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ONE LIFEBOATCHINA AND THE WORLD’S

ENVIRONMENT AND DEVELOPMENT

Arthur J. Hanson and Claude Martin

China Council for International Cooperationon Environment and Development

ONE LIFEBOATCHINA AND THE WORLD’S

ENVIRONMENT AND DEVELOPMENT

ByArthur J. Hanson and Claude Martin

In association with Earl Drake and Jeremy Warford

With contributions from Leo Horn, John MacKinnon, David Norse, David Runnalls,

Bernie Sonntag and Wanhua Yang

December 2006


© 2006, International Institute for Sustainable Development

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One Lifeboat: China and the World’s Environment and Development

By Arthur J. Hanson and Claude Martin

ISBN 1-895536-96-0

This paper was authored by Arthur J. Hanson and Claude Martin, in association with Earl Drake andJeremy Warford, incorporating contributions from Leo Horn, John MacKinnon, David Norse, DavidRunnalls, Bernie Sonntag and Wanhua Yang. It is based on a background report prepared for the ChinaCouncil for International Cooperation on Environment and Development (CCICED) Task Force onReview and Prospects. This Task Force worked throughout 2006 examining China's environment anddevelopment accomplishments over the past 15 years, and tasks ahead to 2020, when China hopes toachieve an environmentally-friendly society. The Task Force was co-chaired by Dr. Song Jian and Dr.Huguette Labelle, and included five senior Chinese and five international members. The work of the TaskForce was supported by the CCICED Secretariat and by a Lead Expert Group headed by Prof. Shen Guofengand Dr. Arthur Hanson. We acknowledge the valuable inputs provided by those involved with the TaskForce and CCICED Council members, and by several past co-chairs of CCICED activities. CCICED is ahigh-level international advisory body with the purpose "to further strengthen cooperation and exchangebetween China and the international community in the field of environment and development." It wasestablished in 1992 by China, with financial support from China, the Canadian International DevelopmentAgency (CIDA) and several other international sources. The views presented in this paper are those of theauthors, not necessarily of CCICED, or any of the other organizations with which contributors are affiliat-ed. Visit the CCICED Web site at <http://eng.cciced.org>.

Cover image of Beijing at night by Bill Glanville, IISD's Vice-President and Chief Operating Officer. Centreimage of PEMSEA conference attendees courtesy of IISD Linkages. All other images are from iStock.

ONE L IFEBOAT: CHINA AND THE WORLD’S ENVIRONMENT AND DEVELOPMENT

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Table of Contents

1. RISING INTERDEPENDENCY 1

2. CHINA’S GROWTH AND CONSEQUENCES 5

Comparative Situation 5

Ecological Footprint 6

Trade, Investment and Expenditures Abroad 9

International Cooperation Roles 12

Environment and Security Matters 14

3. CASE STUDIES 16

Case Study 1 – International Market Supply Chains 16

Case Study 2 – Trade in Illegally Produced, Harvested or Transported Materials 28

Case Study 3 – Biosecurity and Biodiversity Protection 31

Case Study 4 – Regional Environmental Impacts – River and Marine Water Issues 34

Case Study 5 – Learning From and Sharing Environmental Experience 41

4. TEN ISSUES 52

Issue 1 – Enhancing Domestic Performance on Environmental Regulation and 52Enforcement, Pricing, and Environmental Planning and Management within China

Issue 2 – Reducing the Impact of China’s Activities on Global Resource and 52Environmental Conditions

Issue 3 – Avoiding Pathways Taken by High-consuming Nations 53

Issue 4 – Improving Market Access and Promoting Sustainable Trade 53

Issue 5 – Aligning Production and Manufacturing with International Environment, 54Health and Safety Approaches, Standards and Performance

Issue 6 – Alignment with International SHE Standards 55

Issue 7 – Dealing with New Types of Environmental Problems 55

Issue 8 – Fast-track of Innovations for Sustainable Development 58

Issue 9 – Information Quality 58

Issue 10 – Capacity to Share China’s Environment and Development Solutions Globally 59

5. CONCLUSIONS 60


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Global-level interdependency among nations hassteadily increased, especially in the past 25 years. Itis unlikely that this tendency will diminish. We allshare one planet, and by the calculations of theWorld Wide Fund for Nature (WWF) and others,we are well past a level of sustainable environmentand resource use, which is causing severe environ-mental impacts—some irreversible.1 Today’semerging economic powerhouses among nations,and burgeoning populations in poorer nations, layjust claim to a greater share of nature’s wealth andthe fruits of human knowledge. But this is likely tobe a sustainable claim only if there are majoradjustments in the well-entrenched economicways of richer nations, and a better track record ofenvironment and development performance onthe part of all nations. China is rewriting the bookon environment and development, affecting per-spectives held by the entire world. No other nationhas risen so fast in terms of global economic sway,and none among large developing nations has everhad to cope with poverty reduction, job creation,and building of urban and rural infrastructure onthe scale of, and over such a short time, as China.

China influences the world’s economy and ecology.In turn, China’s domestic environmental situationis, of course, affected by changes taking place else-where. There can be little doubt that China isresponsibly engaged in seeking a better relation-ship between environment and development with-in the country, regionally and globally. Since the1992 Rio Earth Summit, there has been an increas-ing national effort2 and, especially since the turnof the century, a considerably greater commitmentof funding for environmental protection and man-agement. In fact, such expenditures are projected

to total US$243 billion between 2006 and 2010.But the actual results to date have fallen short interms of environmental performance. Importantenvironmental goals have not been met withinChina,3 a matter that occupies the most senior lev-els of government, but is often of less concern atlocal levels where GDP growth is a pre-occupa-tion. For example, the targets for reduction of keypollutants such as sulphur dioxide were not metduring the 10th Five-Year Plan (2001–2005), whileeconomic goals were well surpassed. This trendcontinued into 2006 as stringent targets for energyefficiency and pollution reduction were not met.

