China earmarks $10 billion for lending to Russia, other SCO members

In a bid to win friends and influence the countries on its periphery, China, the world's third biggest economy, will extend a $10 billion loan to Russia and four other members of the Shangai Cooperation Organisation (SCO) to help them out of the current financial mess, Chinese president Hu Jintao has said.

Speaking at a summit of the Shanghai Cooperation Organisation (SCO) in the Russian city of Yekaterinburg, president Hu said China would also send delegations to SCO nations to assist them on trade and investment.

Without giving any details of the loan, Hu Jintao said China will extend the loan to member states of the "Shanghai Five'' comprising of Russia, Kazakhstan, Kyrgyzstan and Tajikistan, which observers feel may be in exchange for more access to energy and other resources in order to keep China's economic engine moving.

The Bric countries made up of the world's four emerging economies, India, Brazil, Russia, and China are also meeting for the first time in Yekaterinburg to find ways to combat the global recession.

Ahead of the SCO summit, China offered Pakistan, which has come to the SCO summit as an observer nation, $8.82 million to help relocate refugees fleeing from the war-ravaged district of Swat where the Pakistani army is waging a US backed war against the Taliban.

Besides China and Russia, the SCO group includes Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan. Trade among the six full SCO members stood at $68 billion in 2007.

India, Pakistan, Iran and Mongolia joined later as observer members.

The SCO, originally formed in 2001 to tackle the threat of extremism in the region and enhance border security, later started developing-ordinated trade measures in an effort to stabilise their economies and maintain growth in the current economic crisis.

These include plans of building a single energy market for the SCO grouping.

China, which has increased lending to Russian companies, in recent months, is also seen trying to increase its influence among the highly strategic ex-Soviet states of Central Asia.

In the recent past, China has made huge investments in the energy sector in Russia and Kazakhstan (See: China, Russia sign $25-billion loan-for-oil deal  / CNPC to buy 49 per cent in Kazakh oil major for $10 billion) and the Shanghai Group looks at China for more investments and loans to bolster their economies.

On Sunday, China's Development Bank extended a $ 1 billion loan to its Russian counterpart Vnesheconombank to finance Chinese-assisted investment projects in Russia.

China is Russia's second-largest trade partner after the European Union.

Bilateral trabe totalled $55.9 billion last year, and they plan to increase bilateral trade to about $80 billion by 2010.