China offers $20-B loan package to ASEAN

NAYPYIDAW, Myanmar (AFP) - China on Thursday offered $20 billion in loans and floated the possibility of a "friendship treaty" with Southeast Asian nations, in an apparent bid to defuse regional tensions which spiked this year over contested seas.

Attending the East Asia Summit in Myanmar, Chinese Premier Li Keqiang said $10 billion would be made available to the 10-member Association of Southeast Asian Nations (ASEAN) in cheap loans and a further $10 billion for infrastructure projects.

"These measures will help speed up the building of regional connectivity," Li added, in the official translation of his speech.

Beijing also agreed to set up a hotline to help avert flashpoints in the bitterly disputed South China Sea, and stood ready to sign a "treaty of friendship and cooperation" with the bloc, according to Li.

Four ASEAN states -- Brunei, Malaysia, the Philippines and Vietnam -- claim parts of the South China Sea, a key shipping lane believed to be rich in undersea gas deposits.

But China says almost all of the sea is its own, including waters near to the shores of its smaller neighbours.

A series of incidents earlier this year led Vietnam and the Philippines to decry Chinese acts of aggression at sea, plunging relations with Beijing to a nadir.

Both China and ASEAN need "peace and stability", Li said in a speech at the East Asia Summit which included ASEAN leaders, US President Barack Obama and other visiting dignitaries.

He also backed a hotline for unspecified "maritime contingencies" between senior foreign ministry officials across the region and for joint search and rescue missions, but did not offer specifics.

The hotline has been among the proposals in low-level talks between ASEAN and Chinese officials on a legally binding code of conduct (COC) to ease tensions in the sea.

Militarily and economically weaker than China, Southeast Asian countries are desperate for a multilateral code, but accuse their giant neighbor of stalling.

China prefers to use its economic and political clout in one-on-one negotiations with rival claimants.

Rhetoric from the main claimants has softening in recent weeks.

Philippine President Benigno Aqui- no, the most vocal critic of China's claims, met briefly with Chinese President Xi Jinping on the sidelines of the Asia Pacific Economic Cooperation (APEC) forum meeting in Beijing on Tuesday.

Aquino told ASEAN leaders on Wednesday that the meeting with Xi saw a "warm and sincere conversation", but urged fellow members of the bloc to stand firm in the demand for a code, according to a copy of his speech seen by AFP.

In a sign of the lingering challenges ahead, Li warned "China's resolve to safeguard territorial sovereignty is clear," although he did not specifically mention the contested seas.

In a statement Myanmar, the chair of ASEAN, said the bloc remained "concerned over the situation in the South China Sea" but noted progress in relations with China.