Until recently, there was limited interest in the inter-national implications of China’s environment andresource use. In the early 1990s, when double digitChinese economic growth rates were common, theinternational implications were limited becausedevelopment was starting at such a modest level,domestic consumption was very low and exportswere still limited. Perhaps few people ever believedthat China could maintain very high growth ratesover decades, or that a country that traditionally hadquite low (albeit very inefficient) energy use couldquickly start influencing the world price of naturalresources including oil, cement, forest products,minerals and agricultural commodities. This influ-ence accelerated dramatically once China became amember of the World Trade Organization (WTO),with a rapid increase in exports, but also with moreaffordable automobiles for Chinese citizens, leadingto higher demands for oil.

Today, China is on everyone’s radar screen4 for avariety of reasons: balance of payments issues withthe U.S. and some others; market opportunities for


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1.RISING INTERDEPENDENCY

1 WWF International, Living Planet Report (Gland: 2006), <http://www.panda.org/news_facts/publications/living_planet_report/index.cfm>.

2 Kristen Day (ed.), China’s Environment and the Challenge of Sustainable Development (M.E. Sharpe, 2005), 320 pp.; G. Murrayand I.G. Cook, The Greening of China (Beijing: China Intercontinental Press, 2004), 193 pp.

3 Elizabeth Economy, The River Runs Black: The Environmental Challenge to China’s Future (Ithaca: Cornell University Press,2005), 368 pp.

4 Jianguo Liu and Jared Diamond, China’s Environment in a Globalizing World: How China and the Rest of the World Affect EachOther, Nature, 30 June 2005; Feeding a Dragon, Latin Finance, September 2006; OECD, Environment and Governance in China,Ch. 17 in Governance in China (Paris: OECD, 2005), 236 pp., <http://www.oecd.org/document/32/0,2340,en_2649_33735_35340704_1_1_1_1,00.html>.

export-oriented countries; high stock values ofinternational resource companies; fear of lost jobsas industrial production, and now some servicesector jobs, move to China; fear of hard-won envi-ronmental and social performance of the last 30years being threatened; and worry that pollutionand other environmental impacts from China’srise will directly affect human health and ecosys-tems elsewhere. As noted in a recent Canadiannewspaper commentary, in addition to outsourc-ing manufacturing to China, the developed worldis “outdumping our pollution there as well.”5

These perspectives, of course, represent only oneside of the picture. China also has specific con-cerns about its international environment anddevelopment relationship. It will face the fullimpact of climate change despite many decades ofcontributing only minimally to the problem. Likeother countries, China pays the high price ofresource commodities purchased on the interna-tional market. Undesirable byproducts fromexport-driven industry remain in China, includingpollutants and their health costs. Some of theindustry launched in recent decades is based onobsolete production techniques with limited envi-ronmental protection potential. Countries havereadily given over to China some of the worst pol-luting industries—coke production, for example(China supplied 56 per cent of the world’s coke in2004). And China is concerned over the potentialof non-tariff trade barriers that may be imposed inthe name of environmental protection.

At a global level, environmental governance is weak.While environmental progress has occurred as aconsequence of the many global environment anddevelopment initiatives, this progress pales in com-parison with the growing levels of damage to humanand ecosystem health and to the global commons,including oceans and the atmosphere. China is vul-nerable to this weakly developed environmentalgovernance system, with repercussions domesticallyand for its international cooperation efforts.

This report examines environment and develop-ment implications of China’s rapid growth on therest of the world. Environmental effects of the rest ofthe world on China also are examined. China servesas a workshop for the world, and bears the brunt ofenvironmental impacts associated with tourism, cli-mate change and other activities that are directly theresult of economic activities initiated elsewhere. Thesubject matter is broad and complex.

China’s economic growth and global environmentalinfluence will likely continue to grow towards 2020,a date by which China hopes to have quadrupledGDP relative to 2000 and to have achieved an “envi-ronmentally friendly, resource-efficient society,” aphrase now repeated in major speeches by seniorleaders as an expression of their vision. With thisgrowing prosperity will come additional levels ofresponsibility for China. Such responsibilities couldopen new economic and environmental opportuni-ties and strengthen international perceptions aboutChina’s role in the world.

Chinese leaders have made numerous statementsimplying that China as a responsible country mustdo well in addressing all three aspects of sustainabledevelopment: the economic, social and environmen-tal components. A recent White Paper onEnvironmental Protection in China (1996–2005),produced by the State Council, documents many ofthe major steps taken and also future needs.Concerning international cooperation, the WhitePaper6 notes the many steps taken for bilateral andmultilateral cooperation regionally and globally toimprove environment. For example, the paper notesthat, under the Montreal Protocol, China has adopt-ed more than 100 policies and measures to reduceozone-depleting substances (ODS), accounting forhalf the total amount of ODS eliminated by devel-oping nations.7 The White Paper affirms that Chinawill meet signed and ratified international obliga-tions. And in December 2005, the State Council setout the basic guidelines for domestic implementa-tion of environmental protection.8 This has been


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5 David Reevely, Can’t You Hear the Dolphins Weeping?, Ottawa Citizen, 18 December 2006.

6 White Paper on Environmental Protection Published, China.org.cn, <http://www.china.org.cn/english/2006/jun/170355.htm>.

7 See also Jimin Zhao and Leonard Ortolano, The Chinese Government’s Role in Implementing Multilateral EnvironmentalAgreements: The Case of the Montreal Protocol, The China Quarterly, 175, 2003, 708–725.

8 Decision of the State Council on Implementing the Concept on Scientific Development and Enhancing Environmental Protection,3 December 2005.

followed by the 11th Five-Year Plan (2006–2010),the nation’s first to focus on a comprehensiverange of sustainable development priorities.

