MIGRANTS FUEL SHAANXI PROVINCE'S RURAL ECONOMY

UNCLAS SECTION 01 OF 02 BEIJING 003718

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 ELAB EFIN PGOV SOCI CH
SUBJECT: MIGRANTS FUEL SHAANXI PROVINCE'S RURAL ECONOMY

SUMMARY
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1. (SBU) Rural-to-urban migration is the primary driver of Shaanxi
Province's rural economy -- even in one village that receives strong
financial support from the local government and an American NGO.
Rural residents in Shaanxi are increasingly looking for
opportunities in urban areas for both wage labor employment and
education for their children. At least 50 percent of rural incomes
are derived from migrant remittances, which are wired home through
local banks. With so much labor movement to the cities, farmers and
researchers in the province believe the hukou registration system
has little practical influence on the lives of rural residents. END
SUMMARY.

WHITE HOUSE FELLOWS VISIT TO CHINA
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2. (SBU) A delegation of 12 White House Fellows visited China May
19-26 with stops in Xian and Beijing. The visit covered a wide
range of issues but focused primarily on economic development. The
White House Fellows visited An Shang Village, located two hours west
of Xian in Fufeng County, and exchanged views with village leaders.
The delegation spent the night in the village on May 20, and they
taught English at Fufeng High School during morning classes and
discussed rural development with researchers at the Shaanxi Academy
of Social Sciences on May 21.

AN SHANG VILLAGE: THE HEART OF THE NEW COUNTRYSIDE
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3. (SBU) An Shang Village's economy has developed rapidly during the
past four years. According to An Wei, a village leader and a member
of the Sino-American Society, An Shang's establishment in September
2003 of a Village Congress to improve governance and manage affairs
kick-started a series of economic and political reforms that
improved livelihoods for the 410 families (1,598 people) in the
village. An Shang completed its power supply system in 2003 and,
with the help of local government funding, its first paved road in

2004. In 2005, An Shang Village, with funding from Global
Volunteers, a Minnesota-based NGO, launched Project Peace to build a
new school in the village. The village opened a folk art gallery in
April 2007 to help attract tourists to An Shang.


4. (SBU) In the short term, An Shang's agricultural economy is based
on grain production and small livestock businesses, An Wei said.
Over the longer term, however, An Shang's local leaders are focused
on education as a means to break the cycle of poverty. The
village's goal is to have 100 college graduates by 2012, and An
Shang established an Education Committee, a volunteer organization,
to work alongside the Party Committee and Village Committee and
raise the profile of education issues in An Shang.

MIGRANTS FUELING RURAL ECONOMY, DRAINING POPULATION
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5. (SBU) Just as in many other villages across China, the most
important driver for the rural economy remains rural-to-urban
migration. According to An Wei, approximately 260 residents of An
Shang have migrated to cities in Shaanxi Province, leaving the
village with few young people. Feng Jiedong, the Vice Chairman of
the Village Education Committee, said that approximately 50 percent
of village incomes are derived from migrant remittances, which are
wired to relatives in the village via the Agricultural Bank of China
(ABC),Rural Credit Cooperative (RCC),or Postal Savings Bank. One
farmer with a motorcycle told Econoff that motorcycles costing
approximately RMB 4,000 (USD 500) are increasingly common, but none
of the higher end consumer goods or nice houses would be possible
without funding from outside sources, including migrant remittances
or relatives living overseas.


6. (SBU) Shi Ying, Deputy Director of the Shaanxi Provincial Academy
of Social Sciences, said that An Shang's experience with
rural-to-urban migration is representative of the province as a
whole. In southern Shaanxi, which is poorer than other regions, as
much as 70 percent of rural incomes are derived from migrant
remittances, and more than half of the villagers have moved to urban
areas. Migrants are so prevalent in Xian, Shaanxi's capital, that

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Shi estimates 1 million of the city's 7 million residents are
migrants working in the construction industry. As a result, the
countryside is experiencing negative population growth, and rural
residents are increasingly concerned about education for children
whose parents are away from home.

MOVING FORWARD WITH HUKOU REGISTRATION REFORM
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7. (SBU) With labor moving virtually freely throughout the province,
Shi said that the hukou registration system has little impact on
labor mobility. In Shaanxi Province, there still exists a
distinction between a rural registration and urban registration, but
the province slowly is eliminating that distinction per Central
Government guidance. For poor areas in Western China, including
Shaanxi Province, providing equal levels of services (health care,
education, social welfare) in urban and rural areas remains the
greatest challenge due to lack of financial resources. But in
general, there is little practical difference in a legal sense
between rural and urban residents, Shi said.


8. (SBU) Comment: Lack of practical difference regarding the hukou
registration reflects intra-provincial movement only. If Shaanxi
residents wanted to relocate to Shanghai, for example, they would be
unable to obtain social services and residency benefits under
current rules. End Comment.

PICCUTA