China's Economic Growth and the Environment Fa 08

China's Economic Growth

Introduction (Pre-1978)

Over the past three decades China has had the highest growth rate in the world making China the fastest growing country. Previously to 1978 this was not the case; "agriculture was stagnant, industrial production was low, and the people's living standards had not increased in twenty years" (Nathan 200). The Communist Party of China (CPC), also known as the Chinese Communist Party (CCP), was founded in 1921 but did not gain power until 1949 when they gained control of mainland China renaming it the People’s Republic of China (China Today 2007). This government and their anti-capitalist ideals were the root of the economic problem. The government had control of all production, prices, and wages. There was no foreign trade or foreign investment because of the CPC belief in a closed economy. Before the 1980s eighty percent of Chinese workers were in the agriculture industry and Chinese workers had very little incentive to work hard due to low, stagnant wages and lack of incentive based rewards, like bonuses. Previous to 1978 China had an annual gross domestic product growth rate of six percent with painful highs and lows (Hu 1997). The country and the economy were at a standstill. After the death of China’s premier, Mao Zedong, in 1976 it became apparent to Chinese leaders that economic reform was necessary. They knew that without change they would lose the support of their people. In 1978 China began a series of economic reform that helped their nation become the economic superpower it is today.

Economic Reform of 1978

In 1978 China decided to undergo major economic reform to jumpstart their economy. Their main goals were to provide political and social stability, consumer welfare, and economic growth. In an effort to awaken a dormant economic giant, the government encouraged the formation of rural enterprises and private businesses, liberalized foreign trade and investment, relaxed state control over some prices, and invested in industrial production and the education of its workforce (Hu 1997). The Chinese Government decided to join the world economy and introduced the “Open Policy” in 1979. This policy opened up the Chinese economy to the world and allowed foreign companies to invest in the Chinese market and businesses. At first China only allowed foreign investment in certain areas that they felt would benefit most from it, but by 1988 they opened up most of the country to foreign investment. Due to the cheap labor foreign companies heavily invested in China. Money started flowing into the Chinese economy now. There were many changes in farming. The Chinese government began to allow farmers to sell their surplus crops on the open market, and long term sales contracts were established between the government and farmers. The industrial boom and decollectivization caused millions of Chinese to leave farming for jobs in factories as shown in figure 1. This also created a large scale movement of Chinese to urban areas.

Figure 1

In the 1980s the government decreased their control over production, wages, and prices, and there was a surge in private businesses. Enterprisers were now allowed to produce for profit and the role of the private sector increased. The price of goods were now controlled by the market instead of the government which allowed producers to adjust prices and make profit. With greater incentives the Chinese started producing in excess. This helped foreign trade boom and strengthened the economy. The economic reforms that China underwent boosted their economy. Foreign investment and trade flowed money into the economy which helped to jumpstart the private sector. Chinese men and women now had reason to work hard. Industry and agriculture production soared as the economy strengthened, and the standard of living in China was raised significantly. China had become an industrial and economic superpower. The reform was highly successful.

       Shows GDP Growth skyrocket after 1978 reforms began

Environmental Impact

China’s Environmental Problem’s As a Result of Rapid Development and Growth

While China’s economic situation has drastically improved over the last thirty years, its environment is paying the toll. China is quickly moving in the direction of becoming one of the world’s biggest polluters (Economy, 1). According to Elizabeth C. Economy, the C.C. Starr Senior Fellow and director for Asia studies at the council on Foreign Relation and the author of The River Run’s Black: The Environmental Challenges to China’s Future, turning the environmental situation around will require “revolutionary bottom-up political and economic reforms” (1). Economy believes that three pivotal initiatives must be met in order for there to be any progress. She feels that China’s leaders need to give incentives to local officials so that they will comply with the environmental targets. They must also loosen political restrictions that they have on the courts, nongovernmental organizations (NGO’s) and the media so that these groups can individually help enforce environmental codes (1). Lastly, the international community must play a role in this process as well and focus more on implementing reform policies and put less emphasis on “cutting edge technologies and developing demonstration projects” (2). Doing so means, going out of their way to work with local Chinese officials, factory owners and environmental NGO’s, Sponsoring NGO’s to help with education and enforcement policies, influencing multinational corporations to spend money on making sure China has the resources and funds to start using better environmental practices. If these three initiatives are not met immediately the consequences could be dire for China and will eventually lead to not only their environmental demise but their economy will soon crumble along with it. China’s core environmental problems all revolve around their massive increase in production which was not properly monitored over the past thirty years. Up until recently, China’s sole emphasis was on monetary gain, nevertheless according to Corliss Karasov in his article titled, “On A different Scale Putting China’s Environmental Crisis in Perspective” it would have been far more cost effective in the long term if they had enforced environmental regulations to begin with rather than waiting until now, when so much damage had been done that efforts to turn things around are astronomical. In fact, some estimated reports say that it could cost China as much as 8 to 12 percent of their GDP to adequately clean up their accrued environmental degradation.

