VZCZCXRO5742
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0197/01 0440834
ZNR UUUUU ZZH
R 130834Z FEB 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 5776
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC
RHHMUNA/HQ USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 04 GUANGZHOU 000197 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
 
USDOC FOR 4410/ITA/MAC/MCQUEEN 
STATE ALSO PASS USTR/CHINA OFFICE 
USPACOM FOR FPA 
 
E.O. 12958: N/A 
TAGS: 
SUBJECT: Making Guangxi a Harmonious Society 
 
¶1. (U) Summary: Guangxi leaders vow to create a harmonious society 
in 5 to 10 years through careful implementation of the 11th, and 
possibly the 12th, Five Year Plans.  Leaders emphasized the need to 
increase urbanization and industrialization, improve rural 
conditions, and raise the standard of living in order to meet this 
ambitious goal.  Septel reports on the Consul General/American 
Chamber of Commerce-South China trip to Guangxi, January 23-26.  End 
Summary. 
 
---------------------------- 
PROVINCIAL EXPECTATIONS HIGH 
---------------------------- 
 
¶2.  (U) Guangxi Development and Reform Commission (DRC) Deputy 
Director General Wu told the Consul General January 24 that his goal 
is to achieve a "rich, harmonious, civilized" society in the next 
5-to-10 years.  The DRC will implement the 11th 5-Year Plan (2006 to 
2010) via expanding industrialization, developing the Socialist New 
Countryside, and raising the standard of living for both rural and 
urban inhabitants.  The Deputy Director described Guangxi's 
industrialization as an "axis with 2 wings."  The "Axis" is the 
industrial corridor of Nanning, Liuzhou, and Guilin; the "West Wing" 
is comprised of the Beibu Gulf (Tonkin) cities of Beihai, Qinzhou, 
and Fanchengang; and the "East Wing" consists of the inland 
transport hubs of Hezhou, Yulin, and Guigang that connect to 
Guangdong. (Note: The poorest areas of Guangxi, the prefectures of 
Hechi and Baise, are nowhere in this development plan. End Note). 
By 2010 the DRC intends to increase the urbanization rates of 
Nanning, Liuzhou, and Guilin to 40% (currently, 33% of Guangxi's 
total area is urbanized, about 10% below the national average). 
Through industrialization and urbanization, the Deputy Director 
General expects Guangxi's 2010 GDP to reach RMB 650 billion (USD 
83.9 billion), and per capita GDP to increase from USD 1,600 to USD 
1,800.  In 2015, the DRC projects the GDP to reach RMB 1 trillion 
(USD 129 billion), with a per capita GDP of USD 2,500.  Finally, in 
2020, the DRC expects the GDP to reach RMB 1.5 trillion (USD 194 
billion), with a per capita GDP of USD 3,000, which meets China's 
definition of a "moderately well-off" society. 
 
¶3. (U) The Deputy Director said Guangxi would achieve these lofty 
goals specifically through: 
-- improving rural village construction; 
-- raising industrial value added from 33% of the GDP to 40% by 2010 
by focusing on new industries (metallurgy, automobile manufacturing, 
and petro-chemicals); 
-- developing a logistics and finance service industry, with Nanning 
as an expo center; 
-- promoting regional cooperation though ASEAN and the Beibu Gulf 
Area (especially in Guangxi's West Wing port cities); 
-- building infrastructure by developing ports, railways, roads 
(highways from Nanning to both Beihai and Pingxiang at the Vietnam 
border are already complete), energy sources (specifically nuclear, 
wind, and hydro-electric power) and irrigation and flood prevention; 
 
-- cultural enhancement through education, science, and technology 
while preserving the heritage of Guangxi's ethnic minorities; 
-- increasing farmers' income (part of the Socialist New Countryside 
program).  The Deputy Director said that by 2010, the urban 
population will have a minimum per capita income of 12,000 RMB 
(1,548 USD) while farmers will have a per capita income of 3180 RMB 
(492 USD). 
 
¶4. (U) He further told consulate officers that government officials 
are concerned about the environment.  Officials are now evaluated on 
the basis of reducing environmental pollution and energy consumption 
per unit of GDP, while increasing total GDP.  The Deputy Director 
pointed out that Guangxi achieved a 2% reduction in pollutant 
discharge in 2006, despite nearly 4% of GDP growth. 
 
¶5. (U) When asked about fair land compensation to farmers, whose 
land may be taken due to industrial or infrastructural development, 
the Deputy Director said any problems were likely the result of a 
misunderstanding and could be resolved with better communication. 
The difference between the land purchase price and the compensation 
to farmers is either put toward past or future road and water 
infrastructure improvements or paid directly to village associations 
rather than to individual farmers.  The DRC claims that government 
is improving laws to ensure fair compensation to farmers. 
 
