US embassy cable - 03KATHMANDU2098

C O N F I D E N T I A L SECTION 01 OF 02 KATHMANDU 002098 
 
SIPDIS 
 
STATE FOR SA/INS 
LONDON FOR GURNEY 
NSC FOR MILLARD 
 
E.O. 12958: DECL: 10/23/2013 
TAGS: PREL, EAID, PGOV, CH, NP 
SUBJECT: NEPAL:  VISIT OF CHINESE DEPUTY FOREIGN MINISTER 
 
 
Classified By: CDA ROBERT K. BOGGS.  REASON:  1.5 (B,D). 
 
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SUMMARY 
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1.  (C) The October 16-18 visit to Kathmandu of Chinese Vice 
Foreign Minister Wang Yi focused primarily on preparations 
for the upcoming Dec. 2-3 visit of Chinese People's Political 
Consultative Conference Chairman Jia Qing Lin.  According to 
the head of the Political Section of the Chinese Embassy in 
Kathmandu, the Chinese delegation sought and received 
assurances that the embattled Government of Nepal (GON) would 
be able to provide adequate security for the visit.  Although 
"politically there is no problem" in bilateral relations 
between the two nations, he expressed frustration at GON 
slowness in implementing Chinese assistance projects and 
noted that the comparatively poor quality of Nepali 
products--and thus their noncompetitiveness in Chinese 
markets--makes improvement in the trade imbalance between the 
two countries unlikely in the near term.  An official visit 
for Crown Prince Paras to Beijing is being planned for 2004. 
End summary. 
 
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CPPCC Chairman's Visit in Works 
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2.  (SBU)  On October 21 Poloff met with Cheng Ji, Chief of 
the Chinese Embassy's Political and Press Section, to discuss 
the October 16-18 visit to Kathmandu of Chinese Vice Foreign 
Minister Wang Yi.  Cheng said although Wang's visit was 
officially characterized as part of regular bilateral 
consultations between the two nations (which are supposed to 
be held annually, but which in practice often slip a year), 
its main purpose this time was to prepare for the upcoming 
visit of Chinese People's Political Consultative Conference 
Chairman Jia Qinglin to Kathmandu December 2-3.  (Note:  This 
visit, which will include other South Asian countries, marks 
his first official trip as Chairman.  End note.)  Cheng said 
the Vice FM sought and received assurances from his 
interlocutors that the Government of Nepal (GON) could 
provide adequate security for the Chairman's visit.  Wang's 
visit coincided with a much-hyped Nepal-Tibet trade fair in 
Kathmandu and followed closely the October 15 official visit 
to Beijing of Royal Nepal Army Chief of General Staff Lt. 
Gen. Victory Rana. 
 
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BILATERAL RELATIONS:  "NO PROBLEM" 
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3.  (C)  Politically there is "no problem" in bilateral 
relations between the two nations, Cheng declared.  An 
official visit by Crown Prince Paras to Beijing is being 
planned for 2004.  The official Chinese position regarding 
the seven-year insurgency waged by Maoist rebels--whom the 
Chinese Embassy prefers to call "anti-government 
activists"--is that the conflict is purely an internal affair 
which the GON is fully capable of resolving on its own.  When 
pressed to elaborate on this position, Cheng explained 
patiently, "This is what we always say.  We never change it," 
regardless of what may be happening in the field.  When asked 
for his government's views on recent speculation in the local 
press that the Maoists may seek another ceasefire, Cheng 
said, the GON should continue to  "take action militarily 
against the Maoists" in the near term but that ultimately the 
conflict must be resolved through negotiations. 
 
4.  (SBU)  The main "deliverable" during Wang's visit, 
according to Cheng, was an agreement between the two 
governments to open two additional trading points on the 
Nepal-Tibet border.  Recently, Cheng noted,the GON has been 
pressing the Chinese government to grant greater economic and 
trade concessions to help it reap some of the benefits of 
China's economic boom and to redress the trade imbalance 
between the two governments (about USD 58 million in China's 
favor in FY 02, not including a substantial trade in smuggled 
Chinese goods).  Since China is unlikely to increase its 
imports from Nepal significantly in the near term (the local 
press quoted an unnamed Chinese official in Wang's entourage 
as attributing the trade imbalance to the inferior quality of 
Nepali goods), Cheng said the delegation proposed expanding 
Chinese tourism to Nepal as a way of reducing the trade 
surplus.  He enumerated several steps already taken to this 
end.  Since the end of 2001, when the Chinese government 
included Nepal as one of a number of officially approved 
tourist designations, tourist arrivals from China have 
increased by 13 percent.  The GON has exempted Chinese 
tourists from visa fees and now allows them to apply for 
visas upon arrival.  The two governments signed a bilateral 
air services agreement earlier this year, which has doubled 
the number of flights between China and Nepal (from 7 to 14). 
 Finally, since June Chinese tourists have been able to use 
yuan to pay for expenses incurred while traveling in Nepal. 
(Comment:  The GON views progress thus far in increasing 
revenues from Chinese tourism as disappointing.  The local 
press covering Wang's visit, referring to Chinese pledges to 
promote tourism to Nepal, commented, "a positive outcome of 
this development is yet to be realized."  End comment.) 
 
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ECONOMIC AID: YOU CAN'T GIVE IT AWAY 
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5.  (C) Although the GON has pressed for increased Chinese 
economic assistance, it has been notoriously slow in moving 
to implement bilateral aid projects, Cheng complained.  Each 
year the Chinese government advises the GON it can offer 
about USD 10 million in (tied) aid, generally for 
infrastructure projects, and asks the GON to list priorities 
for the funding.  Cheng lamented the GON's slow response to 
these offers, noting that often the full USD 10 million 
remains unspent.  Only one of three projects agreed to at the 
last bilateral consultation in 2001--construction of a new 
building for the state-owned television station--has been 
completed, Cheng said, and even then the GON repeatedly 
delayed scheduling a hand-over ceremony for the completed 
building.  Only after the Chinese Ambassador complained 
directly to the King did the ceremony take place.  Other 
pending projects include construction of a hospital for civil 
servants, a polytechnic institute, and a 22-km highway in 
Rasuwa District that will link with a highway in Tibet. 
 
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COMMENT 
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6.  (C) Landlocked and underdeveloped, Nepal runs substantial 
trade deficits with both of its powerhouse neighbors. 
Nepal's trade relations with India have historically been 
contentious, and the GON is obviously hoping to develop more 
robust relations with China to counterbalance the tremendous 
influence of its southern neighbor.  Nepalese planners are 
excited by the construction of a railroad from the Chinese 
heartland to Lhasa, hoping the Chinese government can be 
persuaded to extend it toward the main Sino-Nepal border 
crossing point at Kodari.  China's polite but tepid response 
to GON overtures regarding trade expansion--parrying requests 
for concessions in the present with hypothetical benefits 
from an as yet unrealized tourism boom--will likely do little 
in the near term to meet Nepalese aspirations. 
 
BOGGS