Some of the Core Environmental Problems

Coal

China was ranked as having sixteen out of twenty of the most polluted cities in the world. Four of the most polluted are in the coal-rich province of Shanxi (Economy, 2). As much as ninety percent of China’s sulfur emissions and fifty percent of its particulate emissions are the result of coal use. Particulates are responsible for respiratory problems and acid rain. Acid rain is specifically caused by sulfur dioxide emissions and falls on one-fourth of China’s territory and on one-third of its agricultural land. Acid rain is not only detrimental to agriculture but also erodes buildings and eats away at people’s residential homes (Economy, 2). Acid rain covers 30% of China and can cause up to 20 billion dollars worth of yearly damage of agriculture, forestry and construction materials (Karasov, 455). Acid rain can also greatly deplete crop output, destroy forests and plants and cause pest attacks (Karasov, 455).

Transportation

Another one of the main reasons for China’s surge in pollution is their growing population. Due to the dramatic increase in China’s population over the last decade and the increased economic development more people are driving because they have the money to afford cars (Economy, 2). In 2007, China started a massive project to build 52,700 miles of new highways. As a result, 14,000 new cars are on the roads producing ghastly high amounts of CO2 emissions. By 2020, China is projected to have 130 million cars on the road and by 2050, it is said that China will have even more cars than the United States (Economy, 2). The increase in transportation coupled by coal burning has made China the world’s leading contributor of CO2, the leading cause of climate change (Korosov, 455) Estimates show that this pollutant could cause as much as a 30% drop in precipitation in three of China’s major river regions as well as a 37% decline in the country’s wheat, rice, and corn yields by 2050. It is also predicted that the Yangtze and Yellow Rivers which derive much of their water from glaciers, would overflow as because the glaciers were going to melt. More still, China’s environmental damage is so bad that it is said that they are now affecting other parts of the world. Japan and South Korea now experience acid rain as a result of China. In the United States, 25% of the particulates in the atmosphere found in Los Angeles are caused by China’s pollution (Economy, 4).

Land Deterioration and Erosion

Several Factors have led to severe land deterioration and erosion as a result of unmonitored, extreme development. First of all, deforestation has become a huge issue along with the overgrazing of grasslands and over cultivation of cropland. Over the last fifty years, forests and farmland have been plowed down to make room for more industry and cities, resulting in diminishing crop yields, a loss in biodiversity and local climate change (Economy, 2). The Gobi Dessert is spreading more than 1,900 square miles every year turning more and more land that was once fertile into desert. Now, approximately one fourth of the entire country is desert. Moreover, as much as 10% of china’s farmland is now polluted. As a result, 12 million tons of grain is contaminated with heavy metals absorbed from the polluted soil (Economy, 2).

Picking Up the Pieces

The biggest problem with China right now is that while China does want to clean up its environment it does not want to do so at the cost of devastating the economy. While Beijing has signed off on many policies to reduce pollution, they have a hard time implementing these policies on a local level. For instance, SEPA has discussed how it does not have enough power over or contact with local environmental protection programs to actually enforce these policies and plans (Korosov, 458). Nevertheless, the longer China waits the more costly it is going to become to clean up their environment. In 2005, Beijing constructed an ambitious five year plan. By 2010 it wants 10% of the nation’s power to come from renewable energy sources. It wants energy intensity reduced by 20%, levels of sulfur dioxide reduced by 10%, water consumption reduced by 30%, and finally it wants to increase investment in environmental protection from 1.3% to 1.6% of GDP. Finally, the five year plan called for local officials to shut down some of the plants in the most energy intensive industries, such as power generation and aluminum, copper, steel, coke and coal and cement production. Since the main issues with environmental health have been enforcing policy on local officials, the main tactics for implementation is to deny tax breaks and other production incentives to industries who do not comply with standards (Economy, 5).

