NDRC / Ministry of Foreign Affairs / Ministry of Finance

March 27, 2008

I. Executive Summary

The Mekong River, an important transnational river in Asia of a total length of 4880 kilometers, originates from the Tanggula Mountain Range on Qinghai-Tibet Plateau, running through Qinghai Province, Tibet Autonomous Region and Yunnan Province of China as well as Myanmar, Laos, Thailand, Cambodia and Viet Nam from north to south, and flows from the vicinity of Ho Chi Minh City, Viet Nam into the South China Sea. The section of the Mekong River within the Chinese border is called the Lancang River.

As a land bridge connecting China with Southeast Asia and South Asia, the Greater Mekong Sub-region (hereafter also referred to as "GMS") is highly important geographically. It covers a whole area of 2.5686 million square kilometers, with a total population of approximately 320 million. Abundant with natural resources, it has a huge market, a long history and colorful ethnic cultures. Rich in water, biological and mineral resources, the Grater Mekong Sub-region has great economic potential and development prospects.

The countries in the Greater Mekong Subregion have long historic traditions, beautiful landscapes, and colorful ethnic cultures. For a very long period of time, the development of economy and society in the region has lagged behind due to a variety of factors. Among these countries, Myanmar, Laos and Cambodia are on the UN list of the least developed countries. In recent years, these countries have been reforming their economic systems, restructuring industries and opening wider to the outside world, with boosting the economic growth being their common goal.

In 1992, in response to the advocating by Asian Development Bank, the six countries in the Greater Mekong Subregion held the first ministerial meeting and jointly initiated the GMS economic cooperation mechanism in order to enhance economic relations among these countries, promote economic and social development in the region, and achieve common prosperity. Henceforth, the GMS ministerial meeting has been held once a year in principle.

On November 3rd, 2002, the first GMS summit was held in Phnom Penh, Cambodia, which approved The Strategic Framework for the Next Ten Years' Development in the GMS and determined that the GMS summit would be held once every three years and the member countries would take turn to host the meeting. The GMS cooperation thus ascended to the summit level and entered a new stage.

The second GMS summit was held between July 4th and July 5th of2005 in Kunming, China, where the six participant countries signed a number of cooperation documents covering facilitation of cargo and passenger transportation, prevention and control of animal epidemics, construction of information highways and power trade, and approved a number of cooperation proposals related to issues such as construction of biodiversity protection corridors and the action framework of the GMS for facilitation of trade and investment. The meeting laid down a guiding principle for GMS cooperation, of which the main elements are "Mutual respect, equal consultation, practical results, gradual progresses", opening a new page for GMS cooperation.

GMS cooperation is project-oriented and provides financial and technological support as per the actual needs of member countries of the region. Since its initiation, GMS cooperation has concentrated on five strategic fields, namely, infrastructure construction, cross-border trade and investment, participation by private sectors, human resource development, and environmental protection and sustainable utilization of natural resources. Till the end of 2007, US$10 billion had been spent on 180 cooperation projects in nine key fields, namely, transportation, energy, telecommunications, environment, agriculture, human resource development, tourism, trade facilitation, and investment, lending great momentum to the economic and social development of GMS countries. Of these cooperation projects, 34 were investment projects costing a total of US$9.87 billion, of which US$3.426 billion was supplied by ADB and 2.98 billion and 3.466 billion respectively by GMS members and other development partners. The other 146 projects were technological aid projects costing a total of US$166 million, of which US$75.79 million was granted by ADB.

The other countries in the Greater Mekong Subregion are all friendly neighbors of China, and they and China have maintained a long tradition of friendship. China has always attached importance to enhancing and developing its friendly and neighborly relationships with the other countries in the region. Recent years have witnessed very frequent high-level visits, increasing personnel travels, daily closer trade and economic connections, more active social and cultural exchanges, and expanding and deepening cooperation in various fields between China and the other GMS countries.

China is willing to work with the other GMS countries to bring GMS cooperation to an ever greater depth, so as to speed up infrastructure construction, push forward facilitation and liberation of trade and investment, and try to realize regional interconnection in the GMS; to boost ability building and mutual exchanges, strengthen the integral competitiveness, promote the overall economic and social development, and raise the living standards of the people of the region; further consolidate and develop China's traditional relationships with the other GMS countries and jointly create a regional environment characterized by peace and stability, mutual trust, and win-win cooperation.

The third GMS summit will be held in Vientiane, Laos between March 30th and March 31st of 2008. China will work with the other countries of the region as well as ADB to make elaborate plans and careful preparations to ensure that the meeting will generate specific and practical results, so as to further broaden and deepen GMS cooperation and make contribution to the common prosperity of all GMS countries.

II. Economic and Trade Relations between China and Countries in Greater Mekong Subregion

Since the second GMS summit in 2005, the bilateral trade between China and the other GMS countries has maintained a good development trend while enjoyed an improved trade structure, and the volume of bilateral investment has also experienced rapid growth. China has undertaken labor service contracting and design consultation in the other five GMS countries and has realized higher contract values and larger turnovers each year. China has also participated, in the form of joint ventures or wholly Chinese-owned enterprises, in development and construction of the economic and trade cooperation zones in Cambodia, Thailand and Vietnam, and in this way advanced local economic development.

