VZCZCXRO0594
RR RUEHGH RUEHVC
DE RUEHCN #0229/01 2880943
ZNR UUUUU ZZH
R 150943Z OCT 09
FM AMCONSUL CHENGDU
TO RUEHC/SECSTATE WASHDC 3458
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHCN/AMCONSUL CHENGDU 4152

UNCLAS SECTION 01 OF 02 CHENGDU 000229 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ELAB EAGR PGOV SOCI CH
SUBJECT: CHONGQING GOALS FOR BALANCED URBAN-RURAL DEVELOPMENT 
 
REF: A) 2007 CHENGDU 129, B) CHENGDU 163 
 
CHENGDU 00000229  001.2 OF 002 
 
 
¶1. Summary:  As one of only two pilot areas in China working to 
reduce the economic imbalance between urban and rural citizens 
(ref A), Chongqing Municipality -- where rural residents account 
for 70 percent of 33 million inhabitants -- is focusing inter 
alia on reforming the social security, land use, and rural 
banking and finance systems, Chongqing Development and Reform 
Commission (CQDRC) officials said.  County-level experiments 
include offering apartments in lieu of farmland, providing 
preferential policies for new businesses, and establishing 
agricultural cooperatives.  Land use rights are being relaxed to 
allow farmers to convert land into shares of cooperatives, and 
rural "hukou" or residence registrations are being gradually 
reclassified as "urban" to reap social service and insurance 
benefits.  UK banks HSBC and Standard Chartered have received 
approval to operate at the county level in order to expand rural 
finance.  End Summary. 
 
Urban-Rural Coordinated Development and Reform 
--------------------------------------------- - 
 
¶2. Chongqing Municipality's second ten-year development plan, 
begun in 2007, focuses on making Chongqing an important "pole 
for growth" in western China and becoming the economic center of 
the upper Yangtze River area, CQDRC Deputy Director Shen 
Xiaozhong told Consul General on September 22.  Key to these 
goals is accelerating urban-rural reform to reduce disparities 
between urban and rural areas.  The State Council thus announced 
in 2007 that Chongqing Municipality, with a 70-30 split between 
rural and urban among its population of 33 million, was to 
become one of two pilot areas (along with Chengdu and six 
million rural inhabitants in its environs) for "Urban-Rural 
Coordinated Development and Reform." 
 
¶3. In January 2009, the State Council issued further guidance to 
Chongqing, recommending the municipality focus on settling 
migrants from the Three Georges Dam (90 percent complete), 
develop modern agriculture to boost development of a "new 
socialist countryside," accelerate transformation of old 
industrial bases, develop a modern service industry, develop an 
inland open economy, accelerate infrastructure development, 
strengthen resource conservation and environmental protection, 
improve public services, and promote scientific and 
technological progress and independent innovation.  Specific 
areas mentioned by the State Council for reform in Chongqing's 
urban-rural systems include public budget and revenue, "hukou" 
or residence registration, land use and management, social 
security, rural banking and finance, and administrative 
management and government operations. 
 
Reform Experiments in Three Counties 
------------------------------------ 
 
¶4. CQDRC Senior Chief of Reform and Coordination, Chen Jihong, 
offered examples of pilot urban-rural reform projects being 
carried in three counties.  In Jiulong County, an economically 
backward area close to the main city, the government is 
experimenting with urbanizing rural residents by relocating them 
to a centralized community, where they can obtain a 
government-built apartment in exchange for their farmland.  In 
Dianjiang County, the government is experimenting with reforming 
farmers' land use rights in order to develop an agriculture 
product base and develop tourism, offering preferential policies 
for farm laborers who return from coastal areas to start their 
own businesses.  In Liangping County, farmers are being 
encouraged to form farmers' specialized cooperatives (nongmin 
zhuanye hezuoshe) to focus on specific agriculture areas such as 
aquaculture and orchard production.  Longer-term, those living 
in rural areas will be gradually moved from the mountains to the 
plains, and later become urban residents, Chen explained. 
 
Expanding Farmers' Land Use Rights 
---------------------------------- 
 
¶5. At the Chongqing Academy of Social Sciences (CASS), Deputy 
Director Zhang Bo elaborated on attempts to reform farmers' land 
use rights under the urban-rural reform plan.  Previously, he 
said, farmers had only the right to use or rent their land. 
Under the reforms, farmers will also be able to sub-contract out 
land, as well as obtain a mortgage loan, or form a business by 
transforming land value into shares.  In the latter case, 
farmers can form land use cooperatives (tudi hezuoshe), Zhang 
said, becoming shareholders of the co-op by using land value as 
shares.  These co-ops, once established, can attract outside 
investment for future development.  Zhang offered examples 
including Chongqing's Organic Vegetable Production Base and 
Fruit Production Base. 
 
Improving Social Security: Calling Rural "Urban" 
--------------------------------------------- --- 
 
¶6. Due to the imbalance in development between urban and rural 
 
CHENGDU 00000229  002.2 OF 002 
 
 
areas, China's social security system is also not well 
implemented in rural areas, CASS Section Chief Xu Yuming added. 
With financial support from the central government, Chongqing 
plans to accelerate the process of improving the social security 
system and promote reform of medical insurance and insurance for 
the elderly.  To achieve equal coverage for both urban and rural 
residents, the Chongqing government plans to gradually redefine 
those currently classified as rural according to their "hukou" 
(residence registration) as "urban," as those classified as 
urban enjoy higher insurance coverage and public services.  This 
cannot be done all at once, however, due to the enormous costs 
of expanding services to the entire rural population, she said. 
 
Opening County Financial Markets to Foreign Banks 
--------------------------------------------- ---- 
 
¶7. To increase rural financial activity, CQDRC Deputy Director 
Shen said that Chongqing is working to open up financial markets 
at the county level and allow foreign financial institutions to 
operate.  HSBC and Standard Chartered have already received 
approval in two counties (ref B), though no American bank has 
yet received approval, he said.  To date, some 52 domestic 
financial institutions have won approval from the Chongqing 
government to set up county level banks.  These banks will 
provide farmers with easier access to small loans.  At the same 
time, small-scale commercial loan operators are also being 
allowed to provide private capital to farmers.  This method is 
not only flexible, convenient, and efficient, but will also 
create additional job opportunities, Shen said. 
BROWN