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Keeping Up With China’s Olympic Shine – Part I

Keeping Up With China’s Olympic Shine – Part I
China must enact policies good for both the environment and economy

Awarded the right to stage the 2008 Olympics, China set to work polishing cities and parks, designing grand architecture, and coaching citizens to be warm and welcoming hosts. No sacrifice was deemed too great for achieving a successful Olympics and sending a message worldwide about China’s can-do spirit. Perhaps more than anyone else, China’s people appreciated the end results, with the emphasis on shining cities, happy and impressed visitors, organized streets, clean air and water. This YaleGlobal series addresses China’s great strides in preparing for the Olympics and Chinese hopes that the improvements in quality of life can be sustained. In the first article of the series, economist David Dollar points to strong economic reasons for protecting the environment. By acting sooner rather than later – to limit cars and energy use, expand public transportation, and increase jobs by improving key services – China can avoid mistakes made by the US and other developed nations. – YaleGlobal

David Dollar – YaleGlobal, 22 September 2008

BEIJING: “The old people in the park say that they have not seen such clean air since the 1960s.” That’s how my Chinese teacher summed up reactions of long-time Beijingers to startlingly clean air enjoyed since the second week of the Olympics. As Beijing prepares to return to its polluting ways, citizens ask: How can we return to the happy days of the Olympics? The Chinese government may struggle to answer the question, yet the success of temporary measures during the Olympics shows that cleaning up is both possible and a smart move economically.

A recent poll in Beijing found 70 percent of people supporting permanent measures to keep the air clean. Now that the Olympics are over, the Chinese government faces a host of daunting challenges – maintaining growth in a slowing world economy, addressing social disparities and repairing the environmental destruction that accompanied rapid industrialization. For most Chinese people, the environmental agenda has the most direct impact on their lives.

The environmental toll from China’s industrialization is well known: water pollution in all major rivers and lakes; 20 of the 30 most air-polluted cities in the world; deforestation reducing forest cover to 12 percent by the 1990s; and China supplanting the US as the largest source of greenhouse-gas emissions. Less publicized in the Western press is that China has made progress on some environmental issues: It has the most successful aforestation program in the developing world, restoring forest cover close to 20 percent. Rivers in the South are gradually improving, and events such as a mass swim across the Pearl River in Guangzhou last year celebrate the progress.

Still, the environmental problems are serious. Last year the World Bank and the environmental ministry prepared the first careful estimates of health costs of air pollution ever done in a developing country: The urban air pollution in China leads to hundreds of thousands of premature deaths each year. We estimated the economic costs of the losses to be 3.8 percent of GDP in 2005, or $85 billion. The air could be significantly cleaned for less cost, and so the economic case for clean-up is clear. And this estimate only takes into account measureable health effects. Psychic benefits of living in a lovely environment are hard to measure, but arguably as important.

China’s current five-year plan recognizes the value of environmental clean-up and sets a number of ambitious targets. Halfway into the plan, there’s progress, but not rapid enough to meet these targets. In two years, chemical oxygen demand emissions dropped 2 percent (target: 10 percent in five years); sulfer-dioxide emissions fell 3 percent (five-year target: 10 percent); energy intensity of GDP declined 5 percent (five-year target: 20 percent). Why isn’t China meeting its own environmental objectives?

First, the pattern of urbanization is too energy intensive. Chinese cities have built a lot of roads, made it easy to register cars and kept parking cheap. The national government has not passed to consumers the full cost of recent hikes in oil prices in the world market. The current retail price of gasoline in China would be a market price if the world price of oil were $92 per barrel. Given recent world prices of $100 to $140 per barrel, China subsidizes firms and drivers to use gasoline. Beijing and other big Chinese cities add 1,000 new cars per day on the road, and these policies encourage them to use cars to commute. On the other hand, there’s been under-investment in public transportation.