(I) Bilateral Trade and Investment with Cambodia

In 2007, the volume of the bilateral trade between Cambodia and China was US$933 million, 193.6 percent up from the figure in 2004. China's export to and import from Cambodia were US$882 million and US$51 million, respectively 195.1 percent and 170.0 percent more than in 2004. In terms of commodity categories, China mainly exported to Cambodia yarn, fabrics and related products, apparel and clothing accessories, agricultural products, vessels, and rolled steel while mainly imported log, natural rubber, sawn timber, yarn, fabrics and related products, and apparel and clothing accessories. Till the end of 2007, Cambodia had accumulatively invested US$84 million in China, while the latter's non-financial direct investment in Cambodia reached an accumulated total of US$190 million.

The contracted amount that Chinese enterprises signed with Laos for labor service contracting and design consultation reached US$380 million in 2005, US$320 million in 2006, and US$560 million in 2007, respectively. Till the end of 2007, Chinese enterprises had accumulatively signed labor service contracts and design and consultation contracts with a total worth of US$1.97 billion, with a total realized turnover of US$860 million.

Besides, Sihanoukville Special Economic Zone Company Limited, a Chinese-Cambodian joint venture, will develop and construct the Taihu International Economic and Trade Cooperation Park in Cambodia. This cooperation park has an initial area of 1 square kilometer, but will swell into a total area of 11.08 square kilometers. Its total investment will be 2.6 billion yuan, and its major industries are textile and garment, machinery and electronics, and new and high technology.

(II) Bilateral Trade and Investment with Laos

In 2007, the volume of bilateral trade between Laos and China was US$249 million, increasing by 218.4 percent from 2004. China's export to and import from Laos were respectively US$164 million and US$85 million, rising by 162.4 percent and 653.8 percent from 2004. In terms of commodity categories, China mainly exported to Laos motorcycles, iron, car and motorcycle components, cars and car chassis, and electric wires and cables, while mainly imported log, unforged copper and rolled copper, agricultural produce, sawn timber, and copper ores and concentrates. Till the end of 2007, Laos had accumulatively invested US$17 million in China, and the latter's non-financial direct investment accumulatively reached US$146 million.

The amount of the contracts that Chinese enterprises signed with Laos for labor service contracting and design consultation was respectively US$180 million in 2005, US$360 million in 2006, and US$610 million in 2007. Till the end of 2007, the accumulated amount of the contracts that Chinese enterprises had signed with Laos for labor service contracting, and design consultation reached US$2.28 billion, with a total realized turnover of US$1.41 billion.

(III) Bilateral Trade and Investment with Myanmar

In 2007, the volume of the bilateral trade between Myanmar and China was US$2.057 billion, increasing by 179.7 percent from 2004. China's export to and import from Myanmar were respectively US$1.686 billion and US$371 million, rising by 179.6 percent and 179.2 percent from 2004. In terms of commodity categories, China mainly exported yarn, fabrics and related products, rolled steel, motorcycles, natural products, and oil products, while mainly imported log, sawn timber, agricultural products, natural rubber, and jewelry. Till the end of 2007, Myanmar had accumulatively invested US$76 million in China, and the latter's non-financial direct investment in Myanmar accumulated to US$134 million.

The amount of the contracts that Chinese enterprises signed with Myanmar for labor service contracting and design consultation was US$510 million in 2005, US$310 million in 2006 and US$450 million in 2007 respectively. Till the end of 2007, the accumulated amount of the contracts that Chinese signed with Myanmar for labor service contracting and design consultation reached US$4.72 billion, with a total realized turnover of US$3.05 billion.

(IV) Bilateral Trade and Investment with Thailand

The volume of the bilateral trade between Thailand and China was US$34.638 billion, increasing by 199.7 percent from 2004. China's export to and import from Thailand were US$11.974 billion and US$22.665 billion respectively, rising by 206.4 percent and 196.4 percent from 2004. In terms of commodity categories, China mainly exported to Thailand rolled steel, components of automatic data processing equipment, yarn, fabrics and related products, and telephone sets while mainly imported from Thailand automatic data processing equipment and its components, integrated circuits, agricultural products, plastics of primary pattern, and natural rubber. Till the end of 2007, Thailand had accumulatively invested US$2.965 billion in China, and the latter's non-financial direct investment in Thailand had accumulated to US$302 million.

The amount of the contracts that Chinese enterprises signed with Thailand for labor service contracting and design consultation was US$880 million in 2005, US$1.07 billion in 2006 and US$820 million in 2007. Till the end of 2007, the amount of the contracts that Chinese enterprises had signed with Thailand was accumulatively US$5.61 billion, with a total realized turnover of US$3.11 billion.

In addition, Thai-Chinese Rayong Industrial Estate Development Company Limited, a Thailand-China joint venture, is now actively building the Thai-Chinese Rayong Economic and Trade Cooperation Park. This park has a total planned area of 3.5 square kilometers, containing a general industrial zone, a bonded zone, a logistics zone, and a commerce and residential zone. The park aims to attract the Chinese firms engaged in automotive components, machinery, home electric appliances and other lines to set up factories there. At present, the park has already developed 1.5 square kilometers and signed contracts with 12 enterprises that will invest a total of US$99 million in the park.

