US embassy cable - 05HARARE1331

S E C R E T SECTION 01 OF 07 HARARE 001331 
 
SIPDIS 
 
NOFORN 
 
AF/S FOR B. NEULING 
AF/RSA FOR J. NAY 
EAP/CM FOR B. CRANE 
SENIOR AFRICA DIRECTOR C. COURVILLE 
UECOM PLEASE PASS TO JAC MOLESWORTH RAF 
 
SIPDIS 
 
E.O. 12958: DECL: 09/23/2015 
TAGS: ECON, EMIN, PGOV, PHUM, PREL, ZI, CH, Foreign Relations 
SUBJECT: IDEOLOGY, DESPERATION FUEL GOZ,S TIES TO CHINA 
 
REF: A. REF A: STATE 153199 
     B. REF B: HARARE 001088 
     C. REF C: USUN 001704 
     D. REF D: BEIJING 011949 
 
Classified By: Ambassador Christopher Dell for reasons 1.5 b/d 
 
1. (C) Summary: The ruling ZANU-PF party has long maintained 
a close diplomatic and military relationship with China, 
dating back to the liberation war in the 1970,s.  In recent 
years as the GOZ,s international isolation increased and the 
local economy nosedived, Zimbabwe has placed growing 
importance on this relationship, which forms one of the 
principle pillars of Robert Mugabe,s &Look-East8 policy. 
The GOZ publicly touts China as one of its most important 
allies in the global community.  Trade and investment from 
China remain one of the Zimbabwean economy,s few bright 
spots ) albeit in relative terms.  Meanwhile, tourism from 
China has failed to get off the ground.  The 
Chinese-Zimbabwean relationship is driven by Zimbabwe,s 
commercial and military needs and China,s interest in 
accessing Zimbabwean platinum and gold, while the only 
apparent political connection is Chinese rhetorical support 
for the isolated regime and the GOZ,s strict adherence to 
the one China principle.  Increasing Chinese influence in 
Zimbabwe has been paralleled by a growing negative perception 
of the Chinese and their commercial wares by the local 
population and stiffer competition for the already struggling 
local manufacturing sector.  This cable is in reply to the 
questions asked in ref A.  End Summary. 
 
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Liberation War Ties Hardened by GOZ,s Pariah Status 
--------------------------------------------- ------ 
 
2.  (C) Beijing,s close ties to the ZANU-PF ruling party 
were forged during the war for independence when the 
communist country funneled arms, training and money to Robert 
Mugabe,s Mozambique-based insurgency.  (Moscow meanwhile 
supported a rival insurgency based in Zambia.)  More 
recently, western criticism of the GOZ,s heavy-handed 
policies and the economy,s related free-fall have created a 
further impetus for the GOZ ) and an opening for Beijing - 
to expand bilateral ties.  China,s relatively modest 
political engagement here is magnified by GOZ rhetoric, which 
is eager to publicly tout Chinese assistance and demonstrate 
that its &Look-East8 policy is sustaining the otherwise 
moribund economy.  The official media frequently showcase 
evidence of Chinese-Zimbabwean fraternity and the Chinese are 
uniformly portrayed as caring for the welfare of Zimbabweans 
and in solidarity with them against neo-colonial imperialist 
aggressors. 
 
3.  (C) Regular high-level visits between Zimbabwean and 
Chinese government and party officials provide the most 
public demonstration of this relationship.  Mugabe has 
visited China at least seven times since becoming Zimbabwe,s 
leader in 1980.  The most recent visit occurred in July 2005 
when Mugabe met with President Hu Jintao, Premier Wen Jibao 
and National People,s Congress Chairman Wu Bangguo (ref D). 
According to local media, the Zimbabwean delegation secured a 
number of commercial and loan agreements, including a $6 
million grant to import maize.  Numerous Chinese leaders have 
visited Zimbabwe, including President Jiang Zemin (1996), 
Foreign Minister Tang Jiaxuan (2000), and Chairman of the 
Standing Committee of the Chinese National People,s Congress 
Wu Bangguo (2004). 
 