The Olympics became a natural experiment for restricting car use by odd-even license plate restrictions, introducing high-occupancy lanes for Olympic-related vehicles and expanding the public transportation system at reduced prices. The vast majority of Beijing residents support similar measures on a permanent basis. The odd-even license plate scheme is inefficient, but other measures could discourage car use: high prices for parking, higher fees for car registration or London-style fees for driving into the inner city. Keeping buses moving fast in special lanes is one of the best measures to encourage use of public transportation over cars. Well-designed policies use revenue raised from registration and parking fees to finance expansion of public transportation.

My driver joked that 70 percent of residents favor these kinds of restrictions because 70 percent don’t own cars yet. That’s exactly the point. China’s at an early stage of urbanization and motorization. It can avoid the mistakes the US made in developing a car-and gasoline-dependent economy. If it waits ten years, it will lock into inefficient energy use for a generation.

The second reason why China isn’t meeting environmental targets is that its pattern of growth is still too reliant on exports, industry and investment – all of which are energy intensive and polluting. China could grow rapidly with less pollution if it shifted toward domestic-demand driven growth – again, a target not being met.

Some voices in China argue that the rapid export and industrial development are needed to create jobs – but that’s simply not true. The industrial sector has become so capital intensive that it creates relatively few jobs. Most jobs are created in the service sector. China gradually moves on policies that would rebalance the economy toward domestic needs – that is, discourage such rapid growth of exports and encourage domestic consumption, both private consumption and government spending on education, health and other social services. The current five-year plan, adopted in 2005, sets an explicit objective of this kind of rebalancing.

The policies to bring this about are appreciation of the exchange rate, higher interest rates, collection of more dividends from state enterprises and higher energy prices. All would tend to reduce profitability in the export sectors, cooling off that part of the economy. That would open up space for fiscal spending to clean up pollution, expand public transportation, invest in health and education, and strengthen the safety net.

China is gradually taking these steps, but so far there’s been little if any rebalancing. The drop in the trade surplus from 11 percent of GDP in 2007 to a projected 9 percent in 2008 may signal some rebalancing. However, this decline is almost completely due to higher prices of China’s imports, especially oil, rather than any drop in exports. In constant prices there’s been little reduction of the trade surplus or rebalancing.

To be fair to the authorities, to redirect the economy from exports and industry to domestic needs and services – without much of a slowdown during the transition – is more art than science. Any big miscalculation would have serious consequences for the Chinese. Rebalancing will lead to some labor-intensive firms closing, with workers losing jobs. Absorbing them into expanding service industries does not happen instantly. If adjustment is too rapid, there could suddenly be many more unemployed, unhappy workers. So, there’s something to be said for a cautious approach.

But it’s clear that the public interest would be served by a shift in priorities favoring a better environment and resource efficiency, at the expense of export and industrial competitiveness. Naturally, interest groups oppose any particular policy change: exporting firms prefer to keep the renminbi’s value low; car owners complain about rising gas prices; factory managers protest costs of emission controls.

The question for the Chinese government in the aftermath of the Olympics is, can they manage these interest groups and bring about environmental policies that are in the public interest and ultimately economically beneficial? This is a much more daunting task than organizing a brilliant Olympics.

David Dollar is World Bank country director for China and Mongolia, based in Beijing. For an ongoing discussion of economic, social, and environmental issues, click here to see his blog.

Rights: © 2008 Yale Center for the Study of Globalization

Pollution Curbs End

22nd Sep 2008 – SCMP

The capital is bracing for a return to smog-ridden reality as yesterday marked the first day in two months that construction sites were allowed to reopen, factories could resume production and all cars were allowed on Beijing roads. The pollution curbs aimed at cleaning the air for the Olympics and Paralympics ended at midnight on Saturday. AP

Games Over, Pollution Back

Updated on Sep 22, 2008 – SCMP

The pollution came back and my eyes started stinging like crazy again.

I realised this must be because the Paralympic equestrian events were over and that Guangdong had been given the green light to “power up” again.

Mark Cryer, Kennedy Town

Queries Over Pollution Fight

Updated on Sep 16, 2008 – SCMP

Can any of the readers out there give any hard facts as to the extent of just how far our government and the regional mainland government went to clear the air during the Olympics?

