US embassy cable - 05HANOI2378

UNCLAS HANOI 002378 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, EAP/EP, EAP/CM 
STATE PASS USTR ELENA BRYAN 
STATE PASS NSC HOLLY MORROW 
 
SENSITIVE - DO NOT POST ON THE INTERNET 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, ETRD, PREL, CM, VM, CVR, ASEAN, WTO 
SUBJECT: CHINA'S TRADING HOPES AND REGRETS 
 
1. (SBU) Summary:  According to Chinese Embassy Economic and 
Commercial Counselor He Xiaoling, Chinese businesses face 
many of the same obstacles - lack of transparency, 
transportation, and expediency - that American companies 
face when doing business in Vietnam.  She attributed the 
dramatic rise of bilateral Chinese-Vietnamese trade to more 
than USD 6.7 billion in 2004 to the Chinese-ASEAN Free Trade 
Agreement, rising oil prices, and Vietnam's textile quotas. 
She also shared some insights into China's disappointment 
with the amount of concessions given to the Vietnamese at 
the close of its bilateral WTO accession negotiations.  End 
Summary. 
 
2. (SBU) On Thursday, September 1, EconCouns and Econoff 
meet with Chinese Embassy Economic and Commercial Cou 
nselor Ms. He Xiaoling.  Ms. He, a fluent English speaker 
trained in Beijing, Hong Kong, and the United States 
(Colorado), was accompanied by Economic and Commercial 
Second Secretary Mr. Wei Xichen, who said he was on his 
second tour and seventh year in Hanoi.  Ms. He, who has only 
been in her position for five months, began the discussion 
with a description of the business climate in Vietnam, 
frequently referencing her own previous experience here as a 
textile buyer for a Chinese SOE.  She joined the Ministry of 
Foreign Affairs (MFA) in 2000.  She observed that Vietnam's 
business climate is a difficult one for Chinese firms, 
despite the recent boom in trade.  Chinese companies list a 
lack of government transparency, poor transportation 
infrastructure, and slow, complicated government decision- 
making as their top complaints.  Ms. He added that the Prime 
Minister, in her experience, reviews any foreign contract 
worth more than USD 60,000, which means, in practice, that 
all business proposals require the Prime Minister's 
approval. 
 
3. (U) When asked why, despite these obstacles, Chinese- 
Vietnamese trade had increased so dramatically in 2004, Ms. 
He named three factors: 1) the benefits of the China-ASEAN 
Free Trade Agreement; 2) the rising price of oil and 
Vietnam's inability to refine it (requiring export to China 
for processing and then re-import to Vietnam as refined 
products); and 3) the lower quality of Vietnamese textiles, 
which, Ms. He claims, creates a demand for higher quality 
textiles to maximize Vietnam's quotas, textiles which China 
can most cheaply and easily supply. (Note: Chinese total 
trade with Vietnam in 2004 reached USD 6.743 billion, up 
more than 45.3 percent from 2003.  Total trade in January 
2005 alone was more than USD 753 million.  Even more 
astounding are China's 2004 imports, which, at USD 2.482 
billion, are up 70.4 percent from 2003.  As a point of 
reference, Vietnam's total bilateral trade with the United 
States reached USD 6.4 billion last year.  End note.) 
 
4. (U) Ms. He also expressed hope that the proposed rail 
line and roadway to connect Guangzhou, China and Haiphong, 
Vietnam would increase trading opportunities even further. 
She noted the Chinese refer to this plan as the "Two 
Corridors, One Belt" concept which, if realized, would 
eliminate some of the transportation obstacles Chinese 
companies currently face. 
 
5. (SBU) Most interesting of all, Ms. He and Mr. Wei, both 
of whom participated in the seventh and final Chinese- 
Vietnamese WTO negotiating round, expressed some regret at 
the way China had concluded its bilateral agreement with 
Vietnam on WTO accession.  They confirmed that Article No. 
44 of the Chinese-Vietnamese WTO agreement details China's 
concession on safeguards, which the Vietnamese pledged not 
to use against them.  Ms. He also expressed regret that such 
important issues like tariffs on Chinese motorcycles were so 
quickly conceded when raised by the Vietnamese.  She opined 
that this was partly a politically motivated conclusion that 
took place on the margins of the July visit of Vietnamese 
President Tran Duc Luong to Beijing. 
 
MARINE