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Cablegate: China's Growing Economic Influence in Morocco

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PP RUEHBC RUEHBZ RUEHDE RUEHDU RUEHGI RUEHJO RUEHKUK RUEHMA RUEHMR
RUEHPA RUEHRN RUEHROV RUEHTRO
DE RUEHCL #0107/01 1501628
ZNR UUUUU ZZH
P 291628Z MAY 08
FM AMCONSUL CASABLANCA
TO RUEHC/SECSTATE WASHDC PRIORITY 8078
INFO RUEHRB/AMEMBASSY RABAT 8326
RUCPDOC/USDOC WASHDC
RUEHBJ/AMEMBASSY BEIJING 0051
RUEHLO/AMEMBASSY LONDON 0378
RUEHNK/AMEMBASSY NOUAKCHOTT 2353
RUEHFR/AMEMBASSY PARIS 0656
RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHZO/AFRICAN UNION COLLECTIVE

UNCLAS SECTION 01 OF 02 CASABLANCA 000107

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: ECON ETRD PGOV XA CH MO
SUBJECT: CHINA'S GROWING ECONOMIC INFLUENCE IN MOROCCO

REF: A) CASABLANCA 50 B) RABAT 252

1. (SBU) Summary: Strong bilateral ties between China and Morocco
have been bolstered in recent years by state and official visits.
Commercial exchanges between the two countries have increased, and
Chinese traders have begun to set up shop in Casablanca's largest
commercial district. Although bilateral trade has risen 30 percent
per year since 2005, Moroccan business leaders complain that it
remains largely unbalanced in China's favor. To improve results,
Morocco seeks to leverage its position as a Mediterranean production
and export platform for China, as well as a bridge to sub-Saharan
Africa. Promoting Chinese tourism in Morocco and exporting
foodstuffs such as olive oil and citrus are seen as other ways to
improve the trade imbalance. While some Moroccans are apprehensive
about China's presence in Morocco, it has aroused less concern than
in other more resource-rich countries. End Summary.

------------------------------------
GROWING TIES BETWEEN MOROCCO & CHINA
------------------------------------

2. (U) For the past several years, China and Morocco have made
efforts to strengthen their ties. In February 2002, King Mohammed VI
conducted a state visit to China. Chinese President Hu Jintao
reciprocated in April 2006. In June 2007, a delegation of 200
Chinese businesspeople from Guangdong came to Casablanca for the
Morocco-China Business Forum. In March 2008, a high-ranking Chinese
Communist Party official, Li Changchun, and Vice Minister of Commerce
Wei Jianguo led a delegation to Morocco that included representatives
from 60 Chinese companies. Chinese officials met with Prime Minister
Abbas El Fassi during the visit, and the General Federation of
Moroccan Businesses (CGEM) organized a business forum that was
attended by Moroccan Minister of Foreign Trade Abdellatif Maazouz.

3. (SBU) Commercial exchanges between Morocco and China also indicate
a growing relationship. In 2007, Maroc Telecom, Morocco's largest
telecommunications operator, selected the Chinese company Huawei
Technologies Company, Ltd. to provide a nationwide communications
network. On a smaller scale, numerous businessmen in Casablanca
report importing goods from China. Abdelmalek Kettani, CEO of the
Moroccan electronics company Galaxy, has been importing products from
China for several years. Recently, he designed a television model,
which a Chinese firm produces for his brand according to his
specifications. Similar stories abound. Finding it simpler and more
lucrative to design merchandise for production in China and sale on
the local market, some businessmen have shifted from running
factories in Morocco to importing goods and wholesaling them from a
warehouse. Kettani orders about USD one million worth of merchandise
per shipment, selling his goods to local chains such as Marjane.
Econoff spoke with a satellite technician/importer who said that his
goods are all sold before they even arrive from China.

4. (SBU) Not only are Moroccans importing from China, but Chinese
traders are setting up shop in Morocco. In Derb Omar, one of
Casablanca's largest commercial districts, Chinese merchants can be
found in significant numbers, earning the area the nickname
"Morocco's Chinatown." On a recent trip to the area, a Casablanca
resident pointed out a long, narrow shop that a Moroccan had sold to
a Chinese buyer. The buyer had divided the space into ten or twelve
stalls using plywood separators, and had then rented them to Chinese
merchants - a move that apparently infuriated the original Moroccan
owner. Nonetheless, the approach seems increasingly common. While
Moroccan retailers purchase most of the goods, ranging from shoes to
kitchenware, in bulk for sale in towns and rural areas outside of
Casablanca, individual shoppers also frequent the Chinese shops. One
long-time resident of Casablanca said he and other lower-income
earners appreciate the ability that Chinese imports give them to buy
previously-unattainable goods cheaply. He projects that in a matter
of years, most of Derb Omar will be Chinese-owned.

