VZCZCXRO5933
OO RUEHGH
DE RUEHCN #0031/01 0351120
ZNR UUUUU ZZH
O 041120Z FEB 10
FM AMCONSUL CHENGDU
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3732
INFO RUEHKT/AMEMBASSY KATHMANDU IMMEDIATE 0245
RUEHOO/CHINA POSTS COLLECTIVE
RUEHCN/AMCONSUL CHENGDU 4456

UNCLAS SECTION 01 OF 03 CHENGDU 000031 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/CM 
 
E.O. 12958: N/A 
TAGS: PREL ETRD EINV ENRG SENV CH NP IN
SUBJECT: NEPAL'S LHASA CG ON PRIME MINISTER'S VISIT TO CHINA 
 
REF: 09 CHENGDU 283 
 
CHENGDU 00000031  001.2 OF 003 
 
 
¶1.  (U) This cable contains sensitive but unclassified 
information.   Not for Internet distribution. 
 
 
 
¶2. (SBU) Summary.  The unspoken quid pro quo during the December 
26-31 visit of Nepal's Prime Minister to Lhasa and Beijing 
appears to have been a public statement by Nepal that it would 
not allow its territory to be used for anti-Chinese activity, in 
return for Chinese promises of continued development aid, a 
gradual reduction in tariffs, and promotion of Chinese 
investment in, e.g. Nepal's hydropower and tourism sectors. 
Nepal hopes to attract 100,000 Chinese tourists to Nepal in 
2011, Nepal's Lhasa CG told Chengdu CG.  End Summary. 
 
 
 
Nepal PM Seeks Strong Bilateral Ties; China Seeks Stable Border 
 
--------------------------------------------- ------------------ 
 
 
 
¶3. (SBU) Nepal Prime Minister Madhav Kumar Nepal made a 
successful first official trip to China on December 26-31, with 
stops in Lhasa, Xian, Beijing, and Shanghai, Nepal's Consul 
General in Lhasa, Naindra Upadhaya, told Chengdu CG on January 
¶31.  The PM's visit to Lhasa, cut short by a plane delay, 
included only two courtesy calls with Tibet Autonomous Region 
(TAR) Party Secretary Zhang Qingli, and then TAR Governor Chamba 
Phuntsog.  While in Lhasa, the PM discussed how to "consolidate 
bilateral relations," including promoting tourism, trade, and 
investment.  The Nepali delegation on this China visit included 
Minister of Finance Surendra Pande and 25 businesspersons, only 
two of whom were present in Lhasa, Upadhaya said. 
 
 
 
¶4. (SBU)  The Chinese official press portrayed the PM's initial 
stop in Lhasa as a "signal" that Nepal was looking forward to 
maintaining stability along its 1,400 km border with China, and 
beefing up economic cooperation.  The Chinese press further 
quoted PM Nepal as having told 25 Nepali Parliamentarians before 
his trip to China that Nepal would not allow anyone to use 
Nepal's territory for anti-Chinese acts -- an oblique reference 
to Tibetans that Beijing feels support the "Dalai Lama clique." 
(Note: Nepal Deputy Prime Minister and Minister for Foreign 
Affairs Jujata Koirala reaffirmed to Chinese Foreign Minister 
Yang Jiechi on December 29 in Beijing that Nepal's policy was to 
not allow the use of Nepalese territory for anti-Chinese 
activity, per MOFA's website.  End Note.) 
 
 
 
Hydropower: Discussed, But No Deals Made? 
 
----------------------------------------- 
 
 
 
¶5. (SBU) PM Nepal also discussed hydropower with relevant 
Chinese officials during his stop in Beijing, Upadhaya said.  He 
was unaware of any hydropower agreements reached during this 
visit, but noted that hydro deals had been concluded during 
earlier high-level visits.  (Note: Nepal Energy Minister Prakash 
Sharan Mahat was also present during the Beijing stop.  The 
joint China-Nepal statement issued December 30 in Beijing said 
that the Nepalese side welcomed "Chinese businesses to actively 
participate in hydropower construction and development in 
Nepal."  End Note.) 
 
 
 
Nepal: No Political Pressure to Repatriate Tibetans? 
 
--------------------------------------------- ------- 
 
 
 
¶6. (SBU) Nepal's foreign policy toward China was to "be a good 
neighbor" and "maintain friendly relations," Upadhaya explained. 
  At the same time, he added, Nepal had to maintain a balance 
under which it did not lean to heavily toward either China or 
India.  Upadhaya claimed to be unaware of any pressure by China 
to repatriate Tibetans from Nepal; Tibetans with valid visas 
were allowed to stay, while in some cases Tibetans who 
overstayed their Nepal visas had been repatriated to China.   He 
said that the Nepali Consulate General in Lhasa "always" issued 
 
CHENGDU 00000031  002.2 OF 003 
 
 
visas to Chinese, and believed that the Chinese Embassy in 
Katmandu had similarly liberal visa policies concerning 
Nepalese. 
 
