China's Big, Dirty Secret

China's runaway growth is taking a heavy toll on the environment and public health. Beijing hints of changes, but so far, it's mostly talk

By Brian Bremner

Economic juggernaut, factory of the world, emerging superpower: When it comes to China's ascendancy, the journalistic clichés come fast and furious. And there's no denying that China's hypergrowth wave is a wondrous thing. But another, darker dimension to China's prosperity exists. The country is fast becoming an ecological wasteland, home to some of the world's smoggiest cities as well as rampant water shortages, soil erosion, and acid rain.

It's not a pretty picture. Moreover, judging by the spike in respiratory diseases and other ailments in recent years, China's wonder growth is taking a toll on public health.

Chinese officials have acknowledged a problem in the past, but quickly termed it a necessary side effect of rapid industrialization and catch-up economic growth, not unlike what Japan experienced in the 1960s. What's more, China is now a net importer of oil and relies heavily on coal, much of it dirty, high-sulfur stuff, for about 70% of its domestic-energy needs. Unless China can secure significantly more oil supplies from abroad and ramp up cleaner domestic-energy sources such as nuclear power and hydroelectric plants, Chinese President Hu Jintao and his Communist colleagues will face a nasty policy dilemma.

BETTING ON DENIAL.

  Runaway economic growth with little thought of environmental side effects at some point can provoke societal backlash. It's difficult to tell whether Beijing understands this challenge, but signs indicate it may be starting to. Last month, China's State Environmental Protection Administration (SEPA) Vice-Director Pan Yue announced the suspension of 30 large projects that have failed to meet environmental standards. The list includes 26 hydropower stations, including a $5 billion megaproject in an area skirting the borders of Sichuan and Yunnan provinces.

Under an environmental law passed in late 2003, such projects must have environmental impact statements in place, and efforts must be made to limit any fallout. Before the law passed, however, local governments would rush forward with big-tickets projects to generate more growth regionally, blithely ignoring environmental impacts. In essence, they bet that government authorities would look the other way. For a long time, they did.

In a statement posted on the environmental agency's Web site, Pan seemed to indicate that game is over. "We shall never be reduced to rubber-stamping," he said, adding the government was now committed to reining in the growth of environmentally damaging power-generation projects as well as those in basic industries such as iron, steel, and cement.

ENERGY SQUANDERER.

 . Trouble is, there isn't much Pan can do to force the projects' backers to really clean up their acts. SEPA doesn't have the authority to cancel construction of these plants for good. Nor can it impose much in the way of penalties. Still, in the context of Chinese politics, his move is startling.

Nobody expects Beijing officialdom to turn into a bunch of tree-huggers, of course. But if they want to put China on a more sustainable growth track and at least halt the pace of environmental damage affecting big chunks of the mainland, SEPA must be given some real authority -- and that's not likely to happen soon.

Also, China needs to diversify from its heavy dependence on coal for energy -- or at least encourage investment in cleaner coal-burning technologies now common in the West and Japan. It also must improve energy efficiency across the country. There's a colossal amount of energy waste, thanks to primitive coal-mining techniques, loose building-construction codes, and inefficient factories. For every $1 of gross domestic product produced, China spends three times the world average on energy.

WEALTHY AND UNHEALTHY?

  It's also a standout in other less-than-admirable areas. China leads the global pack in sulfur-dioxide emissions, has a massive acid rain problem, and contains more than a dozen of the most polluted cities on earth. One World Bank study estimated that environmental damage costs China some $170 billion a year in lost productivity and associated health care. Unfortunately, such costs don't seem relevant when China is clocking near double-digit growth year in and year out.

Some economists think China's rapid growth period could last well into the next decade. That may be true. If so, millions of ordinary Chinese families may see their living standards rise, doubtless a good thing. One just hopes that China doesn't commit ecological suicide along the way. For if it does, China may be rich, but who will want to live there?

Bremner is Asia regional manager for BusinessWeek in Tokyo

Edited by Patricia O'Connell