RURAL ANHUI: CALM ON THE SURFACE BUT SEA MONSTERS LURKING

C O N F I D E N T I A L SHANGHAI 000103


STATE FOR EAP/CM, INR AND DRL
NSC FOR LOI, KUCHTA-HELBLING

E.O. 12958: DECL: 3/2/2034
TAGS: PGOV ECON ELAB PHUM CH
SUBJECT: RURAL ANHUI: CALM ON THE SURFACE BUT SEA MONSTERS LURKING
BELOW

REF: A. (A) BEIJING 400

B. (B) SHANGHAI 51

CLASSIFIED BY: SIMON SCHUCHAT, DEPUTY PRINCIPAL OFFICER, U.S.
CONSULATE SHANGHAI, U.S. DEPARTMENT OF STATE.
REASON: 1.4 (b),(d)


Summary
--------------


1. (C) Rural Anhui Province has not yet faced new social
instability problems as a result of China's economic downturn,
but the province's ongoing dependence on migrant worker
remittances for disposable income in the countryside leaves
Anhui, particularly its northern region, vulnerable to social
unrest if the economic downturn deepens. A major source of
migrant labor, Anhui does not have a comprehensive plan for
reintegrating workers who lose their jobs in coastal factories,
our interlocutors in Hefei and Fuyang said, and Central
Government efforts to promote rural consumption in poor areas
may backfire. Farmers outside Fuyang said they still rely
heavily on remittances from their sons and daughters to maintain
their livelihoods. Local governments in Anhui are increasingly
wary of outbreaks of instability, as evidenced by a front page
local newspaper article on February 25. End Summary.

Travel to Anhui Province
--------------


2. (C) DPO and PolOff traveled to Anhui Province February 24-27.
In Hefei, the provincial capital, DPO and PolOff met with
provincial government officials and a rural expert at Anhui
University. On February 26, they traveled to Fuyang in the
northern part of the province to visit a rural area and meet
with local officials.

Anhui Province's Migrants Looking for Work
--------------
C) Rural Anhui Province remains stable even as many of the
province's migrant workers are struggling to find new jobs in
China's coastal areas following the Lunar New Year holiday (see
reftels). Anhui is a major sending area for migrant workers,
said Lin Fei, a researcher at the Anhui Academy of Social
Sciences (AASS),who estimated that approximately 11 million
migrants (roughly one-sixth of Anhui's total population) are
working outside the province with most workers employed in the
Yangtze River Delta (YRD). Migrant workers are "used to living
in the city," Lin said, and many have faced difficulties
readjusting to life in the countryside since being laid off by
cost-cutting employers prior to the Lunar New Year.


4. (C) Lu Liansheng, head of the rural development division at
AASS, acknowledged that many of Anhui's migrants returned home
early for the holiday in November and December. He did not
estimate how many of Anhui's migrants lost their jobs in late
2008, but he said he is "not optimistic" that all of Anhui's
migrants will be able to find jobs outside the province in the
near-term. Many migrants returned to the coast before the end
of the holiday to try to "beat the rush," Lu observed. Even
then, it will still be "very difficult" for migrants who are
looking for work. Lu said local governments are encouraging
migrants to return home to the countryside and set up small
businesses because they have some money saved and "understand
the market" in coastal areas, but there inevitably will be
"successes and failures" for migrants turned entrepreneurs.

Rough Waters Ahead in Anhui?
--------------


5. (C) Addressing social stability concerns will be a major
challenge for Anhui, our interlocutors said. Zhang Deyuan, the
Deputy Director of the San Nong Institute at Anhui University,
said on February 25 that social stability in Anhui's rural areas
"looks calm on the surface, but there are sea monsters lurking
below." The Central Government's efforts to address rural
development such as the State Council's 2009 Number One Policy
Document -- which tackled rural issues for the sixth year in a
row -- are insufficient, Zhang said. In Anhui, the question of
what returning migrants should do if they cannot find work in
coastal areas is a serious problem, he said.


6. (C) Zhang dismissed local policies to promote small business
development, stating that rural small and medium sized
enterprises (SMEs) are too inefficient. He also refuted claims
made by Anhui officials that the province's own industrial
development could absorb excess labor, stating that several
major factories in the province that recently closed. There are
stopgap measures for deploying excess labor (including one
program to send 40,000 Anhui rural residents to Xinjiang
Autonomous Region to work on an agricultural project),as well
as short-term training opportunities, but there is no
comprehensive plan for helping migrants find work, Zhang said.


7. (C) Farmers have enough money saved to last for a few months,
Zhang said, and Anhui likely will avoid social problems linked
to migrant worker dissatisQ in the near-term. Central
Government plans to promote rural consumption, however, are
misplaced, Zhang said, for if migrants do not have jobs, and
therefore do not have disposable income, then it will be
difficult for them to buy consumer goods. Rural residents may
have enough money saved to buy a refrigerator, or a TV, or even
a car, but this consumption will not promote social stability,
Zhang said. Migrant workers who can find factory jobs in
coastal areas most certainly will leave, Zhang said, as they do
not want to remain in the countryside. Local governments are
now focusing their attention on stability and security instead
of GDP growth, Zhang observed, adding that "the problem is that
when things go bad in China, it happens quickly."

Fuyang: Possible Problems on the Horizon
--------------


8. (C) The biggest potential social stability problem in Anhui
Province is in Fuyang, Zhang said, echoing the sentiments of
several observers. Fuyang's high population density, limited
land, remote location (two and a half hours northwest of Hefei),
and dependence on migrant remittances for its economy leave the
area susceptible to social unrest. At first glance, however,
the city appears to be growing at a reasonable pace with a new
development zone and new university campus. Several nearby
villages also are beneficiaries of a rural development project
implemented by the U.S.-based NGO, Heifer International, to help
farmers purchase livestock and sell the offspring for profit.


9. (C) Despite economic gains from the project, however, farmers
in Omiao Village in Fuyang's Yingzhou District, told DPO and
PolOff that they remain dependent on non-farm income. All of
the farmers interviewed in the village said their children work
in coastal areas (mostly in Shanghai),and their remittances
home contribute well over half of the families' incomes. One
villager pointed proudly to the government-installed running
water tap in his newly constructed house -- though it was
remittances that paid for the house itself. The rural landscape
was dotted with China Mobile cell towers, but the roads were
unpaved and thick with mud. The farmers acknowledged that the
Fuyang City Government has tried to facilitate investment in the
city in order to provide more industrial and service sector jobs
locally, but all of the farmers said their children would be
unwilling to return to Fuyang to work. One farmer told PolOff
that his son was laid off from his job in a Shanghai packaging
plant just before the Lunar New Year, but his employer had
recently called in late February to summon him back to Shanghai
to continue working.

Local Governments Move to "Safeguard Stability"
-------------- --


10. (C) The Hefei Evening News (Hefei Wanbao) reported on
February 25 that municipal leaders had met the previous day to
discuss social stability under the framework of the Central
Government's document on "Safeguarding Social Stability Work in
2009." According to the report, local leaders emphasized during
the meeting that internal and external economic problems would
likely lead to new pressures and challenges for social stability
in the coming year, and local governments must pay close
attention to social problems. In Fuyang, Wang Bin, Director of
the Municipal Development and Reform Commission, said on
February 27 that Fuyang remains stable, but local government
meetings that focus on safeguarding stability indicate that
Anhui is going through "extraordinary times." Wang expressed
confidence that Anhui will remain stable so long as no one
"stirs up trouble."


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