(V) Bilateral Trade and Investment with Vietnam

The volume of the bilateral trade between Vietnam and China was US$15.115 billion, increasing by 224.2 percent from 2004. China's export to and import from Vietnam were US$11.9 billion and US$3.216 billion respectively, rising by 279.3 percent and 129.6 percent from 2004. In terms of commodity categories, China mainly exported to Vietnam rolled steel, yarn, fabrics and related products, oil products, steel billets and crude forgings, and agricultural products, while mainly imported from Vietnam coal, agricultural products, crude oil, natural rubber, and log. Till the end of 2007, Vietnam had accumulatively invested US$108 million in China, and the latter's non-financial direct investment in Vietnam already accumulated to US$379 million.

The amount of the contracts that Chinese enterprises signed with Vietnam for labor service contracting and design consultation was US$1.16 billion in 2005, US$2.7 billion in 2006, and US$2.23 billion in 2007. Till the end of 2007, the accumulated amount of the contracts that Chinese enterprises had signed with Vietnam for labor service contracting and design consultation already reached US$8.18 billion, with a realized turnover of US$3.45 billion.

Besides, the preparatory work for Chinese enterprises to develop cooperation zones at Da Nang City and Tan Fuoc County of Tien Giang Province of Vietnam is currently proceeding smoothly. China Longjiang Economic and Trade Cooperation Zone, which is located at Tan Fuoc County of Tien Giang Province, has a planned area of 6 square kilometers and is positioned for textile, light industry, machinery, electronics, building materials, chemical, and other industries. Tien Giang Province already issued an investment license for the zone in November 2007, and is expected to transfer 1.5 square kilometers of land in March 2008.

III. New Progresses in Chinese Participation in GMS Cooperation

Since the 2nd GMS summit for economic cooperation in 2005, the Chinese Government has make continued efforts to promote GMS cooperation, and has played an active role in the various coordination mechanisms. China has continued to deepen its cooperation with other GMS member nations in the nine key fields, namely, communication, energy, telecommunications, environment protection, agriculture, human resource development, tourism, and facilitation of trade and investment. Meanwhile, it has continuously pushed forward the cooperation in other fields such as health and drug prohibition. A lot of successes have been made in both sectors.

(I) New Progresses in Communication Cooperation

The Laos 1/3 section of the western line of the south-north economic corridor (Kunming-Laos-Bangkok Road), for which China is responsible for providing the construction funds, was completed in June 2006, one year earlier than scheduled. At present, China is intensifying its efforts to renovate the 175km domestic section between Xiaomengyang and Mohan, has aiming for its completion and operation in the first half of 2008. The 400km high grade road between Kunming and Hekou in China, as a section of the central line of the south-north economic corridor (Kunming-Hanoi-Haiphong), is expected to be completed and put in use in 2008. Besides, the construction of the Hekou-Lao Cai Road Bridge across the Red River, as a part of this transportation artery, was initiated in 2006 and is expected to be finished in 2008. As for the eastern line (Kunming-Nanning-Hanoi) of the south-north economic corridor, the 179km expressway between Nanning and Friendship Pass (Huu Nghi Border Gate) within China was already completed and put in use at the end of 2005. As for the north corridor (Kunming-Dali-Ruili-Myanmar), the 497 km section from Kunming via Anning, Chuxiong and Dali to Baoshan within China has been built into an expressway, and the 78km section between Baoshan and Longling, which is being built with ADB loans, is expected to be finished in 2008. In terms of navigation channel construction, the principal part of the project of building a 71km five-star navigation channel along the Lancang (Mekong) River from Jinghong to the 243rd monument of the China-Myanmar border has been accomplished, with the work of renovating the channel and eliminating the dangers already basically finished, so that the section of the domestic section of the Mekong River up to Jinghong has become navigable for 300t vessels.

Thanks to the close cooperation between China and the other GMS countries, the annexes and protocols of "The Agreement on Cross-Border Transportation of People and Goods in the GMS" (CBTA for short) have been fully signed, the domestic acceptance procedures for all the 17 annexes and 3 protocols of CBTA have been fulfilled, and China and Vietnam have signed a memorandum of understanding on preliminary implementation of CBTA at the Hekou-Lao Cai border. As prescribed by CBTA, China has established a CBTA commission to coordinate and deal with the specific questions which might be encountered during CBTA implementation. China has compiled its Country Action Plan and Implementation Manual for CBTA implementation, and has held training classes on CBTA and its annexes and protocols for relevant departments of the central government, related agencies of Yunnan and Guangxi, and the offices of united inspection from the involved 7 ports.

China has taken an active part in cooperation for the Pan-Asia Railway, and has organized researches of both the domestic section and the sections outside the country. With the international aid provided by the Chinese government, the preliminary feasibility research for the 255km Bat Deung-Loc Ninh section (within Cambodia), where no existing railway is available, has been completed, as has the survey for the approximately 150km section between Muse and Lashio in Myanmar. The domestic sections of the supposed eastern, central and western lines of the Pan-Asia Railway have all been included as projects of "The Mid- and Long-term Plan for Railway Networks of China" and "The 11th Five-Year Plan for Railway Construction". For the eastern line, the newly built Yuxi-Mengzi Railway was started in 2005 and is expected to be completed in 2010, and the project proposal for newly building the railway between Mengzi and Hekou has been approved. For the western line, the feasibility research report onthe project of expanding the capacity of the Kunming-Guangtong Railway was approved, and the project was launched in 2007; review of the preparatory feasibility research of the project of expanding the capacity of the Guangtong-Dali Railway has been performed, and the project proposal has been submitted, so the project is expected to begin soon; the feasibility research report on newly building a railway between Dali and Ruili has received approval from the Chinese government and the important parts of the project have already begun. For the central line, the preliminary feasibility research will be initiated at an appropriate time in view of both domestic social and economic development as well as the progress of the sections outside the country.