--------------------------
TRADE STATS SHOW IMBALANCE
--------------------------

5. (U) Trade figures for China highlight increasing economic links
between the two countries. China's primary exports to Morocco, in
descending order of dollar value, are: textiles, industrial thread
and electric cable, shoes, tea, telecommunication equipment, and
televisions. In 2007, Chinese exports to Morocco totaled
approximately USD 1.8 billion. Morocco exports electronic products,
phosphates, frozen fish, cobalt and small volumes of leather and
textiles to China for a 2007 total of about USD 171 million.
Although China earns many times the amount Morocco does from
bilateral trade, commerce in both directions is moving in a positive

CASABLANCA 00000107 002 OF 002


direction. China's exports to Morocco went up 38 percent in 2007,
while its imports from Morocco rose 18 percent. Bilateral trade has
increased 30 percent on average per year since 2005.

6. (U) Still, Morocco views its trade with China as unbalanced.
Following the March 2008 visit of a Chinese delegation, CGEM
President Moulay Hafid Elalamy noted that only one percent of
Moroccan exports go to China, and lamented the fact that current
commercial exchanges are insufficient. To remedy this situation,
Elalamy and other Moroccan business leaders believe the country must
do a better job of exploiting its attributes. With its strategic
geographic location and trade agreements with Europe and the U.S.,
Morocco hopes to offer China a Mediterranean production and export
platform, using the TangerMed port.

7. (U) Morocco also hopes to be a bridge to sub-Saharan Africa, where
China has significant interests, particularly in natural resources.
Morocco may not offer raw materials on the level of countries such as
Congo, which exports billions of dollars of copper to China, or
Sudan, where Chinese companies have invested billions in the oil
industry. However, as a politically stable, economically viable
country on the African continent, Morocco sees itself as ideally
placed to provide its African neighbors with services that may be
lacking. Morocco's BMCE Bank, for example, seeks to become "the
reference bank" for Africa, and this month secured a loan of USD 110
million from the International Finance Corporation to finance its
acquisition of a 35 percent stake in the Bank of Africa. Similarly,
Royal Air Maroc runs 70 flights per week to 20 destinations in
sub-Saharan Africa, including less popular locales such as Kinshasa,
Yaounde and Monrovia. Morocco hopes to interest China in the
networks it has established in Africa.

8. (U) The Moroccan government has other ideas about how to boost
trade with China as well, including encouraging Chinese tourists to
visit Morocco. To this end, the Moroccan Ministry of Tourism signed
a memorandum of understanding with the Chinese Office of Tourism in
April 2006, and efforts are underway to establish partnerships with
Chinese tour operators. Morocco would also like to export food items
such as olive oil, fish and fruit to China. During the March 2008
visit of Communist Party official Li Changchun and Vice Minister of
Commerce Wei Jianguo, Moroccan Prime Minister Abbas El Fassi signed a
protocol on phytosanitary conditions that allows Morocco to export
fruit and citrus to China.

----------------------
CHINESE AID TO MOROCCO
----------------------

9. (U) Similar to its approach in other countries on the African
continent, China has brought aid to Morocco alongside its economic
interests. In February 2008, for example, China donated USD 1.3
million to the Mohammed V Foundation for Solidarity. The donation
included furniture and equipment to outfit a 100-bed girls' center.
While Morocco receives far less aid from China than its needier
neighbors in Africa, it does receive some. (Note: Last week, Morocco
granted USD one million in emergency humanitarian aid to Sichuan
province, which was struck by an earthquake on May 12.)

10. (SBU) Comment: China's influence in Morocco raises mixed feelings
among Moroccans. Some Moroccan traders in Derb Omar, for example,
fear being displaced by Chinese merchants who undercut them with
rock-bottom prices. Similarly, textile retailers feel they cannot
compete with cheap Chinese imports (REF A). In addition, concerns
about poor quality are common, and many have stories of buying shoes
or toys that fall apart in a matter of days. On the whole, however,
Moroccans accept China's growing influence, realizing that it is a
reality that cannot be ignored. As CGEM's Elalamy commented after
the June 2007 business forum with China, "One has to latch onto these
economies that are at once dangerous and offer opportunities." With
its focus on economic development, Morocco is poised to take
advantage of its cooperative relationship with China. End Comment.

GREENE

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