China Eyes Palm Oil, Power Plant Deals With Indonesia

Chinese Premier Wen Jiabao will sign a series of agreements next week during visits to Malaysia and Indonesia covering everything from banking and energy to palm oil and infrastructure, a senior diplomat said on Thursday.

Assistant Foreign Minister Hu Zhengyue said deals in Malaysia would include telecommunications and infrastructure construction cooperation, while in Indonesia there would be a greater number of documents signed, including on banking.

"The bank cooperation will probably involve many banks, not just one or two," Hu said. "There will also be some financing (deals) for major projects."

Other agreements to be signed in Indonesia would cover palm oil plantations and coal-fired power plant projects. He gave no firm details for any of the deals to be concluded.

"I believe that this visit will be very fruitful," Hu added.

China already has close trade, economic and cultural ties with both countries. In 2009, China signed currency swaps with Malaysia and Indonesia, as part of moves to give the yuan a bigger international role.

In Malaysia, Aluminum Corp of China Ltd (Chalco) has signed a framework agreement for a $1 billion aluminium smelter in Sarawak state in Borneo, though the project has yet to get off the ground.

Sarawak also plans to double its hydropower capacity to 6,000 megawatts (MW) in 2015 by building five more dams to complement the Bakun and Murum dams, which have a combined capacity of more than 3,000 MW.

State government officials have declined to name a price for the expansion but they are counting on investors like China's state run power grid operator to help build the dams to exploit Sarawak's rivers.

However, Malaysia and China are involved in a tricky territorial despute.Malaysia disputes ownership with China over parts of the resource-rich South China Sea. Vietnam, Taiwan, Brunei and the Philippines also claim parts of the sea and the numerous atolls scattered through it.

Hu said he did not believe this issue would hamper the success of Wen's visit.

"The South China Seas problem is an old one. I think that when the leaders of both nations meet they won't deliberately try to avoid it, but as we both understand each other's stance, this won't be a major issue."

Wen goes first to Malaysia, from April 27-28, and then to Indonesia. He returns to China on April 30.

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