China and a more sustainable economic resource model

 

In July 2015, the IMF cut its global projections for growth in 2015, from 3.5% down to 3.3%. In doing so, it noted that the fall in the US economy was the main contributing factor, with forecast of growth down to 2.5%, compared to the previous 3.1%.

Indeed, China recently overtook the US as the largest economy in the world. Between 1978 to 2011, it experienced an average GDP growth rate of nearly 10% (GDP, in nominal terms, is the total goods and services output in local currency converted at the prevailing exchange rate to USD).  No other country has been able to come even close.  Growth in China’s economy slowed to 7.4% in 2014 and will likely continue to drop more in 2015, as has been mentioned quite a lot recently. However, this rate is viewed by its leaders as the ‘new normal’. Between 2008 and 2014, its nominal GDP rose from the equivalent of US$4 trillion in 2008 to over US$9 trillion in 2014. While its total debt at 282% of GDP, is amongst the highest in major economies it is manageable. It is the largest trading partner of 140 countries.  That trading activity accounted for 13% of the world’s total growth from 2000 to 2012.

According to the United Nations Environment Programme (UNEP), globally, around of 5 billion kilograms of waste are disposed of each year. A recent study by Credit Suisse confirmed what several other studies have also shown, that there is a strong correlation between GDP per capita and the quantity of per capita waste generated (see figure below).

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Source: Credit Suisse 2014

As illustrated, the US ranked highest in GDP and waste production, with each person producing over 2.5 kilograms of trash per day. Other large, developed economies like Germany, Japan and Australia were close behind. Further down the curve were the emerging economies of Mexico, China, Brazil and India. This is interesting, because it suggests that as these emerging economies grow, then it is likely that their generation of waste will also grow. Unless, there are measures in place to ensure efficiency.

It is difficult to go to any monument or building in any city or town with a significant tourist influx and not be bombarded with souvenirs from that city or town. However, a closer look at the tag, usually indicates the story ‘made in China’. A 2013 UNEP report, stated that it is the world’s largest consumer of primary materials (such as construction minerals, metal ores,fossil fuels and biomass), with domestic material consumption levels four times that of the USA. From 1970 to 2008, it’s per capita consumption of materials grew from one third to over one and a half times the world’s average levels. Domestic consumption of natural resources per capita increased at almost twice the rate of the whole of the Asia Pacific region due to significant investments in urban infrastructure, energy systems and manufacturing capacity. However, around 20% of the resource use in China goes to producing goods which are eventually consumed abroad.

These massive rises in consumption levels have led to rising environmental challenges as a result of the extraction, processing and use of those natural resources.At the same time, a number of measures have been put in place by the Chinese Government to shift towards a more sustainable model. The previous and current Five-Year Plans for Social and Economic Development (FYPs) have an increased focus on more balanced growth, greater resource and energy efficiency, better living standards, and sustainable rural-urban development. Various policy instruments to strengthen the economy and conserve resources have also been put in place, including a US$586 billion stimulus package with a green focus, incentives for more efficient vehicles, and setting targets for a more energy efficient building sector. It is also one of the first countries to embrace the circular economy approach, through the Circular Economy Promotion Law which came into force in 2009 and aims to improve resource efficiency, protect the environment and achieve sustainable development.

Despite, making huge strides in energy efficiency, the report noted that there is a need for China and other emerging economies to make significant investments in more resource-efficient infrastructure (e.g. green buildings, management of waste and water, and public transport), as well as in human capital and governance capacity (particularly implementation).

There are perhaps three key take home messages from the above: First, as GDPs rebound from the 2008 economic crisis, resource consumption and waste generation will most likely increase in commensurate fashion. Second, it is likely that wastage in emerging economies will approach those of the more developed countries. Third, there is no doubt that countries are heeding to the messages of the need for more sustainable approaches. However, all countries (i.e. not only China), need to redouble their efforts to develop and implement measures to ensure that they utilise a more sustainable economic model. Without this more sustainable approach it is worrying to think what will happen to the world’s resources in the next 5 – 10 years.

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