 
 
2011 Tourism Goal: Welcome 100,000 Chinese Tourists 
 
--------------------------------------------- ------ 
 
 
 
¶7. (SBU) In regards to tourism, Nepal's Government had recently 
declared 2011 to be "Visit Nepal Year," Upadhaya explained, and 
had set a goal of attracting 100,000 Chinese tourists.  The 
Nepali Consulate General in Lhasa organized a tourism promotion 
event in 2009 for Chinese travel agents, airlines, and 
government officials.  (Note: The joint China-Nepal statement 
discusses efforts to enhance land routes and air services 
between the two countries, and specifically mentions the goal of 
establishing more border trading points between Nepal and the 
TAR.  The statement also indicates that the Chinese side agreed 
to "actively encourage Chinese businesses to invest in and 
develop tourism infrastructure in Nepal."  End Note.) 
 
 
 
China-Nepal Trade: Talks about Duty-Free Access 
 
--------------------------------------------- -- 
 
 
 
¶8. (SBU) Nepal supports free trade with China, and has asked for 
duty free access for certain Nepali goods, Upadhaya said.  In 
2008, the Chinese government rolled back a 50-percent reduction 
in tariffs on certain goods from neighboring countries that had 
existed for several years, he explained.  While the Chinese 
government rejected requests by Nepal's government not to roll 
back these tariff reductions, he noted, Beijing did grant tariff 
free trade for goods whose total value was under 8000 RMB (1173 
USD) -- a move likely aimed to help small traders at border 
crossings.  Talks are continuing about another Nepali request 
for lower tariffs; Upadhaya was hopeful that the Chinese 
government would grant these requests.  (Note: The December 30 
joint statement indicated that China would "gradually provide to 
Nepal zero-tariff treatment to 95 percent of the products (sic), 
in accordance with its commitment made at the United Nations 
High-Level Event on the Millennium Development Goals."  End 
Note.) 
 
 
 
China-Nepal Trade: Beijing Enjoys a Surplus 
 
------------------------------------------- 
 
 
 
¶9. (SBU) Nepali handicraft exports to China have been 
increasing, Upadhaya said, but Nepal has been running a growing 
trade deficit with China because its relatively simple export 
base cannot compensate for increased imports.  Bilateral trade 
during the first 10 months of 2009 was $304 million, according 
to the Chinese press.  Besides handicrafts, Upadhaya said, 
Nepal's exports to China include textile garments, wheat and 
wheat flour, and rice and beaten rice - although rice exports 
dropped to zero recently because supplies could not keep up with 
domestic Nepali demand.  China's exports to Nepal include raw 
wool from Tibet and other parts of China, fresh apples, textile 
garments, construction materials, and machine parts.  At one 
point, local Chinese customs officials instituted restrictions 
on certain Nepali handicrafts, including metal statues - perhaps 
as a way to squeeze bribes out of importers in exchange for 
waivers of the "duties."   After the Nepali CG complained to TAR 
authorities about these arbitrary tariffs, Lhasa ordered Chinese 
customs officials to return to the status quo ante. 
 
 
 
Nepali Community in TAR is Small? 
 
--------------------------------- 
 
 
 
¶10. (SBU)  The Nepali community in the TAR was actually quite 
small, Upadhaya said, estimating it to be 300 persons in the 
winter time (200 of whom were in Lhasa), with perhaps 100 more 
 
CHENGDU 00000031  003.2 OF 003 
 
 
in the summer months.  Nepalese do not own many big enterprises, 
but examples of companies in the Lhasa area include a dairy, 
carpet company, handicrafts store, beauty parlor, and 
restaurants.  Nepalese tend to be either businesspersons, or 
working as employees in those businesses; several have ethnic 
Tibetan or Han spouses.  (Comment: Because Nepalese do not tend 
to register with their local consulate, per Upadhaya, he may 
have significantly underestimated the number of his fellow 
countrymen in the TAR.  End Comment.) 
 
 
 
Nepal CG: Tibet Seemed Stable in 2009 
 
------------------------------------- 
 
 
 
¶11. (SBU) Based on his travel outside of Lhasa to Ali and 
Shigatsu, as well as from what he has heard from the Nepali 
business community, Upadhaya felt Tibet was quite stable in 2009 
(following a difficult 2008, when unrest in the TAR and other 
Tibetan areas in March led to a severe Chinese government 
crackdown.) 
BROWN