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08/30/2007
China's Crisis
Elizabeth Economy, Director of Asia Studies at the Council on
Foreign Relations, has an important essay in the Sept./Oct. issue
of Foreign Affairs titled “The Great Leap Backward?...The Costs
of China’s Environmental Crisis.” Ms. Economy addresses the
mammoth issues facing the nation, “the risks to its economy,
public health, social stability, and international reputation.”
Following are some facts and excerpts from her work that can
also be found in Economy’s book, “The River Runs Black: The
Environmental Challenges to China’s Future.”
Economy notes that with the coming 2008 Olympic Games in
Beijing, as well as the Chinese government’s statements that they
recognize they have major environmental issues to deal with, the
rest of the world “seems to accept that Beijing has charted a new
course.”
“Unfortunately, much of this enthusiasm stems from the
widespread but misguided belief that what Beijing says goes.
The central government sets the country’s agenda, but it does not
control all aspects of its implementation. In fact, local officials
rarely heed Beijing’s environmental mandates, preferring to
concentrate their energies and resources on further advancing
economic growth. The truth is that turning the environmental
situation in China around will require something far more
difficult than setting targets and spending money; it will require
revolutionary bottom-up political and economic reforms.”
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“China’s rapid development, often touted as an economic
miracle, has become an environmental disaster. Record growth
necessarily requires the gargantuan consumption of resources,
but in China energy use has been especially unclean and
inefficient, with dire consequences for the country’s air, land,
and water.”
The facts:
Coal provides about 70 percent of China’s energy needs but it
is choking its people. The country consumes more than the
United States, Japan, and the United Kingdom combined. “In
2000, China anticipated doubling its coal consumption by 2020;
it is now expected to have done so by the end of this year.”
China is home to 16 of the world’s 20 most polluted cities. “As
much as 90 percent of China’s sulfur dioxide emissions and 50
percent of its particulate emissions are the result of coal use.”
But it’s not just about coal. Consider 14,000 new cars hit
China’s roads each day. Perhaps as early as 2040, China will
have more cars than the United States. “In a 2006 survey,
Chinese respondents rated Beijing the 15th most livable city in
China, down from 4th in 2005, with the drop due largely to
increased traffic and pollution. Levels of airborne particulates
are now six times higher in Beijing than in New York City.”
In moving a projected 400 million people from rural to urban
areas between 2000 and 2030, China is expected to erect half of
all the buildings projected to be constructed in the world during
that period. “This is a troubling prospect considering that
Chinese buildings are not energy efficient.” Thus, there will be
even higher pollution as a result.
The land is suffering, thanks to centuries of deforestation,
overgrazing and overcultivation. The Gobi Desert, which
engulfs at least a third of the country, is spreading by 1,900
square miles annually.
On the water front, “two-thirds of China’s approximately 660
cities have less water than they need and 110 of them suffer
severe shortages.” There is a tremendous amount of waste in the
agricultural sector and Chinese industry is highly inefficient,
using 10-20 percent more water than Western counterparts. And
in urban China, as much as 20 percent of the water is lost
through leaky pipes.
But get this. “China’s plundering of its ground-water reserves,
which has created massive underground tunnels, is causing a
corollary problem: some of China’s wealthiest cities are sinking
– in the case of Shanghai and Tianjin, by more than six feet
during the past decade and a half.” In Beijing, the airport is
threatened as the ground sinks.
Of course pollution is rampant when it comes to the water
supply. “According to one report by the government-run Xinhua
News Agency, the aquifers in 90 percent of Chinese cities are
polluted. More than 75 percent of the river water flowing
through China’s urban areas is considered unsuitable for drinking
or fishing, and the Chinese government deems about 30 percent
of the river water throughout the country to be unfit for use in
agriculture or industry. As a result, nearly 700 million people
drink water contaminated with animal and human waste.”
“A 2005 survey of 509 cities revealed that only 23 percent of
factories properly treated sewage before disposing of it.
According to another report, today one-third of all industrial
wastewater in China and two-thirds of household sewage are
released untreated.”
In the southeastern provinces of Guangdong and Fujian,
untreated sewage is discharged into the ocean, making 80 percent
of the East China Sea, one of the world’s largest fisheries,
unsuitable for fishing, up from 53 percent in 2000.
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“In the view of China’s leaders, however, damage to the
environment itself is a secondary problem. Of greater concern to
them are its indirect effects; the threat it poses to the continuation
of the Chinese economic miracle and to public health, social
stability, and the country’s international reputation. Taken
together, these challenges could undermine the authority of the
Communist Party.”
Consider this “fully 190 million Chinese are sick from drinking
contaminated water. All along China’s major rivers, villages
report skyrocketing rates of diarrheal diseases, cancer, tumors,
leukemia, and stunted growth.” As Elizabeth Economy adds,
“Social unrest over these issues is rising.”
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One problem is that Chinese companies see little benefit in
acting as good corporate stewards. Suntech, a solar polar
company, has become a leading exporter of solar cells, but only
18 percent of Chinese companies believed they could be
successful while doing the right thing for the environment. [Ed.
full disclosure. I own shares in Suntech.]
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What China needs is real reform, and that has to start from the
ground up. Top down isn’t working. Last spring I visited a
biodiesel plant in Fujian province, one that I have invested in. I
trust management and am in contact with them on an as needed
basis. I’ve also learned to watch the weather there. The plant is
near the coast, directly across from Taiwan (the shortest point
which means there have to be some missile bases I couldn’t spy
from the road), and it has been one typhoon after another the past
month or so. The plant missed taking a direct hit just the other
week.
But I bring this up because in my exchange of ideas, I pass on
opinions from America on the pollution front and I consistently
get the reply back, “XYZ doesn’t disobey the government’s
rules. Those who do should be shot.”
I honestly believe the biodiesel operator is doing the right things,
but, again, the only way to reverse the current road to death and
destruction that China finds itself on is for the reform movement
to start at the ground level. That means protests, and this is the
last thing those in charge want.
I have to admit that with regards to my own investments in
China, I feel like I’m playing a bit of roulette, as in I may only
have two years, or thereabouts, to make the return I was hoping
to before all hell breaks loose. In the meantime, Americans
glancing skyward are beginning to understand that much of the
particulates up there originated halfway around the world.
Hot Spots will return in two weeks.
Brian Trumbore
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