated equipment and tactics.  Today, 
the PLA is leaner and is becoming a modern force.  Chinese 
military and paramilitary units have participated in 
UN-sponsored peacekeeping missions in East Timor, Kosovo, 
Haiti and Africa.  In December 2008, for the first time, the 
PLA Navy deployed beyond the immediate waters surrounding the 
country to participate in anything beyond a goodwill tour to 
combat piracy off the Horn of Africa.  It is likely that 
China will continue to support UN-sponsored PKOs, and if the 
piracy expedition is successful, China might follow up with 
expeditions to future piracy hotspots such as the Strait of 
Malacca or elsewhere. 
29. (C) Over the past thirty years, Chinese officials have 
come to begrudgingly acknowledge the benefits to East Asia 
resulting from the U.S. military presence in the Pacific, 
especially the extent that a U.S. presence in the Pacific is 
an alternative to a more robust Japanese military presence. 
A peaceful resolution of the threat posed by North Korea 
might cause China to call for an end to the U.S. base 
presence on the Korean Peninsula.  Perceived threats to 
China's security posed by Japan's participation in missile 
defense or by future high-tech U.S. military technologies 
might cause tomorrow's Chinese leaders to change their 
assessment and to exert economic pressures on U.S. allies 
like Thailand or the Philippines to choose between Beijing 
and Washington. 
30. (C) Whatever the state of our future relations with 
China, we will need to understand more about the Chinese 
military.  Multilateral training and exercises are 
constructive ways to promote understanding and develop joint 
capabilities that could be used in real-life situations.  In 
the coming years, the Chinese may be called upon to 
participate in regional peacekeeping and humanitarian relief 
exercises.  Some of these could be handled under UN auspices, 
but others could be bilateral or multilateral.  For instance, 
Cobra Gold, which is held every year in Thailand, is 
America's foremost military exercise in Asia.  It has a 
peacekeeping component and since the December 2004 tsunami in 
Indian Ocean has included a humanitarian relief element. 
With proper buy-in by the Pentagon and PACOM, we could create 
a program to engage the PLA more directly both with our 
military and with friendly militaries in the region.  Modest 
efforts at expanding search and rescue capabilities on the 
high seas, developing common forensic techniques for use in 
mass casualty events, conducting exercises with PLA units 
tasked with responding to civil nuclear emergencies, or 
table-top exercises for U.S. and Chinese junior officers 
could be steps that promote trust with little risk.  At the 
same time, more frequent, regularly scheduled high-level 
reciprocal visits between Chinese and U.S. security officials 
might eventually lead to a constructive strategic security 
policy dialogue on nonproliferation, counterterrorism and 
other issues. 
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Taiwan and Human Rights 
31. (C) Taiwan was the most vexing issue holding up the 
establishment of relations 30 years ago and remains the 
toughest issue for U.S.-China relations despite significant 
improvement in cross-Strait relations since the election of 
Taiwan President Ma.  It will remain a delicate topic for the 
foreseeable future.  We should continue to support Taiwan and 
Mainland efforts to reduce tension by increasing Taiwan's 
"international space" and reducing the Mainland's military 
build-up across from Taiwan. 
32. (C) Thirty years ago, the Chinese state interfered in 
virtually every aspect of its citizens' lives.  An 
individual's work unit provided housing, education, medical 
care and a burial plot.  Reeducation sessions and thought 
reform were common, churches and temples were closed, and 
average citizens had little access to the outside world. 
Today, Chinese have far greater ability to travel, read 
foreign media and worship.  Nonetheless, the overall human 
rights situation falls well short of international norms. 
Today, China's growing cadre of well-educated urbanites 
generally avoids politics and seems more interested in 
fashion and consumerism than in ideology; after all, 
outside-the-box political thinking, much less activism, 
remains dangerous.  However, any number of factors in the 
future ranging from rising unemployment among recent college 
graduates, or growing discontent over the income divide 
separating rich urbanites from poor peasants, to discontent 
among the mass of migrant workers could lead to unrest and 
increased political activism.  The Chinese Government still 
responds with brutal force to any social, religious, 
political or ideological movement it perceives as a potential 
threat.  Chinese political leaders' occasional nods toward 
the need for political reform and increased democracy suggest 
a realization that the current one-party authoritarianism has 
its weak points, but do not promise sufficient relaxation of 
party control to create a more dynamically stable polity in 
the long term. 
33. (C) While the U.S. model of democracy is not the only 
example of a tolerant open society, we should continue to 
push for the expansion of individual freedoms, respect for 
the rule of law and the establishment of a truly free and 
independent judiciary and press as being necessities for a 
thriving, modern society and, as such, in China's own 
interests.  Someday, China will realize political reform. 
When that day comes, we will want to be remembered by Chinese 
for having helped China to advance. 

Latest source of this page is cablebrowser-2, released 2011-10-04