A Tale of Two Chinas

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by: Joel Makower

Viewing China through an environmental lens these days is like trying to solve a bogus Sudoku puzzle: It just doesn't add up.

On the one hand, China is leapfrogging the industrialized world, adopting clean technologies like solar and wind energy with dizzying speed. On the other hand, China's environmental problems make it seem a hopeless cause. At times, there appear to be two Chinas: the good, green China that is adopting clean technologies faster and more aggressively than almost anyone; and the problematic China whose vociferous appetite for food, energy, and housing is pushing the planet to the ecological brink. To be optimistic or not? That's the China Syndrome.

Here's a brief picture of the two Chinas, taken from headlines and blog posts from just the past few weeks. First the bad news:

  • Drinking water: Currently, more than 300 million rural residents, nearly a quarter of China's total population, lack access to clean drinking water. And only one third of the 3.7 billion tons of wastewater discharged in the country is treated. At a recent national meeting on legal enforcement of the protection of drinking water sources, China's environmental authorities concluded that the country's water quality situation remains grim, according to People's Daily, as reported by WRI's China Blog. Critical drinking water sources, such as rivers, lakes, and underground aquifers, have been increasingly threatened by industrial pollution accidents. The most serious, the contamination of northeast China's Songhua River last November, was caused by an explosion at a petrochemical plant upstream and cut off the drinking water supply of 3.8 million people for four days.  
  • Soil Quality: Worldwatch also reports that China's arable land, which feeds 22% of the world's population, is facing grim pollution and degradation. The decline in soil quality has become one of the most worrisome byproducts of China's breakneck economic growth. Heavy metals are accumulating in the soil, hardening the soil surface and reducing its fertility, and residues from chemical fertilizers and pesticides are showing up in farm products, poisoning both people and livestock. Currently, about 10 million hectares of cropland — 10% of the country's total cropland area — has been contaminated, most of it in more affluent regions like the Pearl River Delta.  
  • Forests: According to yet another Worldwatch report, thousands of hectares of natural forests are being eliminated to make room for fast-growing tree plantations in southwestern Yunnan province. The logging operations, which have turned lush hillsides into barren wastelands, have enjoyed the green light from village and county officials as well as local forestry authorities. This collusion between government officials and business interests endangers one of the few remaining intact forest landscapes in China.  
  • Air Quality: China's air pollution problems are legendary. A 1998 report found that by the World Health Organization (WHO) noted that seven of the ten most polluted cities in the world are in China; given the boom in power plants and automobile use since then, things have only gotten worse. Beijing and its environs in northeast China were named as having the world's highest levels of nitrogen dioxide — a key smog gas originating from power plants, heavy industry and vehicle emissions — which the government has vowed to clean up by the 2008 Olympics. And some of that pollution is reaching the Western U.S.. Worldchanging recently noted that that coal-burning in China is killing 400,000 Chinese a year. And it's not just Chinese: The U.S. Environmental Protection Agency estimates that on certain days nearly 25 percent of the particulate matter in the skies above Los Angeles can be traced to China. Some experts predict China could one day account for a third of all California's air pollution. 

And so it goes. There doesn't seem to be much hope for the world's largest country.

Or does there? Consider some of the encouraging stories emanating from that country in recent weeks:

  • Greener Cars: China is aiming to take the lead in "green car" technology by aiming to make Shanghai the first city to use hydrogen-powered cars on a large scale, and plans to the government will push hydrogen car technology over the next five years, reports Platinum Today. Meanwhile, the Boston Globe reported last month about a deal between Shanghai Fuel Cell Powertrain Co. and Canada's Ballard Power Systems to supply fuel cells for a Shanghai government demonstration fleet of up to 100 cars. 
  • Clean Energy: China is pushing renewable energy solutions like no other country. The government has set a target of 20% of its power to come from renewable sources by 2020. That kind of aggressive strategy sets the stage for renewable energy companies to participate in the anticipated growth in wind, solar and energy efficient technologies. And they are: Chinese developers unveiled the world's first full-permanent magnetic levitation (Maglev) wind power generator in June, reports Worldwatch. The generator is expected to boost wind energy generating capacity by as much as 20% over traditional wind turbines, effectively cutting the operational expenses of wind farms by up to half. China is set to spend a whopping $200 billion on renewable energy over the next 15 years, and industry players are racing to grab a slice of the action, according to Reuters. ("That kind of money would buy you an oil firm the size of Chevron and leave change to fund the current renewables programs of all Europe's top oil firms for 25 years," the news service noted.)  
  • Clean-tech Capital: And more money is on the way. Recently, China encouraged state and local governments to set up venture capital firms to stimulate investment in technology startups, according to the eco-finance blog EcoLog, which notes: "Expect the domestic competition among private equity investors to become even more intense. China is lifting its 10-month ban on IPOs and launching a market for small companies, similar to NASDAQ. Both these developments will mean more exit strategies for Chinese clean technology investors." 

So, is the Chinese teacup half empty or half full? It could go either way. Problem is, whenever I let my optimistic side take over, it gets quashed by some sobering story such as this: "New research by the McKinsey Global Institute suggests that while global companies have fixated on serving [China's] most affluent urban consumers in recent years, they should broaden their vision to include the large body of middle-class consumers expected to emerge over the next two decades."

Imagine: The Chinese want to live as well as we do. The hubris!

Original Post: http://makower.typepad.com/joel_makower/2006/08/a_tale_of_two_c.html