Skip to Main Content
Have library access? Log in through your library
China's Dilemma

China's Dilemma: Economic Growth, the Environment and Climate Change

Ligang Song
Wing Thye Woo
Volume: 2008
Copyright Date: 2008
Published by: ANU Press
  • Cite this Item
  • Book Info
    China's Dilemma
    Book Description:

    China's Dilemma—Economic Growth, the Environment and Climate Change examines the challenges China will have to confront in order to maintain rapid growth while coping with the global financial turbulence, some rising socially destabilising tensions such as income inequality, an over-exploited environment and the long-term pressures of global warming. China's Dilemma discusses key questions that will have an impact on China's growth path and offers some in-depth analyses as to how China could confront these challenges. The authors address the effect of the global credit crunch and financial shocks on China's economic growth; China's contribution to greenhouse gas emissions and emissions reduction schemes; the environmental consequences of foreign direct investment in China; the relationship between air pollution and mortality; the effect of climate change on agricultural output; the coal industry's compliance with tougher regulations; and the constraints water shortages may impose on China's economy. It also emphasises the importance of managing the rising demand for energy to moderate oil price increases and placating domestic and international concerns about global warming. In the thirty years since China started on the path of reform, it has emerged as one of the largest and most dynamic economies in the world. This carries with it the responsibility to balance the requirements of key industries that are driving its development with the need to ensure that its growth is both equitable and sustainable. China's Dilemma highlights key lessons learned from the past thirty years of reform in order to pave the way for balanced and sustained growth in the future.

    eISBN: 978-1-921536-03-8
    Subjects: Economics, Environmental Science

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Tables
    (pp. vii-ix)
  4. Figures
    (pp. x-xiii)
  5. Symbols used in tables
    (pp. xiii-xiii)
  6. Abbreviations
    (pp. xiv-xv)
  7. Contributors
    (pp. xvi-xvii)
  8. Acknowledgments
    (pp. xviii-xviii)
  9. 1 China’s dilemmas in the 21st Century
    (pp. 1-12)
    Ligang Song and Wing Thye Woo

    Thirty years of reform (1978–2008) have turned China into one of the largest and most dynamic economies in the world. China, however, faces three significant and profound challenges towards the end of the first decade of the twenty-first century: First, to maintain continued high growth amid global financial turbulence, the slow-down of the major economies abroad, and some rising socially destabilising tensions such as growing income inequality; second, to bring its growth path in line with environmental sustainability; and third to manage the rising demand for energy to moderate oil price increases and to placate heightening domestic and international...

  10. Part I Economic growth:: determinants and prospects

    • 2 Will China fall into stagflation?
      (pp. 13-29)
      Yiping Huang

      The growing risk of stagflation has perhaps been one of the most important macroeconomic surprises around the world since the beginning of the year. China is not excluded from the risk. According to the National Bureau of Statistics (NBS), real gross domestic product (GDP) growth moderated from 11.9 per cent in the fourth quarter of 2007 to 10.6 per cent in the first quarter of 2008. Between mid 2006 and late 2007, the growth of export volumes fluctuated largely within the 20–30 per cent range. After that, however, export growth tanked (Figure 2.1). The growth of industrial production showed...

    • 3 American and European financial shocks: Implications for Chinese economic performance
      (pp. 30-58)
      Rod Tyers and Iain Bain

      China’s exports amount to almost half of its gross domestic product (GDP), with most of these directed to Europe and North America, so China can expect that negative financial shocks in these regions might retard its growth. Mitigating factors, however, include the temporary flight of North American and European savings into Chinese investment and some associated real exchange rate realignments. These issues are explored using a dynamic model of the global economy. A rise in North American and European financial intermediation costs is shown to retard neither China’s GDP nor its import growth in the short term. Should the Chinese...

    • 4 Global production sharing and US–China trade relations
      (pp. 59-89)
      Prema-chandra Athukorala and Nobuaki Yamashita

      In the past decade, the widening bilateral trade deficit has been the focal point of US–China economic relations. This is often portrayed as a cause of the overall US current account imbalance. Real public concerns in the United States surrounding the debate about the ‘China deficit’ are, however, rooted in the perceived economic threat of import competition. In the late 1990s, when imports from China were dominated by traditional labour-intensive manufactures such as clothing and footwear, unskilled workers’ employment losses and wage suppression were the prime focus of the debate. More recently, the apparent rising sophistication of imports from...

