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