VZCZCXRO3107
RR RUEHCN RUEHGH
DE RUEHBJ #1704/01 1600713
ZNR UUUUU ZZH
R 090713Z JUN 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC 8233
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 02 BEIJING 011704 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS USTR FOR STRATFORD, WINTER, PORTER, LAWRENCE 
TREASURY FOR OASIA/KOEPKE 
USDA/ERS FOR LOHMAR, TUAN, SYLVANA LI 
USDA/FAS/ITP FOR HANSON, SHEPPARD 
USDOL FOR ILAB 
 
E.O. 12958:  N/A 
TAGS: ECON EAGR PGOV SOCI CH
SUBJECT: New Socialist Countryside Budget Insufficient, 
Says Policy Advisor 
 
REF:QBEIJING 5009 and previous 
 
¶1. (SBU) Summary: A Chinese policy advisor believes the 
allocated budget for the recently launched New Socialist 
Countryside initiative is woefully inadequate.  While 
Central Government funding for rural programs is increasing, 
the allocation as a percentage share of the total budget 
remains relatively unchanged.  The advisor noted that New 
Socialist Countryside expenditures are insufficient given 
the needs of rural residents and the number of ministries 
and levels of government that depend on the funding.  End 
Summary. 
 
¶2. (SBU) Zhang Xiaoshan, Director of the Rural Development 
Institute at the China Academy of Social Sciences (CASS) 
and a senior advisor to the Chinese leadership on rural 
policy, briefed Embassy-sponsored visitors from the Defense 
Orientation Conference Association (DOCA) on China's rural 
situation on June 6.  During the briefing (also attended by 
Econoffs), Zhang introduced the New Socialist Countryside 
initiative and assailed insufficient funding for the 
program. 
 
New Socialist Countryside: What Does the Budget Mean? 
--------------------------------------------- -------- 
 
¶3. (SBU) Zhang noted that the Central Government's budget 
to support agriculture, rural areas, and farmers increased 
to RMB 339.7 billion (USD 42.5 billion) in 2006 from RMB 
293.5 billion (USD 36.7 billion) in 2005 in order to 
support the 11th Five-Year Plan's New Socialist Countryside 
initiative, which aims to provide improved social services 
and infrastructure in rural areas.  In 2004, expenditures 
on agriculture, rural areas and farmers were only RMB 262 
billion (32.75 billion). 
 
¶4. (SBU) While the rural budget increased by 12 percent in 
2005 and 15 percent in 2006, however, Zhang lamented that 
the allocation as a percentage share of the total budget 
remains relatively unchanged, and in fact, declined between 
2004 and 2005.  According to Zhang, the Central 
Government's budget to support agriculture, rural areas, 
and farmers was 9.2 percent of the total Central Government 
budget in 2004, but that share fell to 8.8 percent in 2005. 
Likewise in 2006, the rural account's increase is 
comparable to the overall budget increase, and the change 
in the rural budget's percentage share of total expenditure 
is therefore insignificant. 
 
Officials' Rent-Seeking Behavior a Disservice to Farmers 
--------------------------------------------- ----------- 
 
¶5. (SBU) Zhang stated that an additional problem with the 
funding is that it primarily pays overhead costs rather 
than directly supporting farmers.  Although rural residents 
have significant needs, including education, health care, 
clean water, and employment training, a disproportionate 
amount of the New Socialist Countryside's budget funds 
local government salaries for officials who may or may not 
be able to deliver services. 
 
¶6. (SBU) Zhang emphasized that 16 or 17 Central Government 
ministries and several layers of local government (county, 
township, and village) ultimately depend on New Socialist 
Countryside expenditures, and these ministries and local 
governments unfortunately do not coordinate their efforts. 
Instead, officials seeking to maintain annual budget 
allocations engage in rent-seeking behavior, justifying 
their own bureaucracy at the expense of farmers.  This 
phenomenon is a serious problem in western and central 
China where cash-strapped county governments (that no 
longer can depend on the recently eliminated agricultural 
tax) wait for trickle-down funding from Beijing. 
 
Comment 
------- 
 
¶7. (SBU) Zhang's views on the New Socialist Countryside's 
budget are similar to those of other observers.  While the 
State-controlled media has trumpeted the Central 
Government's 2006 expenditures in the rural sector as 
 
BEIJING 00011704  002 OF 002 
 
 
increasing resources for a major policy initiative, 
impartial observers are quick to point out that the Central 
Government's overall budget expenditure has been increasing 
at an average of 17-18 percent in recent years, and the 
rural account should be viewed in that context.  Moreover, 
regardless of budget outlays, it is nearly impossible to 
assess how much money the Central Government, much less 
provincial and local governments, actually is spending on 
the rural sector.  End Comment. 
 
RANDT