September 2004

China's rapid economic development has improved the country's standard of living considerably. However, its enormous economic growth has also led to serious environmental pollution. It is estimated that environmental damage costs up to 8 percent of China's gross domestic product each year. Since the 1990's, the Chinese government has made efforts to improve the natural environment by enforcing stricter environmental protection laws and regulations. As a result, the country is experiencing the fastest growth in demand for environmental products and services in the world.

Sustainable Economic Development

As China's economy continues to race ahead, it is paying the costs associated with the rapid growth. The country has become the world's biggest coal consumer and second biggest consumer of power and petroleum, while using 50 percent of the world's cement and 35 percent of iron ore. China's urban areas produce more than150 million tons of garbage, with an annual growth rate of 9 percent. There has also been sharp increase in industrial waste, with 650 million tons produced each year. Most of the waste has been buried or burned untreated by unauthorized small businesses. Water scarcity is another increasingly prevalent problem. Water per capita is about 2,300 cubic meters, ranking 121st in the world. Among 668 Chinese cities, over 400 are short of water. The unit cost of resources and energy for local industries is four times the global average. Last year, China lost more than 2.5 million hectares of arable land, a loss rate as high as 50 percent. Air quality in many cities ranks among the worst in the world. The Chinese government has recognized that sustainable economic development is most important and has paid extraordinary attention to the environmental protection and control industry. Huge government investments, stricter environmental protection and control regulations and preferential policies now are fueling the rapid development of this sector.

Strict Enforcement

China's environmental watchdog, the State Environmental Protection Agency (SEPA) was set up as a ministry at the end of March 1998, when the National Environmental Protection Agency was upgraded from a sub-ministry to a ministry and its name was changed. SEPA has a wide range of responsibilities including formulating national policies and standards as well as environmental supervision and enforcement of environmental laws and regulations at the national level. SEPA organizes the development of environmental science and technology and is responsible for national environmental education, publicity and publication. In its 2004 environmental protection plan, SEPA is determined to hold officials accountable for harming the environment. Under the new policy, Chinese officials who fail to clean up local pollution and water, or who fail to introduce improvement measures will receive negative job-performance evaluations. Assessments will be based on tests of air, water and soil in their governing areas, as well as on information collected from non-governmental organizations, media reports and citizens. By increasing environmental accountability, SEPA intends to send an uncompromising message to officials who have tolerated businesses that expand at the expense of the environment.

In addition, SEPA is taking measures to further crack down on enterprises seriously polluting the environment. The government plans to shut down polluters threatening the safety of drinking-water source areas, punish noise polluters, clamp down on business venues causing smoke pollution, and strictly supervise urban discharge of polluted water and garbage. Any construction project violating environmental laws or regulations will be stopped immediately.

At the end of 2004, SEPA plans to launch a cleaner production experiment on dozens of small and medium-sized enterprises selected from pharmaceutical, printing and dyeing, electroplating, paper-making and brewery industries. The factories will use clean technologies in the production process and recycle the discharge at the end rather than follow China's old practice of "treatment after pollution".

Environmental Protection Industry

In its 10th five-year plan (2001-2005), the Chinese government established environmental protection as one of the key pillar industries, initiating unprecedented development and growth. A comprehensive industry has taken shape, which includes manufacture of environmental protection products and cleaning products, environmental protection services, recycling of wastes and protection of natural ecosystems. This year, the output of the industry is expected to breakthrough the RMB 200 billion (US $24 billion) mark. At present, however, China's environmental protection industry is unable to meet the demand of the country's economic development and is providing a huge market and vast opportunities for foreign companies. According to the projection of Chinese authorities, the growth rate of environmental industries in China will maintain a level of more than 15 percent. Starting this year, the once totally government-funded industry has been allowed to charge its users, such as heavy industry plants and hospitals, in order to attract private and foreign investors.

The environmental protection market in China is comprised of three major sectors: water treatment, air pollution and solid waste management. The country currently spends far more on the water sector than on air and solid waste. In November 2000, the State Council issued a notice requiring all cities with populations over 100,000 to build wastewater treatment facilities by 2005. Solid waste treatment, predominately through incineration and landfill, is expanding as China slowly begins to enforce its comprehensive solid and hazardous waste law. At present, the Chinese government plans to allocate US$ 1.8 billion for the implementation of this plan, which includes construction of 31 hazardous waste treatment centers and 300 centralized medical waste treatment facilities as well as the establishment of 31 hazardous waste registration centers at the provincial level. In the air pollution control sector, current focuses in China include sulfur dioxide and acid rain control, as well as curbing vehicle emissions. In addition, China requires that all coal-fired power plants install desulfurization equipment by the year 2010.

Green GDP

The Chinese government is currently working on the criteria and indexes of the so-called green gross domestic product, which deducts the cost of resources consumption and environmental damage from the traditional GDP. The new set of criteria is expected to be completed in three to five years. Beginning this year, various new methods will be adopted at local levels in some pilot provinces and cities. China at present still faces difficulties in evaluating the loss of resources and environment incurred by economic activities. Based on the United Nations' environmental economic account system, the green GDP system of China will be created in three sequences. The first step will be to work on the quantity of natural resources consumed in economic activities. During the second stage, the environmental loss caused by economic development will be examined. The last step will be to value the quantity of resources and environmental loss. The Chinese government decided to choose land, forestry, mineral and water resources as the first group of resources to be considered. In the coming years, China will expand the experimental scope.

Green Olympics in 2008

Achieving a more environmentally friendly balance between consumption and growth is taking on additional urgency as China's capital prepares to host a "Green Olympics" in 2008. Having promised environmentally friendly games, Beijing officials are making it a central target to improve air quality and promote the use and development of clean energy resources and quality fuel. The capital is speeding up the restructuring and upgrading of traditional industries and the development of high-tech industries to reduce industrial pollution. Beijing intends to clean its smoggy air by introducing 1,000 electric buses, requiring architecture styles that conserve heat or cool air, and installing sensory devices that automatically set signal times according to the level of traffic. Over the past six years the city has spend RMB 52.7 billion (US$ 6.3 billion) on cleaning the air. Environmental improvement in neighboring areas is also crucial to guarantee an environment-friendly games in Beijing. Provinces and autonomous regions around the capital are expected to pay high attention to local environmental improvement so as to contribute to a successful Chinese "Green Olympics".

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