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Cablegate: From Rural to Urban, Part 2: Qingyuan Villages Tap

DE RUEHGZ #1212/01 1940634
O 130634Z JUL 06





E.O. 12958: N/A
SUBJECT: From Rural to Urban, Part 2: Qingyuan Villages Tap
into Cities for Wealth

REFERENCE: A) Guangzhou 21192; B) Guangzhou 11684; C)

Guangzhou 2194; D) 05 Guangzhou 31940

(U) This document is sensitive but unclassified. Please
protect accordingly.

1. (SBU) Summary: Qingyuan, Guangdong province's largest and
fastest-growing prefecture, is riding a wave of
industrialization that has brought rising incomes to its
rural communities. Villages that used to live off their
crops and government subsidies now rely on family members
who work in cities and on the sale of their farmland for
industrial development. Farming is no longer profitable and
agricultural subsidies are largely nonexistent. Land prices
are a source of great frustration for villagers, with many
believing that the prices they get are too low and that
corrupt local officials skim profits. Although Qingyuan's
rural residents are doing fairly well because of urban
employment, officials are likely concerned about their
increasing dependency on urban jobs, goods, and services.
And with the direct and indirect urbanization of Qingyuan's
countryside comes the heightened expectations of an
increasingly sophisticated rural population. End summary.

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2. (U) Econoff and EconPolAsst recently visited Qingyuan
prefecture, a predominantly rural area stretching from
central to north Guangdong Province and lying outside of the
Pearl River Delta (PRD). The southern reaches of Qingyuan,
home to the majority of the population and industry, are
only two hours from Guangzhou by bus. Qingcheng City, home
to half a million people and located in southern Qingyuan,
served as our base as we visited nearby factories and more
distant villages. Reftel A explores the nature of
Qingyuan's rapid industrialization and its long-term impact.
This cable discusses the concerns of the rural population as
they face this incoming tide of industry and urbanization.

What Do You Mean by "Rural"?

3. (U) The distinction between rural and urban in Qingyuan
is becoming increasingly ambiguous. Residents of villages
in Qingyuan's countryside no longer consider farming their
primary source of income, but rather depend on money earned
by family members working in cities. In some cases, only
the young or old live in these villages, with the middle
generation working outside. Indeed, the first two farmers
we spoke with had recently returned to their villages to
farm after having worked as laborers in the Guangzhou area
until they became too old to be employable. Villagers often
told us that once a child completes middle school
(chuzhong), at around the age of 16, they leave to find work
in a city. In several villages that we visited, almost
every family had a member working in a construction or
factory job in Qingyuan or further afar in the PRD.

4. (U) Given the fact that much of Qingyuan's rural income
now comes from the cities, official statistics can be
misleading. The official per capita disposable income of
Guangdong's rural residents grew 7.4% in 2005, to RMB 4,691
(USD 573). This is up 28% since 2000. (The urban per
capita disposable income grew 8.4% in 2005 to RMB 14,770
[USD 1,804] -- up 51% over 2000.) It seems likely that much
of this increase in rural income comes not from farming but
rather from money derived from urban or semi-urban jobs.
Indeed, many villagers described meager earnings from
farming (see below).

5. (U) In addition to the heavy reliance of rural
communities on urban employment, some of these villages are
no longer what could be considered rural, having been
swallowed by expanding cities. The edges of Qingyuan's
cities are dotted with these once-rural villages -- small
clusters of brick houses now surrounded by industrial parks
and factories. These villages typically sell all of their
farmland to the township government, which sells it to
developers. The village holds on to an area just large
enough for the residents' homes -- the building of which is
largely financed with earnings from the land sales.

GUANGZHOU 00021212 002 OF 004

Farming and Subsidies: Dwindling Sources of Income
--------------------------------------------- -----

6. (U) Farmers in Qingyuan have turned to urban jobs in part
because farming no longer generates a sufficient income for
their families and agricultural subsidies are less generous
than before. If it were not for the influx of these
industrial jobs, Qingyuan's rural population would no doubt
be forced to send its family members farther away in search
of income. Several farmers told us they literally lose
money by farming: the cost of plowing (with rented
machinery), harvesting (with hired labor), fertilizer,
pesticide, and seed exceeds the amount they receive after
sales. Even in a village surrounded by healthy orange
trees, farmers said they do not earn enough money to live on
and depend mainly on outside income. It was no surprise,
then, that we occasionally saw untended, overgrown fields.

