CHONGQING SCHOLARS DISCUSS CITY'S DEVELOPMENT CHALLENGES

UNCLAS SECTION 01 OF 02 CHENGDU 000129

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/CM AND EB
NSC FOR CHRISTINA COLLINS

E.O. 12958: N/A
TAGS: ECON ELAB PGOV SOCI CH
SUBJECT: CHONGQING SCHOLARS DISCUSS CITY'S DEVELOPMENT CHALLENGES

REF: A) 06 CHENGDU 1161; B) O6 CHENGDU 1022; C) 06 CHENGDU 1174; D) CHENGDU 36

CHENGDU 00000129 001.2 OF 002



1. (SBU) Summary. In a day of meetings with Chongqing
academics, Embassy Beijing Econ M/C and Congenoff heard about
some of the city's most pressing issues: the aftereffects of
Three Gorges Dam construction, industrial reform, the plight of
farmers and migrant workers. In addition, the city serves as a
pilot for the concept of "urban-rural integration." The depth
of the city's problems seems to have attracted extensive
official attention at least, although the gap between policy and
practice remains as large as ever. End summary.

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THREE GORGES: BUILDING IT WAS JUST THE BEGINNING
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2. (SBU) In an unusually frank presentation, Chongqing
University Academic Commission Director Nei Hengshun (who said
he had spent 16 years in Three Gorges-related research)
described the social effects of Three Gorges Dam construction as
"a long-term problem" that will take "many years to solve."
Noting that many ancient cities had been flooded by the
reservoir, he said that Chongqing was unprepared for the
displacement of such a large number of poorly-educated farmers,
and that the overall effect had been to increase even further
China's rich-poor gap. Said Nei, "If this problem (of displaced
farmers) is not solved, it will affect social stability."


3. (SBU) Although Nei stated at one point that the engineering
behind the dam was the "pride of China," he went on to decry its
effects on the environment. According to Nei, the dam itself is
located in an area of unique geography, with granite outcrops in
an area largely composed of limestone. While the granite has
the effect of stabilizing the dam, the flooding of the reservoir
in an area of highly porous soil will change water levels, and
will ultimately result in an increase in landslides, he claimed.
Even more serious, he said, was the problem of "seasonal
reversal": before the dam was constructed, the area downstream
from the dam was relatively dry in most seasons except for the
periods of summer floods. However, the construction of the dam
will result in increases in water flows during the winter and
decreases in the summer, leading not only to more summer
droughts but also to profound changes in the ecology of the
entire Yangtze River area.


4. (SBU) Turning briefly to the subject of the South-to North
Water Diversion Project, Nei said that construction of the
western line had become "improbable" due in large part to the
concerted opposition of Southwest China academics. Nei
mentioned in particular the book "Nine Questions Concerning the
Western Line Project," which he said had attracted "strong
attention" from the Central Government (ref A). Asked about the
possibility of a line linking the Yellow River with Tibetan
water sources, Nei said that such a project was "impossible."

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INDUSTRIAL REFORM STILL A WORK IN PROCESS
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5. (SBU) For Chongqing University Sustainable Economic
Development Research Institute (SEDRI) Director Chen Deming, the
restructuring of Chongqing's industrial base has become an
"unavoidable challenge." Two of the most urgent priorities are
(1) an increase in the production of motorcycles and automobiles
(he cited the Changan-Ford joint venture specifically) as a
stimulus to the development of other businesses in Chongqing,
and (2) the movement of old-line industries such as iron and
steel production from the city center to outlying areas, and the
promotion of the chemical industry, aluminum production,
clothing industry, light manufacturing, and high-tech firms as
substitutes. He cited the Chongqing Iron and Steel Company as
exemplifying the city's antiquated and inefficient
"production-based economy," and said that due to environmental
protection concerns it would be moved to Changshou (about 80
kilometers from downtown Chongqing). Chen foresaw a gradual
decline in the percent of the city's GDP coming from industrial
production, and a concomitant rise in the service sector.

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MIGRANT FARMERS AND URBAN-RURAL INTEGRATION
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CHENGDU 00000129 002.2 OF 002



6. (SBU) Chongqing Industrial and Business University President
Wang Chongju outlined the city's strategy for "urban-rural
integration," which he said was driven by Central Government
directives. Claiming that Chongqing's urbanization rate (the
percentage of the population living in urban areas) was now 45
percent, he saw the rate increasing to 55 percent over the next
ten years, and eventually peaking at 60 percent.


7. (SBU) The conceptual model used by Chongqing's planners is
called "one circle and two wings." The circle refers to those
areas within a one-hour drive of the city's center, covering 23
districts and counties, and accounting for 78 percent of
Chongqing's GDP. Wang foresaw per capita GDP in the "circle
area" rising to USD 8000 by the year 2020.


8. (SBU) The two wings are swaths of especially poor rural
territory flanking the urban core. The first "wing" consists of
eight counties centered on Wanzhou in the Three Gorges Dam
reservoir area. The second "wing" is centered on Qianjiang in
southeastern Chongqing, an area with heavy minority populations
and per capita incomes only one-eighth to one-sixth of those in
Chongqing's urban core. The residents of those two "wings" will
be urged to move to urban areas as part of the urban-rural
integration process.


9. (SBU) Another important part of urban-rural integration will
be hukou reform, said Wang. Claiming that rural hukous had
already been abolished in some areas, Wang acknowledged in
response to Econ M/C's question that many farmers and migrant
workers still faced major challenges in obtaining social
benefits such as education and medical care. However, he
claimed that the hukou problem was "less and less important,"
since school enrollment fees had decreased or been eliminated
altogether and the health insurance system (especially the Rural
Cooperative Medical System) had improved. He said that the
municipal government planned to offer more vocational training
to migrant workers, and pointed to the construction and light
processing industries as well as to the service sector
(especially household servant and restaurant industries) as
providing the bulk of employment opportunities.

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COMMENT
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10. (SBU) As Chongqing prepares to celebrate its tenth
anniversary as a centrally-administered municipality, Central
Government officials may see the city as something of a test bed
for national economic and social strategies, as in the case of
the "urban-rural integration" project. After all, Chongqing is
in many respects a microcosm of the myriad economic and social
problems afflicting inland China (refs B-D): during an
after-dinner stroll around Chongqing's brightly-lit and
attractive Jiefangbei area, Econ M/C and Congenoff were set upon
by numerous beggars and pimps. And just outside one shopping
mall in the same area, police had massed in an apparent attempt
to stave off unrest in connection with the eviction of a tenant
(this was shortly after the resolution of the "Nail House"
incident between a recalcitrant property holder and a
construction firm). How will the best efforts of policymakers
and academics all turn out? Watch this space.


11. (U) This cable has been cleared by Embassy Beijing Economic
Minister-Counselor.
BOUGHNER