Particularly striking is Premier Wen Jiabao’s state-ment at the 6th National Environmental ProtectionCongress held in Beijing in April 2006. Premier Wennoted that: “We must fully understand the [envi-ronmental] situation is grim and complicated…”He proposed “Three Transformations”: (1) envi-ronment and economic growth should be givenequal status; (2) environmental problems should beconsidered concurrently, not after economic growthis achieved; and (3) instead of the current focus onadministrative initiatives, environmental actionshould be broadened to include legal, economic,institutional and other measures. This robust com-plement of concepts is only slowly making its wayinto the minds and actions of decision-makers, butprovides an important touchstone for the future.

This overview paper is based on a submission pre-pared as part of a year-long examination ofChina’s progress and prospects on environmentand development for the period 1990 to 2020. Thisexamination was carried out by the China Councilfor International Cooperation on Environmentand Development (CCICED).9 The paper containsthe views of several international contributorsassociated with the Council’s past or present work,plus extensive review of Chinese and internationalperspectives on China’s current and future envi-ronment and development situations, and viewsbased on interviews and a literature review.

The analysis acknowledges that China: (1) is a devel-oping nation with hundreds of millions of relativelypoor people, and a growing gap between richer peo-ple in cities, and the poorly educated rural majority;(2) is a “saving” nation which still has a very low percapita consumption level; (3) has limited per capitaresources, with some, especially water, well belowworld averages; (4) has many unique habitats and ahigh level of biodiversity of global as well as of nation-al concern; (5) faces some impacts such as those asso-ciated with climate change which are not primarily ofChina’s own making; and (6) absorbs major environ-mental costs resulting from the pass-through of mate-rials and energy used for traded goods.

These factors call for a great deal of understandingon the part of the international community withrespect to judgments on China’s environment anddevelopment efforts. They also demand recogni-tion that economic growth is fundamental toChina’s future. Many development experts withinChina believe that economic growth levels beloweight per cent per year are likely to lead to unac-ceptable levels of prosperity and to social unrest.

The analysis starts with a look at resource andenvironmental matters related to China’s recentgrowth. We consider five key factors influencingChina’s contribution to global prosperity and thegrowing dependence of other nations on China’sstability and economic growth:

• China’s comparative situation with othernations;

• ecological footprints;

• Chinese trade, investments and expendi-tures abroad;

• international cooperation roles; and

• emerging environment and security matters.

These factors place China’s environment anddevelopment specifics in a broader geopoliticalcontext that cannot be ignored.

This material is followed by five case studies thatexamine how China is dealing with problemswhere effects are global or regional as well asdomestic, including actions that could beenhanced in the future:

• international market supply chains;

• trade in illegally produced, harvested ortransported materials;

• biosecurity and biodiversity protection;

• regional environmental quality and cooper-ation—river and marine water issues; and

• international environment and develop-ment cooperation, including developmentcooperation between China and Africa.


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9 CCICED Task Force on Review and Prospects, General Report, presented to CCICED 5th Annual General Meeting of the ThirdPhase (Beijing: November 2006).

These cases draw on the insights of several formerCCICED task force international co-chairs andothers.

Not all the bases have been covered. In particular,more attention might have been given to the fol-lowing topics:

• China’s implementation strategies for sev-eral multilateral environmental agree-ments (MEAs), especially on climatechange.

• Selected sub-global and regional environ-mental problems such as long-rangetransport of air pollutants (LRTAPs), amatter of growing concern, especially onthe part of the U.S. and Japan.

• Accelerated processes for sustainabledevelopment such as technology transferand partnerships for addressing energyefficiency and environmental protection.This is a broad field in which China hasbuilt an astonishing number of productiveworking relationships, including business,government-to-government, research anddevelopment, and municipal and academiclinkages.

Each of these three topics deserves in-depth analy-sis which was not possible to include here.10

Based on the analytical information, 10 importantissues have been identified, with conclusionsdrawn about each.


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10 An example of such in-depth analysis is a recent report prepared by UNDP in China reviewing efforts on capacity building forimplementation of multilateral environmental agreements (MEAs).

The rapid growth of the Chinese economy sincethe 1970s, but particularly in the past 10 years, hascaused reverberations in global markets. This ten-dency has been further reinforced followingChina’s WTO accession. The quest for resources tosupport China’s growth; increasing emissions;surging commodity prices; China’s overseasinvestments; and rapidly increasing exports ofmanufactured goods have become topics regularlycovered by the world’s media, and tracked by manyorganizations. With this newfound prosperity,many more Chinese are travelling abroad, bolster-ing tourism and schools in many countries.Investment by China’s government and enterprisesin other countries is accelerating, and is beinggiven intense scrutiny internationally.

Comparative SituationChina’s contribution to the growth of the globalGDP since 2000 has been almost double that ofBrazil, India and Russia combined—the threelargest emerging economies after China. Since1990, China’s economy has grown over nine percent on average annually and it is likely that thisgrowth will continue to grow by eight per cent ormore a year. At this rate, by 2015, China will be thethird largest economy of the world with about 6.5per cent of world GDP, using a 2000 real dollarexchange rate. By comparison, Japan during itsphase of rapid growth, between 1971 and 1991, onaverage grew only by 3.85 per cent annually.

According to The Economist,11 China manufac-tures 30 per cent of all of the world’s televisionsets; 50 per cent of the world’s cameras; and 70 percent of the world’s photocopiers. It also accountsfor 30 per cent of the world’s furniture trade.China also has become a major player in worldmarkets for oil, metals and raw materials, andcommodities such as grain soybeans, fruits, veg-etables and seafood.12

No doubt the sudden increase of productioncapacity initially came as a result of DengXiaoping’s call for rapid growth in 1992. Whatmakes its current level so remarkable is its sus-tained nature, even as other nations in Asia facedserious downturns in the late 1990s. Variousauthors have been pondering over the reasons forChina’s rapid and sustained growth. The reasonsmost often cited include: high productivity due toimportant structural changes; foreign, as well asdomestic investment; and the opening of theChinese economy to international trade.

