Rural Policy Remains Government's Top Priority in 2007,

UNCLAS SECTION 01 OF 02 BEIJING 001081

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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