Social cost of China's boom

The Australian

Rowan Callick, China correspondent | July 30, 2007

YOU can't escape the pollution in China. Everyone knows by now about the stench in the cities, how 16 of the World Bank's 20 world cities with the worst air are in China.

But perhaps even more depressing is the sense that no matter where you go, you can't escape it.

Xi'an is the new name for the ancient capital of Chang'an, a wonderful place to visit, the terminus of the Silk Road in its golden era during Europe's Dark Ages. It's at the centre of China's agricultural heartland. Not verdant rice paddies, but fruit led by apples, fields of corn and a big variety of horticultural produce and livestock.

Over the past year, I have had to travel out of Xi'an on three occasions, deep into the farmland of Shaanxi province. Once was to talk with farmers about their response to the negotiation of a free trade agreement with Australia. On each occasion, the countryside remained enveloped in a grey fog of pollution, visibility restricted to a couple of hundred metres or so.

I have seen the same shroud in Guangdong province, too. This is the greatest engine of China's manufacturing miracle. It is a large area, about 77 per cent the size of Victoria. By no means is it covered in factories, yet I have travelled through the province's countryside with its rice paddies and banana plantations, by train, bus and taxi, and, as in Shaanxi, never escaped the pollution. It is bad enough to live in cities like that. But how must it feel to be a farmer and still not see the sun or even the sky?

The price, though, is more than just aesthetic and psychological. Pollution also has a direct impact on economic capacity, of course. At an apocalyptic level, the more lurid forecasters claim that Beijing will have to be abandoned by the end of the century because of a lack of water, and Shanghai because of rising water levels in part caused by the Three Gorges project.

You develop in an unbridled way, and for every extra dollar you earn, the country pays an extra "X" cents for the cost of increased health problems, for the natural resources used up without being fully priced, for the loss of alternative revenue earners such as tourism or horticulture or fisheries, for the cleaning up of physical waste.

Since Deng Xiaoping announced China's opening and reform 30 years ago, the country has become as fascinated by gross domestic product figures as Australia is by football or cricket scores.

Officials throughout the country receive a substantial proportion of their wages in bonuses measured according to the official figures for economic growth in their areas.

The Chinese public has also become fixated on the growth figure too, because it tends to reflect people's prospects for more or better jobs, schools and colleges, roads, subways and recreation facilities.

Over the past decade, economists everywhere have started to respond to the needs of policy planners to be able to measure the trade-offs between development and the environment. This has inevitably been happening in China, which today as a great globaliser is naturally also itself open to global influences -- as long as they appear, like the notion of "green GDP", technical rather than political.

Wang Jin-nan of the Chinese Academy for Environmental Planning, the technical head of the project to develop a green GDP for China, revealed last week that after just one year of putting a figure on those extra X cents, fierce opposition by officials appeared to have prevented further such reports. For that one year, 2004, the project participants calculated that the 9.5 per cent growth should be discounted for pollution by three percentage points, to 6.5 per cent. Such figures would undercut many bonuses and deter the construction of projects whose polluting impact might hurt overall growth.

The environment has been given a higher priority over the past couple of years in Chinese government rhetoric and in policies, in part responding to public concerns. But although the 2005 green GDP report was prepared, the State Council -- China's cabinet -- appears now to have sided with the powerful political lobby preventing its release and halting the whole project.

Leaks indicate the 2005 figure was worse than 2004's. The World Bank estimates that the health effects of air and water pollution cost 5.8 per cent of GDP in 2003, for which comprehensive statistics are available.

The National Bureau of Statistics has played its political cards carefully, justifying the withdrawal from green GDP reports on the grounds that there is no internationally accepted standard for them. But of course, on countless other issues China goes its own unique way regardless of international standards or the lack of them.

The Communist Party-controlled media have for some time given clues about the fragility of support for the green GDP.

People's Daily has editorialised that "it is a limited concept, which can't meet the needs of all sides, especially when it is proposed as a criterion for officials' promotion". And Xinhua news agency reported six months ago that several provinces and cities wanted to withdraw from the "green GDP experiment".

But China's most prominent pro-green official, State Environmental Protection Administration vice-minister Pan Yue, said six months ago: "Even if there is only one province left in the project, we will continue." He has lost this round though.

That this debate has become public indicates the growing preparedness of the central Government to tolerate some debate on such issues within the establishment, in which the public has some room to participate online -- until it becomes raucous, when control of the web enables officials to simply turn it off instantly.

One of the official lines about pollution most often repeated, is that the West went through its industrialisation at considerable environmental cost, and that it is almost racist to expect China to slow, or maybe forgo aspects of its own modernisation. Worse, the West has exported much of its industry to China so that it can benefit from importing the fruit of low-cost production without suffering any side-effects itself. It's even importing the by-products of pollution in the West, including millions of tonnes of waste plastic every year.

However, everyone now knows better than Britain did, say, when it suffered the social and physical impacts chronicled by Charles Dickens on its own environment 150 years ago. There are means to mitigate such impacts without halting development.

These means touch on four areas: policy formation, implementation, technological change, and structural reform. The blame tends to be swept down from the higher levels of the central Government to the local officials responsible for implementation.

Last Friday, Xinhua said the Politburo had become fired up about the economy overheating after inspection teams dispatched to the provinces had found that "some local governments are ignoring the decision to save energy and cut greenhouse gas emissions and are still investing heavily in high resource-consuming sectors".

Others are going in the opposite direction. Shanxi province, polluted awfully by its coal mines, power stations and brickworks, decided two months ago to award city leaders $160,000 if they could drag the capital, Taiyuan, from the list of China's five most polluted cities, among a batch of other bonuses for greening the province measurably. Despite the apparent discarding of green GDP, the debate on greening China is full-steam ahead.