China continues to be a leading exporter of man-ufactured goods including electronics, clothingand furniture, and the world’s largest consumerand importer of many raw materials. Its total tradein goods grew at an annual rate of 24.5 per centduring the 10th Five-Year Plan period(2000–2005), and the target set for the 11th Five-Year Plan period (2006–2010) is to increase itstrade in goods from US$142.2 billion in 2005 toUS$230 billion in 2010.13

When China was the 25th largest exporter in theworld, a decade ago, this routine doubling washardly noticeable in the world. Now that it is eithernumber three or four, it is truly astounding. Andthe environmental implications will be considerablein the years ahead, for environmental effects tend tounveil themselves more gradually than the economicsuccesses with which they are associated.

In the next 15 years, China will build its funda-mental transportation, urban, water control, energyand other infrastructure that will serve the nationfor decades to come. Half the concrete and steelused in the world is in China. And up to 2015, halfof the world’s new buildings will be constructed inChina. These demands cause Chinese suppliers toscour their own country and the world for the rawmaterials and manufactured products to meet


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2. CHINA’S GROWTH AND CONSEQUENCES

11 The Economist, 30 July 2005.

12 M. Shane and F. Gale, China: A Study of Dynamic Growth (Washington: Economic Research Service, USDA, 2004).

13 The 11th Five-Year Plan Outline for National Economic and Social Development of the People’s Republic of China, adopted by theNational People’s Congress in March 2006.

these immense, very immediate needs. They alsostimulate a rapid industrial development responsewithin China that sometimes creates overbuildingand surplus, for example in the steel industry.Chinese manufacturers then become exporters. TheU.S. steel industry, feeling the pressure of Chinesesteel exporters, calls this “The China Syndrome.” Afurther consequence of this rapid development is thecreation of some infrastructure that simply meets arelatively low standard of energy efficiency, and withlimited potential for contributing to environmentalprotection. Some, but not all, Chinese building con-struction falls in this category, and so do many ofChina’s coal-fired power plants.

Information on China’s environmental perform-ance during the past years of rapid growth, com-pared to selected nation groups, has been com-piled in a separate report for CCICED prepared byDr. Stephen Lonergan.14 His report draws uponbest available international sources, but thesesources provide only a very approximate picture.In some instances, the results reveal that China hasmade dramatic progress over a 10-to-20-year timeperiod, for example, on energy efficiency. Andoverall per capita production of pollutants, anduse of resources are relatively low. Yet in aggregate,China has moved into the major leagues. Forexample, the rise in carbon dioxide emissions isdramatically increasing so that China is nowbehind only the U.S., and will soon become num-ber one in the world. These dynamics have caughteveryone by surprise, with the InternationalEnergy Agency (IEA) repeatedly having to updateits forecasts of China’s situation.15

Ecological FootprintEcological footprint calculations (see Box 1) allowcomparing and tracking of natural resource con-sumption and efficiency at the per capita level. Theadvantage is that the actual net consumption perperson of resources, taking imports and exportsinto account, can be compared, irrespective of thesize of a country. As an example, China’s ecological


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14 S. Lonergan, Global Environmental Trends and China, background paper produced for CCICED Review and Prospects TaskForce, 2006, 39 pp.

15 See J. Logan, Surging Chinese Carbon Dioxide Emissions, EarthTrends, (World Resources Institute, November, 2006),<http://earthtrends.wri.org/updates/node/110 >.

16 WWF International, 2006.

Box 1. Ecological footprint analysis.

Countries use ecological footprint analysis to com-pare their impact on the world’s resources and asa tool to help shape national policies. The ecologi-cal footprint of a country is the total area requiredto produce the food, fibre and timber that it con-sumes; absorb its waste; and provide space for itsinfrastructure. A nation consumes resources andecological services from all over the world and itsfootprint is the sum of these areas, wherever theyare located on the planet. In 2003, the ecologicalfootprint corresponded to 2.2 global hectares perperson (a global hectare is a hectare whose bio-logical productivity equals the global average). In2003, the Earth’s biocapacity was 11.2 billion global hectares, or 1.8 global hectares per person.Thus, humanity’s ecological footprint exceededglobal biocapacity by almost 25 per cent. Thisglobal overshoot began in the 1980s and has beengrowing ever since. This means that natural capitalis being spent faster than it is being regenerated. Ifcontinued, overshoot may permanently reduceecological capacity.16

footprint in 2001 amounted to 1.5 global ha/per-son, considerably below the world average (2.2global ha/person); lower than other Asian coun-tries such as Japan (4.3 global ha/person) andMalaysia (3.0 global ha/person); and well belowthe U.S. (9.5 global ha/person) and WesternEurope (5.1 global ha/person). But China’s ecolog-ical footprint in 2001 was higher than some otherAsian countries, e.g., India (0.8 global ha/person)or Indonesia (1.2 global ha/person), and has likelybeen growing in the past five years.

China’s “Export of Biocapacity”

The 2005 Asia-Pacific report on ecological foot-prints17 compares the export of biocapacity (bio-logical capacity)18 from Asian countries (seeFigure 1), which provides a clear notion of the factthat, contrary to common perceptions in the West,China as yet is not a high-consuming country fornatural resources per se, but an increasinglyimportant manufacturer of goods consumed else-where in the world.

