China’s time bombs

In a recent post Dr. Demarche of The Daily Demarche wrote:

We haven’t done a group blog project in a while and now seemed like as good a time as any to start up another one. To that end we have cast a net out to some of our favorite bloggers and asked them to play along- the theme this time is China in the coming decade.

I was one of those invited to participate and, although I’m a little slow at getting off the block, I have a few thoughts to throw out. Digressing slightly I must admit that I’m very impressed by Dr. Demarche’s management skills. He’s managed to recruit at least a dozen top-notch bloggers to participate in his “China project”, apparently without breaking a sweat.

Before I get into my post in earnest I want to put my cards on the table: I’m a China skeptic and I’ve been one for nearly forty years. Sure, we couldn’t continue to ignore China indefinitely. But we haven’t expected nearly enough of China and we have become far too dependent on the Chinese—I believe to our detriment. When they look at China Western entrepeneurs and politicians see a potential market of nearly a billion brand new customers and a source of cheap labor. I see something that more closely resembles a very large United Arab Emirates: vast riches dominated by a fairly small oligarchy and it’s an oligarchy whose goals are so different from typical Western politicans’ that few Westerners have much real insight into how the members of that oligarchy might respond to changing events. And I think it’s likely to remain such an oligarchy for some time to come for a variety of cultural and social reasons.

So, yes, trade with China. Form closer economic, political, and military ties. But keep one foot on the threshold and be ready to pay the consequences of cutting China loose. Ask much more from China, be prepared to be rebuffed, and be prepared to make China suffer consequences. And be prepared to pay some consequences ourselves.

We just aren’t willing to give up anything in dealing with the Chinese, the Chinese know this, and that puts us at an enormous disadvantage in negotiations.

Many bloggers participating in “the China project” have noted military threats. Some have also noted demographic problems looming on the horizon for China. A few have mentioned China’s oil dependency. I’m going to concentrate on just three time bombs that I see in China’s future: the environment, banking, and economic vulnerability. In this post I’ll concentrate on the environment and leave banking and fundamental economic vulnerability for future posts.

China is suffering an environmental catastrophe of enormous proportions. Here’s how Joshua Kurlantzick described it last September in an article for The Washington Post:

The catastrophe is already unfolding in sickening detail. In a new book on China’s environment, “The River Runs Black,” a Council on Foreign Relations scholar, Elizabeth Economy, documents how two-thirds of Chinese cities have air quality below World Health Organization standards, by far the worst rate of any large country in the world. By some measures, at least six of the world’s 10 most polluted cities are in China, including Beijing and Urumqi. Several have the highest rates of airborne carbon monoxide in the world. The country’s environmental agency says that living in Chinese cities with the worst air pollution does more damage to an average Chinese person’s lungs than smoking two packs of cigarettes a day.

Meanwhile, as trees are ripped out of northern and central China — forest cover has fallen by more than half over the past two decades — the country’s deserts are expanding by several hundred thousand square kilometers per year, faster than anywhere else in the world. The government’s efforts to replant tens of millions of trees have thus far proven woefully ineffective at stopping the desert’s march. The Gobi Desert, which stretches across central China, has moved so close to Beijing, at a pace of about two miles a year, that its borders are less than 200 miles from the capital. Beijing is buffeted every summer by sandstorms that fill the sky and sometimes send particles drifting as far as South Korea.

According to Economy, the water in five of China’s largest rivers is so polluted it is dangerous to the touch, because it causes skin diseases; the Huai River, in the fertile province of Anhui, is filled with garbage, yellow foam and piles of dead fish. Several of the country’s main waterways, including the Yellow River, a vital artery, run dry before reaching the sea. More than 600 million Chinese, roughly half the country’s population, now drink water contaminated with animal and human waste, says Jasper Becker, a longtime China analyst based in Beijing.

Air pollution, water pollution, loss of precious arable land. All of these things are have immediate health consequences for the people of China and are going to have longterm health consequences for them. And China’s environmental problems aren’t being kept within its borders.

According to this article from Energy Bulletin 40% of the air pollution in South Korea and Japan is due to Chinese coal-fired power plants. The pollution may be spreading as far as the United States and Canada and could stress forest lands and do who knows what to the intervening oceans.

China is also the world’s largest producer of ozone-layer damaging chloro-fluorocarbons.

Where is all the pollution coming from? According to the United States Energy Information Administration these are the sources of China’s energy:

Source Percent
Coal 63.4%
Oil 25.8%
Hydroelectricity 6.9%
Natural gas 3.1%
Nuclear 1%

Burn more coal to fuel China’s 8-10% per year economic growth, get more pollution.

Although China’s production of electricity from nuclear power plants is expected to rise from 1% to 4% by 2025, you just can’t build and bring nuclear power stations online fast enough to make a significant dent in China’s growing power needs.

Burn more oil? Have you noticed your gas prices going up lately? A big reason for that is China’s increasing use of (mostly imported) oil.