7. (U) Agricultural subsidies are no longer a significant
part of the income for Qingyuan's rural families. The
majority of farmers claimed they receive no subsidies
whatsoever. In some cases, farmers receive a subsidy for
growing rice of RMB 7 (USD 0.88) for each mu (0.16 acres).
In one mountain farm, where the sole crop is bamboo, an
older woman said the village was part of an agricultural
collective until the 1970s and received subsidies in the
form of grains. Now the subsidies are gone and they rely on
harvested bamboo -- which sells for RMB 1.2 (USD 0.15) per
piece and brings each family only a few thousand RMB (less
than USD 500) per year -- and outside jobs.

8. (U) The elimination of China's agricultural tax in 2004
has helped Qingyuan's farmers, but it was only a small part
of their overall expenses. On the other side of the
equation, local governments are now without an important
source of revenue. In some cases, they have responded with
creative accounting: residents in one Qingyuan village said
their township government imposed a RMB 10 (USD 1.25)
monthly "fee" on every person in the village soon after the
agricultural tax was eliminated. Villagers were more
pleased with a recent reduction in school fees from
approximately RMB 200 (USD 25) to RMB 50 (USD 6.26) per
student per semester. For families with two children -- and
many of the rural families do take advantage of their
exemption from the one-child policy -- the school fees were
a significant burden.

Public Utilities: A Mixed Blessing

9. (U) Many rural communities in Qingyuan have access to
public utilities such as electricity and are becoming
reliant on goods such as gasoline and propane. Though
villages benefit greatly from these goods, they are forced
to maintain a higher level of income and are also vulnerable
to shifts in prices. All of the villages in Qingyuan's
countryside that were accessible by road had electricity,
and some of the residences in these villages had motorcycles
and basic appliances such as televisions and rice cookers.
Most villages, unless they were located close to cities,
relied on water wells. In one interesting case, a village
near Qingcheng city told us that the city provides them with
access to its water supply. In return, however, the city
has been dumping sewage into the village's ponds.

10. (U) Prices for public utilities in Guangdong have been
rising during the last year, including a recent hike in the
cost of electricity. The government, under pressure from
refineries, has lifted price controls on gasoline. With
income that falls well below that of their urban
counterparts, villagers are hit particularly hard by these
increases. In mountain villages, where less land is arable
and they do not farm their own food, the cost of staples
such as rice and vegetables are a heavy burden. For those
villagers that have sought employment in the cities and are
sending money home, rising rents and public utility costs in
the cities are serious hardships.

Land Sales: Source of Hope and Frustration

GUANGZHOU 00021212 003 OF 004

11. (U) Though agriculture may no longer be profitable for
many villages, their land has become an important source of
wealth. It was rare that we met a villager who did not know
how much his land was worth, or have an opinion about the
price. Land compensation has become a contentious issue in
China, and China's leaders are concerned about its potential
for unrest. Guangdong was the site of several significant
rural protests in late 2005 and early 2006, in part because
of disputes over land compensation and usage (see reftels B,
C, D). Nevertheless, these incidents are typically
isolated, based on grievances with local officials, and thus
far there appears to be no sign of a large-scale,
coordinated rural movement on land compensation issues.

12. (U) Negotiations over land prices are largely conducted
behind closed doors, with the township governments
apparently setting the price. We met a number of farmers
who criticized their village leaders for selling land at a
price that was too low and not consulting with village
residents first. Some villages appear to be more
transparent than others, holding meetings to discuss sales
terms and prices. Regardless, a village's approval of a
land price is largely a formality. Indeed, one village
leader told us the township government sets the price and
his job is to convince the village residents to accept it.

