RURAL REFORM AND NGO ACTIVITIES IN ANHUI PROVINCE

C O N F I D E N T I A L SECTION 01 OF 03 SHANGHAI 000144

SIPDIS

SIPDIS

E.O. 12958: DECL: 4/11/2033
TAGS: PGOV ECON EAGR SOCI CH
SUBJECT: RURAL REFORM AND NGO ACTIVITIES IN ANHUI PROVINCE

CLASSIFIED BY: Christopher Beede, Political and Economic Section
Chief, U.S. Consulate General Shanghai, Department of State.

REASON: 1.4 (b),(d)




1. (C) Summary: Poloff and political assistant traveled to Anhui
Province on April 7-8 to meet with Zhang Deyuan, the deputy
director of the China San Nong Problem Research Center at Anhui
University in Hefei, and to observe a rural poverty alleviation
project in Yuexi County sponsored by the NGO Heifer
International. Yuexi, a poor county in Anhui's mountainous
southwest, is undergoing a building boom but many of its
residents still struggle to fulfill basic daily needs. Heifer's
Laibang village project benefits from close cooperation with
local officials, who see the NGO's methods as expedient in
implementing Central Government initiatives. Deputy Director
Zhang, pessimistic about the prospects for resolving rural
problems, has noted an increase in the rural-urban gap as well
as mismanagement and abuse in rural reform experiments. End
summary.


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Pigs Raise Incomes in Laibang Village
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2. (SBU) Heifer's project in Laibang village, a tea-producing
community deep within the mountains of Yuexi County, is a
holistic community development effort providing seed funds and
training in animal husbandry, agriculture, as well as public
health and environmental protection. So far, Heifer has helped
94 households in the village purchase pigs, which has increased
household income by about 3000 RMB (USD 428) since the project
began in spring 2007. Project Director Chen said higher pork
prices have particularly benefited the farmers, with the profit
per pig rising from 200 RMB (USD 28) to 500-1000 RMB (USD
70-140). One farmer we spoke with sold her first pig in
December and was pleased to report a 1000 RMB profit. She
currently owns seven pigs and is looking forward to expanding
her operation-- perhaps to 30-- with Heifer's assistance. Her
neighbor sold five pigs last year and will use the 3000 RMB
profit to build a new house across the valley, closer to the
road, later this year.

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Heifer Project Benefits From Government Cooperation
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3. (C) Discussions with Project Directors Wang and Chen, the
Laibang village committee chief, and Heifer representatives show
that Heifer benefits from close cooperation with local officials
in Laibang. Project Director Wang from the local Energy
Department appreciates Heifer's assistance in promoting the
installation of biogas systems. According to Wang, he found it
difficult to implement this central initiative prior to adoption
of Heifer's development methods and patient work with individual
households. The local government fronts 800 RMB of the total
2000 RMB cost, and households can install various portions of
the system as they are able to afford them. The systems, when
complete, eliminate the need for firewood and improve local
water quality and sanitation. Moreover, Project Director Chen
and the village committee chief are closely involved in the
project's progress, with Chen, from the Yuexi Agricultural
Commission, providing training. Heifer's Anhui Regional Program
Director Zhang Hong said, however, that Laibang is just one
model Heifer is exploring in China and that in other localities
Heifer chooses to bypass local authorities and work with farmers
directly. In Laibang, Heifer is trying to transmit some
community development values and hopes the local government will
adopt some of these ideas.


4. (C) Comment: The Amity Foundation, a domestic faith-based
NGO with whom Poloff met at its Nanjing, Jiangsu Province
headquarters on March 28, also benefits from close government
support. Because Amity is seen as providing necessary social
services, the Nanjing municipal government provides buildings
rent-free for Amity's operations, such as its Home of Blessings,
a school for children with cognitive disabilities. The
Foundation's general secretary, Qin Zhonghui, is a member of the
standing committee of the Jiangsu Chinese People's Political
Consultative Conference. Assistant Director She Hongyu noted
that while the government is very supportive of Amity's
activities due to its long history and respected status,
officials are sometimes "cautious" about individual volunteers'
background or agenda. End Comment.


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Yuexi's Building Boom
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5. (SBU) Yuexi County, one of Anhui's poorest, is undergoing a
building boom. Money appears to be pouring into the area, both
into individual pockets and government projects. Many farmers
in the area are renovating or building new two or three story
houses, possibly with the assistance of remittances from the
significant outflow of labor in the area. The head of Laibang
village reported that about 30 percent of household income comes
from remittances. Other projects are also apparent: a
government "development zone" outside of Yuexi, spaces for small
street-side businesses, land cleared for unknown development,
and road construction and repairs.


