Rural Policy Remains Government's Top Priority in 2007,

UNCLAS SECTION 01 OF 02 BEIJING 001081 SIPDIS SENSITIVE SIPDIS USDA/OSEC FOR DORR/BUCHANAN/TERPSTRA USDA/FAS FOR OA/YOST; OSTA/BRANT/HAMILTON; OCRA/ALEXANDER/RADLER/HIGGISTON/MIRELES, OFSO/LEE/SCHAYES/THURSLAND USDA FOR FAS/ITP - SHEIKH TREASURY FOR OASIA/ISA CUSHMAN LABOR FOR ILAB USDOC FOR ITA/MAC/OCEA - MCQUEEN E.O. 12958: N/A TAGS: ECON EAGR EFIN PGOV SOCI CH SUBJECT: Rural Policy Remains Government's Top Priority in 2007, with Increasing Focus on Finance REF: (A) BEIJING 461 (B) BEIJING 450 (C) 06 BEIJING 24338 (D) 06 BEIJING 4224 SUMMARY -------------- ¶1. (SBU) On January 29, the State Council issued its Number One Document, naming rural policy as the leadership's top priority for the fourth year in a row. As expected, the Number One Document supported the outcome of the December 2006 Rural Work Conference and emphasized the importance of modernization in the rural sector (Ref B). As was the case with the 2006 Number One Document, the 2007 version aims to support the Central Government's New Socialist Countryside initiative (Refs C and D). Contacts emphasize that modernization goes beyond agricultural technology to include rural finance reform. Government officials and the media have continuously drawn attention to rural financial reform in the wake of mid-January's National Financial Work Conference (Ref A). End Summary. RURAL POLICY TOP GOVERNMENT PRIORITY AGAIN IN 2007 -------------- -------------- ¶2. (SBU) China's State Council and the Central Committee of the Communist Party of China released the Number One Document on January 29, stating that developing modern agriculture would be the Central Government's top policy priority in 2007. It was the fourth year in a row that the Central Government named rural policy as its top priority and follows up the official launch of the Central Government's New Socialist Countryside initiative, which was the focus of the 2006 Number One Document (Refs C and D). By specifically focusing on modernization, the Number One Document aims to help farmers who remain in the countryside increase their incomes. The National Bureau of Statistics recently announced that average per capita rural income in 2006 was RMB 3587 (USD 460),or less than one-third of urban income on average. NOT SURPRISING TO BEIJING-BASED CONTACTS... -------------- ¶3. (SBU) Rural watchers in Beijing were not surprised that the Number One Document again identified rural policy as the government's top priority or that the document focused on modernization. The annual Rural Work Conference, held in Beijing December 22-23, 2006, previously had emphasized that modernization, including agricultural technology, rural financial sector reform, and energy efficiency, would be a focus of the government's work in 2007 (Ref B). Embassy contacts at the China Academy of Social Sciences and the Development Research Center of the State Council said they support the Central Government's efforts to modernize the rural sector, and these efforts do not represent a shift in the Central Government's policy towards the countryside. ¶4. (SBU) Chen Xiwen, Vice Minister of the State Council Leading Group for Financial Affairs, said that the Number One Document reiterates the Central Government's commitment to increase its investment in rural areas. Chen stated at a press conference on January 30 that funding for rural areas will increase by a greater margin in 2007 than in 2006. As he did the previous year, Chen also used the press conference as an opportunity to criticize illegal land seizures as a threat to rural stability, and he called on local officials to work with farmers to resolve disputes. ...NOR TO OBSERVERS IN THE PROVINCES -------------- ¶5. (SBU) An official at the Agriculture Bureau in Jiangxi Province's Jiujiang Municipality told Econoff on February 6 that it is clear from his perspective that the 2007 Number One Document would serve primarily to support the New Socialist Countryside policy outlined in the 2006 Number One Document. The 2007 version does not represent a change, he said, but instead is one step in China's long-term process of rural reform. The official said that in Jiujiang, in northern Jiangxi Province on the banks of the Yangtze River, the government already promotes modern agricultural methods, including providing training for farmers on how to take advantage of BEIJING 00001081 002 OF 002 available technologies. WHAT DOES RURAL MODERNIZATION INCLUDE? -------------- ¶6. (SBU) Most observers agreed that rural modernization in the context of the Number One Document includes not only agricultural technology but also rural finance reform. Du Xiaoshan, Deputy Director of the Rural Development Institute at the China Academy of Sciences (CASS) and Min Tang, Chief Economist at the Asian Development Bank, previously emphasized the importance of rural finance after the Rural Work Conference in December 2006 (Ref B). The Financial Work Conference in mid-January (Ref A) also focused on the important role of rural finance in a modernizing rural sector, and reportedly called on the Agricultural Bank of China (ABC),one of China's four state-owned commercial banks, to expand its operations in the countryside and extend credit to farmers at the county level. ¶7. (SBU) Liu Dongwen, Director of the Microfinance Department at the China Fund for Poverty Alleviation (CFPA),said on February 1 that the Number One Document, taken together with the outcomes of the Financial Work Conference and Rural Work Conference, clearly indicates that rural finance has become a key part of rural policy. Liu said he is not surprised by the Central Government's current focus on rural finance, stating that it has been a long-term process for China to reach this point. Considering the question of why rural finance has become the focus of so much attention at this time, an official at the China Banking Regulatory Commission told Econoff on January 30 that rural finance reform, including improving farmers' access to credit, would be critical for maintaining social stability in the countryside. COMMENT: RURAL POLICY IN THE MEDIA -------------- ¶8. (SBU) State-controlled media appeared to focus less attention on the Number One Document than in previous years. In the English-language China Daily on January 30, for example, the coverage of the Number One Document's announcement appeared on page three, and there was no editorial in support of the announcement as in previous years. Most rural policy-related articles in recent weeks have focused more comprehensively on the Financial Work Conference and outcomes for rural finance, lending more credence to the idea that there is little new in this year's Number One Document other than an overall emphasis on modernization, under which reforming rural finance is clearly among the highest priorities. SEDNEY