Well, how about renewable hydroelectricity? That’s no solution for China, either. The reason that the Three Gorges Dam project has been so controversial is that the land flooded by the dam is so poisonous. And there’s another reason that hydroelectricity is no solution: hydroelectric dams are a major cause of increased methane production which may lead to global warming.

Can China grow wealthy enough to solve its environmental problems (as many suggest)? It’s possible but China is just not on the right trajectory for that right now. China’s economy is six times more energy intensive than that of the United States. That is, it takes six times more energy to produce a dollar’s worth of economic growth in the Chinese economy than it does to produce a dollar’s worth of growth in the U. S. economy and the amount of energy that China takes to produce a dollar’s worth of growth is increasing.

So it’s becoming increasingly obvious: China’s environmental problems are a disaster of unimaginable and rising consequences that China is neither willing nor able to solve on its own. And nobody much wants to put pressure on them to change. That’s why I was opposed to the Kyoto Protocol, by the way. No such agreement that exempted China made any sense at all.

UPDATE: the next installment of my series on China’s time bombs is here.

28 comments… add one
  • Excellent post. China sounds like the USSR. If they don’t become more democratic soon, they’ll poison themselves — and their neighbors — to death. Perhaps the environment imposes a natural limitation on the lifespan of totalitarian governments intent on becoming a World Power.

  • We need more essays like this one–many more. March of the Gobi in China is like march of Sahara across Africa.

    Kyoto worse than useless; it’s very dangerous because it gives illusion that something is being done. See linked article in my piece on Kyoto

  • I wonder how the distribution of pollution compares to the distribution of profits. China seems ripe for a break-up to me.

  • Perhaps some communists really don’t understand how to succeed at capitalism after all.

  • Great job Glittering Eye, this info has been available in fifty or so parts for a long time and it’s great that you put it all under one roof. What is interesting too is that the MSM never prints data that is available.

    This is a result of growing too fast and a government that is not accountable. They have created a water pollution situation that is not fixable. They don’t care.

    Again, terrific job.

  • Outlaw3 Link

    Very good entry. I will look forward to the next part.

  • TZ Link

    China is indeed poisoning itself to death. I have also heard it is quickly using up all of it’s farmable land through wasteful agricultural processes, which will eventually lead to a food shortage. What worries me the most, is that when all this hits… what will China do to let off the steam? Will the government go on a military expedition to a certain place blaming all of their troubles on outsiders? It seems to me like this is a likely scenario.

  • As long as the PRC has enough industrial profits, it can buy food. We don’t have a shortage of calories available on the worldwide markets and the higher prices will bring a densification trend to US cities/suburbs as agriculture comes back in vogue in order to feed the PRC.

    The problems for the PRC will really kick in as a younger generation with no personal memory of the bad old days comes into the armed forces ranks that usually stage coups and make classic chinese warlords. At some point, one of the time bombs mentioned here and elsewhere will cause a declaration of independence either in a neglected interior West or in an overtaxed, subsidizing East. This is the true significance of the secession law, which I think has been horribly misinterpreted in the US.

    The energy inefficiency of the PRC could be cured by a nice recession of a year or two duration where the inefficient would go out of business and the watchword would be efficiency and holding on to survive. Unfortunately, it’s unlikely that the current government could survive a year of negative growth, much less two and so inefficiency will continue to grow until a breaking point. That break is likely to be ugly.

  • blueblog Link

    I cannot agree some opinions here.
    In fact, the problem of energy efficiency in China is quite misleading. Different from the economy structure of US, 70% of China’s GDP consists of manufacturing. Only 20% of China’s GDP is service. Compared to China’s economic structure, 70~80% of US GDP is service industry. Manufacturing industry consumes much more energy than service industry to produce the same amount of dollars. For example, the steel production of China is almost 200 million tons in 2004, which is equal to the combination of steel produced by US and Japan. Steel is energy intensive industry. Obviously, it is not surprised to me that seem China has lower energy efficiency than other developed countries, like US and Japan.

    Pollution is a big problem in China. But it is controllable. The similar problem appeared in US and Western Europe from 1910s to 1960s. With efficient national pollution control (requiring a huge investment) and upgrading of industry from high pollution emission to cleaner industry, pollution can be alleviated in China. However, during the current period, Chinese government has not so much capital available to invest on pollution control. They have a long list of urgent issues to resolve, you know, the high unemployment rate, eliminating illiteracy and development of advanced technology. Every of them need the precious capital.

  • Excellent post.

    I was in Russia in 1993 and was amazed at how polluted Moscow was. The whole city stank, and every fourth car spouted visible smoke. It made me appreciate the efforts of environmentalists in the west who fought for reform.

    Goes to show you the power of democracy vs totalitarianism or authoritarianism forms of government. Governments that do not derive their powers from the people through elections will simply never clean up the environment. China again proves it.

    I hope that “TM Lutas” is right about an explosion/revolution, but I’m not so sure. the government’s strategy is to buy off the population and it seems to be working so far. But as he or she points out all it may take is a business downturn. We shall see.

