Baise, Guangxi: Poor Amidst a Wealth of Resources

UNCLAS SECTION 01 OF 02 GUANGZHOU 030952

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TAGS: EAGR ECON SOCI PGOV CH
SUBJECT: Baise, Guangxi: Poor Amidst a Wealth of Resources

REFERENCE: A) Guangzhou 4033

(U) This document is sensitive but unclassified. Please protect
accordingly.


1. (U) Summary: Baise, Guangxi, is one of China's poorest
prefectures and despite relatively successful anti-poverty efforts,
accounts for one-fourth of the poor population of Guangxi. The
prefecture has rich agricultural, mineral and tourism resources, but
is only now developing its economy; earlier, military conflicts with
Vietnam had impeded its efforts. Trade frictions with Vietnam could
arise as agricultural products in both areas compete with one
another. End summary.


2. (U) Baise is located in the mountainous northwestern area of
Guangxi Zhuang People's Autonomous Region and borders two Chinese
provinces, Yunnan and Guizhou as well as Vietnam. It has a
population of about 3.7 million people, and an area of 3.63 million
square kilometers. There are seven major ethnic minorities in the
Prefecture and the Zhuang people account for 80% of the population.
It generally is hard to distinguish them from Han nationality on the
basis of looks or lifestyle.

Rich in Resources...Moving Out of Poverty But Staying Poor
-------------- --------------


3. (U) Baise reportedly has more than 57 types of different mineral
reserves, including aluminum, gold, coal and petroleum; it claims
one billion tons of aluminum reserves, which is half of China's
total and is said to be large enough to allow for more thal one
hundred years of0mini~g. Bcise'ssubtRopiaaovteS$txeted%gu}pe$ `rkd Vmyet}!ofmQ
pm4motiad bmlngical vesources e.d ha3 bretdD"#gntitan~s for"lkcQnmQ
aeibMltu}%Fvm&t}!dQ0o~`}gkQmV&bnxayj(qtgoZq0b {nnQJQ}SvQ`E`,$Wyu5xVQcQRuQQoQaHdR$tQ|}E-zIsnciPItQ~ "+x:axag&|`)Q:Aocl?1@Qources, Baise is among the poorest areas
in China. Officials explained that conflicts with Vietnam through
the late 1970s prevented the prefecture from developing
economically. The municipality has 12 counties and one-county level
city; 10 of them are recognized by the Central Government as
national level poverty counties while the remaining two are
classified as Regional/Provincial poverty counties. In fact,
prefectural officials told Congenoff that all 12 counties and the
county-level city are equally poor, but since the prefecture had a
quota limit from the central governments, only ten were granted
national-level status; this results in a higher level of monetary
and material support. The average rural net income in Baise was RMB
1,850 (USD 233) in 2005, compared with Guangxi's RMB 2,500 (USD 314)
and China's RMB 3,255 (USD 410). Eight percent of the total
population in Baise belongs to the poorest social group, according
to central government standards. (Note: according to the State
Statistics Bureau's standard in 2005, "poor people" refers to those
with an average annual income of lower than RMB 683, or USD 86. End
note.) Baise's poor account for one-fourth of Guangxi's total
population in abject poverty.


5. (U) Currently, Baise is predominantly an agricultural economy.
The Government's priority in its rural work is to increase farmers'
incomes, especially by guiding farmers to grow cash crops. The
income gap between rural mountain areas and flat lands is huge. In
flat areas, the average annual income is RMB 3,095 (USD 389) and can
be as high as RMB 40,000 (USD 5,060). In contrast, in remote and
mountainous areas, people's average annual income can be as low as
RMB 300 to 500 (USD 38 to 63),well-below China's abject poverty
line.

Industry: just starting up
--------------


6. (SBU) As noted, Baise's industrial development in the past had
been limited by fighting between China and Vietnam in the late
1970s. Only in recent years has Baise gradually begun developing
its industrial sector, focusing on primary processing of mineral
resources, especially aluminum. Baise's goal is to become the
world's capital of aluminum. The central government is investing
RMB 70 billion (USD 8.8 billion) to build a large aluminum refinery.

GUANGZHOU 00030952 002 OF 002


The Prefecture's ultimate goal is to build an annual aluminum
refining capacity of five million tons. Local reserves of
low-quality coal and hydroelectricity provide strong support to the
aluminum industry, though this also raises environment concerns,
though will need to be addressed.


7. (U) Congenoff visited a local aluminum enterprise ("Yinhai"),
which began operations in Baise in January 2003. It has an annual
refining capacity of 100,000 tons but currently only produces 70,000
tons because of shortages of mined bauxite. The company's output
ranks 30th among China's 90 aluminum refining enterprises. All of
its refined aluminum bars are sold to aluminum processing
enterprises in Nanhai, Guangdong Province. Employees have an
average income of RMB 15,000 to 20,000 a year (USD 1,900-2,500).


8. (U) Baise also has oil reserves. With oil prices rising, the
Baise government plans to expand the annual refining capacity of its
refinery from one million tons to five million tons with investment
from the central government. The prefecture also plans to develop
higher value-added processing industries of manganese, construction
materials, pharmaceuticals, and drinking alcohol.

Benefit from Pan-PRD
--------------


9. (U) Baise is actively seeking opportunities from the Pan
Pearl-River Delta (Pan-PRD) Forum (nine provinces plus Hong Kong and
Macau). Currently, Baise is supplies electricity to Shenzhen.
Guangzhou, Guangdong's capital city, was assigned by the central
government as the Baise's sister city to help the latter with
poverty-relief issues; Guangzhou provides monetary support and
introduces investors to Baise. Baise officials hope the prefecture
will benefit from its geographic location as the major channel of
cargo from Yunnan Province to Hong Kong, and one of China's gateways
to Vietnam.

Competition with ASEAN Imports
--------------


10. (U) Baise is only now beginning to face competition from
Vietnam, ASEAN countries, and elsewhere due to the importation of
agricultural products. Officials believe the influence of rice
imports is limited since they complement Baise's current rice
structure. The impact from fruit imports would be much stronger
since fruit varieties in ASEAN, particularly Vietnam, could compete
with Baise's produce and ASEAN fruits have the advantage of earlier
harvest seasons. The impact on Baise's sugar sector is less from
Thai sugar imports than from Cuba, as Cuba's much lower price
negatively affects local production. Officials noted that, as
Baise's agriculture grows, the ASEAN impact on its nascent cash crop
industry will become more evident, and they expect Baise will need
to upgrade its agriculture system to adjust. Xinhua news service
recently reported that Guangxi more than doubled the importation of
farm produce as of August this year, up to USD 142 million, largely
due to the cancellation of import duties on most agricultural
products from ASEAN countries. Of the total, USD 120 million worth
of products came from Vietnam.

Comment
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11. (U) Rich in material resources, the prefecture has the
potential over time to substantially raise its GDP through increased
industrialization. However, Baise's large rural population, the
economy's gradual development, and increasing agricultural
competition from Vietnam means the poor will likely remain poor for
a while longer.

GOLDBERG