Panelists:
Nathan Nankivell, Senior Researcher, Office of the Special Advisor at Joint Task Force Pacific Headquarters, Canada
Shelly Singhal, Chairman and CEO, SBI Group
Paul Smith, Associate Professor, Asia-Pacific Center for Securities Studies, U.S. Department of Defense
Perry Wong, Senior Research Economist, Milken Institute

Moderator:
Graham Earnshaw, Editor-in-Chief, Xinhua Finance News

China's growth in 2005 was at a whopping 9 percent for the ninth year in a row. But impressive growth also brings impressive environmental problems.

Find out how a Canadian researcher, a CEO, a US Department of Defense and an economist would play the environmental clean-up game in China after the jump.

Moderator Graham Earnshaw sets the stage. China is in a unique position in that they are willing to admit that they have an environmental problem, and are trying to take steps toward fixing it. The Chinese are a shame culture as opposed to guilt culture, so the more we talk about the filthy state of Shanghai, the faster we will see results.

Question from the Moderator for Nathan Nankivell: Where do you think all of this is going?

Nathan reveals that the water scarcity in China is on par with sub-Saharan conditions. Waste water is as much of a problem as water shortage. 400,000 people die every year from respiratory disease. Pollution is part of it.

Things will get worse before they get better

The more cars there are on the roads, the more pollution. The US has been an example for China in the past. However, we don’t live in an environmentally sustainable, so how do we expect China to follow?

There is time for change. China needs dedicated leadership. President Hu Jintao wants sustainable development from this point forward. There were 80,000 protests, many of which were related to environmental issues. Maybe a tariff to raise price of gasoline?

How can we help China and why would we want to? Because there might be a large migration of people when water runs out. The sandstorms in China were felt in Korea and Japan. Destabilization of party is the end result and the impact would be huge with respect to security and violence.

Solutions include small-scale hydroelectric and solar power. China could be the model for revolutionizing green GDP. They just need to find resources.

Example of environmental issue coverage in Chinese media

Perry Wong is an economist with the Milken Institute. Reform has enabled the Chinese government to recognize that people don’t want to live in a city like that;one that is so polluted. Government moved large factories to the outskirts of the city. In the past 20 years, big cities reduced CO2 by going to natural gas. That is the benefit of economic openness. However, there is a counter-effect. Hyper-development called for building high rises, bridges, and roadways. China had to buy up steel, aluminum, and cement. This has had a negative impact. The cost of high growth, as the market economy took root in China, enabled villages to operate on their own. They have become market-force driven and can exist as money-making enterprises.

It is true that we do need to create jobs to create wealth in these factories. The pursuit of jobs is the number one issue in China, but it overtook the economic cost, and the now the cost is the environment.

On April 17, the sandstorm hit Beijing, dropping 300,000 tons of yellow dust on China’s capital city. This was not due to production. It was due to accumulation of over-farming over the past 30 years. Soil got loose. Wind blows and brings yellow dust. In the 1950s and 1960s, the government tried to build a “green lining” (tree-line) to block off that sand. Back then, it was done well because one command came down from the government and it got done.

Now everything is different.

Perry is optimistic, but concerned. Green technology is promising, but based on experience, i.e. 1955-1975 CO2 emissions – we have to wonder if pollution as a result of high growth is a necessary condition,.

Paul Smith looks at the problem in China from a Defense perspective and says that environmental degradation is the most serious security threat faced by China on two levels.
1) Human security – more people are dying from pollution than from the Jihad
2) State security and stability – environmental degradation threatens the integrity of the Chinese CCP.

Social protests are an indicator of the nascent rise of civil society. There are on average, 20,000 protests per year. The Chinese people are crying out to their government and the international community for justice. There is increased pressure by people to do something about women with stillborn children and developing cancer at young ages. The protests are pathway to a solution. They represent the rise of an environmental movement in china. Nothing will change unless it happens at the grassroots level. The problem is that the national government is more pro-environment than local governments, so protests for action have to be at local level.

Shelly Singhal reminds us that one farmer can feed 300 people today. Change in agriculture leads to fewer people required on farms. Nobody wants pollution, but its a byproduct of transitioning from an agrarian society to an industrial society, and finally to an information society.

The Chinese have destroyed their environment, and are now supporting 21% of world on 7% of water.

Consumers here have to demand accountability from their purchases. Bring justice through lawsuits. Obviously, this implies a solid legal system is in place.

Perry says that Democracy and how we advertise way of life in US is that automobiles are good. Thus, China’s response is that it is becoming the #1 auto market. Is this good or bad?

A slide shows that in the US, each household owns 1.78 cars.
In China, each 100 urban households owns 1.36 cars.
If every 10 Chinese urban households owns 1 car, China’s emission of CO2 will increase by 79.4 million tons each year.

Paul says that we are at a period in history in which world needs to view China with a Marshall plan. No one will profit from environmental degradation in China. What about exogenous pressures like climate change and sea level rise? To address these issues, we need an environmental Marshall plan.

We do see signs of turnaround, i.e. green elements like the vast amounts of solar energy in countryside.

Perry responds that China has the largest coal deposits after US, but it has overreached its production capacity. The cost of production to maintain Chinese growth is new technology. In this case, since they cannot rely on more oil resources, they will have to go back to the methods of the 1990s that they wanted to abandon or minimize back then.

Nathan believes that putting pressure on lower level groups will cause change. Sacrifice intellectual property rights to let China use clean burning coal technology.

Paul also says that there is a business opportunity. Washington state is ahead of the game, selling products to China to help them in their environmental efforts. The central government pays attention, but local governments are where we need to focus.

Perry believes that the real problem in China is not city or provincial governments. How do you set up a system that is not provincial that imposes on villages, like guangdo? The government has to be willing to enforce rules, which are there.

Shelly tells us that China set up an EPA in 1998 and yet, they didn’t pass any laws until 2002. They need better law enforcement.

Question form the moderator: What about the power of the Internet? The Chinese government is good at controlling the Internet.

Graham thinks that the government will put policies in place, not from pressure from below as Cole thinks.
Cole thinks that is naive

Perry says that in the old days, politics was all central. Now, it’s local, cut-throat in all cities, townships, etc. Local governments are trying to woo investors to come in. Technology is one way to help. Carbon trading system is another way to help. However, he opposes Cole’s idea of Marshall law.

Paul asks, “How do you get multinationals to do something?” You can’t put pressure on local Chinese governments as we’ve done in the US.

Nathan wants to provide expertise, teaching at the party level, and to facilitate cooperation between agencies in China.

Moderator sums up each panelists’ recommendations in one sentence.
Paul wants to prosecute US companies that pollute in China. Shelly thinks consumers should spend more in Wal-mart. Nathan thinks we should abandon technology. Perry believes in experts, administrate advice and providing mechanisms to the local governments.

The bottom line is that we have to wait for a generation that is so concerned about their living conditions that they will do something. We have to wait for the generation that is in their 20s and 30s now who are more vocal, which won’t be too long, 5-10 years. China has to pay attention to energy consumption. The environmental issue is not a single item with a single solution.