Import of Natural Resource Commodities

Nevertheless, China’s rapid economic growth,industrialization and urbanization face majorresource constraints (see Box 2). Its large popula-tion will make domestic resource constraints evenmore significant in the future. China is now thelargest consumer and producer in the world ofmany different commodities. It is the secondlargest consumer of primary energy after the U.S.,and the top global producer of coal, steel, cementand 10 different kinds of non-ferrous metals. Itsincreasing appetite for commodities is drivingglobal demand for everything from oil and steel tocopper and aluminum. In recent years, due to itsrobust growth, China has replaced the UnitedStates as the dominant market and price setter forcopper, iron ore, aluminum, platinum, etc.

China’s total forest imports in volume went upfrom 40 million cubic metres in 1997 to 134 mil-lion cubic metres in 2005. China’s agriculturalimports also are expanding. It increased importsof cotton from the United States by 700 per cent.


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Box 2. Securing stable sources of imported natural resources.

China has now sought raw materials from regions asdiverse as the Middle East, Africa, Latin America,Asia and the Pacific, and East Europe through eitheroverseas investment or by strengthening its politicalrelationship and promoting bilateral free trade agree-ments with the commodity-producing countries.China’s big three energy multinationals—ChinaNational Petroleum Corporation, Sinopec and theChina National Offshore Oil Corporation—have been“buying up oil and gas concessions” around theworld. China and ASEAN signed the FrameworkAgreement on China-ASEAN ComprehensiveEconomic Cooperation in 2002; and ASEAN + 3 arenow negotiating a complete free trade agreement(FTA) package aimed to be established by 2010.China is also holding talks with Australia about apotential FTA. It has also started talks with SouthAfrica on the creation of a new FTA. Negotiationshave taken place between China and the six-nationGulf Cooperation Council about a possible FTA.Brazil is also developing a “strategic partnership” withChina.

17 WWF International, Asia-Pacific 2005: The Ecological Footprint and International Wealth (Gland: 2005).

18 The relationship of biocapacity and ecological footprint is explained by Wackernagel in <http://www.footprintnetwork.org >.


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Figure 1. Export of biocapacity fromChina, Japan and Thailand in 2001.

Source: WWF International. 2005. Asia-Pacific2005: The Ecological Footprint and NaturalWealth. WWF, Gland.

Table 1: Export of biocapacity fromthree Asia-Pacific countries, 2001,million gha.The maps show flows in biocapacity particularly tothe high income countries of Europe, Japan andNorth America. While some of this biocapacitycomes directly from the exporting country, signifi-cant amounts originate in other countries, many inthe developing world.

Export

From China Japan Thailand

To

1 Australia 2.5 2.1 1.4

2 Brazil 0.9 0.7 0.2

3 Canada 2.8 1.8 0.8

4 China – 6.5 6.5

5 Egypt 0.5 0.2 0.2

6 France 3.0 1.7 0.9

7 Germany 7.3 4.3 1.7

8 India 1.4 0.5 0.5

9 Indonesia 1.6 1.8 1.5

10 Italy 2.7 1.3 0.7

11 Japan 25.1 – 10.6

12 Korea, Rep. 7.1 6.9 1.3

13 Malaysia 2.2 3.0 2.9

14 Mexico 1.3 1.1 0.5

15 Netherlands 4.7 3.2 2.2

16 New Zealand 0.3 0.3 0.2

17 Nigeria 0.5 0.1 0.4

18 Russian Fed. 1.3 0.2 0.1

19 Saudi Arabia 0.8 1.0 0.4

20 Singapore 4.3 4.0 5.6

21 South Africa 0.9 0.4 0.3

22 Spain 1.7 0.8 0.6

23 Thailand 1.9 3.3 –

24 U.K. 6.2 3.3 2.5

25 USA 43.2 33.6 14.1

Numbers refer to map locations only.

China’s grain production has declined in the pastfew years. According to World Bank’s forecasting,China’s net grain imports will rise to 19 milliontonnes in 2010 and 32 million tonnes in 2020.

The growth in China’s oil consumption has beendramatic. Twenty years ago, China was East Asia’slargest oil exporter, but it became a net importer in1994. In 2003, it became the world’s number threeoil importer after the U.S. and Japan, and in 2005it accounted for 31 per cent of global growth in oildemand.19

China’s quest for natural resources (includingtimber, oil, base metals as well as agriculturalproducts) and overseas investment in support ofmeeting these needs have become frequent topicsin the global media. China has often been por-trayed as responsible for negative global develop-ments beyond its borders. However, in some cases(e.g., timber/furniture and cotton/textiles), it isnot only China’s own consumption that drivesthe resource demand. For example, over half thevalue of China’s exports is derived from import-ed components and raw materials. A StanfordUniversity study pointed out that the importvalue of Chinese exports to the U.S. is as high as80 per cent (i.e., the products include a high levelof materials imported to China, reprocessed intomanufactured items).20 This would imply thatresponsibility for sustainability and environmen-tal concerns lies with consumers in the importingcountries as well as with China, since the rawmaterials are taken from their own as well asother nations, and the final products are con-sumed outside of China.

Trade, Investment and ExpendituresAbroadRecently, for the first time ever, China’s StateCouncil in its Decision on Implementing theScientific Concept of Development and StrengtheningEnvironmental Protection,21 called for more com-prehensive attention to trade and environmentissues, including Doha negotiations on trade andenvironment, refining environmental standardsfor exporting products, illegal waste imports andinvasive alien species.

