Hu Mixes Economic Message

China's plans for expansion and the environment are in conflict.
by Michael Lelyveld
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Motor vehicles make their way on a smoggy day in Hefei, east China's Anhui province, Dec. 29, 2011.
Motor vehicles make their way on a smoggy day in Hefei, east China's Anhui province, Dec. 29, 2011.

China's departing President Hu Jintao has laid out a comprehensive but contradictory plan for future development, relying on energy goals he has failed to achieve, experts say.

In a 64-page report to the Communist Party Congress on Nov. 8, Hu called for creating a "beautiful" China while sounding familiar themes of economic growth.

"We must give high priority to making ecological progress, work hard to build a beautiful country, and achieve lasting and sustainable development of the Chinese nation," Hu said, according to state media.

Hu set a target of doubling both the Gross Domestic Product (GDP), a measure of the value of a country's economic activity, and per capita income by 2020 from 2010 levels, implying average annual economic growth rates variously interpreted as 7 or 8 percent.

The blueprint also repeated calls for a more sustainable growth pattern that would promote energy efficiency and environmental protection.

"Energy consumption and carbon dioxide emissions per unit of GDP, as well as the discharge of major pollutants, should decrease sharply," said Hu, speaking before Xi Jinping was named as the party's new general secretary last week.

He promised that China would pursue a series of previously announced policies, including taxes on resource consumption, emissions trading, and higher pollution fines, the Financial Times said.

Official reports stressed new elements of the speech, noting Hu had not promised before that China would be made beautiful or that per capita income would be doubled.

A well-worn path

But the thrust of the report followed a well-worn path, promising that China could have both consistent economic expansion and environmental improvement at the same time, producing what the party now calls "a moderately prosperous society in all respects."

While that may prove to be the case, the proposition relies heavily on increases in energy efficiency and policies that have yet to be implemented.

Derek Scissors, senior research fellow in Asian studies at the Heritage Foundation in Washington, said Hu's promises broke no new ground.

"The remarkable thing about the full document is that it takes 60 pages to say nothing," Scissors said,

Instead, the speech may serve as a reminder that China has consistently missed its energy conservation targets during Hu's tenure.

Under the 12th Five-Year Plan, the government pledged to cut energy waste by 16 percent by 2015.

But last year's 2- percent reduction fell short of the annual 3.5-percent goal, the National Development and Reform Commission said.

The "energy intensity" index tracks the amount of energy used to produce each unit of GDP, meaning that total energy use continues to rise with economic growth.

The index is closely linked to carbon emissions, since some 70 percent of China's energy comes from burning high-polluting coal.

Last year, coal consumption climbed 9.7 percent, which was more than the 9.3-percent GDP growth rate, according to the National Bureau of Statistics (NBS).

Low-key reports

Although quarterly updates on energy intensity were widely publicized during the previous Five-Year Plan in an effort to meet conservation goals, more recent reports have been low-key.

In October, the NBS said in a release of economic data that the energy index had declined 3.4 percent in the first nine months of the year, compared with an improvement of just 0.8 percent a year before.

"That could stem from a more efficient use of energy, or be a sign that China's much-heralded rebalancing away from dirty, resource-intensive heavy industry towards services and domestic consumption is gaining traction," a Reuters report said.

Scissors said the NBS stopped issuing regular reports on coal when it became clear that targets were not being met.

But he argued that the energy index may matter only to international audiences and environmentalists who want to keep track of whether China is meeting its conservation commitments.

Chinese citizens are more concerned with the visible effects of pollution and impacts of development.

"It's purely an international marker," said Scissors. "You don't satisfy an angry crowd about a petrochemical plant because their energy intensity index is declining."

Social unrest

Recent outbreaks of social unrest over environmental damage are more relevant to Hu's promise of a "beautiful" China than any numbers that the government can produce.

Last month, mass demonstrations forced local authorities in the port city of Ningbo in Zhejiang province to cancel the expansion of a Sinopec petrochemical plant.

In July, protests halted construction of a copper smelting plant in Shifang city of Sichuan province. There are signs that the central government is getting the message about the costs of unchecked development.

Last week, the State Council ordered all major industrial projects to conduct a "social risk assessment" before construction can proceed, The New York Times reported.

"By doing so, I hope we can reduce the number of mass incidents in the future," said Environmental Protection Minister Zhou Shengxian.

Contradictory goals?

Judging from his report, it is unclear whether Hu has gotten the message.

Philip Andrews-Speed, principal fellow in the East Asia program at the National University of Singapore's Energy Studies Institute, said it is unclear how economic expansion can be balanced with energy conservation.

"Hu has two apparently contradictory goals," he said. "They could, in principle, be reconciled by a new growth model, but he does not seem to address this."

Andrews-Speed sees a conflict in Hu's suggestion that China will continue to rely on mammoth state-owned enterprises (SOEs), which dominate its energy-intensive heavy industries.

"Another contradiction is his explicit reference to keeping the SOEs as a key part of the economy and yet promoting the development of the private sector," he said.

"If this is the policy he is leaving for his successors, then they have an impossible task," said Andrews-Speed.





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