China further improved the functions of its existing airports, built an appropriate number of branch airports, and continued to expand the network of air routes, so to form a network of airports together with the general airports in the region and promote the air transportation among GMS countries. On one hand, China and Thailand in 2004 and China and Myanmar in 2006 respectively realized mutual access to each other's air transportation market. On the other, China has made much progress in aviation cooperation with Vietnam, Cambodia and Laos due to increased economic exchanges in recent years. In 2007, between China and the rest GMS countries, 16 airlines companies were flying 39 international airlines, 2 more companies and 1 more airline compared with 2005.

(II) New Progresses in Energy Cooperation

As the beginning, the 110kw power line connecting Hekou of Yunnan Province and Lao Cai in Vietnam officially began to send electricity on September 25th, 2004. Today, China Southern Power Grid is providing electricity to Vietnam through two 220kw power lines and three 110kw power lines. Till the end of 2007, China had provided totally 410 million kilowatt hours of electricity. In August 2006 and November 2006, China separately signed a memorandum with Laos and Vietnam by which China Southern Power Grid Co., Ltd. would invest to construct Nam Tha No.1 hydropower station in Laos and Phase I of Vinh Tan Coal-fired Power Plant in Binh Thuan Province of Vietnam in the BOT pattern. Besides, China and Cambodia officially signed The Memorandum of Understanding on China Southern Power Grid Company Limited's Undertaking Feasibility Research for Sambor (With a planned installation capacity of 3000MW) and Stungcheayareng (With a planned installation capacity of 26MW) Hydropower Projects in the Kingdom of Cambodia. Currently, China is working hard to speed up the feasibility research for these projects in accordance with the requirements of the memorandum. Chinese power companies also contacted related departments of Myanmar for development of hydraulic power.

(III) New Progresses in Telecommunications Cooperation

The GMS Information Highway (GMS IS) Phase I project has proceeded smoothly; the domestic construction work within China, Laos, Thailand and Vietnam has been completed, and the international connections including the China-Laos, China-Vietnam, China-Myanmar, Laos-Myanmar, Thailand-Myanmar, Laos-Vietnam, and Vietnam-Cambodia connections, have all been fulfilled. The construction of the sections within Myanmar and Cambodia has also started, and the first phase is expected to be completed by the end of March, 2008. China Kunming International Entry-Exit Bureau was established in August 2007. In addition, China assisted ADB in holding the 7th GMS telecommunications forum in Guilin, Guangxi. After successfully holding the first training program for senior telecommunications officials of GMS countries, China has held another three sessions of such training.

(IV) New Progresses in Agricultural Cooperation

In April 2007, Beijing sponsored the first GMS Agriculture Ministers' Meeting. The meeting reviewed and endorsed The Strategic Framework for Subregional Cooperation in Agriculture and Core Agriculture Support Program (CASP) for 2006-2010, published "The United Declaration of the GMS Agriculture Ministers' Meeting", clarifying the strategy, major fields and key projects for GMS cooperation in agriculture in the future 4 years. With strong support from other ADB and other GMS countries, the GMS Agriculture Information Network Service (AINS), of which China played a leading role in the organization, construction and management, entered operation in April 2007, becoming an important platform for exchange of agricultural information between GMS countries.

China attaches importance to cooperation with other GMS countries in training and popularizing of agricultural technologies. In the past three years, China has invested a total of about 2 million yuan, held 7 training classes, and trained technicians from other GMS countries for 130 person-times. China has actively organized its relevant provinces to undertake the model biogas projects for rural households in GMS countries like Cambodia and Laos, launched the model projects for growing rubber siblings and rubber processing and set up an agricultural technology park in Myanmar, and cooperated with the government of Cambodia in a model pig breeding project. Besides, utilizing Special Funds for Regional Cooperation in Asia funded by the Chinese Government and the China-ASEAN Cooperation Fund, China has engaged in cooperation with Laos, Myanmar and Vietnam for prevention and control of animal epidemics to promote cross-border epidemic prevention and control in the sub-region.

(V) New Progresses in Environmental Cooperation

China has been active in sub-regional cooperation for environmental protection. It advocated and made efforts to build a biodiversity protection corridor, established its National Support Unit (NSU) for this project, and listed Xishuangbanna and the Shangrila-Deqin region in Yunnan Province as the key region for the first phase of the project. Besides, in 2007, China successfully sponsored the 13th meeting of GMS environment working team and the "Colorful Yunnan" International Forum for Biodiversity Protection in Guangxi and Yunnan respectively, expanding Chinese participation into GMS environmental cooperation and the influence of the biodiversity protection program. The 13thmeeting of GMS environment working team also clarified that Guangxi would take part in the second phase of the biodiversity protection program.

