Reuters AlertNet Lite - Japan cutting 2006/07 yen loans to China by 17 pct

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Japan cutting 2006/07 yen loans to China by 17 pct

06 Mar 2007 04:02:46 GMT
Source: Reuters

TOKYO, March 6 (Reuters) - Japan will cut yen loans to China by 17 percent to 62.3 billion yen ($539 million) for the year to March 31 in line with its policy of ending fresh aid to its giant neighbour by the time of the Beijing Olympics in 2008, a Japanese Foreign Ministry official said on Tuesday.

All of the aid will be devoted to environmental projects, the official said, adding that the decision had been approved by a ruling Liberal Democratic Party panel on foreign aid.

Japan has been reducing its official development aid to China from a peak in 2000/01 in view of its giant neighbour's robust and fast-developing economy. The latest drop would mean yen loans are down 71 percent from the peak.

"You could say that the role of such aid for economic infrastructure is coming to an end," the official said.

Concerns about China's double-digit growth in defence spending have been another factor behind the decline.

China said on Sunday that it that it would boost defence spending by 17.8 percent in 2007, accelerating its string of annual double-digit increases in money to modernise its military.

Japan and its close security ally, the United States, have repeatedly expressed concerns about China's defence spending and called for greater clarity about the budget and its aims.

The Japanese government decides its total aid budget before the start of each fiscal year in April, but usually does not decide the final breakdown until the end of the fiscal year.

Last year, Japan delayed a decision on the aid until June because of strains in ties, which had chilled after Junichiro Koizumi became prime minister in 2001 and began visits to the Yasukuni Shrine, seen by Beijing as a symbol of past Japanese militarism.

Sino-Japanese relations have warmed since Prime Minister Shinzo Abe took office in September and held ice-breaking summits with Chinese leaders. Premier Wen Jiabao is set to come to Tokyo in April on what would be the first visit to Japan by a Chinese prime minister since 2000. ($1=115.52 Yen)

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Last updated:Tue Mar 6 04:16:23 2007