4.  (C) Political ties to China are an important source of 
international legitimacy and respect for the GOZ, which is 
increasingly isolated from the international donor community 
and, recently, even by African criticism over its human 
rights record.  Zimbabwe strictly adheres to the &One China 
Policy8 and forbids the establishment of an official 
Taiwanese presence in Zimbabwe.  Most recently, the GOZ bowed 
to Chinese pressure in February 2005 and barred Miss Tibet 
from competing in a Miss Tourism World Pageant held in 
Zimbabwe.  Meanwhile, China,s general preoccupation with 
issues of national sovereignty prompt its leaders to publicly 
criticized western sanctions against regime leaders. 
 
5.  (C) Chinese patronage in the UN has helped to lessen 
international criticism of the GOZ,s Operation Restore 
Order, which has displaced some 700,000 people, according to 
UN tallies.  The Chinese delegation to the UN Security 
Council in July unsuccessfully attempted to prevent the 
Council from addressing the issue, saying that it is not the 
role of the Council to disccuss domestic issues and that the 
GOZ can handle its own internal affairs (ref C).  During his 
Heroes Day address on August 8, Mugabe publicly thanked China 
for its support in the Security Council. 
 
6.  (C) China maintains one of the largest diplomatic 
missions in Harare, with 26 diplomats on the diplomatic list, 
including six officers in the economic/commercial section. 
There are also three military officers serving in the Defense 
Attache,s Office.  The official Chinese community is highly 
insular, with all diplomats residing in apartments attached 
to its chancellery downtown and rarely mingling in Harare,s 
diplomatic circles with western officials.   According to the 
Chinese Embassy,s webpage, eleven Zimbabwean students were 
studying in China as of November 2004.  More recently, Duan 
Schaohua, a third secretary (economic and commercial) of the 
Embassy of the People,s Republic of China, told poloff on 
September 8 that the Embassy receives multiple inquires a 
week from Zimbabwean students eager to study in China. 
During Mugabe,s recent trip to China, Beijing reportedly 
increased the number of scholarships offered to Zimbabwean 
students by eight.  Meanwhile, according to the Chinese 
Embassy,s webpage, China had three teachers and nine medical 
personal in Zimbabwe as of last November. 
Uncharacteristically, the Chinese Embassy has recently begun 
attending humanitarian coordination meetings called by the 
UN. 
 
7.  (C) In contrast to most other foreign communities in 
Zimbabwe, the Chinese population has grown substantially in 
recent years.  Duan reported that the number of Chinese 
citizens registered with the Embassy has jumped from about 
3,000 in 2003 to a current figure of between 4 and 5,000. 
Private Chinese citizens are chiefly engaged in commercial 
retail and light manufacturing for both the domestic and 
export market, as well as operating restaurants and some 
financial services.  Confederation of Zimbabwean Industries 
Vice President Florence Sachikonye on September 19 claimed to 
econoff that the size of the resident Chinese population was 
however misleading, as many use Zimbabwe primarily as an 
agreeable base from which to do business throughout the 
southern African region. 
 
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Military Assistance, Gifts Sweeten the Pot 
------------------------------------------ 
 
8.  (S//NF) Our Defense Attache reports that China has 
invested a significant amount of military resources in 
Zimbabwe.  The delivery in October 2004 of six K-8 training 
aircraft from China is the most noted recent sale, but Harare 
since independence has purchased large quantities of military 
hardware from China, including aircraft, vehicles, air 
defense radars, and medical equipment.  When a UK Military 
Advisory and Training Team departed circa 2002, the Chinese 
immediately sent instructors to the Zimbabwe National Army 
Command and General Staff College as well as technical 
advisors to individual units.  China has been benefiting from 
Zimbabwe,s &Look-East8 program through military arms 
sales.  We have no concrete numbers on the amount of sales in 
recent years.  With limited foreign currency availability, 
the Zimbabwe Defense Forces cannot afford any western 
military sales, only the mass produced eastern arms.  The 
military leadership is embracing Chinese ideology, according 
to the Defense Attache, leading them to take an anti-western 
approach and to look at western governments with suspicion. 
 
9.  (C) The Chinese have also heaped lavish gifts on their 
Zimbabwean counterparts.  In addition to helping build 
Harare,s soccer stadium, Beijing supplied the now-infamous 
blue tiles for the roof of Mugabe,s new US$13 million home 
outside Harare.  Earlier this year, China also reportedly 
donated one MA60 passenger airplane to Zimbabwe, in addition 
to two aircraft that were purchased. 
 
