CENTRAL PARTY SCHOOL PROFESSOR SAYS RURAL REFORM

C O N F I D E N T I A L SECTION 01 OF 02 BEIJING 019660

SIPDIS

SIPDIS

USDOC FOR 4420
TREASURY FOR OASIA/ISA - DOHNER/CUSHMAN
STATE PASS USTR FOR STRATFORD, WINTER, ALTBACH
STATE PASS CEA FOR BLOCK
STATE PASS FEDERAL RESERVE BOARD FOR JOHNSON/SCHINDLER; SAN
FRANCISCO FRB FOR CURRAN/LUNG; NEW YORK FRB FOR DAGES/CLARK

E.O. 12958: DECL: 09/15/2016
TAGS: ECON EAGR PGOV EFIN SOCI CH
SUBJECT: CENTRAL PARTY SCHOOL PROFESSOR SAYS RURAL REFORM
MOVING IN A NEW DIRECTION

REF: BEIJING 4224

Classified By: ACTING MINISTER COUNSELOR FOR ECONOMIC AFFAIRS CHRISTOPH
ER BEEDE; REASON 1.4(B) AND (D)

SUMMARY
--------------


1. (C) A researcher at the Central Party School said that a
recent conference on rural reform has important implications
for rural policy. The Central Government in recent years has
pursued a micro approach to rural development, emphasizing
the livelihoods of individual farmers. The announced third
phase of rural reform, however, is to be more macro in
nature. The researcher said this represents government
recognition that governance must be fixed at local levels, or
there will be little hope of improving livelihoods in rural
areas. He sees changes to rural reform policy as a natural
step following the Central Government's elimination of the
agricultural tax. The researcher acknowledged that there are
many unanswered questions about the ability of county
governments to implement effective policies and provide
social services. END SUMMARY.


2. (C) BIO NOTE: Niu Xianfeng, whose informed views are
reported in paras 5 and thereafter, is a professor at the
Central Party School specializing in China's rural economy.
He currently is in the United States on an International
Visitor's Program (IVP) grant. In addition to his research
at the Central Party School, Niu previously served as a Vice
Mayor in Chongqing Municipality. END BIO NOTE.

PREMIER: MOVING RURAL REFORM TO THE NEXT PHASE
-------------- --


3. (U) A two-day conference on rural reform, chaired by
Premier Wen Jiabao, closed on September 2, with the Premier
declaring that China is entering a third phase of reform.
The Chinese Government will continue to deepen existing
reforms and implement financial reforms at local government
levels, Wen said. According to media reports, the next phase
of rural reform will build on the Central Government's New
Socialist Countryside initiative and focus on
institution-building and governance.


4. (U) The next phase of rural reform will shift away from
the Central Government's pQvious emphasis on raising
individual farmer incomes, the state-controlled media
reported. Wen reportedly stated that policies focusing on
rural incomes, which included the Central Government's
elimination of the agricultural tax, were launched in 2000 as
tQ second phase of rural reform after the first phase's
establishment of the household responsibility system from
1978 to 2000.

IMPORTANT IMPLICATIONS FOR FARMERS AND POLICIES
-------------- --


5. (C) According to Niu, the Wen-chaired conference has very
important implications for rural reform in China. The
Central Government in recent years adopted a micro approach
to rural development, attaching importance to improving the
livelihoods of individual farmers, he said, but the announced
third phase of rural reform would be more macro in nature,
executed from the vantage point of a bird's eye view over
local governments. The new phase represents recognition on
the part of the Central Government that unless it fixes
governance at local levels, there is little hope of improving
livelihoods in rural areas, Niu said.


6. (C) According to Niu, the shift to the next phase of
reform likely indicates that rural policy, which has been
named in the Number One Document as the Central Government's
policy priority each of the last three years (see reftel),
likely will not be the target of next year's Number One
Document. Instead, he said he expects the Central Government
to focus on social ills, including poverty, disease, and
crime, and to address improving governance as a policy
prescription for solving these problems. These problems and
solutions are not confined to rural areas, said Niu, so he
believes that rural policy will not be the Central
Government's top policy priority in 2007.

BEIJING 00019660 002 OF 002



SHIFTING THE FOCUS TO THE COUNTIES
--------------


7. (C) Niu stated that his first-hand experience confirms
other reports that county governments are under increased
scrutiny to see how they respond to the Premier's call for
improved governance at local levels. Niu said that he
attended a conference in Gansu Province in March where the
Central Government provided training to hundreds of
county-level officials on implementing the New Socialist
Countryside. In addition, Niu stated that there is a
nationwide training session for county level officials
currently underway with a goal of providing governance
training to approximately 5,300 officials throughout the
country. Niu noted that the Central Party School recently
dispatched him to Heilongjiang Province, Hubei Province, the
Inner Mongolia Autonomous Region, and Jiangsu Province to
assess local governance capabilities and research county
government provision of social services.


8. (C) According to Niu, the most important question for the
Central Government in this effort is what can be reasonably
be expected of county government officials with relatively
low levels of education and few resources. Niu stated that
China must fundamentally transform its governance structure
into one in which the Central Government provides financial
resources and local governments deliver services. He
acknowledged, however, that such a transformation would be
difficult in a financial environment where county governments
often must overcome the burden of delivering 80 percent of
the services with only 20 percent of the resources.
RANDT