(VI) New Progresses in Health Cooperation

China actively engaged in GMS health cooperation, laying its focus on epidemic prevention and control in border regions. In 2005 and 2007, China implemented trial projects for AIDS prevention and control in the China-Myanmar, China-Laos and China-Vietnam border regions, the trial project for united malaria prevention and control at some parts of the China-Myanmar border region, and the cooperation program for tuberculosis control for migrant population in the China-Vietnam border region. Especially for AIDS prevention and control, China has realized cross-border prevention and control at the key points of all the borders connecting China with other GMS countries. In addition, in October and November 2007, China held two training sessions about bird flu diagnosis and check, and trained 10 technicians from Cambodia, Laos, Myanmar, Vietnam and Thailand and helped them to acquire stronger professional ability. Partly due to the Chinese initiative, the first GMS health forum was held in Vientiane, Laos in November 2007.

(VII) New Progresses in Tourism Cooperation

In 2007, China sponsored the 20th meeting of GMS tourism working team. China has been actively implementing the projects for which The GMS Tourism Development Strategy requires China to play a leading role, and has initiated the work of compiling The Plan of Transnational Tourist Lines in the Upper Mekong (Golden Square) Tourism Region and The Plan of Transnational Tourist Lines in the Western Yunnan-Northern Myanmar Region. Substantial progresses have been achieved in China-Vietnam cooperation in border tourism, especially in the project of "The Karst Mountain-Sea Tourism Area in the Border Region Between Northeast Vietnam and Guangxi". The Gaolin-Jiulongtan Vietnam-China border drifting project in Fangchenggang, Guangxi already went in operation in 2006, as did the Vietnam-China border drifting project at Dongxing, Guangxi. China cooperated with Vietnam and Cambodia respectively in planning large-scale natural-setting performance programs entitled "Impression-Halong Bay" and "Impression-Angkor Wat". Strenuous efforts have been made to promote cooperation for Pan-Beibuwan Bay tourism and the "Two Corridors, One Circle" tourism cooperation between China and Vietnam, and a maritime tourist line has been opened between Beihai and Halong Bay of Vietnam. China has also funded the training of some tourist talents from Laos and Vietnam.

(VIII) New Progresses in Human Resource Cooperation

The Chinese government highly values the personnel exchange and cooperation among GMS member countries. Utilizing the "China-ASEAN Cooperation Fund" and the "Asia Regional Cooperation Special Fund" financed by China, China has actively engaged in cooperation with other GMS members in human resource development. Since 2005, through holding various workshops and technology training classes, the Chinese government each year trained a large number of officials and technical talents for other GMS countries. Till now, the first two sessions of the "Phnom Penh Program" has provided over 900 person-times of training for other GMS members, and the third session was already launched in July 2007. China has enthusiastically participated in the "Phnom Penh Program" and promoted domestic ability building through training. Meanwhile, the Chinese government has supported the "Phnom Penh Program" through the "China Poverty-Reduction and Regional Cooperation Fund" managed by ADB. In addition, China has actively undertaken research and seminars about prevention and control of women and children trafficking and promotion of the safety of immigrants.

(IX) New Progresses in Trade and Investment Cooperation

China has been active in implementing The Action Framework for the GMS Strategy of Facilitation of Trade and Investment, and has formulated and begun to implement its own country action plan. For the customs sector, China has done active research in the "Single Window" mode and has started compiling the special operational manual for CBTA; for the inspection and quarantine sector, the country promoted united network verification of clearance declarations; for the trade and logistics sector, China has been advocating establishing a GMS logistics cooperation and coordination mechanism, and has made its domestic working plan for the GMS logistics cooperation program; and for traveling of business people, China has simplified its visa application procedure, has been publishing and updating the information about its visa policy, and has adopted some new policies such as the 12 entry-exit measures, of which one exempts Chinese citizens from filling in the entry-exit registration record and the other orders improve entry-exit inspection services.

Since 2005, China has cooperated with related international organizations in launching 19 activities in the trade and investment sector, including seminars, training classes and subject researches, which were directly participated by over 1000 people. Besides, starting from the Hekou Port (Yunnan) and the Friendship Pass (Guangxi), both being key ports in the south-north economic corridor, China has launched GMS customs clearance information services, providing multiple kinds of information to the public through computerized information searching service and exhibition of free information materials.

Moreover, the Chinese government attaches great importance to cooperation with international organizations and related countries in drug prohibition, and has taken a serious of policy measures. In 2006, the Chinese government introduced a special policy to increase its support to crop substitution outside the Chinese border. First, China has arranged special funds for overseas crop substitution to help Chinese enterprises in undertaking crop substitution and developing substitute industries in northern Myanmar and Laos. Second, China has enlarged the variety of products allowed to sell back into China, and has extended the valid period of their import quotas. Third, China Export and Credit Insurance Corporation has stipulated measures for providing insurance support to the enterprises engaging in overseas crop substitution. Fourth, China has provided aid to the government of Myanmar for implementing crop substitution programs in Kokang in northern Myanmar. Fifth, China has enacted flexible measures for personnel to undertake crop substitution work outside the country.

The Chinese government has signed cooperation agreements with Laos and Myanmar, and has energetically undertaken bilateral cooperation with them. In 2006, the Chinese government aided Laos to establish a drug addiction treatment and rehabilitation center with US$600,000, and provided 600,000 yuan worth of drug addiction treatment medicine to the center; it has provided Myanmar with 20,000 tons of rice as an emergency aid to ensure that the tobacco farmers would not return to planting opium due to hard life. In 2007, the Chinese government and the United Nations Office on Drugs and Crimes (UNODC) jointly sponsored in Beijing the 7th ministerial meeting of the signatory countries of The MOU on Narcotic Drugs Control in the Subregion of East Asia. The ministerial-level officials in charge of drug prohibition from 6 countries, including China, Cambodia, Laos, Myanmar, Thailand and Vietnam, attended the meeting and adopted The 2007 MOU Beijing Declaration. China has also made many solid efforts in strengthening its cooperation with other GMS countries in law enforcement for drug prohibition. China has joined combined operations for many times and successfully cracked down on a number of major transnational cases of drug making and trafficking.