10.  (C) The GOZ has repeatedly used Chinese assistance to 
undercut its opponents.  For instance, the Chinese earlier 
this year reportedly provided the GOZ with technology and 
equipment that could be used to disrupt independent radio 
broadcasts outside the country from being received in 
Zimbabwe.  In the run-up to the March parliamentary election, 
Beijing reportedly gave ZANU-PF crates of T-shirts and 
bicycles to distribute to supporters.  More recently, there 
have been rumors that China has given the GOZ financing to 
undermine the country,s independent trade unions. 
 
-------------------------------------------- 
Benefiting from Zimbabwe,s Fire Sale, Barely 
-------------------------------------------- 
 
11.  (C) As local and western investors have fled the country 
in droves, Chinese investors have made major inroads into 
several sectors of the Zimbabwean economy, chiefly 
construction, energy production, and transport.  According to 
Duan, the largest Chinese investment in Zimbabwe thus far is 
Sino Cement, a $50 million building materials maker 
inaugurated by Mugabe in October 2001.  Chinese investors 
have also opened a steel mill, which buys scrap metal locally 
for fabrication into pipes and sheets for export to China. 
According to local media reports, the China National 
Aero-Technology Corporation (CATIC) has agreed to help 
Zimbabwe,s struggling energy parastatal, Zimbabwe 
Electricity Supply Authority (ZESA), expand the Hwange power 
station, and revive local coal mining.  Meanwhile, Huawei 
Technologies last year reportedly signed contracts worth more 
than $300 million with Zimbabwe,s state-owned fixed-line and 
mobile telephone companies.  Local representatives of Cisco 
Systems told poloff September 13 that some of the 
telecommunication systems installed by Huawei appear to be 
counterfeit Cisco technology.  The most visible indicator of 
Chinese-Zimbabwean commercial ties is the 50 commuter buses, 
reportedly worth more than $2 million, supplied earlier this 
year by FAW to the Harare public transport system.  (N.B. 
These buses show that politically-motivated Chinese aid is 
often at odds with local needs; despite the pressing need for 
transport in the rural areas, the buses can only be used in 
Harare due to low ground clearance.) 
12.  (C) The contraction of Zimbabwe,s large-scale tobacco 
industry, the sharp decline in product quality, and 
consequent departure of many international buyers have left 
the Chinese as the main buyer of Zimbabwean tobacco, 
according to Richard Tate, a consultant for Zimbabwe,s 
largest tobacco auction floor.  Tate told poloff on September 
1 that about half of all Zimbabwean tobacco production now 
goes to Asia, chiefly China.  Data from Zimbabwe,s Central 
Statistics Office (CSO) show that China last year imported 
almost a quarter of Zimbabwe,s total tobacco exports.  Tate 
noted that China remained the only major consumer of auction 
tobacco as other major buyers have left the country in recent 
years in favor of competitors, such as Brazil. Andrew 
Engelbrecht, an executive of Zimbabwe Leaf Tobacco, owned by 
Virginia-based Universal, told econoff September 14 the 
Chinese were highly valued customers who paid promptly and 
well.  Press accounts indicate that Chinese tobacco buyers 
have signed long-term contracts directly with large and 
medium-sized farmers.  Under these contracts, the Chinese 
supply most inputs, such as seed and fertilizer, and in 
return receive the bulk of the tobacco yield.  Engelbrecht 
said that his company had partnered with ZESA and the Chinese 
in a local tobacco production project as a means for ZESA to 
source foreign exchange to finance capital improvements.  One 
unsubstantiated newspaper article said that as much as a 
quarter of Zimbabwean exports were mortgaged to China in one 
form or another. 
 
13.  (C) China is also widely seen to covet access to 
Zimbabwe,s platinum reserves ) the 5th largest in the 
world.  To date, however, no Chinese firms have taken up 
platinum concessions.  Zimbabwe Platinum Mines (Zimplats) CEO 
Greg Sebborn told Post on July 29 the Chinese were eyeing 
greenfield sites north of Harare, which would require a 
substantial investment to become operational (ref B).  China 
had promised the GOZ to build a platinum refinery in return 
for a share of the deposit, but Sebborn said such investment 
was unlikely because the Chinese lacked sufficient technical 
expertise.  Instead, Sebborn assessed China could build 
another base metal refinery similar to the one that Zimplats 
had already built. 
 
