VZCZCXRO0071
OO RUEHCN RUEHGH RUEHVC
DE RUEHBJ #0870/01 0700941
ZNR UUUUU ZZH
O 100941Z MAR 08
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5604
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUCPDOC/USDOC WASHDC
RUEHGV/USMISSION GENEVA 2144
RUEHFR/AMEMBASSY PARIS 4285
RUEHRC/USDA FAS WASHDC

UNCLAS SECTION 01 OF 02 BEIJING 000870 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECON EAGR EFIN PGOV ETRD CH
SUBJECT: NPC: FOOD INFLATION RURAL SECTOR'S MAIN CONCERN 
 
REF: (A) BEIJING 823 
 
(B) BEIJING 750 
 
SUMMARY 
------- 
 
¶1. (SBU) Ministry of Agriculture officials met the press on March 10 
to discuss agricultural and rural development issues.  The officials 
cited China's rural development accomplishments in 2007, notably the 
9.5 percent increase in rural incomes, and also outlined the 
challenges ahead.  Food prices and inflation, however, dominated the 
press conference with journalists from the mainland and abroad 
focusing on rising prices in China.  Food safety also was a major 
focus of th press conference.  END SUMMARY. 
 
MINISTRY OF AGRICULTURE:  2007 ACCOMPLISHMENTS 
--------------------------------------------- - 
 
¶2. (SB) Vice Minister of Agriculture Wei Chaoan told eporters at 
the press conference that the Central Government accomplished its 
agricultural and rural development goals in seven major areas in 
2007: 
 
--increased grain production for the fourth consecutive year; 
 
--boosted rural incomes by 9.5 percent to RMB 4140 (USD (575); 
 
--steadily developed agricultural industries, including livestock, 
vegetables, oilseeds, cotton, fruit; 
 
--improved the living conditions and quality of farmers; 
 
--accelerated progress in agricultural science and technology, 
including modernizing agricultural production; 
 
--improved food safety and quality; and 
 
--combated animal diseases, including avian influenza and blue ear 
disease. 
 
RURAL DEVELOPMENT PROBLEMS REMAIN 
--------------------------------- 
 
¶3. (SBU) Wei also identified seven major challenges for rural 
development, including: 
 
--guaranteeing food supply and protecting food security; 
 
--narrowing the urban-rural income gap, which reached 3.33 to 1 in 
2007; 
 
--strengthening agricultural technology; 
 
--investing more capital in rural areas, particularly in rural 
infrastructure; 
 
--improving assistance for farmers' transition from agricultural to 
non-agricultural work; 
 
--protecting the environment in rural areas; and 
 
--recovering from winter storms. 
 
INFLATION STILL THE TOP CONCERN 
------------------------------- 
 
¶4. (SBU) With these general positives and negatives as a backdrop, 
rising food prices and growing Consumer Price Index (CPI) inflation 
were the top concern of the journalists covering the press 
conference, as was the case with NDRC Chairman Ma Kai on March 6 
(Ref A).  Wei acknowledged that increasing rural incomes is more 
important than ever before due to the rising cost pressure on poor 
farmers.  Wei said that although food products account for one-third 
of the CPI basket, the government cannot simply say that the 
increasing CPI is totally the result of rising food prices.  Wei 
said that rising labor and input costs, increasing consumption and 
the resulting imbalance in supply and demand, and influence from 
global markets all affect China's CPI.  China needs to continue to 
increase agricultural production, Wei said, and the Number One 
Document's emphases on building up rural infrastructure and 
protecting arable land will be important factors in increasing 
production (Ref B). 
 
¶5. (SBU) Throughout the press conference, Wei answered a barrage of 
questions about food prices.  A foreign journalist asked about the 
 
BEIJING 00000870  002 OF 002 
 
 
impact of rising soybean prices on China, a Macao-based journalist 
inquired about the impact of winter storms on agricultural 
production, and two mainland reporters asked about livestock and 
vegetable prices.  Wei maintained that rising prices are a threat to 
China's poor population.  Wei stated that the winter storms would 
have a significant impact on rural incomes in southern and central 
China, but the impact on grain production would be limited as those 
regions primarily grow fruits and vegetables. 
 
FOOD SAFETY CONCERNS 
-------------------- 
 
¶6. (SBU) Not surprisingly, food safety also was a hot topic during 
the press conference with a Japanese reporter asking about the 
safety of China's food exports, and a domestic reporter asking about 
food safety at home.  Zhang Yuxiang, Director General of MOA's 
Department of Marketing and Information, answered with the oft-heard 
statement that China attaches great importance to food safety and 
more than 99 percent of China's food exports are safe.  The quality 
of food at home as well as shipped abroad remains high, the 
officials said. 
 
COMMENT:  FEEDING FRENZY ON INFLATION 
------------------------------------- 
 
¶7. (SBU) The amount of attention paid to food prices and inflation 
by both domestic and foreign journalists is significant and follows 
the statements of the previous week by Premier Wen Jiabao and NDRC 
Chairman Ma Kai that inflation is a serious threat to China's 
macroeconomic development.  Questions about inflation drowned out 
other possible topics at the press conference.  With February CPI 
statistics due to be released on March 12 in the middle of the NPC, 
it is likely that inflation will attract even more attention before 
the NPC session concludes on March 18. 
 
RANDT