Cablegate: U/S Sheeran Holds 6th Round of the State-Ndrc

VZCZCXRO9444
RR RUEHCN RUEHGH RUEHVC
DE RUEHBJ #4669/01 3540339
ZNR UUUUU ZZH
R 200339Z DEC 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC 3173
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC

UNCLAS SECTION 01 OF 03 BEIJING 024669

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EB U/S SHEERAN,
STATE FOR EAP DAS CHRISTENSEN
TREASURY FOR OASIA/CUSHMAN
USDA/FAS/ITP FOR SHEPPARD

E.O. 12958: N/A
TAGS: ECON EAGR PGOV SOCI CH
SUBJECT: U/S SHEERAN HOLDS 6TH ROUND OF THE STATE-NDRC
DIALOGUE IN BEIJING WITH FOCUS ON RURAL DEVELOPMENT

REF: BEIJING 24338

SUMMARY
-------

1. (SBU) Under Secretary of State for Economic, Energy,
and Agricultural Affairs Josette Sheeran and the Vice
Chairman of China's National Development Reform
Commission (NDRC), Zhu Zhixin, co-chaired the sixth
round of the State-NDRC Dialogue on December 17 in
Beijing. Following on the heels of the Strategic
Economic Dialogue on December 14-15, the State-NDRC
Dialogue focused on rural development with Zhu
emphasizing China's challenges to improving
agricultural productivity, raising rural living
standards, promoting coordinated urban-rural
development, and protecting the environment. U/S
Sheeran and Thomas Dorr, Under Secretary of
Agriculture for Rural Development, highlighted lessons
learned from the United States' experience in rural
development, discussing strategies for raising rural
incomes and promoting consumption. Site visits to two
villages in Qinglong Township on the outskirts of
Beijing Municipality illustrated the growing
importance of non-farm income in China's countryside.
At the same time, discussions and the site visits
proved that the Central Government's New Socialist
Countryside remains a top-down model with few
opportunities for rural residents to explore private
sector solutions for rural problems. END SUMMARY.

United States and China: Finding Common Ground
--------------------------------------------- --

2. (SBU) U/S Sheeran stated that rural development is
an urgent priority for both the United States and
China, and the timing of the State-NDRC Dialogue was
appropriate, following on the heels of the Strategic
Economic Dialogue. With new technologies, energy
alternatives, biofuels, and more opportunities to
connect to rural areas via modern communication, there
is a lot of potential for rapid growth in the rural
sector. U/S Sheeran noted that 75 percent of the
United States' land area is rural, and the pace of
development in those areas is changing in today's
globalized world. U/S Dorr echoed U/S Sheeran's
sentiments, adding that the information technology
revolution means that promoting development in rural
areas is not only linked to agricultural policy but to
other sectors as well.

3. (SBU) Vice Chairman Zhu noted the fast pace of
economic development in China since reform and opening
in 1978 with the country more than tripling its grain
production during that time while also reducing the
number of people living in poverty by more than 225
million. Zhu cited several reasons for the rapid
improvements in rural livelihoods, including economic
reform implemented in rural areas, government
investments in agriculture (including the recently
launched New Socialist Countryside--see reftel), the
elimination of the agricultural tax, and the
government's emphasis on resources and infrastructure
such as water, electricity, gas, and roads.

The Challenges Ahead for China
------------------------------

4. (SBU) Zhu acknowledged, however, that China faces
many challenges in the countryside, particularly
because the country regularly experiences a five-year
crop cycle of two good years, two average years, and
one bad year (which may include natural disasters).
According to Zhu, China needs to reach a point where
it no longer "relies on heaven for food." He cited
four major problems: (1) water shortages in rural
areas, (2) the lack of agricultural technology, (3)
lagging infrastructure, and (4) a growing rural-urban
income disparity. On the last point, Zhu lamented
that urban incomes now are three times greater than
rural incomes on average, and that the gap has been
growing since 1978. The Central Government must

BEIJING 00024669 002 OF 003

therefore facilitate the support of industrial and
urbanized areas to the countryside, encourage
urbanization, equalize public services, and promote
technologies that meet the needs of China's citizens.

Evolving Views on Food Security
-------------------------------

5. (SBU) In response to U/S Sheeran's question about
China's views on food security, Zhu said that China
must maintain a higher grain reserve ratio than
western countries for several reasons. China's
susceptibility to natural disasters and the large
number of people affected by those disasters requires
more grain to be stored. Chinese people tend to eat
different types of grain depending on their region of
origin, so it would be difficult to reserve just one
type of grain. In addition, a situation of food
insecurity potentially would cause social instability,
Zhu said. China's decisions on food security must
balance wheat versus rice, production and consumption,
and bumper harvests against bad years, he said.