Whatever they did, it worked.

It has proven to be cosmetic: today’s air quality has returned to the usual filth we have become sadly accustomed to.

I had heard that our regional power companies had been asked to use a cleaner fuel: did they?

Second, how many factories closed, for what period, and what was the pollution cut-off limit?

Alastair Robins, Lamma

We Can Bring Back Blue Skies

Updated on Sep 11, 2008 – SCMP

It was curious to note some unusually lovely clear blue skies over Hong Kong during the Olympics. It was the best I’ve seen it in 10 years.

The skies are noticeably greyer now. Why? A friend has a textile factory in the Pearl River Delta and told me a lot of factories closed for the Games and more gas was used by Hong Kong power companies to help clear the air pollution. So for those who say it is too hard to fix the pollution, it’s nonsense.

We just need political willpower. The prospect of international shaming worked miracles.

Now we just need to find a way to get our complacent politicians to keep the momentum going and understand that local people deserve clean air, not just visitors with higher standards than ours.

P. Gilbert, Lam Tin

Traffic Controls Back For Opening Ceremony

Al Guo – SCMP – Updated on Sep 06, 2008

Strict traffic controls will return to Beijing from noon until midnight today for the Paralympics opening ceremony at the National Stadium.

Roads on the city’s north side will be closed off to ensure smooth transport for those attending the event.

Given the odd-even day vehicle ban still in place, traffic jams should not be a great concern.

The measures came as no surprise to residents. Similar, if not tougher, controls had been rolled out during the Olympics opening and closing ceremonies, and on peak competition days.

The looming question is whether the odd-even day controls will be extended beyond September 20, the end of the official Games’ period.

A survey of more than 5,000 people sponsored by The Beijing News found that 68 per cent wanted the controls to stay, while 19 per cent opposed an extension.

Beijing Municipal Committee of Communications deputy director Zhou Zhengyu did not give a clear answer when asked to comment on a ban extension yesterday.

“The thinking and discussion on the issue reflect progress in society … but I think it takes a collective effort from both the government and city residents to solve the issue in the long term,” Mr Zhou said.

Beijing’s air quality has improved dramatically since July 20, when the city imposed the odd-even traffic restrictions that restrict vehicles to alternate days on the roads.

The city registered 14 days of “class-one” air quality last month and air quality has been good this month too, with the air pollution index below or close to 50, considered excellent.

Those who support extending the ban argue that the improved air quality was a direct result of the measure.

Others, including Mao Shoulong of Renmin University, say the better air is the result of a combination of measures.

“The shutdown of construction sites in Beijing, in fact, played the key role [in improving air quality],” Professor Mao said.

Fears about tonight’s weather, meanwhile, have been dispelled.

The Beijing Meteorological Bureau said there would be no rain during the opening ceremony, and the temperature would stay relatively cool and comfortable at 19 to 29 degrees Celsius.

Beijing Saw 14 ‘Top Grade’ Days In August

Agence France-Presse in Beijing – Updated on Sep 02, 2008

As Beijingers started their working week on another day of clear skies, the capital’s environmental protection bureau reported that the city experienced 14 days of “level one” air quality, the highest possible reading, last month.

Main pollutants were down 50 per cent from normal during the Olympics, and 45 per cent for the whole month, the bureau said on its website.

“This was the best level in 10 years,” it said.

Among drastic measures to ensure clean air for the Olympics, private cars were allowed on the roads only on every second day using an odd and even number plate system. This took about 1 million of the city’s 3.3 million cars off the roads.

More than 100 heavily polluting factories were also temporarily closed, while some construction work was suspended.

These measures started on July 20 and are due to remain in place until September 20 following the end of the Paralympics, which begin on Saturday.

The improvement in air quality has sparked online debates on whether to continue the measures, particularly the restrictions on car use. More than 400,000 people have joined a discussion on www.ynet. com, the website of the Beijing Youth Daily newspaper, on whether to keep anti-pollution measures going, with about half in support.

