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