VZCZCXRO8773
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #5601/01 2360552
ZNR UUUUU ZZH
P 240552Z AUG 07
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 1254
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 BEIJING 005601 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON EAGR PGOV SOCI CH
SUBJECT: NINGXIA:  FARMERS GETTING INCOME BOOST FROM CASH CROPS AND 
NON-FARM WORK BUT FACE CONSTRAINTS 
 
 
SUMMARY 
------- 
 
¶1. (SBU) Farmers in Ningxia Hui Autonomous Region's Zhongning County 
have enjoyed a significant income boost in recent years as a result 
of both expanding opportunities for non-farm work and Zhongning's 
production of wolfberries, a cash crop which is earning historically 
high prices in the international market due to increasing demand. 
Local officials are pleased with the pace of economic development in 
the county, and they acknowledge the important role played by both 
rural cooperatives and local companies.  Local officials and 
businessmen state, however, that Ningxia's farmers remain concerned 
about a lack of available arable land, an inadequate water supply, 
and insufficient financing.  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, on 
August 15-16.  Emboffs traveled to the countryside in Zhongning 
County on August 18. 
 
NON-FARM WORK AND CASH CROPS TO BOOST INCOMES 
--------------------------------------------- 
 
¶3. (SBU) According to officers at the Wolfberry Bureau in Zhongning, 
Ningxia Hui Autonomous Region accounts for more than 40 percent of 
China's wolfberry production, and the industry has benefited from 
increasing prices in the international market due to demand in 
health stores in Europe, Japan, and the United States for the dried 
fruit, which is purported to have antioxidant properties. 
 
¶4. (SBU) Zhongning's wolfberry farmers earn higher incomes than many 
of their counterparts in poor provinces.  Despite the fact that 
Ningxia is one of China's 10 poorest provinces -- with an economic 
structure similar to Sichuan, Gansu, Guizhou, and Jiangxi -- farmers 
in Zhongning County manage to earn approximately RMB 3000 (USD 400) 
per year with half of that amount derived from wolfberries and the 
other half from grain production and part-time work. 
 
ACHIEVING ECONOMIES OF SCALE WITH SMALL PLOTS 
--------------------------------------------- 
 
¶5. (SBU) In the case of wolfberries, Zhongning County officials said 
they use two methods to bundle together small plots into large farms 
in order to achieve economies of scale and share costs of water, 
fertilizer, and seeds.  One method is to help farmers organize 
cooperatives or sales associations to share costs and market their 
products.  In general, each farmer has only one mu to farm (although 
Emboffs spoke to one farmer who operates four mu).  The cooperatives 
then sell their products to companies (longtou qiye) in the county 
who promise to pay farmers a competitive rate for the wolfberries, 
which are then processed, dried, and exported. 
 
¶6. (SBU) Companies also use a more direct method, sometimes 
purchasing farmers' land-use rights for RMB 500 per year and then 
paying the farmers or contract workers a salary for farming the 
land.  (Note:  Wolfberry production is very labor-intensive 
requiring work throughout the spring, summer, and fall for planting, 
care, and harvesting.  End Note.)  The company is then responsible 
for irrigating the land and purchasing inputs.  Farmers are free to 
either work for the company or seek work elsewhere in the city or 
countryside. 
 
STILL FACING SIGNIFICANT CONSTRAINTS 
------------------------------------ 
 
¶7. (SBU) Local officials and businessmen said they are concerned 
about constraints facing farmers that will limit growth in the 
future.  The primary constraint is the lack of arable land in one of 
China's most arid regions.  The Deputy Head of Zhongning County was 
quick to point out that only one-third of the county's arable land 
can be utilized for wolfberries because, according to the official, 
Central Government guidelines require the remaining two-thirds of 
the county's arable land to be reserved for grains and staple fruits 
(such as apples).  The area also lacks sufficient water supply, as 
fields adjacent to the Yellow River have irrigation, but there is 
not enough water for plots farther away. 
 
¶8. (SBU) Zhu Yanhua, Chairman of the Board of the Ningxia Zhongning 
Zaokang Wolfberry Development Company, said he is struggling with 
how to help cooperatives access financing so that they can improve 
their livelihoods and expand their own operations, which also will 
benefit his company in the long-run.  Zaokang is studying other 
financing models such as those used by dairy companies to help 
 
BEIJING 00005601  002 OF 002 
 
 
herders expand their livestock herds by guaranteeing bank loans. 
Growers in Ningxia, however, are not able to access financing 
because their land, for which they have land-use rights and is their 
only asset, cannot be transferred, mortgaged, or used as collateral. 
 
 
PICCUTA