China Pushes SCO Economic Agenda at Western China

UNCLAS SECTION 01 OF 02 BEIJING 019030

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SENSITIVE
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USDOC FOR ITA/MAC/AP/MCQUEEN
STATE PASS USTR STRATFORD, WINTER, ALTBACH
GENEVA PASS USTR

E.O. 12958: N/A
TAGS: ECON ECIN ETRD PREL PTER CH ZK
SUBJECT: China Pushes SCO Economic Agenda at Western China
Trade and Economic onference

REFS: A) SHANGHAI 03842; B) BEIJIG 16162; (C) 05 BEIJING
15345


1. (SBU) Sumary: Zhang Deguang, Secretary General of the
Shanghai Cooperation Organization (SCO),exhorted his
central Asian counterparts at a September 2 event in Urumqi
to quickly conclude three key economic agreements on
customs, transportation and protection of foreign
investment. These are key to broader economic integration
between China and Central Asia, he stated. Zhang added
that once these agreements were signed by the SCO members
they could be expanded to include observer countries.
Zhang also emphasized that economic cooperation is
important for the SCO, not just politics, security and
fighting terrorism. Several other speakers also
highlighted the importance of the SCO to regional economic
cooperation. End Summary.

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The SCO - Key to Central Asian Economic Cooperation
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2. (SBU) Speaking at the High-level Forum on Regional
Economic Cooperation between China and Central-West-South
Asia of the annual Urumqi Fair on September 2, 2006, SCO
Secretary General Zhang Deguang repeatedly emphasized the

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importance of the SCO to regional economic integration.
Suddenly switching to Russian, Zhang exhorted visiting
delegations from SCO member countries to sign three
proposed agreements on customs, transportation (highway
cooperation, cargo, vehicles, general procedures, and
quarantine conditions) and protection of foreign
investment, respectively.


3. (SBU) Noting that there are differences of opinion
amongst SCO member countries regarding these topics, Zhang
stressed that agreement is needed soon. In further
expanding the range of SCO activities beyond the political
arena, Zhang added that business leaders and academics
should increase their participation in the organization and
greater cooperation between politics and business is
needed. He emphasized that regional economic cooperation
is an important goal and work topic for the SCO, not just
politics, security and fighting terrorism.


4. (SBU) Former Vice Minister of China's Ministry of
Commerce, Liu Shanzai, echoed Zhang's emphasis on the SCO's
central role as a platform for enhancing regional economic
cooperation. Liu recalled that as early as 2001, when the
SCO was formed, mechanisms were set up to establish
meetings between economic and trade ministers of SCO member
states. At that time negotiations for facilitation of
trade and development were also launched. Liu went on to
say that at the fifth anniversary celebration of the SCO's
founding held in Shanghai in June, 2006 (see Reftel A),all
parties agreed to give priority to cooperation in energy,
information technology and transportation as well as to
actively promote facilitation of trade and investment,
gradually realizing the free flow of goods, capital,
services, and technology.


5. (SBU) Huang Fanzhang, a Deputy Director of the China
Reform Forum, also noted in his Urumqi speech that the SCO
planned to establish a common market around 2020. He went
on to say that at the Shanghai Summit in June, 2006, China
promised to provide USD 900 million in loans to increase
cooperation among member countries in energy, IT, transport
and other sectors.


6. (SBU) Yue Sondong, Deputy Director General of the State

BEIJING 00019030 002 OF 002


Council's Development and Research Center, continued to
echo this theme of the SCO's central role in promoting
regional economic cooperation. Yue outlined a series of
practical cooperation projects stemming in part from a
series of June Summit agreements including the "Memo on
Developing Regional Economic Cooperation and Facilitating
Trade Investment" and the "Outline on Multilateral Trade
Cooperation." These include the China-Kazakhstan oil
pipeline that has begun operating, the gas pipeline that is
under construction, and the initiation of the China-
Kazakhstan Huoergousi Border Cooperation Center that has
been initiated. He noted that the member countries of the
SCO are working on the subdivision and promotion of 127
projects listed in the plans of the SCO which involve 11
industries, including transportation, energy, communication
and agriculture.

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Extending Economic Agreements to West and South Asia
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7. (SBU) In his prepared comments SCO Secretary General
Zhang stated that the SCO stands ready to intensify
exchanges with countries all over the world, especially
Central, West and South Asian states. In his exhortation
to the delegates in Russian, he also suggested that these
agreements, once signed, would be expanded to include
observer countries. (Note: The observer countries include
Iran, Mongolia, India, and Pakistan. Observer status was
granted to these countries in 2004 and 2005. End Note.)

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Comment
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8. (SBU) China's campaign for the Shanghai Cooperation
Organization's greater role in Central Asian economic
cooperation was in full swing at the Urumqi Conference.
Many speakers stressed the SCO's economic importance in
almost identical terms. The presentations in Urumqi did
not make explicit the "differences of opinion" Secretary
General Zhang alluded to in his exhortation nor whether
they would be resolved by the Dushanbe conference starting
in mid-September. This appears to be the first time the
SCO has been a main feature of the high-level Urumqi forum.
End comment.


Randt