“In the past few years, many of the people I know have had cancer, and this is definitely linked to air pollution,” one posting said. “Where health is concerned, it’s worth making some sacrifices, like leaving the house earlier, being squeezed in the bus sometimes.”

The Beijing Times quoted the city environmental protection bureau saying it would take measures to continue to improve the air quality after the Games, including a possible charge on vehicle emissions. But it made no mention of the alternate driving days. The city’s air quality is routinely rated among the worst in the world by global agencies.

Manufacturers Suffer From ‘Olympic Effect’

Denise Tsang – SCMP – Updated on Sep 02, 2008

Mainland manufacturing shrank last month for the second consecutive month as exports softened and factories shuttered production to clear the air for the Beijing Olympics.

Slowing factory production increases pressure on Beijing to introduce new measures to avert a sharp fall in economic growth.

The purchasing managers’ index (PMI) compiled by the China Federation of Logistics and Purchasing remained at 48.4 for the second month in August. A reading below 50 means manufacturing is contracting.

Economists said the world’s fastest-growing economy was feeling the rippling impact of slowing economic activity in the United States, Japan and the European Union.

Manufacturing was likely to stabilise in the coming months when Beijing lifts anti-pollution measures that suspended factory production before and during the Olympic Games. Still, slowing global growth would continue to have an impact.

Zhang Liqun, an economist at the State Council’s development research centre, said companies continued to operate in a hostile environment even though factory gate price inflation was easing.

A separate purchasing managers’ index by CLSA slipped to 49.2 last month from 53.3 in July, the first drop since November 2005.

But CLSA said the “Olympic effect” had probably made the slump in last month’s manufacturing more severe than it really was. Factories within several hundred kilometres of Beijing were ordered to shut down to improve the air quality for athletes.

Without the Olympics, “it would have been modestly lower than July, primarily reflecting softer export orders, but still comfortably above the 50 break-even line”, said CLSA economic researcher Eric Fishwick. “Manufacturing growth is slowing but nowhere near as rapidly as the drop in the August PMI suggests.”

Morgan Stanley chief economist Wang Qing said he did not think manufacturing would shrink further in coming months as factories would gradually resume production.

“It will stabilise after the one-off factor of the Olympics-related suspension of production activities,” Mr Wang said. “Factory-gate prices will peak along with the downward trend of consumer price inflation.”

He added that shrinking manufacturing would foster a slower pace of yuan appreciation. A stronger yuan makes mainland-made good less competitive on world markets.

The yuan softened to 6.83 yesterday against the US dollar from its historical peak of 6.81 in July, according to the China Foreign Exchange Trade System.

Credit Suisse chief economist Tao Dong said a slowing economy would reduce inflationary pressure.

“The receding inflationary threat is positive news for Beijing, as the government has more policy tools and experience to deal with a growth slowdown,” Mr Tao said.

He expected that loan quotas for smaller firms would be lifted further and the reserve ratio for banks would be cut 50 basis points by the end of this year.

He also expected Beijing to beef up spending on infrastructure to avoid a sharp fall in growth.

Hong Kong Skies Clear — Thanks to Nature, Not Games

By Aaron Pan and Wendy Leung – Bloomberg – Aug. 28

Tommy Chan, a street vendor in central Hong Kong, credits China’s drive to close factories across the country before the Olympics for the blue skies the city’s citizens have been enjoying.

“Maybe they shut down a few more this time for the Olympics because they wanted to give a good impression to the rest of the world,” said Chan, 65, who has been selling snacks on Queen’s Road for more than a decade.

He’s wrong. It’s not China, it’s nature.

The brown-tinged haze that typically obscures views in the city, which hosted the Olympic equestrian events, has been absent for the past two weeks due to seasonal wind and weather patterns, according to the Environmental Protection Department. The message: Olympics or no Olympics, foul air will return.

“Weather conditions in summer months favor dispersion of air pollutants,” said Felix Leung, a spokesman for the department. “With oceanic wind and good air dispersion, the current pollution levels are low.”