14.  (U) Trade statistics from CSO show a balance of trade 
heavily in Zimbabwe,s favor.  Duan reported that bilateral 
trade has been in the African country,s favor ever since 
independence.  According to CSO data, total bilateral trade 
reached Z$834.2 billion last year.  (N.B. The IMF reported 
that the official exchange rate for 2004 averaged 
Z$4,131:US$.)  By comparison, bilateral trade with the U.S. 
was only Z$408.0 in 2004. 
 
Zimbabwean trade with China, 2004 
Billion Zimbabwean Dollars 
 
                        China  Hong Kong  Taiwan 
 
Total Exports           546.8  24.6     105.0 
Tobacco (HTS 2401)      471.0  20.7     13.8 
 
Total Imports           287.4  42.0     59.2 
 
Source: Central Statistics Office. 
 
15.  (C) Zimbabwe,s economic hardships, however, have not 
left Chinese investors untouched, despite favorable GOZ 
concessions.  According to Duan, Chinese manufacturers and 
investors often complain about the critical lack of foreign 
exchange, skyrocketing inflation (now officially 265 
percent), shortages of basic inputs from abroad and declining 
infrastructure and labor standards.  Even China,s flagship 
investment, Sino Cement, has been forced to scale-back 
production because of shortages.  In light of these 
hardships, Duan suggested that Chinese investors were 
beginning to look elsewhere in the region.  Duan also noted 
that the local Chinese community has not been immune from 
Zimbabwe,s worsening crime and suggested this too was having 
a dampening impact on business.  The new Chinese Embassy 
Counselor, Ma Deyun, on September 21 paid a courtesy call on 
the acting DCM and echoed Duan,s comments by noting that 
private Chinese ventures in Zimbabwe had yet been able to 
turn a profit.  Both Duan and Deyun inquired about the extent 
of US sanctions and appeared extremely interested to learn 
that the USG had only imposed targeted travel and financial 
sanctions against specific individuals, and did not have 
general economic sanctions against the country. 
 
16.  (C) Chinese tourists have largely failed to flock to 
Zimbabwe, despite the GOZ,s encouragement and Beijing,s 
designation of Zimbabwe as a sponsored travel destination in 
June 2004.  Visitors from China and Hong Kong comprised only 
4 percent of overseas tourists ) excluding travelers from 
other parts of Africa - who came to Zimbabwe in the first 
half of 2005, according to the Zimbabwe Tourism Authority. 
Moreover, the economic impact of Chinese visitors is even 
smaller since they tend to spend less than western tourists. 
Despite Zimbabwe,s abysmal international image, traditional 
overseas tourists still dominate; in the first six months of 
this year, 28 percent of overseas visitors came from the UK 
and 14 percent came from the U.S.  Duan suggested that Air 
Zimbabwe,s introduction of direct flights between Harare and 
Beijing in November 2004, which currently costs less than 
$450 at the parallel market rate, gave only a transitory 
boost to the numbers of Chinese tourist arrivals.  Instead, 
Duan reported that wealthier Zimbabweans eager to shop in 
China primarily book the flights, which have been granted 
import duty concessions by the GOZ. 
 
-------------------------------------- 
Friend or Foe: The Inevitable Backlash 
-------------------------------------- 
 
17.  (C) The increasing Chinese influence in Zimbabwe has 
been paralleled by an increase in the negative perception of 
the Chinese by the local population.  Zimbabweans often 
complain that the Chinese consumer goods that dominate the 
shelves of local stores, especially in poorer neighborhoods, 
are of shoddy quality.  They have even coined the term 
&zhing-zhong8 to refer to inferior Chinese goods that 
appear to have been dumped on Zimbabwe.  For instance, 
following the recent procurement of Chinese commuter 
airplanes, Zimbabweans joked that the cheap planes would 
probably fall out of the sky.  Local independent press and 
the opposition have played up this criticism.  They caution 
that China is known for exploiting its weaker economic 
partners by dumping inexpensive, poor-quality products on 
them ) a theme that appears to be resonating among 
businesses and consumers alike.  Earlier this year, rumors 
were rife throughout Harare that Operation Restore Order, 
which targeted the country,s thriving informal sector, had 
been launched by the GOZ at the request of Chinese 
businessmen who wanted to undercut their competition. 
18.  (C) There is a widespread perception among locals that 
the Chinese are fueling the parallel currency market by 
purchasing large amounts of hard currency.  MDC MP Priscilla 
Misihairabwi-Mushonga told poloff on August 31 that Chinese 
merchants were heavily involved in Zimbabwe,s thriving black 
market.  According to the MP, Chinese merchants sell Chinese 
goods on the local market, convert their earnings to US 
dollars on the parallel market ) which values the local 
dollar at less than half of its official rate ) and then 
remit their earnings back to China via the Chinese Embassy,s 
diplomatic pouch. 
 