------ 
GUILIN 
 
GUANGZHOU 00000197  002 OF 004 
 
 
------ 
 
¶6. (U) Guilin DRC Deputy Director General Liu pointed out that the 
environment is Guilin's key attraction as a tourist city and, as a 
consequence, industrial development is below average for Guangxi. 
Guilin's pillar industries (in addition to the tourist industry) 
are: machinery, bio-pharmaceutical, food and drinks, car parts and 
rubber.  In the 10th 5-Year Plan period (2001-2005), Guilin's GDP 
averaged annual growth of 10%.  By 2005, Guilin's GDP reached RMB 50 
billion (USD 6.5 billion), while government tax revenues were RMB 
5.1 billion (USD 658 million).  Spending on fixed asset investments 
was RMB 19.8 billion (USD 2.6 billion).  The Deputy Director added 
that during the next five years (2006-2010), Guilin aimed to achieve 
annual GDP growth of 10%, annual tax revenue growth of 12% and fixed 
assest investment growth of 12%.  Guilin's GDP growth in 2006 was 
13.7%, but the Deputy Director claimed, this was not due to 
overheating of the economy.  In fact, such growth was average for 
Guangxi, and perhaps not high enough. 
 
--------------------------------------------- -------- 
BUILDING THE SOCIALIST NEW COUNTRYSIDE IS NOT SO EASY 
--------------------------------------------- -------- 
 
¶7. (U) In response to specific questions from the Consul General, 
the Deputy Director said that Guilin values IPR, and that IPR 
violations do not exist in Guilin.  There was a significant 
urban-rural wealth gap, however, and the Deputy Director said that 
in 2005, the per capita income of rural residents had reached RMB 
3,000 (USD 387), while urban residents' per capita income reached 
RMB 10,000 (USD 1,290).  The Deputy Director said the urban-rural 
income gap had existed since the founding of New China, but that the 
wealth gap was being narrowed and urbanization was speeding up in 
impoverished counties such as Longsheng (a national-level 
impoverished county), Gongcheng, Ziyuan and Guanyang (3 
provincial-level impoverished counties).  The Deputy Director said 
the government had set up an Agricultural Technology Promotion 
Office to educate farmers about modern agricultural techniques, 
established a Poverty Relief Office to coordinate these kinds of 
efforts, and was now providing modest, no-interest loans to farmers. 
 Guilin's Foreign Affairs Office (FAO) representative added that 
each government agency was assigned to head a poverty-relief project 
in an impoverished county.   Regarding the most difficult aspects of 
poverty relief, the Deputy Director said stable funding was 
problematic and projects including road construction, drinking water 
supplies, and free education initiatives were all under-funded.  The 
Deputy Director also said that changing the mindset of the rural 
residents was difficult, as rural farmers often prefer the old ways 
of doing things and were unwilling to adopt new technologies. 
 
------- 
LIUZHOU 
------- 
 
¶8. (U) In Liuzhou, Agricultural Bureau Deputy Director Li told us 
that the city's agricultural industry added RMB 10.5 billion (USD 
1.4 billion) to Liuzhou's economy in 2006.  The Deputy Director 
noted that while this figure is lower than Liuzhou's neighbor, 
Guilin, Guilin's rural population is 6 million, while Liuzhou's 
rural population is only 2 million.  Primary crops in Liuzhou are: 
rice, sugarcane, sub-tropical fruit, silk, tea, vegetables, and 
Chinese herbal medicines.  The two most important crops are rice 
(the staple crop) and sugarcane (the primary economic crop).  The 
Deputy Director explained there are 2 rice crops each year, and 
Liuzhou produces 2 million mu (329,400 acres) or approximately 
800,000 tons of rice per year (Note: One mu, the Chinese standard 
measure for land area, is equal to 0.1647 acre or 7176 square feet. 
End Note).  Liuzhou produces 1.3 million mu (214,110 acres), or 6 
million tons of sugarcane per year; Liuzhou's 11 sugar refineries 
process 700,000 tons of sugar annually, 2/3 of China's total sugar 
output.  Liuzhou wants to increase its sugarcane output to further 
support countryside development; the Agriculture Bureau is 
interested in obtaining higher producing species from the United 
States. 
 
