Forum: China’s Rapid Economic Growth and Resultant Negative Externalities
CHINA’S RAPID ECONOMIC GROWTH AND RESULTANT NEGATIVE EXTERNALITIES
China’s economic growth over the past fifteen years has turned it into the world’s major manufacturing base, making it one of the world’s four largest economies.1 During this period, China’s average annual real Gross Domestic Product (‘GDP’) grew by 9.7 per cent peaking at 11.9 per cent up to the second quarter in 2007, the highest growth rate over that period of time.2 At the same time the negative environmental externalities of economic growth have escalated and are causing concern not only ...view middle of the document...
A virtually limitless supply of cheap labour is a further bonus for investors. The overall result has
Head of Department of Business Law, Macquarie University, Sydney, Australia. My thanks to Gisele Kapistran for her excellent research and assistance with this article. While Morrison places it second, a recent Organisation for Economic Co-operation and Development (‘OECD’) report places it fourth. Wayne Morrison, China’s Economic Conditions, CRS Report for Congress, 12 July 2006, 1-2; OECD, Environmental Performance Reviews China (2007) 15. ‘Economic and Financial Indicators’, The Economist (London), 21-27 July 2007, 93-4. China became a member of the WTO on 11 December 2001.
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been foreign direct investment surpassing US$700 billion since China adopted its open door policy in 1978.4
OVERVIEW OF CHINA’S POLLUTION PROBLEMS
As foreseen by China’s political leaders in 1978, rapid growth has generated not only the urbanisation of a substantial proportion of a previously agricultural society, but also a number of unintended and undesirable effects to health and natural resources5 – so much so that China plays host to 20 of the world’s 30 most polluted cities.6 The negative economic impact of environmental issues on the Chinese economy is estimated to result in an eight per cent drain on the GDP.7 China’s air pollution levels are very high. The State Environmental Protection Administration (‘SEPA’) reports that almost two-thirds of the 300 cities it tested in 2002 failed to meet minimum World Health Organization (‘WHO’) standards.8 The problem is so extensive that, according to the United States Environmental Protection Agency, almost 25 per cent of the atmospheric pollution over Los Angeles can be traced back to China.9 Air pollution has become one of the most visible environmental problems in China. Most of the causes can be directly or indirectly linked to an increase in trade and the consequential boost to development and urbanisation.10 The highvolume output of heavy-polluting leather tanneries, chemical plants, rubber manufacturers, and the electronic and dyeing industries have been accompanied by a massive and increasing reliance on coal combustion without adequate emission controls. The Organisation for Economic Co-operation and Development (‘OECD’) has noted that despite declining figures at the turn of the 21st century, the number of cities suffering from acid rain and SO2 concentrations has been steadily increasing.11 The burning of more than two billion short tons of coal represents more than one third of the world total coal consumption and a 46 per cent increase since
4 5 6 Bloomberg News, ‘Foreign Investment in China Rises 12 Percent in 1st Quarter’, International Herald Tribune, 12 April 2007 at 20 September 2007. China’s 1978 Constitution included provisions for the regulation and management of the environment. The World Bank, ChinaQuick Facts (2007) at 20...