IV. Participation by China's Yunnan Province and Guangxi in GMS Cooperation

Yunnan Province and Guangxi Zhuang Autonomous Region (Guangxi, for short), located in the southwest of China and bordering Myanmar, Laos and Vietnam, are the regions of China to participate directly in GMS cooperation. In 2007, the two provinces together had a territory of 630,700 square kilometers, a population of 95.16 million, and a GDP of US$140.3 billion. Due to influences of various factors, the economic and social development of the two provinces is generally backward, with a per capita GDP of US$1,474. In 2007, the two provinces had a population of absolute poverty of 2.734 million (Based on the poverty standard of the Chinese government, by which absolute poverty means having an annual per capita income less than 693 RMB yuan, which is lower than the UN standard of US$1 of living cost per day), and a population of low income of 6.608 million. To develop the economy and society and raise the people's living standards in the two provinces, it is necessary for them to take an active and practical attitude in participating in GMS cooperation and speed up their opening process.

Yunnan Province has 15 ethnic minorities that live across the border between Yunnan and the neighboring countries, and Guangxi has been a famous hometown of overseas Chinese and is an autonomous region with the Zhuang people as the major ethnicity, so the people in the two provinces have had a long tradition of exchange and communication with the people in other GMS countries. They are the major tropical provinces of China, unique among Chinese provinces but share many features with the other GMS countries in terms of agriculture. As for leading industries, Yunnan concentrates on tobacco, hydraulic power, nonferrous metals, steel, mineral exploitation, chemical, and development of biological resources, while Guangxi emphasizes nonferrous metals, sugar making, power, automotive, integrated development of forestry and pulp and paper making, and steel, iron and manganese. In terms of these industries, these provinces enjoy leadership in Southwest China and even in the whole country and are quite complementary with the other GMS countries. As for tourism, these two provinces are major tourist destinations, and are also the most convenient tourist passages between China and the other GMS members. In conclusion, there are great potentials for the cooperation between the two provinces and other GMS countries.

Thanks to the support and guidance from the central government, since the second GMS summit, the cooperative relations between the two provinces and related GMS countries have continuously deepened and the bilateral cooperation has proceeded steadily in various fields.

Yunnan Province has established a number of mechanisms for bilateral cooperation, including "Yunnan-Northern Thailand Working Team", "The Economic Consultative Conference Between the Five Cities of Yunnan Province and Vietnam", "Yunnan-Northern Laos Working Team", and "Yunnan-Myanmar Cooperation Business Forum". Since it officially participated in GMS cooperation in 2005, Guangxi has established its inter-departmental coordination mechanism for the cooperation and has formulated its strategic framework and action plan for the cooperation.

The construction of infrastructures such as roads, railways, navigation facilities, airports, ports, and power and telecommunications facilities has proceeded smoothly, and the facilities already built have operated effectively. At present, 11international passenger and cargo transportation lines have been established across the border between Yunnan and Vietnam, Laos and Myanmar, and the passenger transportation between Yunnan and Vientiane has also entered operation. Guangxi has obtained the approval to open 22 transportation lines with Vietnam, of which 10are already in operation.

The cooperation projects in the sectors of agricultural development, environmental protection, tourism, health, and human resource development have been comprehensively implemented. Yunnanhas signed agreements with Laos, Myanmar and Cambodia respectively on establishing agricultural technology model parks, and Guangxi has signed agreements with Quang Ninh Province of Vietnam on agricultural cooperation. Yunnan has been active in training various technicians for the neighboring countries, with 70 percent of its overseas students coming from GMS countries. Utilizing its language advantage, Guangxi has established the Guangxi Base for China-ASEAN Human Resource Development and Cooperation, training all kinds of talents for GMS members.

In addition, the two provinces have vigorously fulfilled the other commitments that the central government has pledged to GMS cooperation. Take cooperation in drug prohibition, with the support and guidance from the central government, Yunnan has continuously strengthened its cooperation with other GMS countries in fields like crackdown on drug trafficking, training of drug-prohibition officers, opium-replacing crop substitution, and information exchange. For the key agendas, that is, green drug-prohibition and opium-replacing crop substitution, the province has tried many development modes and, one of which is to encourage and support the enterprises to undertake crop substitution abroad, and has achieved a preliminary success. Till July 2007, the province had a total of 135 enterprises engaged in overseas crop substitution, 84.9 percent more than the 73 in 2005.

Sticking to its ideal of realizing common prosperity and affluence with its neighboring countries, China has always attached importance to the development and opening of its frontier regions. Responding to the requirements of the strategy for coordinated regional development, China has enhanced its fiscal transfer payment and investment support to the western region of China that includes Yunnan and Guangxi. In recent years, China has made concentrated efforts to develop and open up some key regions in the country such as the Beibuwan Bay economic zone to enable them to play a leading role in regional development. These measures will definitely inject new life into the GMS, which includes these two provinces; at the same time, the deepening GMS cooperation will bring Yunnan and Guangxi richer and more diverse opportunities for development.

