Is China heading for another toxic cycle of hypergrowth?

China's epic struggle to balance its economic development and environmental goals continues to play out in the midst of the current global financial crisis. Even the most optimistic observers are concerned that Chinese officials are laying the foundation for a great leap backwards as far as the environment is concerned. (GW)

Slump Tilts Priorities of Industry in China

By Jonathan Ansfield
New York Times
April 19, 2009

DUANJIALING, China — Less than a year ago, officials were pressing mines and factories along this limestone belt of northern China to shut down or move away to clear the air of dust and smog for the Beijing Olympics.

Now, amid the global economic downturn, priorities have shifted.

Cumbersome environmental reviews have been accelerated, state bank loans are flowing freely again and workers are welding the grinding mills of Sanhe Yongsheng Cement, one of the new cement plants under construction not far from China’s capital.

“It’s a good thing that officials are working faster,” said a manager at the Sanhe site, who asked not to be identified because he was not authorized to speak for the company. “The economy is looking better now.”

In the rush to invest $585 billion in stimulus spending and revive flagging industrial production, China has at least temporarily backpedaled on some environmental restraints imposed, though with limited impact, during the country’s long boom.

The Ministry of Environmental Protection, citing the urgency of fighting the downturn, adopted a new “green passage” policy that speeds approval of industrial projects. In one three-day stretch late last year, it gave the green light to 93 new investment plans valued at $38 billion.

Provincial environmental agencies quickly followed suit, cutting the allotted time limit to review environmental impact assessments from the maximum 60 days to as few as five days in one province. Here in Hebei, the parched dust-bowl province that surrounds Beijing, officials announced approval of four new cement plants in a single day in January.

Environmentalists say they worry that the government has squandered a chance to use the downturn to put China on a cleaner growth path, and has instead laid the foundation for another toxic cycle of hypergrowth.

“This is the moment to decide whether we want to keep the old growth model or change it,” said Ma Jun, director of the Beijing-based Institute of Public and Environmental Affairs. “But people worry that this new round of development might generate more pollution for the future.”

China’s environmental movement has also been reeling from the unexplained absence of its most outspoken Communist Party supporter, Pan Yue, the No. 2 official in the environment ministry.

For several years, Mr. Pan led an unusually public campaign to blacklist polluters and impose more rigorous environmental inspections. He galvanized the media in “environmental protection storms.”

But Mr. Pan’s populist cachet exceeded his political clout, putting him at loggerheads with many chiefs of provinces, state companies and ministries, including his current boss, according to people with ties to Mr. Pan who declined to be identified while discussing internal government affairs.

These people said they did not have direct evidence that Mr. Pan was sidelined by rivals. But he was replaced last year as the public face of the ministry. In the fall, as the economic downturn worsened, party disciplinary inspectors detained two of his top aides and investigated Mr. Pan, and his wife, they said.

They said Mr. Pan and his wife had been cleared of wrongdoing. He has made more official appearances in the last month than in previous months, the ministry Web site shows. But he no longer holds key responsibilities for environmental reviews and cultural promotion, and people informed about his situation said it was unclear whether he would remain at the ministry.

In the short term, China’s industrial slump has put the country on course to meet environmental targets set when production was racing ahead. By 2010, the government aims to increase China’s energy efficiency by 20 percent over 2005 levels and lower gauges of water and air pollution by 10 percent. Data from the second half of 2008, released in March, showed that the country was getting closer to meeting those goals.

A push to build big, cutting-edge plants and raze filthy, smaller plants like coal-fired power stations, deserves some credit, observers said. But they attributed the cuts largely to tumbling demand.

“We expect the effect of the slowdown to be short-term,” said Sze Pang Cheung, campaign director for Greenpeace in China. The push to stimulate the economy, many say, has undercut the environmental agenda.

To free up stimulus money for other uses, the central government slashed the portion of the package earmarked for environmental projects, like water sanitation, to almost $31 billion from some $51 billion.

Counting projects like high-voltage power grids and high-speed railways, an additional one-third of the $585 billion stimulus package could help increase energy efficiency, said Yang Fuqiang, director of global climate solutions with the World Wildlife Fund International.

But local governments and companies are expected to spend several trillion dollars more on projects that pollute, Dr. Yang said. In terms of cleaner infrastructure, “there’s still going to be a gap,” he said.

In the export centers of Guangdong Province, the party has begun nudging energy-exhaustive industries like ceramics farther inland to bring in greener, high-tech enterprises. But now, officials are feeling pressure to soak up millions of jobless migrants. “The local government is saying, ‘You can stay for now,’ ” Dr. Yang said.

The government’s drive to carry out greener standards remains plagued by bureaucratic conflicts of interest and poor coordination. The environment ministry, for example, is mired in a bureaucratic tussle over raising vehicle emissions standards by next year.

Gas pumps in Beijing switched to cleaner fuel last year to meet the standard, known as Euro IV, before the Summer Olympics. But China’s powerful state oil companies are pushing hard to postpone the nationwide rollout scheduled for 2010 because it requires them to invest billions of dollars in their refineries to produce clean diesel, said Feng An, the executive director of the Innovation Center for Energy and Transportation, a Beijing-based nonprofit organization that advises the government.

Environmental officials defend their response to the economic crisis. From November through February, even as they rushed through nearly 200 big projects, they rejected or deferred 14 other projects worth $15 billion, including paper and petrochemical plants, they said.

But the ministry has acknowledged local abuses of the “green passage” policy and issued at least two directives since December aimed at stemming further problems. Zhang Boju, a researcher at the Chinese nongovernmental organization Friends of Nature, said the policy would only make it easier for local regulators to gloss over reports and ignore rules on public disclosure.

In a telling twist, the charges against Mr. Pan’s aides involved payments from companies seeking environmental approvals, said people who were told about the investigation. The environment ministry declined to provide information about the case.

Mr. Pan himself had ascribed his recent absence from work to illness, and even checked into a hospital for a time, the people said. But, they noted, party officials have been known to wind up in the hospital when troubled by political problems.