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3 Economic Development and the Environmentlocked

3 Economic Development and the Environmentlocked

  • Daniel K. Gardner
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What Accounts for China’s Economic Growth Since the Late 20th Century?

Mao Zedong died in 1976, and two years later Deng Xiaoping became China’s paramount leader. Convinced that the Chinese economy was stagnating, Deng and others introduced a series of reforms meant to improve economic productivity and the living standards of the people. The reforms included decollectivizing agriculture, opening up China to foreign trade and investment, and allowing private enterprises to be established. Signaling that capitalism and personal wealth were no longer taboo, Deng is said to have proclaimed (though there is no documentary evidence), “To get rich is glorious”—a slogan that the Chinese people have embraced with enthusiasm.

The economic growth has been phenomenal. Prior to 1978, China’s GDP was growing at roughly 3% annually; since 1978 it has enjoyed an annual rise of roughly 10%. In 2010 China overtook Japan as the world’s second largest economy, just after the United States; the expectation is that it will surpass the United States as the world’s largest by the mid-2020s.1

With agricultural decollectivization farmers were given partial ownership of the land and the right to sell surplus crops at market rates. In the years from 1978 to 1984 China’s agricultural output skyrocketed by 47%. This increase did not simply p. 32enrich farmers; the surplus of food also allowed for the reallocation of labor from the farm to industry, especially to the town and village enterprises created by local governments.

China now set on a path of industrialization, rural and urban, state-owned and private. This industrialization was the engine driving the country’s efforts to modernize and to challenge the global dominance of Western industrialized nations and Japan. Here we return to the subject of population: the huge and largely impoverished population made for a ready and cheap industrial labor force. Because textiles, furniture, toys, and electronics could be produced inexpensively by global standards, exports grew—and grew. China today is the largest exporter in the world and the second largest importer. In 2015, exports accounted for 22.4% of the country’s GDP. (At their height in 2006, exports made up more than 35% of the country’s GDP.)

Globalization has provided a big boost to China’s economy. Accession into the World Trade Organization (WTO) in 2001, which liberalized China’s terms of trade with other parts of the world, was a particular boon. Globalization and WTO membership provided the Chinese with more than export markets, though: multinational corporations (MNCs) from the West and from East Asia—GE, Johnson & Johnson, IBM, Philips, Toyota, Bosch, Audi, Microsoft, GM, and Apple, to name a few—have found it increasingly attractive to set up shop in China. Various factors have made China an appealing place for MNCs. Most significant perhaps are its cheap labor and lax environmental laws, which have made production there a relative bargain, and its growing consumerism, which has made the country an increasingly attractive market in its own right.

Globalization has also resulted in a tremendous amount of foreign direct investment (FDI) in Chinese enterprises: in 2014 alone FDI in China was around $120 billion, more than in any other country in the world (with the United States second at $86 billion).2 Globalization has been a two-way street, especially in p. 33the past decade. China is also investing abroad, in places like Africa, the Mideast, South America, and, more recently, North America and Europe. In fact, for the first time ever, in 2014 China sent more FDI abroad than it received.

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What Has It Meant for China to Be the “Workshop of the World”?

In the 20th century, the development of worldwide communications and transportation networks facilitated the globalization of trade. From 1978 to 2003 there was roughly a 40-fold increase in international trade; trade between Asia and the European Union, North America, South America, and Africa became routine.

China, in particular, benefited. Because of its (1) large labor force, (2) low wages, and (3) abundant supply of cheap energy (i.e., fossil fuels), the country had become a manufacturing powerhouse by the late 20th century, especially of inexpensive low-tech goods like textiles, toys, bicycles, paper supplies, and building materials. It was cheaper for countries around the world to import these products from China—even including transportation costs—than to produce them domestically. As mentioned earlier, it also became cheaper for MNCs (e.g., IBM, Bosch, Apple, GM, Toyota) to outsource the production of some of their goods, by setting up their own plants and factories in China or by contracting with Chinese suppliers, than to manufacture them at home.