Many Trade-related Resource andEnvironmental Concerns

Expanded trade activities have contributed toChina’s serious environmental problems includingwidespread air and water pollution, and seriousecological environmental damage. The level ofdamage is such that some international observersworry that China has become a very significantpollution haven. However, the evidence for this ismixed.22 There are a number of specific studiescovering environmental assessment of China’saccession to the WTO.23

Increasingly, there is a focus on market supplychains, and the conditions under which resourcesare obtained by Chinese enterprises. A GlobalWitness report found that 90 per cent of timbercrossing into China’s Yunnan from Myanmar’sKachin State was illegal. China responded by sign-ing an agreement with Myanmar to shut down thislong-term trade.24 Similarly, China and Indonesiasigned an agreement to address problems of tim-ber trade, but according to senior environmental


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19 UNCTAD, Trade and Development Report 2005 (Geneva: 2005).

20 Lawrence J. Lau, Is China Playing By the Rules? Free Trade, Fair Trade, and WTO Compliance, Congressional-ExecutiveCommission on China Hearing, Washington, 24 September 2003.

21 Decision of the State Council, 24 November 2005, as noted in Major Domestic Economic Events in the Fourth Quarter of 2005,NDRC News, 11 January 2006.

22 Evidence about FDI seeking lax environmental standards in China is mixed, with countries from Europe and North Americaattracted to areas of good standards, while some investment sources from overseas Chinese sources are put off by high stan-dards. See Judith M. Dean, Mary E. Lovely and Hua Wang, Are foreign investors attracted to weak environmental regulations?Evaluating the evidence from China (World Bank: 2005), <http://www.eldis.org/cache/DOC17666.pdf> and U.S. InternationalTrade Commission, Foreign Direct Investment and Pollution Havens: Evaluating the Evidence from China, Working Paper No.2004-01-B (U.S. International Trade Commission Offices of Economics: 2004), <http://hotdocs.usitc.gov>.

23 IISD, An Environmental Impact Assessment of China’s WTO Accession: An Analysis of Six Sectors (Winnipeg: IISD, 2004),<http://www.iisd.org/pdf/2004/cciced_env_impact_assessment.pdf>.

24 Global Witness, <http://www.globalwitness.org/press_releases/display2.php?id=358>.

officials in Indonesia, there has been limited follow-up. In fact, the “world’s biggest timber smuggling”was found between Indonesia and China.25 A 2006report by the Environmental Investigation Agencylocated in the U.K. indicated that China plays theleading role in the worldwide illegal trade in ozone-destroying CFCs (chlorofluorocarbons).26 These areonly a few examples of trade and environment issuesthat China faces.

China worries about non-tariff trade barriers relat-ed to environment. In fact, this may be the most sig-nificant concern on the subject of trade and envi-ronment. The latest of these “green barriers” hasraised concerns within China about its ability toexport chemicals and products containing variouschemicals. The EU has implemented a programintended to address some 30,000 chemicals whichmay have detrimental environmental and healthaffects. By June 2007, the REACH (Registration,Evaluation, and Authorization of Chemicals)Program will require registration of products withthese chemicals. Apparently some five millionChinese products, including textiles, cosmetics andmany other products, could be affected. At presentthere is no national system of chemical registrationin China, and some 10 standards prevail. Billions ofdollars of exports could be affected.27 China alsoworries that the REACH Program will become aworldwide standard, therefore affecting its exportsto many more countries.

Bird flu is costing China and other countries billionsof dollars. Some of the costs are directly related tomovements of people and exported products.Increasingly these public health issues are linked towildlife, and to disease epicentres in countries suchas China. Invasive species directly affect China andother countries, causing significant economic andecological damage. And trade involving rare orendangered species is a well-established concern.There are environmental matters pertaining to novellife forms associated with biotechnology. All of these

biodiversity-related aspects of trade are of growingsignificance globally and are of concern to China.

Beyond these specific cases, there are many hugeand detailed tasks that need to be performed inorder to introduce environmental considerationsinto trade policies and enforcement practices forChina and other countries, and within the tradeagreements themselves. Most importantly, there isthe need to build a better understanding andapproach to trade and sustainable development—focused more broadly than on trade and environ-ment considerations.

Integrated Trade and SustainableDevelopment Strategy

CCICED’s influential Trade and EnvironmentWorking Group and Task Forces28 advocated foryears that an overall national strategy for sustain-able foreign trade, a green trade action plan and anintegrated investment policy should be developedand implemented by the Chinese government inorder to better promote trade and sustainabledevelopment. Although some progress has beenmade in some sectors and on specific issues, thereis no coherent action. The lack of such a coherentpolicy, higher priorities paid to GDP and tradegrowth, and the absence of the necessary institu-tional coordination are hindering the develop-ment of a sustainable trade strategy.

The State Council’s major 2005 Decision forstrengthening environmental protection and fol-low-up, such as the “Three Transformations”described earlier, calls for the coordination ofsocio-economic growth with environmental pro-tection; putting environment at a more importantstrategic position; and reinforcing leadership onenvironmental protection work. The emphasis ison accountability, with principal officials of rele-vant departments and local governments heldresponsible for environmental protection work in


10

25 Environmental Investigation Agency, World’s Biggest Timber Smuggling Racket Exposed Between Indonesia and China, pressrelease, 17 February 2005.

26 Environmental Investigation Agency, China Exposed as Lead Player in Global CFC Smuggling Racket as Ozone Damage Worsens,press release, 13 December 2005.

27 Firms Prepare for EU Rules on Chemical Goods Imports, China Daily, 16–17 December 2006; also see <http://ec.europa.eu/environment/chemicals/reach/reach_intro.htm >.

28 CCICED Compilation of Recommendations from 1992-2005 (Beijing: CCICED Secretariat, 2006). See CCICED and IISD Websites for further information on publications related to CCICED work related to Trade and Environment.

their jurisdictions. This represents an unprece-dented opportunity for developing integratedtrade and sustainable development strategies, withaccountability on the part of both trade and envi-ronment departmental officials.

