China's environment: An economic death sentence

January 28, 2013: 9:25 AM ET

The hazardous conditions in Beijing and northern China is merely of one many wake-up calls for the Chinese government. Will it be enough to spark change?130128021826-china-air-pollution-gallery-horizontal

By Minxin Pei

FORTUNE -- For a long time, environmental activists, economists, and China scholars have warned about the coming environmental disaster in China. Such a catastrophe finally appeared in the most dramatic form in mid-January, when a thick layer of poisonous pollutants smothered much of northern China and made air in Beijing hazardous to breathe.

For the Chinese government, this was merely one of many wake-up calls. The question on everyone's mind is whether Beijing will finally muster the political will to implement policies to avert an ecological calamity that will almost certainly spell the end of the Chinese economic miracle and potentially lead to the fall of the Communist Party itself.

Judging by the numbers, the scope of China's environmental degradation is beyond shocking.  Consider:

  • The World Bank estimated, in a 2007 report, that pollution caused 5.8% of China's GDP in premature deaths, health care costs, and material damages. Air pollution alone is estimated to kill 700,000 people a year.
  • A 2012 MIT study estimated that air pollution in 2005 cost the Chinese economy $112 billion in lost labor and healthcare costs, roughly five times higher than it was in 1975.
  • In 2010, airborne microscopic pollutants caused an estimated 8,600 premature deaths in four major Chinese cities: Beijing, Shanghai, Guangzhou, and Xian.
  • According to a Chinese vice minister of environmental protection, the water quality in five of the nine bays along China's coast was "extremely poor." Results from monitoring stations along 10 major river basins show that 40% of the water is polluted. And 55% of the underground water in 200 cities is polluted. On top of that, about 300 million rural residents do not have access to safe drinking water.
  • Soil pollution is endangering China's food chain. Roughly 10% of the country's arable land has been contaminated by heavy metal, based on scientific studies conducted in the late 1990s. In 2006, the Chinese government began a nationwide survey of soil pollution. However, it has not released the results, most probably because the findings are too alarming for the government to release.

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Given decades of environmental neglect and China's heavy reliance on coal -- which produces 70% of the country's energy -- it would be difficult to produce a dramatic improvement quickly. Nevertheless, the Chinese government can take a comprehensive approach to environmental protection by adopting tougher environmental standards, changing their economic policy, increasing investment in the environment, and mobilizing the press and civil society to take part in these efforts.

Retrofitting the country's coal-fired power plants with modern pollution control technology should cut down the emission of harmful particulates significantly. Adopting a higher clean-fuel standard for cars and other vehicles, which now contribute to the bulk of urban pollution, will almost certainly make a difference. Gasoline and diesel used in Chinese have much higher sulfur content than the fuel used in the West. And if authorities in China took enforcement of existing environmental regulations more seriously, they could also make a huge impact, as local authorities and Chinese companies routinely violate such rules to cut costs. More

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