6. (SBU) Laibang village is a one and a half hour drive over
rough and treacherous mountain roads from the nearest highway,
but the province is in the process of constructing a massive
highway, cutting boldly through the mountains with tall bridges
across the fields below. The village head said the highway
project will be completed in September 2009 and expects it will
improve Laibang's market access for its economic crops.
Consequently, he hopes the village will move into silk and
organic vegetable production, as well as expand its tea
cultivation.

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No Way Out of "San Nong" Problem
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7. (C) In a meeting with Poloff on April 8 in Hefei, rural
researcher Zhang Deyuan of the China San Nong Problem Research
Center was pessimistic about Beijing's efforts to resolve the
"three rural" problems (san nong: agriculture, peasants, and
countryside),saying that the best China can do is release some
of the social tension in the countryside. Zhang is particularly
jaded about the effectiveness of deepening market reforms in the
countryside and believes this will only intensify the
rural-urban divide, mentioning that his statistics show the gap
is increasing in Anhui. Zhang paints himself as the leading
member of a "Central China" faction (huazhong pai) in rural
reform research, who tend to be less optimistic due to their
experience living and working in China's interior. Zhang draws
a comparison between his group and an "overseas returnees"
faction (haigui pai),staunch proponents of market reform as the
solution to China's rural problems, exemplified in Zhang's view
by economist Lin Yifu.


8. (C) Zhang granted that the "new socialist countryside"
initiative has been effective in improving life in rural areas
in some respects, most noticeably in public health and
education; however, he also identified some major problems with
the overall policy approach. First, Zhang said that centralized
decisionmaking and fiscal allocation results in inefficient use
of resources. The federal system in the United States, Zhang
argued, allows states to wield resources and direct policy
according to their own needs. Provinces in China, on the other
hand, lack this power and may end up having to use
centrally-allocated special funds to build roads when the
locality would prefer to use the money to improve schools.
Second, this centralization also results in dispersion of
financial resources through a number of ministries and
departments and a number of levels, which is inefficient and
invites various actors to skim or divert funds. Third, Zhang
described the new countryside policy overall as a continual
process of "blood transfusion" where the countryside is wholly
dependent on the center for resource support, lacking
independent means to develop itself.


9. (C) Zhang's research center provides reports on pilot reform
projects in the province for provincial, and sometimes central,
leaders. One recent report for the Anhui leadership, dated
March 20, 2008, positively evaluated a "land transfer business
cooperative" (tudi liuzhuan jingying hezuoshe) pilot established
in Mulan village, Sanhe township, Feixi County in October 2006
(ref: www.snzg.com.cn/readnews.asp?newsid=2516). In this
arrangement, farmers can turn their land over to the
cooperative, which acts as a non-profit agent to sub-rent their
land to "capitalists," in Zhang's description, who are
interested in conducting large-scale commercial agriculture. In
return, the farmers-- many of whom have gone to the cities to
work-- receive rental fees and a portion of the renter's
profits. The cooperative is overseen by a board elected by the
village committee. According to Zhang, the government supports
this arrangement, as it has a number of benefits. The pooling
of farmland into larger fields is more efficient and results in
greater yields, and provides a vehicle to incorporate land left

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fallow or under-worked by absent migrant workers and their
families. The consolidation of small family plots creates an
opening for large-scale commercial agriculture, which may more
easily weather rising equipment prices. There is also the
economic benefit to farmers or migrants who participate in the
scheme.



10. (C) Zhang expects, however, that this experiment will run
into problems similar to Anhui's micro-credit projects. The
Grameen-style micro-credit experiment in Feixi County has
received the approval of Anhui's leaders and has been welcomed
by the farmers involved, but Zhang cautions that after two years
the experiment is starting to show some signs of trouble. In
the latter half of 2007, Zhang discovered that democratic
decisionmaking declined as the fund's managers stopped obeying
democratic principles, while transparency also deteriorated,
with farmers finding it difficult to get information. Zhang
marks the problems up to mismanagement, as well as straying of
purpose and mistaken understanding as the project ages and
supervision by project sponsors (Hong Kong Oxfam) wanes.
JARRETT