Investment at Home and Abroad

Investment is important for sustainable develop-ment. High-quality and well-managed foreigninvestment at national and international levels canhelp promote the move from unsustainable to sus-tainable practices in various sectors. During the 11thFive-Year Plan period, China’s goals are to continueto attract foreign direct investment (FDI) vigorous-ly; to improve its investment law and policy; and toguide the FDI flow—to high-tech, to the high-end ofproduction, to environmentally-friendly processesand production methods, and to China’s inland andwestern regions. As China moves to becoming one ofthe world’s leading investors in scientific R&D (like-ly second only to the U.S., or perhaps third), a sig-nificant portion of the investment will be devoted toenvironmental protection. This may help to over-come a significant problem in creating “Made inChina” solutions well-suited to local environmental,social and economic circumstances, and also ameans of overcoming the intellectual property rights(IPR) issues that make it difficult for China toengage in technology leapfrogging, and to gainaccess to leading-edge environmental solutions.

Recently, Chinese companies have actively engagedin overseas acquisition activities all over the worldin an effort to acquire a wide range of naturalresources to meet the short supply at home. In2005, direct investment abroad by Chinese firmsincreased by 27 per cent to US$3.2 billion, andcontracted overseas investment jumped by 78 percent to US$3.71 billion. More than half of 2005’soverseas direct investment by China was in themining sector.29 While this level of Chinese inter-national investment pales in comparison to theUS$60 billion invested in China by foreign firms in2005, it represents the beginning of a new trendwhere Chinese state-owned and private enterpriseswill be more active in establishing a global pres-ence supported by the Chinese government. This

trend will include partial or complete purchase ofbanks and perhaps other financial firms abroad.

In 2002, the Chinese leadership announced at the16th National Party Congress a broad “going out”strategy for both state-owned and private compa-nies. In 2003, the government focused on commodi-ties and adopted a policy to promote and protectinvestments in mineral resources prospecting andexploitation outside China. The 11th Five-Year Plancalls for further implementations of the “going out”strategy, and will provide support to enterprises thathave the ability to engage in overseas operation andoverseas acquisition, particularly resource exploita-tion and development cooperation to meet govern-ment policy objectives of securing commodities.

It is important that Chinese companies with an inter-est in overseas investment are aware of private andpublic opposition to the so-called “race to the bot-tom” on environmental measures and of corporateresponsibility in their overseas acquisition efforts.Recent events in North America and elsewhere sug-gest that Chinese businesses may well benefit fromstronger and sounder investment treaties. Private andgovernment opposition in the United States ultimate-ly prevented the proposed acquisition of Unocal byChina’s National Petroleum Corporation. China’sMinmetals’s potential interest in acquiring Noranda, amajor Canadian resource company, also provokedsome vocal opposition in Canada raising issues suchas poor management, lower global standards of trans-parency, environmental standards and corporateresponsibility of Chinese state-owned enterprises.

China has concluded bilateral investment treatieswith some 71 countries over the past 25 years.Most of these agreements are modelled on the cur-rent international investment model developed ahalf century ago. Chinese interest in investmentsin the national resources sector outside of Chinamay well benefit from a comprehensive and robustinternational investment regulatory regime thatpromotes sustainable development at national andinternational levels. However, there is no strongpush in this direction from China.

International investment agreements (IIAs) havenow become an important part of the legal and


11

29 Andy Rothman, China Eats the World, CLSA, Spring 2005, <http://www.cctr.ust.hk/articles/pdf/China%20Eats%20the%20World%20Spring%202005.pdf> (accessed 20 May 2006).

policy mechanisms that govern the economicprocesses of globalization. To put it more simply,international investment agreements are all aboutthe governance of globalization.30 The currentinternational investment regime developed 50years ago is inherently flawed and can no longermeet the needs of the global economy in the 21stcentury. It only focuses on the protection of for-eign capital and investments; and the arbitrationprocess developed to address disputes primarilyfocusing on investor-state arbitrations has majorflaws. Also, international investment agreementsgrew on a bilateral basis between home and hoststates; there is no international institutional homefor IIAs. This is clearly a topic that should be ofinterest to China and to its main trading partners.It is an example of the fundamental weaknesses ofthe international legal structure in matters affect-ing environment and other significant impacts.

International Cooperation RolesChina’s has clearly signalled its intention to take anactive part in many types of international cooper-ation related to environment and development.The following areas represent some of the moreimportant possibilities:

• Active participation in the negotiation,funding and action internationally of mul-tilateral environmental agreements (MEAs)and environmental aspects of other interna-tional agreements for health, trade, etc.

• Building domestic implementation capacityfor MEAs signed and ratified by China,including new or revised laws and regula-tions, strengthened policies and enforcement.

• Increasing the level of Chinese participa-tion concerning environment and devel-opment in international organizations.

• Ensuring effective implementation ofbilateral and multilateral agreements for

managing shared resources (e.g., “Top ofthe world” mountain regions in westernChina; water resources in border regionssuch as Mekong and Songhua Rivers; andthe South China and Bohai Seas).

• Promoting a good level of corporate gov-ernance capacity, and corporate socialresponsibility of Chinese businesses oper-ating in China and/or internationally.

• Creating transparent processes for infor-mation sharing on resource and environ-mental problems, infectious diseases, etc.,with consumers, organizations and gov-ernments internationally and withinChina. An example is China’s willingnessto undergo examination of its environ-mental protection mechanisms andorganization by the OECD.31

• Sharing of Chinese experience in environ-mental technology and protection withother nations, including via Chinesedevelopment assistance.

• Expansion of joint efforts with foreigngovernments, universities and researchorganizations to address issues of mutualconcern within China and internationally.

This list undoubtedly will be expanded in thefuture, as new problems emerge globally and asChinese presence becomes greater in internationalenvironmental initiatives.

China has ratified dozens of international environ-mental agreements, amendments and protocols.

