VZCZCXRO8326
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #1081/01 0460616
ZNR UUUUU ZZH
P 150616Z FEB 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 4793
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 02 BEIJING 001081 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USDA/OSEC FOR DORR/BUCHANAN/TERPSTRA 
USDA/FAS FOR OA/YOST; OSTA/BRANT/HAMILTON; 
OCRA/ALEXANDER/RADLER/HIGGISTON/MIRELES, 
OFSO/LEE/SCHAYES/THURSLAND 
USDA FOR FAS/ITP - SHEIKH 
TREASURY FOR OASIA/ISA CUSHMAN 
LABOR FOR ILAB 
USDOC FOR ITA/MAC/OCEA - MCQUEEN 
 
E.O. 12958:  N/A 
TAGS: ECON EAGR EFIN PGOV SOCI CH
SUBJECT: Rural Policy Remains Government's Top Priority in 2007, 
with Increasing Focus on Finance 
 
REF: (A) BEIJING 461 
(B) BEIJING 450 
(C) 06 BEIJING 24338 
(D) 06 BEIJING 4224 
 
SUMMARY 
------- 
 
¶1. (SBU) On January 29, the State Council issued its Number One 
Document, naming rural policy as the leadership's top priority for 
the fourth year in a row.  As expected, the Number One Document 
supported the outcome of the December 2006 Rural Work Conference and 
emphasized the importance of modernization in the rural sector (Ref 
B).  As was the case with the 2006 Number One Document, the 2007 
version aims to support the Central Government's New Socialist 
Countryside initiative (Refs C and D).  Contacts emphasize that 
modernization goes beyond agricultural technology to include rural 
finance reform.  Government officials and the media have 
continuously drawn attention to rural financial reform in the wake 
of mid-January's National Financial Work Conference (Ref A).  End 
Summary. 
 
RURAL POLICY TOP GOVERNMENT PRIORITY AGAIN IN 2007 
--------------------------------------------- ----- 
 
¶2. (SBU) China's State Council and the Central Committee of the 
Communist Party of China released the Number One Document on January 
29, stating that developing modern agriculture would be the Central 
Government's top policy priority in 2007.  It was the fourth year in 
a row that the Central Government named rural policy as its top 
priority and follows up the official launch of the Central 
Government's New Socialist Countryside initiative, which was the 
focus of the 2006 Number One Document (Refs C and D).  By 
specifically focusing on modernization, the Number One Document aims 
to help farmers who remain in the countryside increase their 
incomes.  The National Bureau of Statistics recently announced that 
average per capita rural income in 2006 was RMB 3587 (USD 460), or 
less than one-third of urban income on average. 
 
NOT SURPRISING TO BEIJING-BASED CONTACTS... 
------------------------------------------- 
 
¶3.  (SBU) Rural watchers in Beijing were not surprised that the 
Number One Document again identified rural policy as the 
government's top priority or that the document focused on 
modernization.  The annual Rural Work Conference, held in Beijing 
December 22-23, 2006, previously had emphasized that modernization, 
including agricultural technology, rural financial sector reform, 
and energy efficiency, would be a focus of the government's work in 
2007 (Ref B).  Embassy contacts at the China Academy of Social 
Sciences and the Development Research Center of the State Council 
said they support the Central Government's efforts to modernize the 
rural sector, and these efforts do not represent a shift in the 
Central Government's policy towards the countryside. 
 
¶4. (SBU) Chen Xiwen, Vice Minister of the State Council Leading 
Group for Financial Affairs, said that the Number One Document 
reiterates the Central Government's commitment to increase its 
investment in rural areas.  Chen stated at a press conference on 
January 30 that funding for rural areas will increase by a greater 
margin in 2007 than in 2006.  As he did the previous year, Chen also 
used the press conference as an opportunity to criticize illegal 
land seizures as a threat to rural stability, and he called on local 
officials to work with farmers to resolve disputes. 
 
...NOR TO OBSERVERS IN THE PROVINCES 
------------------------------------ 
 
¶5. (SBU) An official at the Agriculture Bureau in Jiangxi Province's 
Jiujiang Municipality told Econoff on February 6 that it is clear 
from his perspective that the 2007 Number One Document would serve 
primarily to support the New Socialist Countryside policy outlined 
in the 2006 Number One Document.  The 2007 version does not 
represent a change, he said, but instead is one step in China's 
long-term process of rural reform.  The official said that in 
Jiujiang, in northern Jiangxi Province on the banks of the Yangtze 
River, the government already promotes modern agricultural methods, 
including providing training for farmers on how to take advantage of 
 
BEIJING 00001081  002 OF 002 
 
 
available technologies. 
 
WHAT DOES RURAL MODERNIZATION INCLUDE? 
-------------------------------------- 
 
¶6. (SBU) Most observers agreed that rural modernization in the 
context of the Number One Document includes not only agricultural 
technology but also rural finance reform.  Du Xiaoshan, Deputy 
Director of the Rural Development Institute at the China Academy of 
Sciences (CASS) and Min Tang, Chief Economist at the Asian 
Development Bank, previously emphasized the importance of rural 
finance after the Rural Work Conference in December 2006 (Ref B). 
The Financial Work Conference in mid-January (Ref A) also focused on 
the important role of rural finance in a modernizing rural sector, 
and reportedly called on the Agricultural Bank of China (ABC), one 
of China's four state-owned commercial banks, to expand its 
operations in the countryside and extend credit to farmers at the 
county level. 
 
¶7. (SBU) Liu Dongwen, Director of the Microfinance Department at the 
China Fund for Poverty Alleviation (CFPA), said on February 1 that 
the Number One Document, taken together with the outcomes of the 
Financial Work Conference and Rural Work Conference, clearly 
indicates that rural finance has become a key part of rural policy. 
Liu said he is not surprised by the Central Government's current 
focus on rural finance, stating that it has been a long-term process 
for China to reach this point.  Considering the question of why 
rural finance has become the focus of so much attention at this 
time, an official at the China Banking Regulatory Commission told 
Econoff on January 30 that rural finance reform, including improving 
farmers' access to credit, would be critical for maintaining social 
stability in the countryside. 
 
COMMENT:  RURAL POLICY IN THE MEDIA 
----------------------------------- 
 
¶8. (SBU) State-controlled media appeared to focus less attention on 
the Number One Document than in previous years.  In the 
English-language China Daily on January 30, for example, the 
coverage of the Number One Document's announcement appeared on page 
three, and there was no editorial in support of the announcement as 
in previous years.  Most rural policy-related articles in recent 
weeks have focused more comprehensively on the Financial Work 
Conference and outcomes for rural finance, lending more credence to 
the idea that there is little new in this year's Number One Document 
other than an overall emphasis on modernization, under which 
reforming rural finance is clearly among the highest priorities. 
 
 
SEDNEY