China Strategy: Big bang measures to fight air pollution
Comment of the Day

March 01 2013

Commentary by David Fuller

China Strategy: Big bang measures to fight air pollution

My thanks to a subscriber for this important report from Deutsche Bank. Here is part of the introduction
With the surge in the air quality index PM2.5 in Beijing and many other regions to near-catastrophic levels since January, as well as the growing public awareness of its serous health implications, the Chinese government has no choice but to double its efforts to control and reduce air pollution. The question is how. The Ministry of Environmental Protection has recently announced a target of reducing the national average PM2.5 to 35, but the policies adopted by many cities are still piecemeal and very short term in nature. These include, among others, temporarily shutting down polluting factories and suspending construction works, requiring a 30% reduction in the use of cars by government agencies, advising people to setting off less fireworks to celebrate the Chinese New Year, and mandatory retirement of old vehicles that do not meet minimum emission standards.

While many of these measures are useful in the short term to improve air quality in a meaningful and sustainable way, in our view China must modify its overall growth strategy - especially its policies - to change the energy mix and to develop its auto sector and the urban transport system, the new energy development strategies, environmental and resources taxes, and policy tools to control the heavy manufacturing sector and to accelerate the growth of service industries.

A fundamental problem with the current policies is that they are inconsistent with the need to reduce pollution to politically acceptable levels within an acceptable period of time. Let's look at three examples to illustrate this inconsistency. The first is coal consumption, the second is auto consumption, and the third is the plan for developing subways and railways.

David Fuller's view The leading black humour joke in China, ruefully states:

"The only thing China's elites share with the masses is dirty air."

This health hazard is an unintended result of China's economic development and GDP growth over the last three decades and counting, which has been extraordinary by any measure. An unfortunate and apparently unanticipated consequence of transforming from a backward economy to an industrial powerhouse with gleaming new cities, has been chronic air pollution.

China has begun to address this serious health hazard which is a threat to its long-term development and prosperity. However, this is a 'Catch-22' situation because short-term measures to reduce China's PM2.5 air pollution may be incompatible with their current ambitions for strong economic growth.

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