China 2.0; after 25 Years of Sizzling Growth, Beijing's Shifting to a New Economic Model. Can Big Red Go Green?
Byline: Melinda Liu
If you're a China watcher, you don't just listen to what top Beijing leaders say, but also to how many times they say it. This month President Hu Jintao has embraced a new mantra, stressing "sustainable development," "innovation" and "a resource-saving, environment-friendly society." He uttered those buzzwords in his New Year's address, then at a high-profile science and technology conference, and then again last week during an inspection tour of Fujian province. In a significant departure from his predecessors' focus on no-holds-barred GDP growth, Hu is calling for nothing less than a quantum shift in China's economic-development model, deeming it "an important and urgent strategic task."
China has already achieved a quarter century of unprecedented economic growth. Now Beijing is essentially saying that it needs to keep growing in a more responsible way, emphasizing environmental protection, more energy efficiency and cutting-edge technology. Software mavens might call this new vision China 2.0. You don't have to be a rocket scientist (or a Politburo member) to see that the mainland's winning formula of cheap labor, heavy investment and nearly double-digit GDP growth can't last forever. Without a fresh paradigm, authorities believe, China will increasingly suffer from environmental degradation, destabilizing income disparity and social unrest. The question is whether the country can afford to shift gears now--or whether such concerns could cost it the competitive advantages that have made China's economy the most-talked-about in the world today.
Certainly China is already paying a heavy price for its economic success. According to the World Bank, pollution and other environmental damage may be costing the Chinese economy between 8 and 12 percent of GDP annually, due to medical-care expenses and damage to crops and marine products. The mainland is now home to 16 of the world's 20 most polluted cities. More than three fifths of the country's rivers and lakes are tainted with chemicals, industrial waste or toxic spills like the recent Songhua River benzene slick, which contaminated the water supply in the city of Harbin for days.
Already scarce arable land is disappearing as rapacious real-estate developers gobble up farmland. Though China is desperate for energy, the country uses power inefficiently. Experts estimate that the country uses three times as much energy per unit of GDP as the United States, and nine times more than Japan. Meanwhile, rural discontent has flared over land seizures, pollution and lagging wages--roughly one third of what urban workers make. Last week the Public Security Ministry admitted that incidents of social unrest grew by more than 6 percent in 2005. "Ordinary people aren't satisfied with the results of fast economic growth," says economics professor Xia Yeliang of Tsinghua University, "so the government has embraced the idea of 'green GDP'."
Chinese leaders are essentially admitting that brains, not brawn, are the key to what Hu calls an "innovation-based economy." The concept is an echo of U.S. economist Paul Krugman's 1990s critique of East Asia's export-based economies, in which he touted the benefits of "inspiration" rather than "perspiration." Chinese experts have even revealed when they believe this paradigm shift should occur--when a country's per capita GDP reaches the $1,000 to $3,000 range. (China's per capita GDP exceeded the $1,000 threshold in 2003. …