Pollution is becoming disastrous for China. It has become a dangerous public health issue, and if the issue goes unresolved there will be extended damage to the Chinese economy and people themselves.
As part of a response to the growing concerns about pollution, China has taken steps to reduce it’s dependence on Coal. Pollution from coal creates a large part of the infamous smog that plagues Chinese cities. Moving towards more sustainable and less polluting forms of energy, such as natural gas and solar power, is a priority according to Chinese officials. The nation has plans to tighten regulations on energy standards and pollution control – capping coal use at 65% of total energy consumption (with plans to lower it to 50% in coming years) and increasing the use of gas and wind power.
Officials also want to reduce the amount of energy the nation is using as a whole – fitting into its goals to reduce dependence on energy-intensive heavy industry and move to a service and consumption based economy. This fits with decreasing costs for heavy industry goods, like steel which is experiencing severe lows, that demonstrate the unviability of relying on heavy industry as a key component of tee nations economic future. China’s economy is slowing down, and it needs to restructure to become sustainable. Part of this restructuring involves drastic changes to Chinese energy and environmental policy. We have seen the beginnings of that movement recently.
Source: http://www.reuters.com/article/2015/03/05/us-china-parliament-ndrc-idUSKBN0M108V20150305
I wonder about the economic impacts these environmental regulations will have on the economy. Coal is the cheapest form of source of energy which explains why China has relied on it so much in the past. When China tries to diversify its energy portfolio, it will likely cause energy prices to rise. This rise in energy prices will come out of the bottom line of manufacturing companies that consume large amounts of energy.
Well, it’s not as though pollution in China is cost-free, in terms of human health and lives, lost output (acid rain, polluted water, work absenteeism) and (for the government) popular dissatisfaction. Sure, these policies might hurt GDP (though less than otherwise if “rebalancing” does indeed lead to more services and less manufacturing). However, isn’t the ultimate purpose of an economy not output for output’s sake, but to provide health, happiness and political stability — in no particular order. So should we really worry that GDP might grow less rapidly??
I think transition which China is going to currently is in the right direction. Though it might hurt it GDP, as professor mentioned, the long-term outlook of the country should consider more on public health and economic sustainability than on growth rate. China’s economic growth has been powered by cheap resource such as coal but I believe gradual transition to service and consumption economy is a timely adjustment.