¶9. (U) The Deputy Director said Liuzhou has 600,000 mu (98,820 
acres) of fruit orchards, producing 270,000 tons of fruit crop each 
November.  The annual fresh fruit crop only lasts three to four 
months and, in order to increase income, the Agricultural Bureau 
would like to establish more fruit processing plants in Liuzhou. 
Currently, there are very few value-added agricultural processing 
plants.  Two additional crops without local processing facilities 
 
GUANGZHOU 00000197  003 OF 004 
 
 
are silk and tea.  In 2006, Liuzhou silk worm farmers raised 26,000 
tons of silk cocoons and produced 5,000 tons of silk.  However, 
because there are few local garment factories to convert silk to 
retail products, silk is usually sent to Jiangsu and Zhejiang.  As 
for the tea industry, Liuzhou produces about 100,000 mu (16,470 
acres) of leaves per year; this crop is mostly sold to processors in 
other provinces, including Fujian.  However, vegetables are 
generally produced for the local market, though some crops are sold 
in Guangdong.  The Deputy Director said Liuzhou harvests 1.3 million 
mu (214,110 acres) of vegetables each year, which yields 1.6 million 
tons of crop.  Finally, the Deputy Director said herbal medicine 
crops are mostly harvested wild, so there is little organized 
farming of this product.  Further development of these secondary 
crops would add support to overall countryside development. 
 
¶10. (U) In an effort to develop farmer knowledge, Liuzhou's 
government subsidizes vocational training and technical training to 
increase agricultural yields.  Internet websites provide 
agricultural product and technology information.  However, few 
farmers have internet access.  Nonetheless, the Deputy Director 
explained many farmers have televisions and telephones and can call 
local television stations and request the broadcast of programs 
which provide agricultural technology information. 
 
------------------------ --------------------------------------- 
GUILIN: DAXIONG VILLAGE, SUCCESSFUL DEVELOPMENT IN RURAL GUANGXI 
------------------------ -------------------------------------- 
 
¶11. (U) Deputy Director of Guilin Agricultural Bureau Lu led 
Congenoff on a tour of Daxiong Village, outside of Guilin, which has 
159 households with a total population of 728.  Last year, the 
village's per capita income was around RMB 6,000 (USD 774), though 
the village head had a personal income of RMB 17,000 (USD 2,193). 
The village has recently built a kindergarten, a home for the 
elderly, and a clinic (which doubles as the family planning service 
center).  Funds for these facilities came from the villagers 
themselves, the village committee and subsidies of the government. 
The key to the village's economic development - a cement road - was 
constructed by the Guilin and county governments in 2001.  Before 
that, there was only a mud path that was nearly impassable on rainy 
days and villagers did not have access to outside markets or 
technical assistance from the government. 
 
¶12. (U) Mushroom growing, which only began two years ago, is the 
village's major source of income, although the villagers also grow 
vegetables (such as winter melons) and run a nonferrous metal 
factory and a plastic factory.  The winter melon crop and surplus 
vegetables largely go by truck to Guangdong for sale.  The mushrooms 
are sold to Guangdong, Hunan, and are even air freighted to Russia 
through a Beijing trader.  Since they do not have a mushroom 
processing industry, the villagers sell the mushrooms fresh once 
they are picked.  The shift to mushroom farming was made after the 
market for Chinese chives (the previous cash crop) went down. 
 
¶13. (U) A mushroom association has been set up in the village, to 
help marketing and to find buyers of the mushrooms; not all 
villagers are members and thus do not share in the profits.  The 
association personnel go on the Internet to check mushroom prices in 
different places to find the most profitable sales location.  The 
agricultural bureau's mushroom research institute said the wholesale 
price of mushrooms was around RMB 3.5 (USD 0.45) per jin (1 jin = 
500 grams), while the retail price could be as high as twice that 
amount.  The mushroom farmers obtain the mushroom spores from the 
local agricultural bureau at a low price - a RMB 2 (USD 0.26) sachet 
of spores can produce 20 square meters of mushrooms - and get 
technical support from the agricultural bureau's mushroom experts. 
Straw and dirt beds for mushroom growth are housed in 
plastic-wrapped, straw-covered structures, while villagers use 
natural manure instead of chemical fertilizer for growing the 
mushrooms. 
 
------- 
COMMENT 
------- 
 
¶12. (U) Guangxi's new infrastructure, commitment to development, 
and role as ASEAN's interlocutor and gateway to western China, 
combined with rising costs of doing business in Guangdong, make the 
province a good time for investment - or so is the pitch we are 
hearing from provincial officials.  Industrialization and 
infrastructure development are favorite methods to draw investment, 
 
GUANGZHOU 00000197  004 OF 004 
 
 
and involvement in developing the latter generally results in a good 
economic payoff.  However, the success of industrialization may 
depend more on industry type, since, for example, major cities in 
many provinces want to build automobiles at the same time the 
central government is encouraging automobile manufacturers to slow 
their expansion plans.  Still, what is most needed is a significant 
increase in farm income in the near future.  Despite several years 
of focused development to raise rural incomes, urban-rural income 
rates remain at a 3:1 ratio, a ratio expected to remain static 
through 2020. 
 
GOLDBERG