Nevertheless, as impressive as these goals look on paper, implementing them has been less than successful. For instance, in 2001, the Chinese government enacted a plan to reduce sulfur dioxide emissions by 10 percent and instead emissions increased by 27%. More still, Beijing’s goal to decrease energy and pollution have yet to be met and only 37% of the wind power projects Beijing promised to construct have been implemented (Economy, 5).

Health Effects

Overview

Since the economic reforms of 1978, China has experienced dramatic industrialization and rising energy usage in conjunction with a population growth and unprecedented urbanization. Subsequently, China's push to become a major industrial power has put a tremendous strain on the environment and on the health of the Chinese population. The health impact from environmental deterioration is considered one of the most pressing concerns in China. China’s economic development has resulted in an increase in air pollution from coal mining, poorly managed solid waste, and contaminated rivers. Consequently, millions of rural and urban Chinese citizens suffer from health conditions directly related to these pollutants and as a result of this economic development (Yang 2007).

Air Pollution

China is one of the largest coal producers, exporters, and consumers in the world. This abundant natural coal reserve has contributed to China’s booming economic development; however, pollution problems from both burning and mining coal have also created serious environmental and public health concerns (Yang 2007). Health consequences remain pervasive in China because coal accounts for approximately 74 percent of China’s primary energy consumption (Yang 2007). An additional concern is that China’s coal production has increased 66 percent over the past five years (Yang 2007). Concerns from this industry are air pollution and the degradation of water and land. The growing coal industry has serious implications for the environment and public health. For example, the city Linfen, located in the Shanxi Province, is known as one of the most polluted cities in the world (Yang 2007). This city’s high pollution level is an example of the devastating impact of the coal industry. Although the coal industry has greatly improved the city’s economic development, this industry is contributing to the deterioration of the environment and increasing health problems among the local citizens. City residents suffer respiratory illness from the toxins emitted from the coal mines. The province of Linfen is an essential example of the pollution problem from the coal mining industry because without enforced emissions regulation the health of the local people and environment is suffering.

Water Pollution

China’s economic growth, industrialization, and urbanization coupled with inadequate investment in basic water supply and treatment infrastructure has resulted in widespread water pollution. Principal threats to human health from water pollution include the rapid and unregulated expansion of industrial activities and the growth of urban and suburban areas without adequate investments in water supply infrastructure. Over half of the population consumes drinking water contaminated with levels of animal and human extract (Wu et al. 1999). These alarming trends present serious consequences for human health. The poor condition of China’s surface water coupled with the lack of coordination between public health authorities and water management officials has resulted in a variety of waterborne illnesses.

Poultry operations have expanded rapidly to meet the demand of city residents for meat, eggs, and mild. These operations generate considerable animal waste within and around cities and most of the wastes from these farms are discharged untreated into water surfaces (Wu et al. 1999). China’s basic water supply and sewage treatment infrastructure has contributed to the increased risk infections and parasitic diseases as a result of the growing volume of industrial chemicals, heavy metals, and toxins. Also, the lack of coordination between environmental and public health objectives to manage these issues compounds these problems (Wu et al. 1999).

Trash

In China, the older landfills do not have proper lining to protect the soil and water from toxins. As a result of the poorly managed landfills, decomposing waste greatly impacts the environment and human health because the landfill linings do not protect the soil and water from toxins as the waste decomposes (Jones 2007). In addition, China’s illegal dumping of municipal and industrial waste has also contributed to the contamination of the local groundwater, rivers and soil (Jones 2007). The runoff from landfills and coal mines also pollutes the surface and groundwater and damages crops and impacts farmer’s seasonal yields (Yang 2007). The expanding wasteland and desertification from these practices each year destroys millions of acres of fertile land.

