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Cablegate: Rural/Urban Divide - Officials and Academics Ponder The

VZCZCXRO7810
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0713/01 3640952
ZNR UUUUU ZZH
R 300952Z DEC 09
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 1229
INFO RUEHOO/CHINA POSTS COLLECTIVE 0411
RUEHBJ/AMEMBASSY BEIJING 0990
RUEHCN/AMCONSUL CHENGDU 0340
RUEHHK/AMCONSUL HONG KONG 0403
RUEHGH/AMCONSUL SHANGHAI 0339
RUEHSH/AMCONSUL SHENYANG 0349
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASH DC
RUEAIIA/CIA WASHDC 0381
RUEKJCS/DIA WASHDC 0377

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

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