The Olympic Games ended Sunday with a closing ceremony in Beijing. In Hong Kong, a semi-autonomous region of China since British rule ended in 1997, the period was marked by a month of the lowest average pollution levels downtown this year.

Hong Kong’s government identifies cutting smog as a priority because poor air quality is harming the city’s reputation as a tourist destination and damaging the health of the population, according to a policy document released last year.

`Not Safest Air’

The government’s air pollution index in the city’s Central and Western districts fell to as low as 11 on Aug. 19, according to the environment department’s Web site. Today it was at 24 as of 2:30 p.m. local time.

Above 100, people with heart or lung problems are advised to avoid exercising outdoors. The index had reached 150 in July and climbed to records in some parts of the territory, raising concerns about the welfare of horses in the Olympics.

“It’s better than it has been,” said Anthony Hedley, a professor in the Department of Community Medicine at the University of Hong Kong. “But it’s not necessarily the safest air we could have.”

Around 220 horses from 42 countries were involved in this month’s equestrian events at the Sha Tin district of Hong Kong. The government had previously released a statement saying record pollution levels were “no cause for alarm” for the horses.

Smog May Return

“It’s seasonal,” said Edward Chan, Greenpeace campaign manager in Hong Kong. “Hong Kong’s air pollution levels are usually lower in July and August. The emission of pollutants never reduced. They will reappear again from September.”

Officials in Beijing, Hong Kong and other Olympic venues intensified efforts to combat pollution before the Games as China sought to showcase its emerging economy. Beijing removed cars and closed factories in a bid to improve air quality.

It’s difficult to say whether the measures helped, Hedley said. “They’ve had some pretty dirty air in the early part of the Olympics.”

In China’s capital, the air quality was at its best level in 10 years this month, according to the Beijing Municipal Environmental Protection Bureau.

“One swallow doesn’t make a summer,” said Hedley. “I’ll personally be very, very surprised if we see any improvement in the near future” in China’s urban air quality. “The growth of road vehicles is a tremendous source of mobile pollution.”

Beijing had spent $17 billion cutting air pollution for the Olympics, removing more than half the cars from its roads, halting construction work, and shutting factories.

Health Link

Air pollution causes about 10,000 deaths yearly in southern China’s Pearl River Delta region, including Hong Kong and Macau, according to a study released in June by a research group and three universities.

Research group Civic Exchange says the link between Hong Kong’s air quality and public health needs to be acknowledged and acted upon. The group has published suggestions for action the government can take to cut the smog.

Hong Kong had the worst March in 30 years in terms of visibility because of bad weather and pollution.

CLP Holdings Ltd., Hong Kong’s biggest power supplier, has won environmental approval to build a liquefied natural gas receiving terminal to help meet emissions targets.

The company plans to use non-carbon sources, including renewables, nuclear and hydropower, for 20 percent of total generation capacity by 2020, according to Chief Executive Officer Andrew Brandler.

Meantime, government predictions suggest Hong Kong residents should enjoy the breather while it lasts. The forecast is that air quality will remain “good” in coming days, Leung said.

To contact the reporters on this story: Aaron Pan in Hong Kong at; Wendy Leung in Hong Kong at

Blue Skies for Beijing

Blue Skies for Beijing Need Marathon Plan That May Slow Economy

By Lee Spears

Aug. 25 (Bloomberg) — Zhang Guoqing says the air quality in Beijing is better since the government clamped down on tailpipes, smokestacks and construction cranes for the Olympics.

“The traffic condition became less crowded and the air quality also improved,” Zhang, 58, said while watching ice skaters at the China World Trade Center. “I don’t want the government to stop those measures.”

Beijing officials say the city experienced its best air quality in 10 years this month after authorities implemented odd- even driving days and shut down factories and building sites before the Aug. 8-24 games. More than half of 2,000 Beijingers surveyed said traffic control measures should continue after the games, state-run China Daily reported.

Yet they won’t get their wish. The world’s most populous nation needs to create 10 million new jobs a year to maintain economic growth and social stability, so business will return closer to usual once the upcoming Paralympics end Sept. 17.