13. (U) The going rate for one mu (0.16 acres) of land in
the flat agricultural areas in southern Qingyuan is roughly
RMB 22,000 (USD 2,752). After the township government buys
the land from the village, it turns around and sells it to a
developer. It is not clear what prices Qingyuan townships
are charging developers, but this transaction certainly
opens the possibility of corruption. The developer must
then level the land and build roads, drainage, and power
lines, before selling it to an investor. In one industrial
park outside of Qingcheng, companies could buy land for
approximately RMB 70,000-80,000 (USD 8,757-10,008) per mu.
Thus the developer earns approximately RMB 50,000 (USD
6,255) per mu in the transaction, minus the costs of
preparing the site. Villagers are understandably suspicious
of collusion between local governments and developers in
these deals. However, villagers are not without their own
schemes: villagers who have moved to cities will sometimes
bribe local officials to change their household registration
(hukou) back to the village in order to receive the land

14. (U) Despite resentment over prices and corruption,
villagers generally see land sales as an excellent way to
finance their ultimate goal: a new house. The cost of a
house in Qingyuan is approximately RMB 40,000 (USD 5,000).
By selling their land, a family can in some cases collect
half that amount overnight. In addition, the factories that
sprout up on the land provide new jobs. Despite these
benefits, not all villagers are eager to give up their land,
which not only has sentimental value but is a safety net in
difficult years. As a result, some villages have opted to
lease all or part of their land, instead of selling it

Blaming the Government

15. (U) Qingyuan villagers generally have a skeptical view
of government, particularly local officials. Some said that
even village leaders, who are elected democratically, cannot
be counted on to serve the village interest. According to
one man, "the position corrupts whoever takes it." The
central government was rarely the target of criticism,
however. Indeed, one man said that the central government
is on the right track, but the local officials are making a
mess of things. Another commented that Chinese officials
obtain promotions by bribery and personal connections,
whereas in America a citizen can rise to governor on merit
alone. (Interestingly, he was not aware that Econoff was
from the United States when he said this). Villagers also
said that officials during the era of Mao Zedong were more
concerned about the well-being of farmers than officials
today. Nevertheless, whenever we asked whether they would

GUANGZHOU 00021212 004 OF 004

prefer to go back to life in the 1950s and 1960s, the answer
was always no.

16. (U) Only some of the farmers had heard of the "New
Socialist Countryside" campaign, which was launched by the
central government in 2006 to improve infrastructure and
social services in rural areas. Among those who had heard
of the term, none said they have seen any initiatives
associated with it.

Comment: The Goal Posts Have Shifted

17. (SBU) Qingyuan's rural villages are fortunate because
the prefecture's industrial boom has brought jobs close by,
and -- at least in the case of villages in the south where
much of the development is taking place -- created a real-
estate market for their land. Guangdong's leaders are
fortunate that these factory and construction jobs have come
at a time when agricultural prices and subsidies are
falling. If Qingyuan's factories depart for cheaper
locales, however, many of Qingyuan's villagers -- without
jobs and without their farmland -- will be forced to join
China's vast migrant worker population and look further
afield for work.

18. (SBU) The source of discontent in rural Qingyuan is no
longer the hardship of poverty, but rather land prices and
the corruption of local officials. Recent village protests
in Guangdong over land compensation came about because of a
lack of transparency in decisions determining compensation
and land usage. Nevertheless, such protests have thus far
been isolated incidents, and show no sign of a linked,
coordinated movement.

19. (SBU) In addition, because villagers are more aware than
ever of how their urban counterparts are living, their
expectations have risen accordingly. Their increasing
reliance on the trappings of city life, including public
utilities and automobiles, make them vulnerable to rising
prices. As a result, officials are no doubt aware that
urban policy no longer stops at the city edge, but ripples
throughout China's vast countryside as well.

20. (SBU) One important key to success -- a university
education -- is still out of the question for the vast
majority of rural children because of the cost. Only once
did we hear of a village child going to university, and he
came back after one week because it was too expensive.
Nevertheless, Qingyuan's rural residents seem determined to
break that barrier as well. One 13-year old girl from a
village in rural Qingyuan told us that she was intent on
studying software at university -- her uncle told her that
is where the money is.


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