V. Visions for Chinese Participation in GMS Cooperation

(I) Transportation Cooperation

China will further its cooperation with the other GMS members in road, water transportation, railway, and civil aviation. It will actively promote the construction of the transportation passages and related infrastructures in the GMS, and provide half of the funds for building the trans-Mekong bridge, as a part of the Kunming-Bangkok Road, that connects Laos and Thailand. It will also speed up the renovation and improvement of various domestic sections of the south-north passages as well as the related port facilities so as to form a road network in the GMS at an early date. China will energetically engage in the cooperation for international navigation including that of the Lancang-Mekong River. It will push forward the comprehensive and effective implementation of CBTA as well as it annexes and protocols to realize convenient flow of personnel and goods among six GMS members and boost the development of personnel exchange, trade and tourism in the sub-region. It will speed up the construction of the domestic section of the Pan-Asia Railway, and meanwhile take an active part in the international cooperation concerning this project, making joint efforts with other GMS members to facilitate the construction of the Pan-Asia Railway. On the basis of the bilateral frameworks, China will continue its enthusiastic efforts to expand the air transportation between China and the other GMS countries, and promote the mutual opening-up of air transportation markets with Vietnam, Laos and Cambodia. On the basis of The Framework on China-ASEAN Aviation Cooperation, China will actively explore a framework for multilateral aviation cooperation. It will also strength the cooperation in human resource development and ability building in the transportation field.

(II) Energy Cooperation

China is willing to work with all other GMS parties, through having full consultation and giving full play to comparative advantages, and following the "four stages" vision and the action plan that the RPTOA advocates for the development of GMS power trade, to push forward the priority works for power cooperation, such as formulating the general plan of the GMS for power development, establishing GMS power database and websites, and stipulating the standards and regulations of GMS for operation of power systems and power transmission, and develop bilateral or multilateral power cooperation and power trade, so that the GMS can establish a unified power market and realize interconnection of power systems and free power trade, so as to optimize the allocation of resources, raise efficiency of power systems, enhance and benefit each other, and bring equal and common successes to GMS members. China is willing to expand energy cooperation with other GMS countries in increasing energy efficiency and developing alternative energy sources, so as to enhance the energy security in the subregion.

(III) Telecommunications Cooperation

China highly values and will continue to advance its cooperation with the other GMS members in the telecommunications sector. On the basis of the goals for the first stage of the GMS IS program, China will enthusiastically launch and implement the construction of the second stage of this program, including the extensive cooperation in network operation and maintenance. It will actively discuss and promote various GMS IS information applications. It will increase its exchanges with the other GMS members on rural telecommunications policies and experiences of developing rural telecommunications, push forward construction of model projects for rural telecommunications, and make joint efforts with all GMS members to promote the development of rural telecommunications in the sub-region. China will further strengthen the communication, exchange and cooperation among the departments of GMS countries in charge of telecommunications in various manners, continue to run the training program for senior telecommunications officials of GMS countries, and help to improve the technical and managerial competence of related personnel in the sub-region.

(IV) Agricultural Cooperation

China will actively implement The Strategic Framework for Subregional Cooperation in Agriculture and Core Agriculture Support Program (CASP) for 2006-2010, and, in view of the strategy and key fields and projects that the Strategic Framework specifies for GMS agricultural cooperation, intensify its efforts in follow-up coordination among all the related parties to raise the quality and efficiency of such cooperation. China will further strengthen its communication and exchange with ADB and other GMS members and dedicate itself to expanding the scope and depth of the cooperation, promoting grain safety and poverty relief, facilitating cross-border agricultural trade and investment, and realizing sustainable utilization of natural resources.

Drawing on its advantages in agricultural technology, capacity building, and information exchange, China will continue to strengthen its exchange and cooperation with other GMS members about raising steadily the standards for safety and quality of agricultural products, establishing an agricultural information service system, conducting exchange and demonstration of agricultural technologies, and building a stronger ability of cross-border united prevention and control of animal epidemics. Specifically, China will engage in the following work of GMS cooperation: First, speeding up the unification of the safety and quality standards of agricultural products to ensure healthy development of cross-border agricultural trade and investment; Second, implementing the critical measures for bird flu prevention as soon as possible, and strengthening the ability of cross-border united prevention and control of animal epidemics; Third, accelerating the utilization and development of biomass energy, mainly methane, to improve the biological environment of countryside; Fourth, giving full play to the agricultural information network of GMS and raising the level of agricultural information service in the sub-region; Fifth, committing itself to grain safety and poverty relief, and deepening GMS cooperation for rural development.

(V) Environmental Cooperation

Taking into consideration its domestic conditions, focusing on the "GMS Biodiversity Conservation Corridors Initiative" (BCI) and considering other core environmental planning (CEP) projects, China will actively facilitate the work of selecting the indexes for the strategic environmental impact assessment in the BCI regions. It will enhance GMS exchange and cooperation under the framework of UN's Convention on Biological Diversity. It will encourage BCI cooperation in the field of climatic changes, enhance the research of the impact of climatic change upon biodiversity, and relate the research of climatic change to the rural environmental protection work under BCI. In GMS environmental cooperation, China will substantially implement the guiding principles of "Help and promote each other in environmental protection, and make joint efforts to guard the earth", forge a positive image of the sub-region, contribute to construction of a harmonious region, and create an international cooperation room that is conducive to the environment and development of the sub-region.

