US embassy cable - 03RANGOON249

C O N F I D E N T I A L RANGOON 000249 
 
SIPDIS 
 
STATE FOR EAP/BCLTV, EB 
BEIJING PASS CHENGDU 
COMMERCE FOR ITA JEAN KELLY 
TREASURY FOR OASIA JEFF NEIL 
USPACOM FOR FPA 
 
E.O. 12958: DECL: 02/20/2013 
TAGS: EFIN, ECON, BM, Economy 
SUBJECT: CHINESE BANKS ARE GOATS, BUT WON'T BE SLAUGHTERED 
 
REF: A. RANGOON 236 
     B. RANGOON 235 
     C. RANGOON 225 
     D. RANGOON 214 
     E. RANGOON 213 
     F. RANGOON 30 
 
Classified By: COM Carmen Martinez for Reasons 1.5 (B,D) 
 
1. (C) Summary: Mounting public frustration with the 
country's disgraced, largely Chinese-owned, private banks has 
led to fears among the Chinese business community and others 
of an anti-Chinese backlash.  Though this remains a 
possibility, particularly if SPDC decides it needs a 
convenient scapegoat, the vast majority of depositers appear 
thus far more inclined to blame the SPDC, rather than the 
Chinese, for their troubles.  End summary. 
 
Chinese Dominance in Banking Sector 
 
2. (C) There is no denying the Chinese dominance in the 
banking sector.  Of the nation's twenty private banks, only 
eight are actually owned and operated by private citizens (as 
opposed to various government ministries or the military's 
economic arms).  Of these eight privately held private banks, 
six of them have chairmen or primary owners of Chinese 
descent.  Of the odd banks out, one is run by a Shan crony of 
Senior General Than Shwe, the other by a Burman. 
 
3. (C) The Chinese were less prominent in the recently 
imploded informal financial institutions as, in those, 
Burmans and Muslims also played a large role.  Of the 16-17 
shadow banks whose ownership we have been able to trace, only 
four were Chinese or ethnic Chinese Burmese.  Four were 
Indian or Muslim, and the rest Burman. 
 
Finger Pointing 
 
4. (C) There is some concern (particularly in the Chinese 
business community) that the dominance of ethnic Chinese in 
the disgraced banking sector will trigger public resentment 
against the Chinese population.  There is some history of 
this, with anti-Chinese riots occuring in the 1960s.  Indeed, 
it is not outside the SPDC's bag of tricks to try and divert 
political discontent caused by its bungling of the banking 
crisis, by surreptitiously feeding the notion that the 
"conniving" Chinese are to blame. 
 
5. (C) However, barring some obvious act of provocation, we 
don't think this is likely.  Commentators here tell us that 
while people may have lost faith in the banks, most don't 
connect their downfall with the ethnicity of their ownership. 
 However, the problem may be that people here, consciously or 
unconciously, factor enthnicity into their calculations about 
the probability of a GOB rescue.  In any case, the banks 
hardest hit by withdrawals (AWB, Yoma, MUB, MOB, and 
Mayflower) have by and large been owned or managed by ethnic 
Chinese banks.  Finally, the possibility of ethnic strife 
remains in the back of many minds.  As one economic 
journalist warned us, because of residual anti-Chinese 
sentiment among Burmans, it would not be too difficult to 
stir up ethnic-derived conflict. 
 
6. (C) That all said, our feeling so far is that the public's 
ire will fall squarely on the ruling junta.  After enduring 
fifteen years of economic mismanagement and political 
oppression by the SLORC/SPDC regime, the public (at least in 
Rangoon) is primed to blame its daily woes on the junta.  In 
the meantime, the ethnic Chinese chairmen and management of 
the private banks are bending over backward to regain their 
customers trust -- through notices, advertising, and efforts 
to explain the situation and fairly disburse available funds. 
 Provided these bankers are not caught up in some new 
scandal, they should be able to avoid any undue blame for the 
current crisis. 
Martinez