19.  (C) China,s emergence as a global economic powerhouse 
poses some risks to the Zimbabwean economy, especially 
small-scale manufacturing where cheaper Chinese-made goods 
have displaced Zimbabwean producers on local shelves.  This 
threat is particularly evident in the apparel sector, where 
) like other parts of Africa ) increased Chinese clothing 
and textile exports over the past year have displaced local 
producers and jobs.  Jeremy Youmans, the finance director of 
one of Zimbabwe,s largest apparel makers and chairman of the 
Zimbabwe Clothing Manufacturers, Association, told poloff on 
September 14 that local garment manufacturers cannot compete 
with China on a cost basis.  While Zimbabwean-made clothing 
can compete on a quality basis with Chinese exports, Youmans 
noted that Chinese government subsidies meant that Chinese 
clothing exports were &sub-economic8 and could therefore 
undercut virtually all competitors.  The Zimbabwean industry, 
according to Youmans, successfully lobbied the GOZ earlier 
this year to enact higher apparel tariffs with an eye toward 
leveling the playing field.  Youmans speculated that Chinese 
apparel producers had the ultimate goal of forcing all 
competitors out of the global clothing market, giving them a 
monopolistic position from which to raise prices in developed 
country retail markets. 
 
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Comment 
------- 
 
20. (C) Beijing,s ultimate objective in Zimbabwe is unknown. 
 From outward appearances, Chinese investors seem to be 
buying up Zimbabwean firms and assets at fire sale prices, 
but even at cut-rate prices and labor costs their 
profitability is in question.  Zimbabwe,s experience with 
former Malaysian and Libyan patrons demonstrates that 
sweetheart deals only go so far.  Instead, Beijing may be 
taking a longer-term view, assessing that its investors are 
ideally placed to capitalize on a future economic turnaround. 
 If this view is true, then Beijing has a stake in economic 
reforms.  Even non-Chinese businessmen who profit from the 
current environment tell us privately that their bottom lines 
would be improved if the GOZ enacted economic and political 
reforms.  It is easy to see how Chinese support for Zimbabwe 
can work at a cross current to our efforts.  Nevertheless, 
while China will probably never press its Zimbabwean comrades 
into making political concessions, Chinese market sense ) 
even if driven by their own self-interest ) could 
potentially be used as a lever to induce economic reforms. 
 
21.  (C) Zimbabwe,s ties to China are a marriage of 
convenience founded on their mutual self-interest rather than 
a sense of mutual affinity.  The GOZ,s public pronouncements 
of extensive ties are not borne out by concrete results; 
Chinese investment in Zimbabwe, despite some high-profile 
projects, is very limited, especially compared with other 
parts of Africa.  Embracing free market capitalism, Chinese 
investors appear to have recognized the GOZ,s massive 
economic policy failures and to have largely avoided Zimbabwe 
in favor of other investor-friendly countries in Africa.  The 
GOZ,s fondness for China is also limited and Post has heard 
from contacts in South Africa that Mugabe is furious at Blair 
for having supposedly influenced the Chinese to limit its 
support for Zimbabwe.  The government,s &Look-East8 policy 
is driven out of desperation caused by the downward spiraling 
economy and the loss of prior patrons, Libya and Malaysia. 
The GOZ has tempered China,s quest for resources and markets 
in Zimbabwe, suggesting that the government, while eager to 
reap benefits from China, is nonetheless wary of the 
relationship.  Policies such as the increased tariffs on 
apparel indicate that, despite public perceptions, the GOZ is 
not completely subservient to Beijing. 
DELL