US embassy cable - 05MANILA1954

C O N F I D E N T I A L SECTION 01 OF 03 MANILA 001954 
 
SIPDIS 
 
STATE FOR EAP/PMBS AND EAP/CM 
NSC FOR GREEN 
OSD/ISA FOR ALLEN 
 
E.O. 12958: DECL: 04/29/2015 
TAGS: PREL, MARR, PINR, CH, RP 
SUBJECT: CHINESE PRESIDENT HU JINTAO VISITS MANILA 
 
REF: A. 04 MANILA 5826 
 
     B. 04 MANILA 5654 
     C. 04 MANILA 4526 
     D. 03 MANILA 752 
     E. 02 MANILA 174 
 
Classified By: (U) Pol/C Scott Bellard for reasons 1.4(b) and (d). 
 
1.  (C) SUMMARY.  The state visit of Chinese President Hu 
Jintao focused primarily on economic and trade issues, with 
apparently no discussion of improving military-to-military 
ties.  Although Deputy Chief of the General Staff General 
Xiong Guang Kai plans a trip Manila in May, observers do not 
expect any rapid changes in the two countries' defense 
relationship.  China plans to open a new consulate in the 
northwestern Luzon town of Laoag to service the growing 
number of Chinese tourists flocking to the area.  END SUMMARY. 
 
2.  (U) Chinese President Hu Jintao's April 26-28 state visit 
to Manila included a meeting with President Gloria 
Macapagal-Arroyo, a state dinner, an address to a joint 
session of Congress, and a meeting with Filipino-Chinese 
business leaders.  In his remarks to Congress, Hu called for 
greater cooperation between China and the Philippines and the 
rest of ASEAN, especially in the area of trade.  Before the 
Chinese leader's speech, Speaker Jose de Venecia awarded him 
the Congressional Medal of Achievement, the Philippine 
House's highest decoration. 
 
"STRATEGIC COOPERATION" NOT PARTNERSHIP 
--------------------------------------- 
 
3.  (C) PRC Embassy DCM Xiao Qian characterized the highlight 
of the Hu visit as agreement on a "new definition" of the 
bilateral relationship, one of "strategic cooperation" -- not 
"partnership," he noted.  He emphasized that this term 
focused on a "long-term, comprehensive, overall 
relationship," with "higher, broader, and more" cooperation, 
but did not refer specifically to a defense or military 
relationship.  He claimed that no defense officials had been 
part of the Hu delegation and that there had been no separate 
talks on this issue during the visit, to his knowledge.   He 
admitted that the PRC Deputy Chief of the General Staff, 
General Xiong Guang Kai, is nonetheless expected to visit 
Manila in May for the first round of a "defense and security 
dialogue," which Xiao Qian described as a PRC initiative 
focused primarily on resolving disputes in the South China 
Seas, among other issues.  He pointed to an existing 
agreement on new efforts at military training and exchanges, 
including senior defense officials, attendance at each 
other's National Defense Academies and additional navy ship 
visits.  Separately, Secretary of National Defense Cruz's 
Senior Military Advisor Colonel Carlos Holganza emphasized to 
pol/miloff that RP-China defense talks remained only 
"exploratory in nature." 
 
4.  (C)  Xiao Qian added that the PRC had been pushing for 
this new conceptual designation for some years, but the GRP 
had been "reluctant," perhaps because of concern over its 
impact on US ties.  He admitted that the GRP had pushed 
instead to describe bilateral ties as a "golden age of 
partnership," but had finally accepted the PRC wording. 
(Note:  In President Arroyo's public comments and in banners 
throughout Manila, the GRP continued to use the term "golden 
age of the relationship," however.  End note)  He underscored 
that the new definition of the relationship was "not aimed at 
a third country," specifically indicating the U.S.   He noted 
that the PRC had been satisfied that President Arroyo 
reiterated the GRP's "One China" policy, while admitting 
continued PRC unhappiness at relatively senior visits to 
Taiwan by GRP officials, which Hu did not raise. 
 
ECONOMIC AND TRADE DEALS 
------------------------ 
 
5.  (C)  Xiao Qian emphasized that the most important 
substantive aspect of the visit was on the economic and trade 
side, with 15 new agreements (not 14 as reported in the 
press) on various investment and trade deals.  Most 
significant were approximately $800 million to reopen an 
existing nickel mine, and a new tranche of long-term, low 
interest credits worth $500 million for the Northern Railway 
project (in addition to an existing $400 credit that has not 
yet been touched).  One of the "major concessions" the PRC 
had made, Xiao Qian said, was on the "Early Harvest program," 
in which the PRC will now allow Philippine agricultural 
exports similarly concessional status as it already affords 
Cambodia, Laos, and Vietnam.  He indicated that these three 
countries would likely be unhappy with the inclusion of the 
more developed Philippines,  but that the GRP had pushed hard 
on this.  (See septel for an in-depth review of RP-PRC 
economic and trade ties.) 
 
