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RUEKJCS/DIA WASHDC 0377

UNCLAS SECTION 01 OF 02 GUANGZHOU 000713 
 
SENSITIVE 
SIPDIS 
 
State for EAP/CM; INR/EAP; S/P 
USTR for China Office 
TREASURY FOR OASIA/INA -- DOHNER/HAARSAGER/WINSHIP 
USDOC FOR ITA DAS KASOFF, MELCHER, MAC/OCEA 
 
E.O. 12958: N/A 
TAGS: SOCI ECON PGOV CH
 
SUBJECT: Rural/Urban Divide - Officials and Academics Ponder the 
Challenges but Propose Few Concrete Solutions at Conference 
 
GUANGZHOU 00000713  001.2 OF 002 
 
 
(U) This document is sensitive but unclassified.  Please protect 
accordingly. Not for release outside U.S. government channels. Not 
for internet publication. 
 
¶1. (SBU) Summary: The Chinese government hopes urbanization will 
boost domestic consumption and reduce reliance on exports, according 
to officials and academics at a conference on rural-urban 
integration in Hainan December 5-6.  One academic estimated, for 
each one percentage point increase in urbanization, spending on 
fixed infrastructure would rise by about US$970 billion.  Speakers 
identified key reforms needed to enhance rural-urban integration, 
eliminate the rural-urban poverty gap and ensure urbanization 
doesn't cause instability, including more investment in small- and 
medium-sized cities, land reform, family registration ("hukou") 
reform, social security reform and administration reform.  In spite 
of identifying these necessary reforms, few of the conference 
attendees gave specifics on how to achieve them.  End summary. 
 
Increasing Domestic Demand 
-------------------------- 
 
¶2. (SBU) Urbanization and urban-rural integration will help to spur 
domestic demand and move China away from an export economy, 
according to Gao Shangquan, Board Chairman of the China Institute 
for Reform and Development, (CIRD), which sponsored the conference 
with the Royal Norwegian Embassy.  For every one percentage point 
increase in China's urbanization rate there will be RMB 6.6 trillion 
(US$971 billion) spent on fixed infrastructure, he said.  The 
Chinese government hoped to see urbanization increase from the 
current level of about 46% to 63.6 % by 2030, according to Zhang 
Junkuo, Director-General of the Department of Strategy and Regional 
Economy of the State Council's Development Research Center. 
However, two conference attendees got up during the conference and 
expressed dissatisfaction with Zhang's urbanization numbers.  They 
stated the urbanization estimates had been calculated incorrectly 
because official numbers included migrant workers in the cities who 
should really be excluded. 
 
Pushing Investment into Small- and Medium-Sized Cities 
--------------------------------------------- --------- 
 
¶3. (SBU) China needs to work harder at integrating rural areas with 
the cities by creating more industrial centers in small- and 
medium-sized cities, according to both academics and officials at 
the conference.  Speakers bemoaned migrant workers who must often 
travel to the large industrial centers of Shanghai and the Pearl 
River Delta because there are few opportunities elsewhere.  There 
are no buffer zones, Chen Huai, the Director General of the Policy 
Research Office of the Ministry of Housing and Urban-Rural 
Development, said.  By concentrating investment in small- and 
medium-sized cities, there will be more opportunities for affordable 
housing and migrant workers will be able to find work closer to 
their native homes, according to Chen.  However, none of the 
speakers offered proposals for exactly how investment should be 
directed into small- and medium-sized cities. 
 
Land Reform - Agreement on Problem, Few Solutions 
--------------------------------------------- ---- 
 
¶4. (SBU) Although many speakers agreed land reform was an issue that 
needed to be tackled, few gave concrete ideas on how to actually 
achieve meaningful reform.  One exception was Guo Zhengmo of the 
Institute of Economics, Sichuan Academy of Social Sciences, who gave 
a presentation on a trial program near Chengdu where the collective 
land rights of 2,000 farmers was auctioned.  The auction produced a 
higher return for the land than farmers would have received if the 
land had been expropriated by the government.  The farmers were able 
to move into new housing thanks to the proceeds from the land sale, 
he said. 
 
Administration Reforms and Democracy? 
------------------------------------- 
 
¶5. (SBU) There was some debate over who should control the pace and 
scope of urban development.  Some speakers advocated control of 
 
GUANGZHOU 00000713  002.2 OF 002 
 
 
cities at the county and provincial levels -- a flat power structure 
with local government making decisions.  Others still advocated 
control by central authorities, a vertical structure. 
Wang Yukai, professor at the China National School of 
Administration, gave a surprising presentation advocating 
"elections" to hold county and provincial administrators accountable 
for their land use decisions.  This was countered by Liu Hao, an 
inspector at the Department of Employment of the National 
Development and Reform Commission, who presented a paper in which he 
found democracy in Taiwan and in South Korea played little role in 
the transformation of those places from rural to urbanized 
societies. 
 
Social Security and Hukou Reform 
-------------------------------- 
 
¶6. (SBU) The need for a stronger social security system and family 
registry or "hukou" system reform were also identified as important 
steps to ensure urbanization doesn't lead to instability.  During 
this most recent economic downturn, China got lucky, according to 
some speakers; migrant workers went home when they found themselves 
unemployed, according to Chen Huai, the Director General of the 
Policy Research Office of the Ministry of Housing and Urban-Rural 
Development.  "During this financial crisis, migrant workers 
returned to their homes without complaint.  We won't be as lucky 
next time," Huai said. The next generation of migrant workers will 
not be satisfied in the future unless migrant workers have the same 
access to social services as urban dwellers, said Lu Xueyi, a senior 
research fellow at the Chinese Academy of Social Sciences' Institute 
of Sociology.  Several speakers argued reform of the family registry 
system and creation of a strong universal social security system 
were needed, but once again, no one gave specifics on how to do 
this.  Peng Xizhe Dean of the School of Social Development and 
Public Policy at Fudan University expressed skepticism about the 
elimination of the family registry system because he believed it was 
the only disincentive that prevented migrants from moving to 
Shanghai in unsustainable numbers. 
 
Comment - Lots of Talk but Few Concrete Strategies 
--------------------------------------------- ----- 
 
¶7. (SBU) While the conference was not attended by policy makers at 
the highest echelons of government, many participants appeared to be 
influential in government and academia.  Other attendees included 
Chen Li, Director-General, of the General Office of the National 
Population and Family Planning Commission; Lin Fanglue, the Vice 
Governor of Hainan; and Li Xi, the Vice Mayor of Kunming to name a 
few.  From the breadth of the discussions, it appeared the Chinese 
authorities and academics know far too well the problems behind the 
urban-rural poverty gap but don't know where or exactly how to begin 
the necessary reforms.  Tackling land rights, reforming the family 
registration system, and creating an equitable social security 
network are complex problems; potential solutions will face many 
challenges.  End comment. 
 
¶8. (U) This cable was coordinated with Embassy Beijing and ConGens 
Chengdu and Shanghai. 
 
JACOBSEN