China gives Cambodia aid and thanks for ASEAN help

A vegetable market in Cambodia

PHNOM PENH, Tue Sep 4, 2012 (Reuters) - China has pledged more than $500 million in soft loans and grants to Cambodia and Prime Minister Wen Jiabao thanked it for helping Beijing maintain good relations with the regional grouping ASEAN, a Cambodian junior minister said.

A summit of the 10 members of the Association of Southeast Asian Nations (ASEAN) in July failed to issue a joint communique for the first time in the group's 45-year history after disagreement over the wording of a section on territorial claims in the South China Sea.

Cambodia, which chairs ASEAN meetings this year, was accused by some countries in the group of stonewalling in support of its ally, China.

The South China Sea has become Asia's biggest potential military flashpoint. China's claim over the huge area has in particular set it against ASEAN members Vietnam and the Philippines.

Four loan agreements for unspecified projects worth about $420 million were signed when Cambodian Prime Minister Hun Sen visited China over the weekend, Secretary of State for Finance Aun Porn Moniroth told a briefing late on Monday.

Another three loan agreements, worth more than $80 million, are expected to be signed this year, Aun Porn Moniroth said, adding that Wen had also promised a grant of 150 million yuan ($24 million) as "a gift" for Cambodia to use on any priority project.

"The Chinese government also voiced high appreciation for the part played by Cambodia as the chair of ASEAN to maintain good cooperation between China and ASEAN," Aun Porn Moniroth said.

According to China's Xinhua state news agency, Wen said China "will closely coordinate with Cambodia and support the country to make the upcoming series of meetings for East Asian leaders a success". Those meeting are in Cambodia in November.

Chinese investment in Cambodia totalled $1.9 billion last year, more than double the combined investment by ASEAN countries and 10 times more than the United States, which is trying to extend its influence in the region.

Aun Porn Moniroth said Premier Wen had given "positive consideration" to Hun Sen's proposal that China provide new loans of between $300 million to $500 million per year for the next five years for unspecified projects.

He also said a Chinese firm planned to invest $2 billion to build a steel plant in Cambodia employing about 10,000 people and with the capacity to produce 3 million tonnes of steel a year. He gave no details so it was not possible to verify how far advanced the plans were. (Reporting by Prak Chan Thul; Editing by Alan Raybould and Robert Birsel)