China’s efforts to clean up its air, soil and water have contributed to the country’s economic slowdown, the Ministry of Environmental Protection said in a report commissioned in response to criticisms that anti-pollution measures have waged an excessive price on heavy industry.
The report acknowledges that environmental protection efforts are one reason for China’s recent economic slowdown, but describes these as short-term effects because of restrictions placed on sectors including coal-burning power generation, steel, concrete, LCD panel manufacturing, all of which are sources of harmful pollutants.
However, emerging sectors such as environmental services and technologies, and machinery manufacturing, will benefit from the anti-pollution measures, the report said.
The economic cost of China’s efforts to save energy and cut emissions of harmful pollutants during the country’s 11th Five-Year Plan (2006-2010) was 186 billion yuan (US$29 billion), just 0.12% of GDP. This compares with 6% of output lost because of pollution, environmental damage, and harmful impacts on health, the Ministry of Environmental Protection estimated.
A report from the MEP found that while environmental protection does have a short-term impact on GDP, in the longer term, efforts to clean up China’s air, soil and water would deliver an overall economic benefit.
With Chinese growth slowing, concerns are being voiced more loudly that environmental protection is damaging the overall state of the economy.
In July, Chinese media speculated that anti-pollution efforts in the industrialised city of Linyi, such as the shutdowns of factories, had contributed to job losses and posed major risks to the financial system. These include the inability of industrial companies to pay back loans.
Some critics of the ‘Linyi model’ have accused the MEP of taking excessive measures and harming the country’s economy, prompting the ministry to commission a response, which has taken two months to complete.
The report admits that environmental protection efforts are one reason for China’s economic slowdown, but describes these as short-term effects due to restrictions placed on sectors including coal-burning, power generation, steel and concrete making, and LCD panel manufacturing.
Meanwhile emerging sectors such as modern services, environmental protection, and machinery manufacturing will benefit from the anti-pollution crackdown.
Wang Jinnan, deputy head of the MEP’s Chinese Academy of Environmental Planning, said at the release of the report that strict environmental standards could lead to companies adopting better technology, as well as weeding out poorer-performing companies to raise overall competitiveness.
The report acknowledged that the US$586 billion economic stimulus plan launched in 2008 had contributed to overcapacity in key industries such as chemicals and heavy manufacturing, while China’s attempts to grow at a slower pace, known as the ‘new normal’, would mean less reliance on traditional industries.
The contribution of heavy industry investment to GDP growth has fallen from 54.8% in 2010 to 48.5% in 2012; while that for exports plummeted from 31.3% in 2010 to 7.9% in 2012.