The lack of recycling programs in Chinas coupled with the growing poverty among rural migrants in China’s urban areas has lead to the growth of an informal sector of waste collectors (Jones 2007). Although this informal sector generates income for the workers there are also health threats from the waste. The workers seek materials that can be sold from picking through the urban waste collection landfills. However these individuals are usually without any form of health coverage and therefore are more susceptible to a variety of health problems including chemical burns, respiratory illness, and accidents (Jones 2007).

Suggestions for improvement

The Chinese government has increased efforts to combat environmental and health challenges. In this new but growing movement, the media has played an essential role in pushing progress in health care and environmental incentives. Major challenges that remain are the decentralized nature of law enforcement and a lack of comprehensive cooperation between health and environmental organizations (Yang 2007). While the central government passed stringent environmental laws, an inability to control enforcement at the local level remains. Therefore, without enforcement of current environmental and health regulations the air, water, and waste related pollution will remain serious public health concerns (Yang 2007).

Kuznets Curve

Background

The environmental Kuznets curve (shown above) represents that concept that environmental degradation will decline once a country's per capita income reaches a certain level. The curve represents the hypothesized pattern that developing countries will follow as they grow. There is much controversy surrounding the validity and practicality of the environmental Kuznets curve.

In the beginning stages of a country's growth, industrialization occurs. During this, the curve shows that environmental damage grows rapidly. At this point people focus more on income, jobs, and improving the standard of living while pollution takes a back seat (Dasgupta 2002). The country is too poor to be able to fund and enforce pollution abatement and environmental regulation is nearly nonexistent. As per capita income rises, however, it reaches a turning point at which people are now able to address the concerns of the environment. Subsequently, new technologies are implemented and legislation is passed which results in environmental degradation falling. Initial estimates of the per capita level of income that represents the turning point range from $5000 to $8000 (Dasgupta 2002).

Controversy

The traditional environmental Kuznets curve applies mainly to water and air pollutants. Since not all types pollution has been found to decrease with a higher level of income, several opposing curves have emerged. As shown in the above figure, the creation of new pollutants as a country develops will stray from the original environmental Kuznets curve (Dasgupta 2002). In fact, these pollutants represented by the New Toxics curve will continue increasing as there is no means to eliminate them. The "Race to the Bottom" curve represents the idea that the curve will rise to a horizontal line at maximum pollution levels as globalization promotes a race to bottom in terms of environmental standards (Dasgupta 2002). The concept behind this is that businesses will flock to these developing countries who are unable to enforce environmental regulation as a way to cut costs by not complying with stricter regulation in other countries. The final alternative scenario is one where the turning point is lower and is reached with less pollution than the traditional curve. The inability to gather proper data in developing countries makes a conclusive argument for or against the validity of the environmental Kuznets curve difficult to reach.

Relating to China

China's gross domestic product (GDP) per capita in 2005 was $1702, well below the level where improvements in the environment should start to be seen (Backer 2007). This figure indicates that the next few decades should see continuing environmental damage in China. With World Bank estimates that mortality and sickness caused from urban air pollution represent a loss of 2-3% of GDP in China, the environmental Kuznets curve has received increased attention (Dasgupta 2002). As China continues to grow, regulation will become key in determining its environmental impact. Dasgupta et. al. argued three reasons why richer countries develop stricter pollution regulation. First, pollution becomes a higher priority after investments in health and education have been made. Second, richer countries have more funding to monitor and enforce regulations. Finally, higher income results in better education which increase awareness and demand by the public for regulation (Dasgupta 2002).

The Liberalization of an economy, as done in China, has been found to result in environmental improvements. When this occurs, government subsidies are often eliminated or reduced which most often benefits the environment (Dasgupta 2002). Subsidies typically are given to the heaviest polluters because those industries lend to state involvement. The elimination of subsidies will shift production to more efficient forms and also allow the free markets to guide firms towards more cost efficient methods These more efficient methods can also have a tendency of being environmentally friendly. As shown in Figure 3, the state-owned enterprises in China have much higher pollution abatement costs because they operate inefficiently (Dasgupta 2002).

