Download China: From quantity to quality of growth Lorena Lizarzaburu

TRANSFORMATIONS FOR SUSTAINABLE DEVELOPMENT IN ASIA AND THE
PACIFIC CONTRIBUTING PIECE
China: From quantity to quality of
growth
Lorena Lizarzaburu
Background
The need for economic growth in the poorest countries is immediate and obvious. Benefits of
growth may include higher incomes, lower unemployment, and lower government borrowing,
improved public services, and increased expenditure in environmental protection. Millions are
expected to enjoy these benefits if developing economies continue to growth. However,
economic growth is required to be carefully planned and managed in order to effectively promote
development and improve people’s welfare in the long term.
With a rapid economic expansion, China is an example of how economic growth helps to achieve
progress in many development issues. Unfortunately, this rapid growth has been promoted by an
incredibly intensive use of resources resulting in environmental and social externalities that may
undermine the prospects of sustaining future growth and development. The need for a more
sustainable model has been increasingly recognized by its leaders and the latest Five Year Plan
(2011-2015) comes with promises of structural changes. It has been widely advertised lately that
China is experiencing a transition from quantitative to qualitative growth. From an environmental
perspective, the following paragraphs will present a brief overview of some achievements and
externalities of China’s rapid economic expansion, the evolution of policies towards a better
quality growth, and the drivers of this evolution.
Achievements and externalities of quantitative growth in China
Market reforms, introduced in the late 70s shifted China’s economy from centrally planned to
market-based, generated unprecedented economic and social development. More than 30 years
of rapid economic growth and structural transformation have positioned China as a manufacturing
power house, the largest exporter, and the second largest economy in the world. The living
standards of the population improved thanks to increased food production, enhanced
infrastructure, greater employment opportunities, and improved health and education systems,
among others. Probably the most recognized achievement of this transformation is the fast and
large scale poverty reduction. It is calculated that more than 500 million people have been lifted
out of poverty.
TRANSFORMATIONS FOR SUSTAINABLE DEVELOPMENT IN ASIA AND THE
PACIFIC CONTRIBUTING PIECE
Unfortunately, all these achievements have been supported by an incredibly intense use of
resources, and have come at a heavy environmental cost related to climate change and
widespread environmental degradation. The economic structure and use of technologies resulted
in an increased demand for energy, and consequently, in an inevitable growth in greenhouse gas
emissions.
China is also experiencing environmental deterioration; air and water pollutions are alarming. For
example, it is calculated that in Beijing, the levels of air pollution have exceeded the safe levels
recommended by the World Health Organization by more than twenty times. Access to clean
water is also limited; approximately sixty percent of China’s groundwater is contaminated, and
more than half of the major lakes are “slightly” or “moderately” polluted. Both air and water
pollution is contributing to serious public health problems. For example, in 2013 the government
acknowledged the existence of “cancer villages” i.e villages where cancer rates are elevated- in
polluted areas.
Policy evolution towards qualitative growth
Efforts to address environmental challenges and to improve the environmental quality of growth
are not new in China. Chinese environmental policy has a long history. The environment was first
mentioned in a national plan in the 6th Five Year Plan (1981 -1985), in 1983 environmental
protection became a state policy, and around two decades later seven environmental laws and
one hundred twenty related regulations were promulgated.
While the environmental policy has continued to evolve, it was not significantly strengthened until
after the 10th Five year plan (2001-2005) period. Owed primarily to high energy consumption
levels between 2001 and 2005, only twelve out of twenty (60%) environmental goals were met.
Consequently, the 11th five year plan (2006-2010) made the environment a priority, setting
ambitious targets for energy consumption and pollution reduction. But, again, the achievement of
energy density and pollution targets suffered from a continuing stress on fast pace economic
growth and a lack of effective policy implementation. Aiming to address previous failures, the 12th
Five Year Plan (2011-2015) was created with promises of a drastic change of course. It has been
advertised as the map for “the great rejuvenation of the Chinese nation”, and promotes inclusive
slow paced growth as the economy’s guiding principle. The objectives of this plan include
rebalancing the economy by increasing domestic consumption, reducing capital intensive
investment and exports, reducing social inequality, and increasing environmental protection. It
has been said, that China is now pursuing a “new normal” of slower but better quality growth.
TRANSFORMATIONS FOR SUSTAINABLE DEVELOPMENT IN ASIA AND THE
PACIFIC CONTRIBUTING PIECE
Drivers
There are strong indications that the intended transition from quantity to a quality of growth
paradigm has been driven by economic motivations. In general, economic growth results from
increases in labor, capital and productivity. However, China has reached certain limits. Its working
age population already peaked in 2012, investment reached 49% of GDP and the technological gap
with rich countries is increasingly narrower (leaving little space for further increases in
productivity). This means that China is now facing a crossroad.
In addition, there are increasing concerns about severe economic vulnerabilities that, if not
addressed, may jeopardize future growth prospects or even lead to an abrupt financial crisis. One
of the main sources of concerns is the local governments’ and state-owned companies’ borrowing
binge, which are particularly concentrated in infrastructure, real state, and export oriented
production capacity. Total debt is calculated to be at 250% of GDP, encouraged by extending
credits to domestic governments and public companies, which was a common strategy during the
previous government. However, return rates have fallen, and the banking system has become a
bubble that can eventually explode.
Today, China is at a crossroad and faces the great challenge of fixing all the unbalances that have
become deeply embedded in its economy during the last 30 years. Based on previous five year
plan’s failures, the economic transformation and slowdown may represent a relief for the
environment. Independently from the drivers, China’s reappraisal of their national strategies
offers many opportunities for improving the quality of its growth.
(May 2015)
About the author
Lorena Lizarzaburu is a student of the Master of Environment at the University of Melbourne and
majoring in Environmental Governance and Policy. She was an intern at UNESCAP’s Environmental
and Policy section.
TRANSFORMATIONS FOR SUSTAINABLE DEVELOPMENT IN ASIA AND THE
PACIFIC CONTRIBUTING PIECE
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