Villages in China have even come to specialize in manufacturing a particular item: jeans, handkerchiefs, socks, and cigarette lighters, for example. In Yiwu, a village in China’s southeastern Zhejiang province, the tree lights and trinkets, polystyrene snowflakes, and plastic Santas and reindeers that decorate houses all over the world during the Christmas season are made. Six hundred factories in Yiwu produce 60% of the entire world’s Christmas decorations. Buyers from all over come to the wholesale market in the village to shop for Christmas ornaments, made by migrant laborers working p. 3412-hour shifts for $300 to $400 a month, and ship them back to their home countries.3

In 2011, China surpassed the United States as the world’s largest producer of manufactured goods. Data from the Natural Resources Defense Council show that in 2015 China was producing 40% of the world’s washing machines, 50% of the textiles, 60% of the buttons, 70% of the shoes, 80% of the televisions, and 90% of the toys.4 In recent years, China has added higher-value products to its list of manufactured goods: computer machinery, home appliances, aircraft, pharmaceuticals, and medical instruments, for instance.

With increased manufacturing comes increased energy consumption. Since 1980 the consumption of energy in China has more than quadrupled (between 2000 and 2010 alone, it rose 130%). And since coal provides the lion’s share of China’s energy needs, coal consumption has exploded, growing five-fold. China today consumes as much coal every year as the rest of the world combined. The “workshop of the world” has helped to bring prosperity to China and to lift hundreds of millions of Chinese people out of poverty, to be sure. But heavy emissions from coal-fired industries and power plants of sulfur dioxide, nitrogen oxides, particulate matter, mercury, and the greenhouse gas carbon dioxide have taken an unspeakable toll on the environment and the people’s health.

A recent study found that the products manufactured for export accounted for more than 36% of the sulfur dioxide, 27% of the nitrogen oxides, and 22% of the carbon monoxide emitted by China.5 We are thus left with the delicate and much-debated question: Whose pollution is this, China’s or the importing countries’?

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How Has Economic Growth Affected the Country’s Environment?

In the first two decades of the reform period, China’s efforts were focused on developing the economy at all costs. The environmental consequences of economic growth received p. 35little or no attention. The slogan “pollute first, clean up later” (xian wuran hou zhili) encapsulated the government’s priorities. And the economy has indeed prospered, and the material well-being of the people has vastly improved.

Today, China’s priorities may be shifting, however: the country appears to be moving in the direction of the “clean up later” stage, as the people and the leadership alike recognize the devastating effects economic progress has had on China’s physical environment. Beginning in 2014, Premier Li Keqiang signaled China’s intention to shutter the “workshop of the world,” saying that the country’s economy must now move away from its dependence on the manufacture of cheap goods for export and pursue a new “low carbon and green growth” path focusing on the production of high-tech products and services for domestic consumption.

Economic growth has meant a heavy reliance on fossil fuels, most particularly coal, for the production of energy. At the turn of this century China was consuming 1.5 billion tons of coal annually; in 2013, the country consumed more than 4 billion tons. And because burning coal emits more pollutants and more carbon dioxide than any other source, China’s economic development has been directly responsible for much of the smog that hangs in the country’s air and nearly 30% of the greenhouse gases warming the globe. The toxins emitted into the country’s air, in turn, have contributed to an increase in the country’s morbidity and mortality rates. Teng Fei, a professor at Tsinghua University, estimates that the country’s coal emissions were responsible for 670,000 premature deaths in 2012 alone.6

In addition, the coal industry—mining, processing, and power generation—is water-intensive, consuming approximately 20% of all of China’s water resources. Thus, the ever-rising need for energy is a growing threat to the country’s already limited water supply. It is estimated that since the 1990s more than 28,000 rivers in China have dried up, owing in p. 36large part to the withdrawal of water by industries located on riverbanks—as well as to climate change, population growth, and poor water management.7

The factories that have sprouted up along China’s rivers and lakes account for much of the country’s phenomenal economic development. However, because they dump their chemicals and wastewater directly into these waters, they account too for the contamination that makes much of the country’s water—surface water and groundwater—undrinkable, even untouchable. The toxins introduced into the water supply and the soil by these factories and taken up by neighboring villagers in their drinking water and crops have resulted in an abnormally high incidence of cancer cases in the countryside. Some villages have been so severely stricken that they are referred to as “cancer villages,” at least 500 of which are known to exist (see Chapter 8).