    • 5 Rebalancing equity and efficiency for sustained growth
      (pp. 90-109)
      Justin Yifu Lin

      Income distribution is currently one of the most conspicuous problems in China. Since the reforms of 1978, China has maintained rapid economic growth, with an average gross domestic product (GDP) growth rate of 9.7 per cent per annum and a yearly foreign trade growth rate of 17.4 per cent. Growth was particularly strong between 2003 and 2007, during which time China maintained a high GDP growth rate of more than 10 per cent and a foreign trade growth rate of 28.5 per cent per annum. As a country in rapid transition, however, many social and economic problems have developed as...

    • 6 Rural–urban migrants: A driving force for growth
      (pp. 110-152)
      Xiaodong Gong, Sherry Tao Kong, Shi Li and Xin Meng

      A spontaneous transfer of rural labour from agriculture to secondary and tertiary industries accompanies economic growth in most countries. It is often believed that this movement is pushed partly by the increase of surplus labour in the agricultural sector and, more importantly, pulled by higher returns to labour in urban manufacturing and service industries. Through this process, modern sectors with high productivity expand and engage more labour to move into modern sectors, leading to an improvement in overall productivity, which in turn gives an impetus to economic growth.

      The world has witnessed China’s extraordinary pace of economic change in the...

    • 7 Rethinking thirty years of reform in China: Implications for economic performance
      (pp. 153-169)
      Xiaolu Wang

      After three decades of economic reform, beginning in 1978, China has transformed itself from a centrally planned economy to a market economy. Prices for most commodities have been liberalised. The private sector, including private enterprises, shareholding companies and foreign-funded enterprises, has become the dominant part of the economy. Although the government is still playing an important role in the economy, the overall command system was abolished long ago.

      During this period (1978–2007), the gross domestic product (GDP) growth rate in China was maintained at an average of 9.8 per cent annually—3.7 percentage points higher than that of the...

  11. Part II Impact of environment degradation and climate change

    • 8 China’s rapid emissions growth and global climate change policy
      (pp. 170-189)
      Ross Garnaut, Frank Jotzo and Stephen Howes

      The world has entered a period of exceptionally fast economic growth, with rapid economic development especially in China, followed by India and many other low-income countries. Early twenty-first century rates of economic growth have been even higher than the average in the ‘Golden Age’ of the 1950s and 1960s, so the current period could be called the ‘Platinum Age’ (Garnaut and Huang 2007). This rapid economic growth goes hand in hand with increasing resource use and pressure on the environment, including the build-up of greenhouse gases and resulting climate change.

      In most of its first two centuries, modern economic growth...

    • 9 China can grow and still help prevent the tragedy of the CO₂ commons
      (pp. 190-225)
      Warwick J. McKibbin, Peter J. Wilcoxen and Wing Thye Woo

      China and India have finally embarked on the path of modern economic growth. China’s economy has grown at an average annual rate of almost 10 per cent for the past 30 years, and India’s has grown more than 8 per cent every year since 2004. Just like the experiences of post-1868 Japan and post-1960 South Korea and Taiwan, China and India are now on the trajectory of catch-up growth that will bring them in the long run to the same living standard as Western Europe, Japan and the United States. At that point, the share of global income produced by...

    • 10 The political economy of emissions reduction in China: Are incentives for low carbon growth compatible?
      (pp. 226-242)
      Cai Fang and Du Yang

      There is growing, unassailable evidence of severe existing and potential consequences of global climate change and of the relationship between human economic activities and global warming (for example, Stern 2007). The Kyoto Protocol and the Bali climate conference road-map proposed either compulsory or moral requirements for action from all economies—including China, which has the largest population size, the fastest growth rate and the second-largest gross domestic product (GDP) in purchasing power parity (PPP) terms. As research (Thomas 2007) estimates, assuming the ratio of carbon dioxide emissions to GDP remains at the 2001 level, total global emissions will reach as...

    • 11 The environmental consequences of foreign direct investment in China
      (pp. 243-264)
      Qun Bao, Yuanyuan Chen and Ligang Song

      China has been the largest recipient of foreign direct investment (FDI) in the developing world since 1990, and there has been a profound change in China’s foreign investment policy in the past decade. It is acknowledged generally that FDI has played a significant role in promoting China’s rapid economic growth through meeting the gaps of capital shortage, pushing technology spill-over towards local firms and improving the degree of China’s economic openness (Cheung and Lin 2004; Yao 2006). Foreign direct investment has, however, also had some negative impacts on China’s economy, which have increasingly aroused concern. Among them, the environmental consequences...

