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Cablegate: China/Rebalancing: Rural Land Policy

VZCZCXRO3729
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #2805/01 2730738
ZNR UUUUU ZZH
P 300738Z SEP 09 ZDK
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 6292
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHKO/AMEMBASSY TOKYO 0049
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEHNSC/NSC WASHDC
RUEHRC/USDA FAS WASHDC

UNCLAS SECTION 01 OF 03 BEIJING 002805

SIPDIS

SENSITIVE

COMMERCE FOR ALBERT HSU
TREASURY FOR OIA CWINSHIP AND TTYANG
NSC FOR LOI
USDA/OSEC FOR MMICHENER
USDA/FAS FOR OGA/HOUSE
FAS FOR OCRA/RADLER/SHEPPARD
FAS FOR OFSO/WAINIO

E.O. 12958: N/A
TAGS: ECON EAGR SOCI CH
SUBJECT: CHINA/REBALANCING: RURAL LAND POLICY

REFORMS MOVING SLOWLY AS FOOD SECURITY AND JOB
CONCERNS LINGER

REFS: A) 08 Beijing 4100
B) 08 Beijing 4102

BEIJING 00002805 001.2 OF 003

C)http://www.intelink.gov/communities/state/c hen
gdu/archives/southwest_china_302.html;
http://www.intelink.gov/communities/state/che ngdu/ar
chives/southwest_china_293.html;
http://www.caijing.com.cn/2009-04-10/11013651 5.html
D) Beijing 1097
E) Beijing 693
F) Shanghai 380

1. (SBU) SUMMARY: China has made only incremental
progress on rural land policy reforms needed to
restructure China's rural economy and increase rural
consumption. Transfers of land use rights have
increased gradually in recent years, but the overall
amount of rural land that has been transferred into
larger, more efficient plots is small. Land
consolidation in many areas is inhibited by the lack
of market linkages needed to make large-scale
commercial operations viable, and authorities are
cautious due to concerns about migrant employment
and the loss of agricultural land. END SUMMARY.

2. (U) This cable summarizes the status of rural
land policy reforms highlighted during Econoff trips
to Ningxia Hui Autonomous Region in May and August
2009, Henan Province in July 2009, and northern
Hebei's Changwei County and Chengde City in August
2009, as well as recent meetings with rural policy
experts in Beijing.

--------------------------------------------- --
More Land Transfers, But No New Official Policies
--------------------------------------------- --

3. (SBU) Provincial officials and rural experts who
spoke with Econoff cited gradual progress expanding
the scope of rural land transfers. (Note: Land
transfers involve transferring land use rights and
can take the form of renting, informal exchanges,
formally transferring contract rights (zhuanbao),
and exchanging land for equity in a cooperative or
"land bank" that then transfers consolidated tracts
of land to a company or large-scale farmer. End
Note.) Land transfers, according to contacts, have
picked up in recent years as factories have sprung
up in peri-urban areas, as rural residents leave to
work outside, and as commercialized aquaculture,
animal husbandry, and agriculture operations that
require larger, consolidated land holdings have
become more prevalent.

4. (SBU) The pace of land transfers has picked up
since 2007. The October 2008 Third Plenum of the
Chinese Communist Party 17th Central Committee
("Third Plenum", see refs A, B) gave high-level
approval to proceed with land transfers and
encouraged continued growth of this practice, but
according to one local agriculture official it did
not bring about new policies. In southern Ningxia's
Guyuan City, local officials said the Third Plenum
and other recent land-policy announcements were only
"government guidance" and no new impetus was in
place; local transfers are still conducted according
to existing law and the willingness of parties to
conduct a transaction.

-----------------------------------------
And Growth is Limited by Local Conditions
-----------------------------------------

5. (SBU) According to a Henan agriculture official,
about 4.8 percent of farmland in Henan has been
transferred. In Ningxia, land transfers constituted

BEIJING 00002805 002.2 OF 003


5.9 percent of household agricultural land and
involved 9.9 percent of rural households. In
Hebei's Chengde City, according to an agriculture
official, approximately 20 percent of agricultural
land has undergone a transfer. (Note: According to
results from a nationwide survey recently published
by the U.S.-based Rural Development Institute,
currently about 15 percent of Chinese farmers are
transferring their land in some way. End Note.)

6. (SBU) Land transfers are occurring most
frequently in areas close to urban markets and where
agriculture is highly commercialized. Land
transfers in remote areas are less common, according
to the officials and scholars in Ningxia, because
there are no large scale farmers or companies
interested in using the land for large-scale
production. The rural land being transferred in
Henan is much less than in other provinces,
according to officials, because urbanization in
Henan is limited, and the province focuses on grain
production rather than vegetables and other higher
value crops. In Hebei, an official explained that
the number of land transfers is relatively low
despite significant numbers of migrant workers
because enterprises that want to consolidate land
and upgrade production techniques want irrigated,
fertile land, not the marginal land found in much of
northern Hebei. Officials in Henan and Hebei also
explained that many older residents want to maintain
the safety net of farming their own land, even if
they are not profiting.

--------------------------------------------- -------
Comment: Slow Land Policy Reforms Limit Rural
Contribution to Rebalancing
--------------------------------------------- -------

7. (SBU) Instead of making dramatic steps to
privatize rural land at the Third Plenum in late
2008 as some observers hoped, China reemphasized
maintaining the amount of land under cultivation,
increasing land transfers, and solidify rural land
rights. News reports highlight local experiments to
mortgage land and allow transfer of village non-
farming land for non-farming purposes (Ref C), but
these practices are not widespread. As Chinese
concerns about food security and the impact of the
global financial crisis on the rural workforce and
rural incomes grew over the last year, officials
such as State Council rural expert Chen Xiwen
cautioned against mortgaging farmland and other land
policy reforms that could leave rural residents
without the safety net of having their own land to
cultivate.

8. (SBU) Barriers to increasing land transfers and
land consolidation hinder the shift to higher-value
farming, the transition of farm labor to higher
paying non-farm jobs, and farmers' ability to sell
or mortgage their land to start businesses. This
adds to difficulties maintaining per capita farmers'
net income growth, which a Ministry of Agriculture
official recently predicted will increase less than
6 percent this year. (Note: The 2004-2008 rural net
income average annual growth rate is over 8 percent.
End Note.) According to the official, if this
growth rate continues, China will have difficulty
achieving the 2008 Third Plenum Communist Party goal
of doubling rural incomes by 2020. Despite moves to
increase rural social safety net spending and other
transfers (Ref D), as long as farmers own few real
assets (e.g., land) and their incomes remain low,
they will be unable to consume more and contribute
to rebalancing China's economy to rely less on

BEIJING 00002805 003.2 OF 003


HUNTSMAN

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