Rural/Urban Divide - Officials and Academics Ponder the

UNCLAS SECTION 01 OF 02 GUANGZHOU 000713 SENSITIVE SIPDIS State for EAP/CM; INR/EAP; S/P USTR for China Office TREASURY FOR OASIA/INA -- DOHNER/HAARSAGER/WINSHIP USDOC FOR ITA DAS KASOFF, MELCHER, MAC/OCEA E.O. 12958: N/A TAGS: SOCI ECON PGOV CH SUBJECT: Rural/Urban Divide - Officials and Academics Ponder the Challenges but Propose Few Concrete Solutions at Conference GUANGZHOU 00000713 001.2 OF 002 (U) This document is sensitive but unclassified. Please protect accordingly. Not for release outside U.S. government channels. Not for internet publication. ¶1. (SBU) Summary: The Chinese government hopes urbanization will boost domestic consumption and reduce reliance on exports, according to officials and academics at a conference on rural-urban integration in Hainan December 5-6. One academic estimated, for each one percentage point increase in urbanization, spending on fixed infrastructure would rise by about US$970 billion. Speakers identified key reforms needed to enhance rural-urban integration, eliminate the rural-urban poverty gap and ensure urbanization doesn't cause instability, including more investment in small- and medium-sized cities, land reform, family registration ("hukou") reform, social security reform and administration reform. In spite of identifying these necessary reforms, few of the conference attendees gave specifics on how to achieve them. End summary. Increasing Domestic Demand -------------- ¶2. (SBU) Urbanization and urban-rural integration will help to spur domestic demand and move China away from an export economy, according to Gao Shangquan, Board Chairman of the China Institute for Reform and Development, (CIRD),which sponsored the conference with the Royal Norwegian Embassy. For every one percentage point increase in China's urbanization rate there will be RMB 6.6 trillion (US$971 billion) spent on fixed infrastructure, he said. The Chinese government hoped to see urbanization increase from the current level of about 46% to 63.6 % by 2030, according to Zhang Junkuo, Director-General of the Department of Strategy and Regional Economy of the State Council's Development Research Center. However, two conference attendees got up during the conference and expressed dissatisfaction with Zhang's urbanization numbers. They stated the urbanization estimates had been calculated incorrectly because official numbers included migrant workers in the cities who should really be excluded. Pushing Investment into Small- and Medium-Sized Cities -------------- -------------- ¶3. (SBU) China needs to work harder at integrating rural areas with the cities by creating more industrial centers in small- and medium-sized cities, according to both academics and officials at the conference. Speakers bemoaned migrant workers who must often travel to the large industrial centers of Shanghai and the Pearl River Delta because there are few opportunities elsewhere. There are no buffer zones, Chen Huai, the Director General of the Policy Research Office of the Ministry of Housing and Urban-Rural Development, said. By concentrating investment in small- and medium-sized cities, there will be more opportunities for affordable housing and migrant workers will be able to find work closer to their native homes, according to Chen. However, none of the speakers offered proposals for exactly how investment should be directed into small- and medium-sized cities. Land Reform - Agreement on Problem, Few Solutions -------------- -------------- ¶4. (SBU) Although many speakers agreed land reform was an issue that needed to be tackled, few gave concrete ideas on how to actually achieve meaningful reform. One exception was Guo Zhengmo of the Institute of Economics, Sichuan Academy of Social Sciences, who gave a presentation on a trial program near Chengdu where the collective land rights of 2,000 farmers was auctioned. The auction produced a higher return for the land than farmers would have received if the land had been expropriated by the government. The farmers were able to move into new housing thanks to the proceeds from the land sale, he said. Administration Reforms and Democracy? -------------- ¶5. (SBU) There was some debate over who should control the pace and scope of urban development. Some speakers advocated control of GUANGZHOU 00000713 002.2 OF 002 cities at the county and provincial levels -- a flat power structure with local government making decisions. Others still advocated control by central authorities, a vertical structure. Wang Yukai, professor at the China National School of Administration, gave a surprising presentation advocating "elections" to hold county and provincial administrators accountable for their land use decisions. This was countered by Liu Hao, an inspector at the Department of Employment of the National Development and Reform Commission, who presented a paper in which he found democracy in Taiwan and in South Korea played little role in the transformation of those places from rural to urbanized societies. Social Security and Hukou Reform -------------- ¶6. (SBU) The need for a stronger social security system and family registry or "hukou" system reform were also identified as important steps to ensure urbanization doesn't lead to instability. During this most recent economic downturn, China got lucky, according to some speakers; migrant workers went home when they found themselves unemployed, according to Chen Huai, the Director General of the Policy Research Office of the Ministry of Housing and Urban-Rural Development. "During this financial crisis, migrant workers returned to their homes without complaint. We won't be as lucky next time," Huai said. The next generation of migrant workers will not be satisfied in the future unless migrant workers have the same access to social services as urban dwellers, said Lu Xueyi, a senior research fellow at the Chinese Academy of Social Sciences' Institute of Sociology. Several speakers argued reform of the family registry system and creation of a strong universal social security system were needed, but once again, no one gave specifics on how to do this. Peng Xizhe Dean of the School of Social Development and Public Policy at Fudan University expressed skepticism about the elimination of the family registry system because he believed it was the only disincentive that prevented migrants from moving to Shanghai in unsustainable numbers. Comment - Lots of Talk but Few Concrete Strategies -------------- -------------- ¶7. (SBU) While the conference was not attended by policy makers at the highest echelons of government, many participants appeared to be influential in government and academia. Other attendees included Chen Li, Director-General, of the General Office of the National Population and Family Planning Commission; Lin Fanglue, the Vice Governor of Hainan; and Li Xi, the Vice Mayor of Kunming to name a few. From the breadth of the discussions, it appeared the Chinese authorities and academics know far too well the problems behind the urban-rural poverty gap but don't know where or exactly how to begin the necessary reforms. Tackling land rights, reforming the family registration system, and creating an equitable social security network are complex problems; potential solutions will face many challenges. End comment. ¶8. (U) This cable was coordinated with Embassy Beijing and ConGens Chengdu and Shanghai. JACOBSEN