    • 12 The impact of global warming on Chinese wheat productivity
      (pp. 265-275)
      Liangzhi You, Mark W. Rosegrant, Cheng Fang and Stanley Wood

      The adoption of modern varieties and the increased use of irrigation and fertilisers during the ‘Green Revolution’ dramatically increased crop yields all over the world (Evenson and Gollin 2003b; Rosegrant and Cline 2003). The Green Revolution enabled food production in developing countries to keep pace with population growth (Conway and Toenniessen 1999). Crop yield growth has slowed since the 1990s (Evenson and Gollin 2003b; Rosegrant and Cline 2003), but continued crop yield increases are required to feed the world in the twenty-first century (Rosegrant and Cline 2003; Cassman 1999) given the continuing decline in the amount of land suitable for...

    • 13 Understanding the water crisis in northern China: How do farmers and the government respond?
      (pp. 276-296)
      Jinxia Wang, Jikun Huang, Scott Rozelle, Qiuqiong Huang and Lijuan Zhang

      Increasing evidence indicates that China is facing serious water shortages, especially in the north of the country. These shortages are a result not only of falling water supplies, but of rising water demand. There is evidence of falling supplies of surface-water resources and the related closure of rivers. Because of climate change and human activity, in the past two decades, run-off in some major river basins in northern China has declined significantly, resulting in the decrease of available surface-water resources. For example, run-off in the Hai River Basin has decreased by 41 per cent (Ministry of Water Resources 2007). Run-off...

    • 14 The impact of air pollution on mortality in Shanghai
      (pp. 297-309)
      Health and Mortality Transition in Shanghai Project Research Team

      Climate change, air pollution and improving public health are some of the most serious challenges facing humankind at the beginning of the twenty-first century. While considerable effort has been made to understand the impact of changing climatic conditions and air quality on population health, our knowledge of their relationship is still rather limited, and this is especially the case in developing countries, where detailed and reliable data for environmental conditions and population health are often difficult to find.

      To further improve our knowledge of declining mortality rates in the past half-century, the major characteristics of current mortality patterns and their...

  12. Part III Energy use, the environment and future trends

    • 15 Energy and environment in China
      (pp. 310-333)
      Kejun Jiang and Xiulian Hu

      Due to rapid economic growth, China’s total primary energy consumption increased from 400 mega-tonnes of oil equivalent (Mtoe) in 1978 to nearly 1,820 Mtoe in 2007, with an annual average rate of increase of 5.3 per cent (Figure 15.1) (NBS 2006a, 2006b, 2007a). Coal is the major energy source, providing 70.7 per cent of total primary energy use in 1978 and 71 per cent in 2006 (Figure 15.2). There has been a dramatic surge in recent years in the rate of increase of energy use in China, as well as widespread energy shortages.

      China’s energy development strategy gives high priority...

    • 16 Chinese urban household energy requirements and CO₂ emissions
      (pp. 334-366)
      Jane Golley, Dominic Meagher and Xin Meng

      Much of the literature on Chinese energy focuses on the insatiable demand of China’s rapidly growing industrial sector. Given that in 2005 industry accounted for close to 70 per cent of China’s energy demand that was consumed directly by the various sectors of the economy, this focus is not unwarranted. Likewise, given that residential consumption accounted for only 11 per cent of this direct energy demand in 2005, perhaps it is not surprising that there has been so little research on this aspect of China’s total energy demand.¹ What tends to be overlooked, however, is that whatever is produced within...

    • 17 Can China’s coal industry be reconciled with the environment?
      (pp. 367-391)
      Xunpeng Shi

      Coal provides 70 per cent of China’s primary energy, therefore it is no surprise that China’s air pollution is caused mainly by coal use. It has been reported that 85 per cent of the sulphur dioxide, 70 per cent of the smoke and 60 per cent of the nitrogen oxides emitted into the atmosphere in China come from the burning of coal (Wang and Feng 2003). The correlation between increased sulphur dioxide levels and coal consumption is above 95 per cent (He et al. 2002). Emerging concerns about climate change add further pressure to the use of fossil-fuel energy in...

    • 18 Emissions and economic development: Must China choose?
      (pp. 392-414)
      Peter Sheehan and Fiona Sun

      China’s energy use has surged since the turn of the century, almost doubling between 2000 and 2007. The rate of growth in energy use during this period (9.2 per cent per annum) has been more than twice that of the previous two decades (4.5 per cent), in spite of similar rates of economic growth. Many factors were undoubtedly responsible for this sharp change in trend. One was the post-2001 development pattern, with a focus on heavy industry, exports and fixed-asset investment. Another was the fundamental change in the structure, ownership and operation of the energy industry that took place during...

  13. Index
    (pp. 415-428)