VZCZCXRO8768
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #5599/01 2360550
ZNR UUUUU ZZH
P 240550Z AUG 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 1251
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 BEIJING 005599 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON EAGR ELAB EFIN PGOV SOCI CH
SUBJECT: NINGXIA BENEFITING FROM CENTRAL GOVERNMENT ASSISTANCE BUT 
HUGE CHALLENGES REMAIN 
 
SUMMARY 
------- 
 
¶1. (SBU) Ningxia Hui Autonomous Region, one of China's poorest 
provinces, has benefited from Central Government funding under both 
the Great Western Development Program and New Socialist Countryside 
policy.  As a result, Ningxia has improved its infrastructure and 
expanded its energy sector as well as increased support for social 
services such as education and health care.  Despite capital inflows 
from the Central Government, however, participants at an economic 
development forum in Yinchuan and others working in the province 
agreed that long-term development in Ningxia will be difficult to 
sustain due to the lack of private sector investment, reduction in 
foreign aid, and the need to balance growth with environmental 
concerns.  END SUMMARY. 
 
TRAVEL TO NINGXIA 
----------------- 
 
¶2. (SBU) Econoff and Conoff traveled to Ningxia Hui Autonomous 
Region August 15-18.  Emboffs participated in the Second Ningxia 
International Halal Food and Muslim Commodities Festival and the 
Investment and Trade Fair in Yinchuan, the provincial capital, and 
attended the Economic Development Forum on August 16. 
 
CENTRAL GOVERNMENT RESOLVING SOME PROBLEMS... 
--------------------------------------------- 
 
¶3. (SBU) The goals of the Great Western Development Program, 
launched by the Central Government in 1999 to develop the economy in 
China's poorest geographic region, and the New Socialist Countryside 
policy, introduced in 2006 to build infrastructure and improve 
social services in rural areas, converge in Ningxia Hui Autonomous 
Region, one of China's poorest provinces.  Central Government fixed 
asset investment has improved the province's infrastructure, 
particularly the transportation network and the energy sector. 
Officials at the Ningxia Foreign Affairs Office (FAO) pointed out 
that there now is 500 km of highways in a province where there were 
no highways ten years ago.  They also stated that the Central 
Government is helping Ningxia build up its energy sector, having 
jointly developed the Ningdong Energy and Chemical Industrial Base 
in the eastern part of the province to tap into coal reserves 
there. 
 
¶4. (SBU) One FAO representative stated that Ningxia will mine 80 
million tons of coal this year and hopes to raise output to 100 
million tons in 2008.  Five new electrical plants are planned, with 
some of the electricity to be transmitted to Tianjin to power an 
industrial area there.  Other signs of increasing affluence include 
Ningxia's first golf course and a new international airport, which 
will begin flights to Hong Kong next year. 
 
¶5. (SBU) With respect to social services, Perrine Lhuillier, China 
Program Coordinator for Enfants du Ningxia, said that Ningxia's 
education sector has made tremendous progress since the introduction 
of the New Socialist Countryside policy.  School fees are now paid 
by the Central Government and the local government has promised to 
cancel boarding fees by 2009.  Ramsey Rayyis, Country Representative 
for the American Red Cross, agreed that Ningxia has made great 
strides recently in rural education, and he said that NGOs such as 
the Red Cross have filled many of the service gaps left by a lack of 
government funding in areas such as health and sanitation. 
 
...BUT LIMITED CAPITAL CAN ONLY GO SO FAR IN NINGXIA 
--------------------------------------------- ------- 
 
¶6. (SBU) At the same time, first-time visitors to Ningxia -- one of 
China's poorest provinces and one of its smallest with a population 
of only six million -- immediately see a difference between Yinchuan 
and other provincial capitals and Ningxia's countryside versus other 
rural areas.  Yinchuan's urban landscape is not dotted with 
high-rises and office parks as cities such as Changsha, Nanchang, or 
Zhengzhou might be.  Students who manage to go to university usually 
leave the province and do not return.  Ningxia is one of only five 
provinces without any of China's 119 key universities that receive 
special Central Government funding and attention.  (Note:  Two 
college students on summer break interviewed by Emboff in Yinchuan 
said they hope to find jobs after graduation in Xian where they are 
studying.  End Note.) 
 
¶7.  (SBU) In the countryside, some farmers are starting to build 
brick houses, but many still live in mud-walled homes and walk 
several miles a day to retrieve water.  Despite the Central 
Government's focus on rural policy, most farmers in Ningxia still 
earn only RMB 2000 to RMB 3000 (USD 250 to USD 375) per year. 
 
¶8. (SBU) Lu Dadao of the China Academy of Sciences told participants 
at the Ningxia Economic Development Forum on August 16 that 
 
BEIJING 00005599  002 OF 002 
 
 
Ningxia's future development faces a number of challenges, 
especially with respect to sustainability, due to the lack of 
private sector investment, reduction in foreign aid, and the need to 
balance growth with environmental concerns.  Lu said that he is 
particularly concerned about the environmental impact of rapid 
industrial development in an ecologically fragile area. 
 
NEED A STRONG DEVELOPMENT STRATEGY FOR FUTURE GROWTH 
--------------------------------------------- ------- 
 
¶9. (SBU) Zhao Kang, a researcher at the Ministry of Finance, said at 
the Forum that Central Government funding for Ningxia is limited and 
the province will therefore need to make tough decisions on what to 
spend money on.  With so many needs -- infrastructure, public 
services, industrial development, and natural resources -- those 
decisions will not be easy.  Rayyis added that the Red Cross and 
other NGOs are facing increasing difficulty raising money for 
projects in Ningxia as China develops and donor interest wanes.  In 
the health sector, therefore, it is imperative that short-term gains 
earned from outside funding must be sustainable over the long-term, 
Rayyis said. 
 
PICCUTA