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Cablegate: Ningxia Benefiting From Central Government Assistance But

VZCZCXRO8768
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #5599/01 2360550
ZNR UUUUU ZZH
P 240550Z AUG 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 1251
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 BEIJING 005599

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EAGR ELAB EFIN PGOV SOCI CH
SUBJECT: NINGXIA BENEFITING FROM CENTRAL GOVERNMENT ASSISTANCE BUT
HUGE CHALLENGES REMAIN

SUMMARY
-------

1. (SBU) Ningxia Hui Autonomous Region, one of China's poorest
provinces, has benefited from Central Government funding under both
the Great Western Development Program and New Socialist Countryside
policy. As a result, Ningxia has improved its infrastructure and
expanded its energy sector as well as increased support for social
services such as education and health care. Despite capital inflows
from the Central Government, however, participants at an economic
development forum in Yinchuan and others working in the province
agreed that long-term development in Ningxia will be difficult to
sustain due to the lack of private sector investment, reduction in
foreign aid, and the need to balance growth with environmental
concerns. END SUMMARY.

TRAVEL TO NINGXIA
-----------------

2. (SBU) Econoff and Conoff traveled to Ningxia Hui Autonomous
Region August 15-18. Emboffs participated in the Second Ningxia
International Halal Food and Muslim Commodities Festival and the
Investment and Trade Fair in Yinchuan, the provincial capital, and
attended the Economic Development Forum on August 16.

CENTRAL GOVERNMENT RESOLVING SOME PROBLEMS...
---------------------------------------------

3. (SBU) The goals of the Great Western Development Program,
launched by the Central Government in 1999 to develop the economy in
China's poorest geographic region, and the New Socialist Countryside
policy, introduced in 2006 to build infrastructure and improve
social services in rural areas, converge in Ningxia Hui Autonomous
Region, one of China's poorest provinces. Central Government fixed
asset investment has improved the province's infrastructure,
particularly the transportation network and the energy sector.
Officials at the Ningxia Foreign Affairs Office (FAO) pointed out
that there now is 500 km of highways in a province where there were
no highways ten years ago. They also stated that the Central
Government is helping Ningxia build up its energy sector, having
jointly developed the Ningdong Energy and Chemical Industrial Base
in the eastern part of the province to tap into coal reserves
there.

4. (SBU) One FAO representative stated that Ningxia will mine 80
million tons of coal this year and hopes to raise output to 100
million tons in 2008. Five new electrical plants are planned, with
some of the electricity to be transmitted to Tianjin to power an
industrial area there. Other signs of increasing affluence include
Ningxia's first golf course and a new international airport, which
will begin flights to Hong Kong next year.

5. (SBU) With respect to social services, Perrine Lhuillier, China
Program Coordinator for Enfants du Ningxia, said that Ningxia's
education sector has made tremendous progress since the introduction
of the New Socialist Countryside policy. School fees are now paid
by the Central Government and the local government has promised to
cancel boarding fees by 2009. Ramsey Rayyis, Country Representative
for the American Red Cross, agreed that Ningxia has made great
strides recently in rural education, and he said that NGOs such as
the Red Cross have filled many of the service gaps left by a lack of
government funding in areas such as health and sanitation.

...BUT LIMITED CAPITAL CAN ONLY GO SO FAR IN NINGXIA
--------------------------------------------- -------

6. (SBU) At the same time, first-time visitors to Ningxia -- one of
China's poorest provinces and one of its smallest with a population
of only six million -- immediately see a difference between Yinchuan
and other provincial capitals and Ningxia's countryside versus other
rural areas. Yinchuan's urban landscape is not dotted with
high-rises and office parks as cities such as Changsha, Nanchang, or
Zhengzhou might be. Students who manage to go to university usually
leave the province and do not return. Ningxia is one of only five
provinces without any of China's 119 key universities that receive
special Central Government funding and attention. (Note: Two
college students on summer break interviewed by Emboff in Yinchuan
said they hope to find jobs after graduation in Xian where they are
studying. End Note.)

7. (SBU) In the countryside, some farmers are starting to build
brick houses, but many still live in mud-walled homes and walk
several miles a day to retrieve water. Despite the Central
Government's focus on rural policy, most farmers in Ningxia still
earn only RMB 2000 to RMB 3000 (USD 250 to USD 375) per year.

8. (SBU) Lu Dadao of the China Academy of Sciences told participants
at the Ningxia Economic Development Forum on August 16 that

BEIJING 00005599 002 OF 002


Ningxia's future development faces a number of challenges,
especially with respect to sustainability, due to the lack of
private sector investment, reduction in foreign aid, and the need to
balance growth with environmental concerns. Lu said that he is
particularly concerned about the environmental impact of rapid
industrial development in an ecologically fragile area.

NEED A STRONG DEVELOPMENT STRATEGY FOR FUTURE GROWTH
--------------------------------------------- -------

9. (SBU) Zhao Kang, a researcher at the Ministry of Finance, said at
the Forum that Central Government funding for Ningxia is limited and
the province will therefore need to make tough decisions on what to
spend money on. With so many needs -- infrastructure, public
services, industrial development, and natural resources -- those
decisions will not be easy. Rayyis added that the Red Cross and
other NGOs are facing increasing difficulty raising money for
projects in Ningxia as China develops and donor interest wanes. In
the health sector, therefore, it is imperative that short-term gains
earned from outside funding must be sustainable over the long-term,
Rayyis said.

PICCUTA

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