China to expand Central Asian presence with US$ 10 billion in loans

BISHKEK (Reuters): China has invited Central Asian states to invest in road, rail and energy projects, using a US$ 10 billion loan package that will extend Beijing’s reach in the resource-rich former Soviet region.

Chinese Premier Wen Jiabao said the country’s state-run banks were prepared to fund projects including a rail link from Uzbekistan through Kyrgyzstan. China, along with Russia, also planned to launch a new satellite in the region, he said.

Wen was speaking on Wednesday at a meeting of the Shanghai Cooperation Organisation (SCO), a regional security and economic bloc linking China, Russia and four Central Asian states. China pledged the US$ 10 billion loan package at an SCO meeting in June.

“We intend to invest this money in infrastructure, energy and production projects, in order to facilitate development of the real economy,” Wen said in the Kyrgyz capital Bishkek.

He said China would welcome approaches by SCO member states to the state-owned Eximbank and Development Bank of China. Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan all belong to the SCO. China is extending its economic influence across its 2,800 km (1,700 mile) border with Central Asia as a counterbalance to US and Russian presence in a region with vast mineral reserves on the northern borders of Afghanistan and Iran. But China and Russia also share a common interest in reinforcing the region’s porous borders and preventing any spill over of Taliban-inspired violence when NATO troops leave Afghanistan in 2014.

Wen said China and Russia had carried out a feasibility study into the launch of a satellite that he said could become an ‘anti-terror’ platform for SCO member states and improve communications in the event of natural disasters.

“China and Russia, having already completed a feasibility study, are ready to work on the creation and the launch of this satellite,” the Chinese premier said. In addition to the six member countries, the SCO, formed in 2001, invites Iran, India, Pakistan and others to attend its summits.

Russian Prime Minister Dmitry Medvedev, attending the same event, said Moscow would also support the satellite launch and participate in projects to improve regional infrastructure.

Wen said he wanted to accelerate construction of a railway line from Uzbekistan to China and that Beijing was willing to finance interested parties.

China has already supplied billions of dollars in loans to Uzbekistan. Rustam Azimov, Uzbekistan’s first deputy Prime Minister said two state-owned Chinese banks had supplied more than US$ five billion in favourable loans for industrial projects.

Uzbekistan started supplying natural gas to China in August, feeding into a 2,000 km (1,250 mile) pipeline network that originates in Turkmenistan.