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Viewing cable 07BEIJING6456, China/Central Asia - Weak Infrastructure and

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Reference ID Created Released Classification Origin
07BEIJING6456 2007-10-04 08:45 2011-08-23 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Beijing
VZCZCXRO6394
RR RUEHCN RUEHDBU RUEHGH
DE RUEHBJ #6456/01 2770845
ZNR UUUUU ZZH
R 040845Z OCT 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC 2416
INFO RUCPDOC/USDOC WASHDC
RUEHCN/AMCONSUL CHENGDU 8685
RUEHGZ/AMCONSUL GUANGZHOU 3485
RUEHHK/AMCONSUL HONG KONG 9735
RUEHGH/AMCONSUL SHANGHAI 8444
RUEHSH/AMCONSUL SHENYANG 8339
RUEHIN/AIT TAIPEI 6674
RUEHMO/AMEMBASSY MOSCOW 8810
RUEHDBU/AMEMBASSY DUSHANBE
RUEHEK/AMEMBASSY BISHKEK 1315
RUEHTA/AMEMBASSY ASTANA 0028
RUEHNT/AMEMBASSY TASHKENT 1137
RUEHNE/AMEMBASSY NEW DELHI 4442
RUEHUM/AMEMBASSY ULAANBAATAR 3584
RUEHIL/AMEMBASSY ISLAMABAD 6617
UNCLAS SECTION 01 OF 02 BEIJING 006456 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
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/Central Asia - Weak Infrastructure and 
Limited Economic Integration Hinders Development 
 
REF: 06 Beijing 19030 
 
------- 
Summary 
------- 
 
1. (SBU) Transportation and logistics issues continue 
to hamper regional economic growth linking China and 
Central, West and South Asia.  The widely hyped Horgos 
Cross Border trade area featured at last year's High- 
Level Forum on Regional Economic Cooperation in Urumqi 
is still under construction and may be years away from 
railway integration.  China-Central Asia trade 
(Central Asian raw materials in return for Chinese 
finished manufactured goods) continues to grow at 
double-digit rates.  End Summary. 
 
------------------ 
Travel to Xinjiang 
------------------ 
 
2. (SBU) Econoff traveled to Xinjiang Autonomous 
Region in early September to attend the High-Level 
Forum on Regional Economic Cooperation in Urumqi, the 
region's capital, and to meet with provincial 
officials about economic integration between Western 
China and Central Asia. 
 
--------------------------------------------- ------- 
Infrastructure Challenges Hinder Central Asian Trade 
--------------------------------------------- ------- 
 
3. (SBU) Miao Gengshu, Chairman of the China 
International Investment Promotion Council, emphasized 
the need to focus on transportation and logistics 
linking China to Central, West and South Asia at the 
annual Urumqi-based High-Level Forum on Regional 
Economic Integration.  He noted that Eurasian land 
bridge shipments spend on average thirty to fifty 
percent of transit time held up in customs processing. 
Director Irmatov of the Uzbekistan Foreign Investment 
Information Security and Promotion Agency commented in 
his speech that construction of a 270 km road from 
Andijon in Kazakhstan through Osh to Kashgar in China 
would greatly enhance bilateral trade and avoid a 
lengthy detour. 
 
4. (SBU) Xing Guangcheng, Director of the Chinese 
Academy of Social Sciences' Institute of Russian, East 
European and Central Asian Studies, noted during a 
meeting in Beijing that barter trade between China and 
Kazakhstan still has not been completely monetized. 
Other hindrances to greater economic integration 
include: Kazakhstan's investment climate; Kazakh laws 
and regulations that obstruct Chinese companies; and 
the relatively low level of investment. 
 
---------------------------------------- 
Horgos Land Port Still Under Development 
---------------------------------------- 
 
5. (SBU) At this year's High-Level Forum there was 
little mention of the Kazakstan-Horgos International 
Development Zone, which was so widely hyped at last 
year's forum.  According to a Chinese Academy of 
Social Science researcher, the railway line on the 
China side won't be completed until 2009 and it may 
take another five years to connect to Kazakstan.  The 
project involves construction of a "free-trade zone" 
on both sides of the China-Kazakhstan border in 
 
BEIJING 00006456  002 OF 002 
 
 
addition to border processing agreements.  According 
to the Xinjiang National Development and Reform 
Commission (NDRC) the facility is still being built 
and they hope it will be completed by the end of the 
year.  (Note: the Horgos land crossing is 
approximately 8 hours by road from Urumqi, the capital 
of Xinjiang Autonomous Region.  End Note.) 
 
--------------------------------------------- - 
And yet . . . Lopsided Trade Continues to Grow 
--------------------------------------------- - 
 
6. (SBU) Trade between China and Central Asia 
continues to grow at double digit rates, though growth 
slowed to 37 percent in 2006, down from 48 percent the 
previous year.  China's trade balance with the region 
shifted from deficit to surplus in 2003, and grew 95 
percent in 2006 to USD 3.1 billion.  The majority of 
the surplus is attributable to rapidly expanding 
exports to Kazakhstan and Kyrgyzstan (primarily 
manufactured goods).  Total Chinese trade with 
Central Asia (Kazakhstan, Kyrgyzstan, Turkmenistan, 
and Uzbekistan) accounted for 0.7 percent of China's 
total 2006 global trade. 
 
--------------------------------------------- ----- 
While Criticism is Muted, Turkey Expresses Concern 
--------------------------------------------- ----- 
 
7. (SBU) Kazakhstan Deputy Director of the Chamber of 
Industry and Commerce Biyaluofu hinted at the raw 
materials for manufactured goods dynamic but focused 
on Kazakhstan's post industrial policy shifting from 
energy-intensive production to investment in 
processing and services.  He noted potential Chinese 
investment in petrochemicals, oil machinery, food, 
textiles, transport/logistics, metallurgy, building 
materials and tourism - an electrode plant in Pavlodar, 
Kazakhstan was the only example cited. 
 
8. (SBU) The only potentially disparaging comments among 
the speakers came from Ender Oncu, Turkey's Head of 
Department, UnderSecretariat of Foreign Trade.  He 
specifically mentioned that China is Turkey's 2nd 
largest source of trade deficit.  (Note: He was also 
the most outspoken last year regarding the lopsided 
trading relationship.  See reftel.  End note.)  He 
concluded by saying that Turkey and China had agreed 
on concluding a "Strategic Partnership Agreement" and 
a comprehensive "Market Promotion Program" to address 
sustainable and healthy economic relations. 
 
Piccuta