China will actively help building the ability of other GMS members to enforce environmental protection laws at the border regions, help other members elevating their levels of policy and law enforcement for forest protection and fighting against illegal transportation of hazardous wastes across borders, and encourage establishing a law enforcement network among all GMS members. China will also encourage the cross-border trade and investment activities of the member countries to abide by the principle of sustainable development, and enhance the building of environment-related trade and investment ability in the sub-region.

(VI) Human Resource Development Cooperation

China will actively promote the implementation of the Phnom Penh Program, with Yunnan and Guangxi being the participating regions, but enjoying the support, in both technology and teaching staffs, from all the provinces of Southwest China and even the whole country. China encourages and supports all competent universities, polytechnic schools and training institutions to participate in GMS training programs and help to develop Yunnan into a base for GMS human resource development and training. China will actively push forward GMS cooperation in the field of education. China will engage in cooperation with other GMS members in elementary education, vocational education, and higher education. China will promote the mutual recognition of professional qualifications and the degrees and diplomas of higher education among GMS members, and increase government scholarship quotas for students from other GMS members through various channels. It will further improve the distance education network intended for other GMS countries, and continue to enrich the resources for the distance education. China will strengthen its diplomatic negotiation with other GMS countries in hope of signing multilateral agreements and implementation plans for international human resource development and training within the GMS.

(VII) Health Cooperation

Under the existing framework, China will work toward establishing a more steady and sustainable long-term mechanism for health cooperation among GMS countries. It will promotes the formation of the GMS strategy for health cooperation covering control of epidemics such as AIDS, bird flu and dengue fever; extend the malaria control cooperation between China and Myanmar, the AIDS control cooperation between China and Myanmar, China and Laos, and China and Vietnam respectively, and the tuberculosis control cooperation between China and Vietnam into cooperation among more GMS countries to form a cooperation mechanism of the sub-regional level; and improve the mechanism for exchanging and sharing information of epidemics with other GMS members. China will enhance the coordination between different departments, especially that between agricultural departments and the departments of entry-exit inspection and quarantine, to implement the cross-border programs in an all-round and in-depth manner. China will also sponsor the second GMS health forum.

(VIII) Tourism Cooperation

China will continue to attach importance to GMS tourism cooperation at the national level and will boost its development, and work with other GMS members to introduce and promote the cross-border tourist lines and foster a GMS tourist region with distinct features. Yunnan and Guangxi will be major participants in GMS tourism cooperation. Yunnan will speed up compiling The Plan of Transnational Tourist Lines in the Upper Mekong (Golden Square) Tourism Region and The Plan of Transnational Tourist Linesin the Western Yunnan-Northern Myanmar Region. Guangxi will continue to deepen its tourism cooperation with Quang Ninh Province of Vietnam, and try to open the drive travel lines between Guangxi and Vietnam. It should continue to deepen its cooperation with Vietnam and Cambodia in cultural tourism, and energetically strive for tourism integration in the Beibuwan Bay region, so as to form a Pan-Beibuwan Bay tourist region at an early date.

(IX) Trade and Investment Cooperation

China will continue to cooperate with other GMS members as well as international financial institutions such as ADB to continuously facilitate convenience of trade and investment and raise efficiency of customs clearance, so as to make contribution to the economic growth and common prosperity of this sub-region. The Chinese government is willing to work with other GMS members to further eliminate the barriers to and create an easy and convenient environment for trade and investment in the GMS. With the support and coordination from ADB and other international financial institutions, the Chinese government will mainly undertake 5 priority projects for GMS trade and investment facilitation, namely, customs, inspection and quarantine, trade and logistics, flow of business personnel, and construction of information platforms; continue to enhance policy coordination among member countries, solidly implement The Action Framework for the GMS Strategy of Facilitation of Trade and Investment and CBTA, and assist the transportation corridors to develop into economic corridors to boost the economic development along them; starting with the "Single Window" port service, energetically push forward facility of trade and investment, improve the infrastructures of ports and border cities, so as to facilitate trade and investment and improve infrastructures of border regions at the same time; intensify ability building and provide more training opportunities for government officials, especially the law enforcement officials of the ports, to improve their understanding of policies and administrative abilities so that they can provide better services for the industrial and commercial community.

Moreover, China will remain committed to more consultation with other GMS countries and relevant international organizations, push for a more steady GMS cooperation mechanism at the central government level, intensify its crackdown on drug crimes, and try to reduce the harms done to this sub-region by drugs. It will continue to implement The 2007 MOU Beijing Declaration adopted by the 7th MOU ministerial meeting, the updated GMS Action Plan, the bilateral drug prohibition agreements between China and GMS members including Myanmar, Laos, Vietnam and Thailand, and The Memorandum of Understanding Between the National Commission for Drug Prohibition of the People's Republic of China and the Central Committee for Drug Abuse Control of the Union of Myanmar on United Satellite Remote Sensing and Monitoring of Opium Planting in Northern Myanmar to pursue all-round GMS cooperation in drug prohibition. China will continue to strengthen its cooperation with other GMS countries in law enforcement for drug prohibition, and lend strong support to the crop substitution efforts of other GMS countries so that illegal planting of opium can be completely eliminated in this sub-region at an early date.

(Xinhua News Agency March 27, 2008)