NEW CONSULATE IN LAOAG 
---------------------- 
 
6.  (C)  The two sides exchanged notes regarding the 
establishment of a Chinese Consulate in Laoag in northern 
Luzon, with an eye on opening this post later this year if 
possible.  The PRC is now scouting for suitable housing and 
office space and identifying a suitable Consul from its 
Consular Department.  Xiao Qian explained the rationale as 
taking care of a growing number of Chinese tourists 
(approximately 30,000 per year) who come to this area for 
"gaming" (i.e. gambling) on one of the three direct routes 
(from Guangzhou, Chengdu, and Xiamen) now offered by 
Philippine Air charter flights.  He dismissed the validity of 
speculation that the PRC wanted this site in order to "watch 
Taiwan," emphasizing instead the consular aspect that was 
currently plaguing the Chinese Embassy in Manila.  The PRC 
already has a Consulate General in Cebu, but currently has no 
plans to open any other consular establishments.  There had 
been an ROC Consulate in Davao before the establishment of 
relations with the PRC 30 years ago, and the PRC still 
retains this property, along with a bay front site in Manila 
that it too small for construction of a new Chancery.  (The 
Philippines has consulates in Shanghai, Guangzhou, Xiamen, 
and Hong Kong.) 
 
BRIEF DISCUSSION OF COUNTERTERRORISM AND COUNTERNARCOTICS 
--------------------------------------------- ------------ 
 
7.  (C)  Counterterrorism and counternarcotics came up 
"briefly" during the Hu-Arroyo discussions in the context of 
bilateral cooperation, with general pledges of greater 
cooperation, but no new action programs apart from a 
long-awaiting assignment of a PRC police official at the 
Embassy in Manila, which should happen later in 2005, 
according to Xiao Qian.  He indicated that this official 
would work to combat all "illegal trafficking," which he 
indicated might also refer to trafficking in persons as well 
as narcotics.  Hu also referred to the GWOT in talks with 
Senate President Franklin Drilon and Speaker of the House Joe 
De Venecia, calling it a "global and complex struggle" 
against "extremists, separatists" and others. 
 
UN REFORM 
--------- 
 
8.  (C)  Chinese Foreign Minister Li Zhaoxing and Philippine 
Foreign Secretary Alberto Romulo separately discussed UN 
reform, with the PRC urging that UN members "not hasten" 
these decisions and emphasizing the importance of consensus, 
according to Xiao Qian.  He claimed that the two sides did 
not discuss a possible Japanese seat on the UNSC. They 
touched upon the upcoming East Asia Summit without going into 
detail, he added. 
 
OBSERVERS DISCOUNT ANY QUICK WARMING OF DEFENSE RELATIONSHIP 
--------------------------------------------- --------------- 
 
9.  (C) Other observers discounted the possibility of any 
quick warming of RP-China military-to-military relations. 
According to De La Salle University Professor Renato De 
Castro, the Department of National Defense (DND) and Armed 
Forces of the Philippines (AFP) are wary of jeopardizing 
defense ties with the United States, especially while the DND 
and AFP are engaged in the beginning stages of the 
comprehensive Philippine Defense Reform (PDR) effort -- a 
view offered separately by Singapore Political Counselor 
Raymond Chow.  De Castro noted that while China is 
"impatiently" pushing for military exercises, the DND has 
adopted a "go-slow" approach.  De Castro, Chow, and pundit 
Alex Magno, all agreed separately, however, that while the 
AFP, DND, and professional staff of the National Security 
Council are leery of getting too close to China, elements of 
the Department of Foreign Affairs (DFA) are pushing for 
better ties.  Magno noted Philippine strategic thinking was 
largely nonexistent, quipping, "We can't see beyond the end 
of our noses." 
 
10.  (C) An unknown factor in Philippine government thinking 
is the role of the "taipans," the leading members of the 
Filipino-Chinese business community.  Lucio Tan, the owner of 
Philippine Airlines and reportedly a leading financier of 
President Arroyo's 2004 presidential campaign, was among the 
delegation greeting Hu Jintao when he arrived, and the 
Chinese leader stayed in Tan's Century Park hotel (not one of 
Manila's leading establishments) during his visit.  Magno, De 
Castro, and Chow all separately observed that Tan and San 
Miguel Corporation chairman and one-time presidential 
aspirant (and Marcos crony), Eduardo "Danding" Cojuangco, 
were among those positioning themselves to benefit from 
greater Philippine trade ties with China. 
 
COMMENT 
------- 
 
11.  (C) Hu Jintao's charm offensive in Manila appears little 
different than his stops in other ASEAN capitals.  We believe 
the Philippine defense establishment has taken aboard US 
concerns about closer RP-PRC military or intelligence ties, 
and will do little to jeopardize the close relationship with 
the United States.  We will continue to monitor closely 
Chinese overtures here, and believe the upcoming visit of the 
Deputy Secretary and Foreign Secretary Romulo's subsequent 
trip to Washington offer opportunities for us to remind the 
Philippines not to get too close to its northern neighbor. 
 
Visit Embassy Manila's Classified website: 
http://www.state.sgov.gov/p/eap/manila/index. cfm 
Ricciardone