Finally, there are the inevitable industrial accidents that release metals and toxins into the air, the water, and the soil. One of the more notorious occurred in the northern province of Jilin in 2005 when a chemical factory exploded, sending 100 tons of toxic pollutants—benzene, aniline, nitrobenzene—into the Songhua River. Six people were killed by the blast and dozens were injured. Forming a 50-mile-long slick, the deadly spill then drifted downstream, reaching Harbin, a city of 10 million, and cutting off its water supply; from there it continued downstream, flowing into the Amur River and Russian territory.8

Turning the present question on its head, we can ask: What is the cost of environmental pollution to the country’s economic growth? Economists tend to put the cost in terms of percentage of China’s GDP. The figures range widely, from 3% to as much as 15%. But the figures are not based on a consistent set of metrics. Some focus on the costs of air pollution, some on air and water pollution, and some on air, water, and soil pollution; some calculate the costs according to the number of lost working days and productivity; some consider the cost of lost working days and the medical and hospitalization costs; p. 37still others include the cost of lost working days, medical expenses, natural resource degradation, and environmental cleanup. The Chinese Academy of Social Sciences and World Bank put the annual total cost of environmental degradation in China at about 9% of the country’s GDP.9 The World Bank and the Institute for Health Metrics and Evaluation, in a study published in September 2016, calculated that in 2013 the cost to China of air pollution alone approached 10% of its GDP.10

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What Has Economic Development Meant for the Growth of Cities?

With industrialization has come greater economic opportunity for China’s less well-off rural population. The pace of urbanization has been remarkable, as farmers have fled the land for construction, manufacturing, and odd jobs in the cities. In the early 1950s urbanites were but 13% of the country’s population and as recently as 1978, they represented only 17.9%. But by 2013, China had officially become “urban,” with 53% of the people living in cities. In 2015, 56% of the population was urban.

In 1949 there were 132 cities in China. Today there are 655; 12 have populations of over 4 million (Figure 3.1). This “hyper-urbanization” is expected to continue apace, as the government is actively promoting the move from the countryside to cities. Reckoning that urbanization will reduce the number of rural poor and promote greater income equality, Premier Li and the Beijing leadership plan to move 100 million rural Chinese into cities by the end of 2020 (60% urbanization), and another 150 million by 2025 (70%), making for an additional 250 million new city dwellers. According to Li, China should be aiming for an 80% urbanization rate, the average rate for the world’s developed economies.

Figure 3.1 The growth of cities in China

While the move to urbanize may be good for the economy, it naturally has had consequences for the environment—and the environmental challenges will only grow as the flight to p. 38cities accelerates. First, urban expansion has come at the expense of arable land. From 2001 to 2013 the country lost more than 8 million acres of arable land to urban development. The farmland lost to urban growth has put the country’s food security at risk. Urban expansion has also led to the reclamation of wetlands and lakes; in the past 20 years, the city of Wuhan has lost 70% of its lakes.11 To the consternation of environmentalists and scientists, China in recent years has been bulldozing the tops of mountains and filling in the surrounding valleys to p. 39create level ground for urban development. Already, studies have documented the environmental effects of moving mountaintops on the environment: deforestation, soil erosion, landslides, air pollution, water pollution, and so on.12

As might be expected, the construction of wastewater treatment plants has not kept pace with the rapid growth in urban population, which means that cities are discharging much of their municipal wastewater directly into surrounding waterways. The larger numbers of people produce more sewage, which, like the wastewater, contributes to China’s water pollution woes. An often-forgotten consequence of urban growth is the inevitable rise in solid waste. In 1976 Beijing generated 1.04 million tons of municipal solid waste; in 2007, the volume had grown to 6 million tons. Currently solid waste in the capital is increasing 8% annually, and 90% of it is sent to landfills, which already are filled beyond their designated capacities.13

Finally, there is the obvious air pollution, the result of urban industry, power plants, trucks and cars, mass transit, housing and utilities, and so forth.

