The thing that comes to most westerners minds when thinking of Chinese cities is smog. This first came to national attention during the Beijing Olympics, however it has not improved from there. In fact, the Chinese government has finally admitted that the pollution has reached unacceptable levels and pledged to take action. Among potential action plans, the government has considered shutting down the factories producing the most pollution and limiting the number of cars within the country. Additionally, the government has pledged to cut the country’s
ies dependence on coal, its main energy source, in half within two years. These measures are all aimed at reducing the health risks associated with the smog in the city.
The question now is how will these actions affect the Chinese economy? In the short run these up coming policies will most likely be detrimental. The closing of factories should decrease GDP immediately in both consumption and foreign exports, depending which factories are closed. Additionally, by limiting cars they will increase the cost of production in some cases. Finally, switching away from cheap coal to more expensive alternatives should also cause problems. These short run negatives could be off set by the increase in the productive working life of Chinese labor. Additionally, the government spending to move the country away from coal could offset some the decrease in GDP from the shutting down of factories. The real question of which of these positives or negatives will be greatest, that will determine whether these are economically responsible actions.