The government plans to reduce sulfur dioxide emissions by 8 percent, raise the ratio of non-fossil fuels as part of total energy use, lower the ratio for coal, and add 42 million tons of daily sewage treatment capacity from 2011 through 2015, it said in a statement on its website yesterday. Companies and local authorities will be mainly responsible for the investments, while the central government will give support as needed “depending on different circumstances,” it said.
China’s spending on environmental projects is part of a campaign to move the world’s second-biggest economy away from a model that derived most of its growth from exports and investments for roads, railways and airports. Senior Chinese leaders including President Hu Jintao have pledged to bolster domestic consumption, conserve energy and reduce pollution as part of efforts to create more sustainable economic growth.
“Boosting environmental protection is an important step in China’s move to shift its growth model,” said Wang Jun, a researcher with the government-backed China Center for International Economic Exchanges in Beijing. “Excessive infrastructure investment over the past years has been a key factor fueling China’s high inflation and also added to financial risks.”
China will shift its investment focus to sewage treatment plants, water irrigation and other “green” projects, Wang said.
“The government will continue to build roads, bridges, and airports, but the investment won’t match the 4 trillion yuan the country spent after the 2008 crisis,” he said.
That investment was fueled by historic levels of bank lending. Much of the borrowing was by companies local Chinese governments set up to bypass rules barring them from directly taking loans or selling debt. The National Audit Office said in June that local government debt in China totaled 10.7 trillion yuan, with 80 percent of the total coming from banks, and warned of repayment risks.
China is the world’s largest energy consumer and the biggest emitter of greenhouse gases.
While targets and key tasks outlined in the 11th five-year plan for 2006 to 2010 were achieved, the deterioration trend in the environment hasn’t been “fundamentally curbed” and pressures on it are increasing, the State Council said.
The country’s 11th five-year plan targeted total investment on environmental protection at 1.35 percent of gross domestic product during the period, without giving a specific amount. Based on the annual GDP data released by the National Bureau of Statistics during the period, that investment would amount to 2.08 trillion yuan, about 40 percent less than investments planned for 2011 through 2015, according to Bloomberg calculations.
The State Council’s statement on the 12th five-year plan didn’t say whether the goals on emission reduction are “binding indicators,” compared with such a mention in the plan for the previous period.
The government said it will encourage “qualified” local government financing vehicles to expand funding channels for environmental protection projects and will support companies in the industry to issue bonds or list shares.
--Victoria Ruan. Editors: Shamim Adam, John Liu
To contact Bloomberg News staff on this story: Victoria Ruan in Beijing at email@example.com