China's Environmental Regulation Policies

Over the course of the last century China has undergone vast changes in social structure. There was the process of collectivization that lasted from 1949-1978 which was followed by market reform and decollectivization from 1978 to the present (Muldavin 2000). Throughout this time of rapid economic expansion, environmental damage has been profound and evironmental policy largely ineffective. Policy for the environment was typically discretionary and failed to address the causes of problems.

Collectivist Period

During the collectivist period China operated under a system of communal capital (Muldavin 2000). The state provided the means to transform production from private household-based to collective organization of production through redistribution of resources. Under this collective regime, people enjoyed little vulnerability when it came to providing for themselves (Muldavin 2000). Since they were under the protection of the state, they need not worry about going hungry if they had a bad harvest.

This period emphasized growth, regardless of the consequences. Environmental regulations were largely ignored and deemed insignificant compared to the goal of economic growth. It was not until 1972 that the environment became a concern (Muldavin 2000). This year saw a red tide in the Bay of Dalian cause shellfish production losses, fish in Beijing found to have toxic levels of chemicals, and a United Nations conference of health and the environment that encouraged China to develop environmental protection policies (Muldavin 2000). Attention was now brought to the status of the environment and the market reforms allowed more legislation to pass.

Market Reform

When China entered the market reform period beginning in 1978, a major change was the change of entitlement back to the individual (Muldavin 2000). Along with increased freedom came vulnerability and risk that had not been previously experienced. The result of not being able to rely on the state and needing to fend for oneself was environmental damage. The free-rider problem evolved into an open access problem and current regulation was not prepared to combat the ensuing environmental damage. People began to over-consume and exploit resources as a means of getting theirs before others could (Muldavin 2000). Forests were relentlessly cut, overgrazing occurred, and general disregard for the environment developed.

This period, however, also saw new environmental laws being ushered in. The first was the Environmental Protection Law in 1979, which increased regulation but environmental agencies still had little power (Muldavin 2000). Adding to the problem of enforcement was the redistribution of land to the people. This made it even harder to control what people were doing and limit environmental damage. China had finally became aware of the impact of environmental degradation and implemented policy, but simply thought that would be enough. The lack of enforcement and compliance standards made the regulations nearly irrelevant and China seemed to continue to be more concerned with growth, no matter the consequences.

Current Policy and Structure

The main governmental organization responsible for the environment in China is the State Environmental Protection Administration (SEPA), which is in charge of policy making and implementation (Backer 2007). SEPA was given more power in 1998 when its status changed from an agency to administration. On the local basis, Environmental Protection Bureaus are responsible for implementing policy, but remain subordinate to the SEPA.

The United Nations Environmental Programme (UNEP) has played a significant role in getting China to address environmental concerns (Backer 2007). With the help of UNEP, China was able to see that environmental damages were resulting in significant losses of GDP each year. Global United Nations' conferences on the environment in 1972, 1992, and 2002 have also played roles in educating the Chinese government on the environment (Backer 2007). Each conference was taken more seriously as evidence by the increasing number of councils and non-governmental organizations preparing for them.

Now that China has begun to realize the impacts of its prolonged economic growth, it has started to address these concerns. While China seems to be significantly behind the rest of the world in terms of regulation, there is great outside pressure to catch up.

References

• Backer E. and Heggelund G. (2007). China and UN environmental policy: institutional growth, learning and implementation. International Environmental Agreements : Politics, Law and Economics, 7(4), 415-438. Retrieved November 23, 2008, from ABI/INFORM Global database. (Document ID: 1394712261).
• Dasgupta, S., et. al. "Confronting the Environmental Kuznets Curve." The Journal of Economic Perspectives, Vol. 16, No. 1 (2002), pp. 147-168.
• Jones, Samantaha L. "Environmental and Health Challenges of Municipal Solid Waste in China." China Environment Forum's Partnership (2007).
• Muldavin, J. "The Paradoxes of Environmental Policy and Resource Management in Reform-Era China." Economic Geography, Vol. 76, No. 3 (July 2000), pp. 244-271.
• Wu, Changhua, Crescencia Maurer, Yi Wang, Schouzheng Xue, and Devra L. Davis. "Water Pollution and Human Health In China." Environmental Health Perspectives 104 (1999): 251-55.
• Yang, Yang. "Coal Mining And Environmental Health In China." China Environment Fourm's Partnership (2007).