  • seth Link

    I´m preparing a thesis on the effect the chinese transition to capitalism has on the environment, at what cost is China developing, achieving economic growth.
    If anyone has relevant information please send it to my e-mail!

  • I´m preparing a thesis on the effect the chinese transition to capitalism has on the environment, at what cost is China developing, achieving economic growth.
    If anyone has relevant information please send it to my e-mail!

  • Dustin Link

    Have any of you made a visit to China lately? Yes they have environmental problems but so did we in the early part of this century. China will be the number 1 economy. Instead of prophesying about a collapse, breakdown, revolution, or whatever you call it, we should instead be urging our congressmen to take measures to keep us economically competitive in the next century.

  • First, Dustin, you’re wrong on your facts. Serious pollution problems didn’t emerge here until per capita GDP was three times what China’s is now in real dollars. China environmental problems are reaching critical proportions and its officials know it. Second, my position is that the United States should be encouraging and helping China to deal with its serious problems rather than preparing to confront China militarily as many have been encouraging. What’s your position? Third, I would relish China becoming the most powerful economy on the planet. The only way that will happen is if they encourage a domestic market. They’re not doing that and they simply must. Fourth, the only concern I have about U. S. competitiveness in the coming century is over-reliance on and under-enforcement of intellectual property laws. Since I see no real prospects for enforcing such laws in China, I think we need to stop relying on intellectual property for our own economic growth. So we should stop subsidizing it. What do you think?

  • Brian Link

    Why shouldn’t we rely on our own intellectual property? I read a CIA report that was published in like 1997 that China has stolen millions of US patents. Having recently been to China, I know that number has inreased. Their whole mind set is that it is not wrong to steal ideas; it’s considered good business. China will not do business with any major US company unless they agree to a technology transfer. I mean why purchase hundreds of thousands of automobiles from the US when you can buy one and reverse engineer it? Why purchase thousands of GE Turbines when you can get the keys to the kingdom and make your own? Being a GE employee, I know first hand. A few years ago, China signed a huge deal(billions) for GE to supply and build many Gas and Steam turbines. it was called the China Bundle Buy. The deal was supposed to have about 7 phases..China Bundle Buy I, CBB2,…CBB7. It looks really good on paper right. Well, China purchased the new turbines for CBB1, GE built them and then they cancelled all the other contracts. So how can we compete against that? It is a totally lawless and immoral society. If it can happen to GE, it can happen to any company. A GE might survive this outright robbery of their intellectual property but smaller IP companies will be forced out of business while the whole world watches it go down.

  • Brian, I’m aware of China’s organized and disorganized theft of U. S. intellectual property. I’ve posted about it a number of times. I started making the point nearly 30 years ago to top managers. But they think of that billion-person market and have dollar signs in their eyes.

    We only have a small number of alternatives. We can just keep on doing what we’re doing and subvert our own economy. We can cut off trade with China which would be cutting off our nose to spite our faces. Or we can recognize that we can’t enforce our ideas of intellectual property if most of the world thinks it’s crazy.

  • Brian Link

    Good point Dave. I think it is somewhat of a catch 22. We love to buy our cheap goods too much that we are willing to push all US manufacturing jobs to China. I think the whole world is entrusting too many manufacturers to setup shop in China. I do not think China can handle all of this. Their infrastructure cannot support the boom as it is. They are damaging the the Earth more and more every day. I say Earth because I think it is an understatement to say that they are destroying their own environment when in fact they are destroying the entire planet. Their economy is booming now. I use the “My Cousin Vinny” analogy that China’s strength is built on a foundation of bricks that are each as thin as a deck of cards. From the side, the bricks look strong and sturdy when in reality they are made of paper. China does not have this strong foundation for their economic strength. Also, although they have a workforce of 1.3billion people, they do not have many skilled workers. They take farmers from the west and try to make them skilled craft laborers. You cannot substitute quality for quantity. In addition to all the economic, evironmental and lack of good infrastructure, China faces a serious social problem. They have no middle class. Inflation is on the rise. Skilled workers do not receive much more money than non skilled workers. It seems that the only way you can make it big in China is to be in the government where u can accept bribes. All of their economic success is too dependant on foreign investment. I think it is too much; too fast. They cannot handle it and the society will crumble inward.

  • China’s demographic problems and the weakness of their banking system are the subjects of the next posts my series (go to the link at the end of this post).

  • dhruv Link

    good work

  • Carlos Link

    Nice article,

    One extra comment, the China real issue is about productivity. China might have all the cheap labor in the planet but productivity is very low. So all the products and services that the Chinese people generate is not enough to satisfy their basic needs.

    On top of that, most of that hard work is converted into products that will be exported for basically nothing. Chinese are hard working people they should put their efforts in things that will increase their productivity. Education and health are the basic productivity generators; technology, comunications, transportation and others follow.

    The USA is still the land of the most productive people on the world and that’s the greatest thing of this great country.

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