NEPAL'S KING JOURNEYS TO CHINA SEEKING HELP IN

C O N F I D E N T I A L SECTION 01 OF 02 KATHMANDU 001326

SIPDIS

LONDON FOR POL/RIEDEL

E.O. 12958: DECL: 07/07/2012
TAGS: PREL PTER NP CH
SUBJECT: NEPAL'S KING JOURNEYS TO CHINA SEEKING HELP IN
TIME OF CRISIS

REF: A. KATHMANDU 1314


B. KATHMANDU 953

Classified By: Ambassador Michael E. Malinowski, Reasons 1.5(b),(d)


1. (C) Summary. Statements against Nepal's Maoist insurgents
and "anti-China activities" can be expected during the first
visit of Nepal's King Gyanendra to China. A leading Nepali
business leader accompanying the monarch hopes to strike
deals that will help reduce Nepal's sizable trade deficit
with China. In recent weeks new Sino-Nepalese accords on
travel and foreign exchange have taken effect. Gyanendra
will likely press for additional aid and work to reassure
Beijing that stability can be reestablished quickly in his
country. End Summary.

Nepal's New King to Beijing
--------------


2. (U) Nepal's King Gyanendra Bir Bikram Shah travels to
Beijing July 9 on a state visit hosted by Chinese President
Jiang Zemin. It will be only his second visit abroad since
becoming King thirteen months ago; he returned from his
first, to India, June 28 (Ref A). (Note: Gyanendra's
brother, the late King Birendra, paid three official visits
to China, the last time in early 2001 just three months
before his death. Birendra also toured China unofficially on
seven other occasions. End Note.)


3. (U) The King will keep a busy schedule according to
reports in Nepal's official press, stopping first in Beijing
for meetings and to visit "science and technological
centers." Gyanendra departs the PRC from Shanghai July 15.
In between, Nepal's monarch plans to travel to the
northeastern city of Dalian--stopping at the Dalian Mounted
Policewoman Training Base--and to the Three Gorges Dam site
in central Hubei Province.

Focus on Maoists and Other "Bad Elements"
--------------


4. (C) As he did in Delhi, Gyanendra will try to assure his
Chinese hosts that Nepal has made strides in its campaign
against the Maoist insurgents. China's Ambassador to Nepal
Wu Congyong has made strong statements against the
"anti-government" Maoists--singling out their misleading use
of Chairman Mao's name (Ref B)--and similar rhetoric can be
expected from Beijing. Gyanendra will likely reiterate to
the Chinese his previous statements against "anti-China
activities" in Nepal. Meeting with a visiting Chinese
military delegation in September 2001, Gyanendra stated he
"would not allow anti-China activities to be conducted within
Nepalese territory." He repeated this statement during an
April meeting with a delegation of leaders from the Tibet
Autonomous Region.

Nepal Hopes for Economic Benefits
--------------


5. (U) Sharat Singh Bhandari, Nepal's Health Minister, and
Ravi Bhanta Shrestha, President of the Federation of Nepalese
Chambers of Commerce and Industry (FNCCI),will accompany the
King to China. Shrestha told us that he plans to meet with
his counterpart from the All-China Federation of Industry and
Commerce (ACFIC); the two organizations will sign a
memorandum of understanding "to promote mutual cooperation."


6. (SBU) Nepal currently runs a USD 150 million trade deficit
with China, and Shrestha hopes that gap can be closed. China
has offered to build new roads to promote cross-border trade,
including one through the former kingdom of Lo Monthang in
Mustang (on Nepal's northern border) and another leading
northwest out of Kathmandu. (Note: A new road from the
Tibet border to Lo Monthang--built by Nepali villagers with
local funds--has already increased cross-border trade
dramatically in the region. Romi Gauchan, Member of
Parliament for Mustang, told us recently that the road acts
as a substitute for supply lines leading from south Nepal
made impracticable by the Maoist insurgency. End Note.) A
lack of port facilities and exportable products will continue
to disadvantage Nepal, however. At present, nearly 98
percent of Nepal's exports to China enter the country by land
through Tibet, while slightly less than half of Chinese goods
entering Nepal come via Tibet.
Tourism, Foreign Exchange Accords Take Effect
--------------


7. (U) In China the King and his hosts will likely highlight
the memoranda of understanding on tourism and Yuan
convertibility that were signed by Nepal and China in recent
months and have already taken effect. Nepal agreed to permit
Chinese travel agencies to bring Chinese tourists into the
country while China designated Nepal as an authorized
destination for Chinese tourists as of June 1. Then in
mid-June the two countries' central banks agreed to accept
Chinese currency into their bilateral bank settlement system.
Comment
--------------

8. (C) In New Delhi the King worked hard to reassure the GOI
of his commitment to constitutional democracy and pressed the
Indians for help fighting the Maoists. Gyanendra will likely
ask for China's support too, but at the same time try to
reassure them that stability can be restored in Nepal at an
early date.
MALINOWSKI