“These temporary measures are meant to address the issue temporarily,” said Tao Dong, chief Asia economist at Credit Suisse Group AG in Hong Kong. “You can’t prohibit people from driving their cars. You’re going to have a riot.”

Slow Growth

China, the world’s No. 4 economy, may have lost as much as 3 percent of its estimated 4 trillion-yuan ($585.3 billion) gross domestic product by shutting down factories in Beijing and surrounding areas for two months, Tao said. Some factories, including Beijing Shougang Co., the nation’s fourth-biggest steelmaker, were evicted from the capital.

The affected regions generate about 26 percent of China’s economic output, so the world’s fastest-growing major economy will slow during the next two months, Goldman Sachs Group Inc. said in an Aug. 8 report.

GDP growth has slowed for four straight quarters, prompting President Hu Jintao to say Aug. 1 that his priorities were maintaining steady, fast growth and controlling inflation.

There was such concern about Beijing’s air quality that International Olympic Committee President Jacques Rogge said some outdoor events could be postponed if necessary. World-record holder Haile Gebrselassie, an asthmatic, pulled out of the marathon because of the pollution and heat.

The city spent about $70 billion to improve air quality and build subways, sports stadiums and an airport terminal for the games. Chinese officials say the measures worked.

`Itchy Palms’

The average daily pollution index this month was about 31 percent lower than August 2007, the city’s environmental protection bureau said Saturday. Major air pollutants were an average 40 percent lower, with nitrogen oxide emissions from automobiles down 61 percent, the bureau said.

Even Gebrselassie said he noticed the change.

“I was here in February, I don’t see no blue sky,” he said. “To keep such clear air, that’s fantastic.”

Still, levels of particulates known as PM10 were up to double the World Health Organization’s recommended levels on some days. China’s pollution index doesn’t measure smaller particles called PM2.5, which can penetrate deeper into lungs and create greater risk for developing asthma and bronchitis.

Several riders in the 245-kilometer (152.2-mile) bicycle road race on Aug. 9 said they were affected by poor air quality.

“First few days when we went out, I was coughing a lot after,” said American George Hincapie, who finished 40th.

Even the archers suffered.

“I didn’t like the pollution,” bronze medalist Yun Ok-Hee of South Korea said. “My palms and hands were itchy.”

More Emissions

China’s release of greenhouse gases blamed for global warming is increasing more than previously forecast and will swamp pollution cuts planned by the U.K., Germany and other industrialized nations, the United Nations Intergovernmental Panel on Climate Change said in May. It surpassed the U.S. as the world’s largest emitter.

Air pollution-related illnesses and deaths may cost China an additional 3.8 percent of GDP, a World Bank report said. Beijing’s 15 million residents face higher incidences of asthma, respiratory infections and lung cancer, said Hans Troedsson, WHO’s representative in China.

“The government is taking measures in the right direction, but it needs to be scaled up,” Troedsson said.

For the games, the government said cars with license plates ending in odd numbers could drive only on odd-numbered days, and vice versa for even numbers. Beijing has about 3.3 million cars and adds about 300,000 a year.

Controls Continue

City officials said Saturday that normal traffic patterns would return next month.

“They should at least try to continue some of these measures,” said Ricardo Browne, 41, a Brazilian pilot working for Shenzhen Airlines Co. “It’s hard to see the sun.”

Steps are being taken. China will restrict factory discharges and may not let some polluters reopen, and last month it imposed cleaner fuel standards to reduce auto emissions. The government will double the tax on large vehicles to spur demand for more fuel-efficient cars.

“They are meaning business in terms of structural changes that will positively influence the climate and the environment,” Rogge said yesterday.

Beijing editor Zhou Min, 27, said she, like Zhang, wanted the driving restrictions to continue, even though it meant more crowded buses and subways.

I fully support the environment-friendly measures since the air quality has been improved, which puts me in a good mood,” she said.

To contact the reporter on this story: Lee Spears in Beijing at
Last Updated: August 24, 2008 17:01 EDT