China's View on Private Ownership of Land
-----------------------------------------

6. (SBU) Zhu said there are varous opinions on the
utility of private ownersip of land in China, but for
now, land in urban areas continues to belong to the
Central Government and land in rural areas is owned by
village collectives. The Central Government does not
plan to transition towards private ownership in the
near future. Zhu stated, however, that an evolving
country will need to change in many respects, and land
policy is no exception. U/S Sheeran and U/S Dorr
emphasized the importance of private ownership of land
in the United States' rural development experience,
particularly with respect to building individuals'
credit histories and attracting private financing for
development projects.

High-Tech Solutions to Rural Problems?
--------------------------------------

7. (SBU) Vice Chairman Zhu said there is no doubt that
technology can help China's rural development. China
needs to achieve a higher yield from its land in order
to take more land out of agriculture even as
production needs increase. Zhu welcomed U/S Dorr's
suggestion to increase the utilization of broadband in
China's countryside, but he cautioned that China first
must tackle infrastructure deficiencies such as lack
of access to electricity, limited knowledge about how
to use the technology, and few roads to transport
agricultural products to market from remote areas.

The United States' Lessons for China
------------------------------------

8. (SBU) U/S Sheeran and U/S Dorr presented lessons
learned from the United States' own experience in
rural development, including strategies for raising
rural incomes and promoting consumption. During the
past 50 years, the United States has changed
dramatically, and today, more than 93 percent of rural
Americans do not work in the agricultural sector. U/S
Sheeran emphasized the United States' productivity
revolution, crop diversification, risk mitigation and
property insurance, globalization and open markets,
and the social safety net as five pillars of the
United States' approach to rural development. U/S
Dorr added that the United States' experience proves
that implementing centralized top-down directives is
not necessarily the best strategy for promoting rural
development. It is clear, however, that giving rural
residents non-farm income opportunities, introducing
technologies such as broadband, and facilitating the
use of renewable energy offers substantive potential
for wealth creation, U/S Dorr said. U/S Sheeran added
that the key to the survival of farming communities is
empowering farmers at the grass-roots level to respond
to market mechanisms through networks.

BEIJING 00024669 003 OF 003

Visiting China's New Socialist Countryside
------------------------------------------

9. (SBU) Site visits to two villages in Qinglong
Township on the outskirts of Beijing Municipality
illustrated the growing importance of non-farm income
in China's countryside. In Dayuan, a village of 1800
people growing grain and other traditional crops,
villagers interviewed at both of the households
visited by the delegation indicated that much of their
income is derived from non-farm sources. One resident
previously worked for a Chinese insurance company
while another elderly resident depends on income from
his son's work outside the village. In Miao Ergang, a
model village project supported by the Central
Government and Beijing Municipality Government,
villagers reveled in their ability to treat water for
use as irrigation, produce mushrooms for sale in
Beijing, and use methane gas instead of coal for power.
One village official acknowledged, however, that
without private sector solutions, especially for
financing, the Central Government's lack of resources
will make it difficult to replicate the village's
achievements in other parts of the country.

10. (SBU) Participants List:

China
-----

Zhu Zhixin, Vice Chairman, NDRC
Shi Gang, Director General, Department of National
Economy, NDRC
Chen Xuanqing, Deputy Director General, Department of
Regional Economy, NDRC
Hu Hengyang, Deputy Director General, Department of
Rural Economy, NDRC
Wu Yin, Deputy Director General, Department of Energy,
NDRC
Li Guohua, Deputy Director General, Department of
International Cooperation, NDRC
Zhu Baozhi, Deputy Director General, Deparment of
Development Planning, NDRC
Li Hayian, Economic Minister Counselor, Chinese
Embassy
Peng Fuwei, Secretary to Vice Chairman Zhu, NDRC

United States
-------------

Josette Sheeran, Under Secretary of State for Economic,
Energy and Agricultural Affairs
Thomas Dorr, Under Secretary of Agriculture for Rural
Development
Thomas Christensen, Deputy Assistant Secretary of
State for East Asian and Pacific Affairs
Robert Luke, Minister Counselor for Economic Affairs
David Loevinger, Minister Counselor for Financial
Affairs
David Meale, Chief of the Macroeconomic Unit
Peter Haymond, Division Chief, Economic Bureau
Matt Murray, Economic Officer
Jorge Sanchez, FAS Agriculture Attache

11. (U) Under Secretary Sheeran cleared this cable.

RANDT

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