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Written by Laurence Brahm - Published by South China Morning Post on 03/07/2006
Mainland China has set a goal of reducing its energy consumption by 4 per cent this year, and by about 20 per cent by 2010. But how can it realistically cut energy consumption while maintaining high growth rates?
To meet the challenge, indices of national energy consumption will be published in connection with the growth rates of the gross domestic product. That practice will begin this year, according to a joint decision by the National Development and Reform Commission (NDRC), State Energy Agency and State Statistical Bureau.
This marks the beginning of a green-GDP attitude, alongside the government’s usual growth-at-all costs psyche. The new green index will be applied to local governments to assess the quality, rather than quantity, of their growth statistics. But will this have any real effect?
In the past, local governments published indices such as GDP, industrial-added value, fiscal revenue and per capita income. These were watched closely by both local and international media to assess a government’s performance. As for gauging the efficiency of energy consumption, China has never had any compulsory requirements, and nobody cared. The result is that, today, urban areas choke on pollution, and some are almost impossible to live in.
Publishing an energy consumption index represents a positive first step because it exposes the connection between economic growth, energy consumption, and the subsequent pollution as a cost of growth. But how can Beijing turn such index-tracking into an effective means of controlling crazed local growth? That has yet to be answered.
Local governments have an interest in keeping GDP levels high for two reasons. First, over the past decade and a half, GDP growth rates served as the main means of evaluating the achievements of local officials for the purpose of promotion or demotion.
Second, local officials make a lot of money on the side, on infrastructure and property development projects: they will not sacrifice wealth so that their children can breathe cleaner air. Try discussing this with local officials and you are likely to get laughed out of the room.
At a recent forum of Chinese economists, Liu Fuheng, executive vice-president of the Academy of Macroeconomic Research of the NDRC, all but tore up the draft 11th Five-Year Programmes prepared by the local governments of more than 40 provinces, cities and counties. He said: “After reading [it], I have the impression that no significant change has been made in the understanding of the scientific development concept, and that ‘development’ is still regarded as growth.”
In drafting the plan, the only thing that local governments considered was economic growth, their national GDP ranking and raising their competitiveness against each other, he noted. This would only perpetuate the current spending-for-growth cycle. This is a serious problem if China wants to even think about introducing ideas of sustainable development.
Understanding the problem will be the first and possibly insurmountable challenge for the central government’s small coterie of economists with vision.
A large part of the problem stemmed from local governments relying on high rates of investment to sustain GDP increases, said Wang Luolin , a former executive vice president of the China Academy of Social Sciences involved in drafting the five-year plan.
This is often done by winning infrastructure projects from the central government – creating a situation of high growth but not sustainable development. “The situation is rooted in the general system, with profound reasons behind it,” he said. “To change the situation is not an easy thing.”
Laurence Brahm is a global activist, international mediator, political columnist and author. He is the leading advocate of a fresh development paradigm - The Himalayan Consensus - an innovative approach to development.