The urbanization planned through 2025 brings with it opportunity. Cities can be thoughtfully designed, made to be greener and “smarter,” and the present sprawl—and land encroachment—can be curtailed. Denser living could enable better and more efficient management of water, wastewater, and energy; the development of low-carbon public transit systems; and the reduction of private vehicles and their environmentally unfriendly emissions.

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As the 21st Century Unfolds, Can Economic Prosperity and Environmental Protection Coexist?

This is the very challenge China’s leadership has set for itself. Under Communist Party rule, China has become a global economic power and the lives of the Chinese people, materially, have improved dramatically. “Economic prosperity at p. 40all costs” has been the leadership’s guiding principle—and the basis of its legitimacy—for the past few decades, but it turns out that those costs have been unacceptably high. Air pollution, water scarcity, food contamination, and a growing health crisis have made increasingly clear to the Chinese people all that has been sacrificed in the name of economic development. Environmental protests have become more frequent, as people insist that breathing clean air, drinking clear water, and eating foods free of toxins are basic human rights that need the government’s protection.

As a consequence, there has been a seeming shift in the government’s priorities. In the last couple of years, talk of the “economy at all costs” has given way to talk of building an “ecological civilization” (see the Epilogue). In 2012, then-President Hu Jintao remarked, “We must give high priority to making ecological progress . . . work hard to build a beautiful country, and achieve lasting and sustainable development of the Chinese nation.”14 The following year, the Central Committee of the Communist Party of China, under President Xi Jinping’s leadership, picked up on the theme in a November communiqué:

We must deepen ecological environment management reform by centering on building a beautiful China. We should accelerate system building to promote ecological progress, improve institutions and mechanisms for developing geographical space, conserving resources and protecting the ecological environment and promoting modernization featuring harmonious development between Man and Nature.15

Protection of the environment has taken on a new urgency for the Party. But the difficulty the leadership faces in promoting an “ecological civilization” is how to protect the environment without putting at risk the country’s economic growth. When, p. 41for example, in the first quarter of 2014 the government shut down many of the high-polluting, energy-intensive steel, cement, and coal plants in Hebei, the province registered its lowest quarterly growth in 15 years.16 And in 2015, when production was suspended at 57 energy-intensive plants in the city of Linyi in Shandong after the mayor was summoned to Beijing for failing to uphold environmental standards, 60,000 workers were reported to have lost their jobs.17

To this end, Premier Li Keqiang and others have been arguing since 2014 for the need to transform the very nature of the Chinese economy from one based on energy-intensive manufacturing of low-value goods to one centered on higher-tech products and services. In effect, this means a shift away from an export-heavy economy to an economy based on domestic consumption. And since urban dwellers have better incomes and on average consume two to three times as much as those who live in the country, the government, as we have learned, is intent on adding 250 million people to the urban rosters.

But while it is easy to see, as Li Keqiang does, how weaning the economy from dirty manufacturing and lessening the country’s energy intensity might be beneficial for China’s environment, it is less easy to see how vastly augmenting the number of urban dwellers—with the likely need for new building construction, the expansion of urban infrastructure, and the greater demand for automobiles, housing, heating and cooling, and utilities—can be environmentally beneficial. Only the coming years will tell whether Beijing’s “hyper-urbanization” policy has taken adequate account of the potential environmental challenges it poses.

Still, there can be no doubting the leadership’s intention. The many steps introduced by the government in recent years (see Chapter 11) make clear Beijing’s wish to redress the three-decade imbalance in favor of economic growth. Li Keqiang’s declaration of a “war on pollution” in March 2014 is but one indicator of Beijing’s seriousness. Many observers p. 42of the Communist Party believe that much of its legitimacy today rests on the enormous economic progress the country has enjoyed under its leadership. The Party’s legitimacy in the years to come may well depend on how effectively it continues to provide for the people economically even as it safeguards the environment and promotes the people’s “quality of life.”