The national environmental protection law hastaken the position that when domestic law is not inaccordance with an international environmentalaccord ratified or acceded to by China, then theprovisions of the international convention shouldbe implemented, except in those cases whereChina had specified its reservations.32


12

30 Howard Mann, Konrad von Moltke, Luke Eric Peterson and Aaron Cosbey, IISD Model International Agreement on Investmentfor Sustainable Development – Negotiators’ Handbook (Winnipeg: IISD, 2005), <http://www.iisd.org/pdf/2005/investment_model_int_handbook.pdf>.

31 OECD, Environmental Performance Review of China. Conclusions and Recommendations (Final) (OECD: 2006),<http://www.oecd.org/dataoecd/58/23/37657409.pdf>.

32 Article 46 of China’s Environmental Protection Act as noted on p. 42 in PEMSEA, The Development of National Coastal andMarine Policies in the People’s Republic of China: A Case Study (Manila: PEMSEA, 2003), 63 pp.

One persistent concern internationally is howChina can contribute to a strengthening of globalenvironmental governance, and why it might be inChina’s best interest to do so (see Box 3).

What might China do to ensure that its interestsare better served through a strengthened globalenvironmental governance system? First, actionsspeak louder than words. China can meet its ownrigorous domestic targets for energy efficiency andpollution control; restrict activities such as theimport of illegally-cut timber; and ensure that itscompanies investing or operating abroad alsoobserve good environmental standards. In theseways, China will contribute to improved globalenvironmental quality, and build a reputation foritself as a respected and responsible world citizenin regard to environment and development. Chinacan implement internationally recognized bestpractices, including investment in newer technolo-gies domestically, and seek cooperation with oth-ers to ensure these practices operate smoothly.This is particularly needed in coal technology,where China’s practices significantly affect globalenvironmental quality.

China cannot delay taking a larger role in worldenvironmental affairs. It is now a major economicpower, a key player in energy, greenhouse gas emis-sions and climate change. And it is reshaping theworld’s market supply chains. Thus China shouldhave a strong vested interest in creating predictableinternational environmental rules under which itsbusinesses operate, and under which its own goodsand services are traded. At the moment these areonly weakly developed. There are many ways toenhance its role, ranging from pressing forenhanced action on existing agreements wherethese are compatible with Chinese needs, to scien-tific and other cooperation to produce bettermonitoring and environmental knowledge, andthrough expanding Chinese participation withininternational bodies, including financial support.

China also might build on the success it has had indomestic implementation of some global volun-tary efforts for environment such as the wide-spread adoption of ISO 9000 and ISO 14000 man-agement standards. Fully embracing otherapproaches such as the Responsible Care Programsused in chemical and other sectors internationally


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Box 3. Global environmental governance and China.

As a rapidly developing and trading nation, Chinafaces the dilemma of needing fast-paced environ-ment and development decision-making at a timewhen global environmental governance is still slow-paced, inefficient and incomplete. The world’s envi-ronmental governance lags behind the World TradeOrganization.

Global environmental governance could be animportant stumbling block for China’s future envi-ronment and development relationship for a num-ber of reasons: lack of clear and enforceable rulesregarding transboundary pollutants; unclear inter-national demands for rules on sustainable produc-tion of goods and for natural resource imports; lim-ited monitoring and scientific proof concerningcauses of environmental damage, leaving Chinavulnerable to assertions made by other nations orvested interests; unilateral environmental condition-ality imposed by other nations on Chinese exports;unfavourable terms for access to advanced sus-tainable development technologies for key prob-lems such as removing pollutants from new coal-fired power plants in China; poor global environ-mental information systems, making it difficult tobenchmark Chinese experience against effortselsewhere; and no systematic approach to buildenvironmental protocols into trade and investmentwithin the World Trade Organization.

China has been a major beneficiary by participatingin the past 35 years of international environmentaldecision-making, from the 1972 StockholmEnvironment Conference, to the Earth Summits in1992 and 2002. China is signatory to the majorconventions arising from these and other globalmeetings, and was one of the first nations to pro-duce a national Agenda 21. Thus China has hadthe opportunity to apply domestically the knowl-edge and experience gained from global environ-mental governance efforts—over the same timeperiod that China began its own period of veryrapid economic growth.

would help to meet China’s own “circular econo-my” objectives.33

Over the longer term, China and other fast-growingmajor nations such as India and Brazil may haveconsiderable influence in shaping the organizationand effectiveness of the still relatively young globalenvironmental governance structure into a morefunctional system. Certainly other nations alreadyrecognize the major influence these and other largecountries are having on the world’s environmentand development. Needed are very clear signals ofinnovation and success in addressing the problems.This will create a level of credibility with both richerand poorer nations that such problems can be tack-led while continuing ambitious economic and socialdevelopment efforts.

Environment and Security MattersThe notion of considering environment and devel-opment as a security concern is relatively new but ofgrowing interest internationally and nationally.34 Itis derived from an expanded definition of securitythat focuses attention on both human develop-ment and ecological conditions, and on security ofresource supply and ecological services. Thus fac-tors such as climate change, environmental inci-dents, such as large oil spills or prolonged periodsof drought, floods and other natural disasters, canbe considered as threats to human security, and toboth natural and highly managed ecosystems. Ageneral matter of concern for many countries,including China, is security of food, energy andraw materials for manufacturing. These might beconsidered as factors of economic security.Poverty, environment and security is another

approach of considerable concern, especially inregions of scarce land and water resources, whereroots of conflict arise from access to resources andfrom environmental degradation. And, of course,there are those who would place environment andresource considerations into the framework of tra-ditional military security, for example, refugeesfrom civil strife over matters such as water andland use conflicts, and, internationally, militaryinterventions to safeguard market supply chainsfor oil or other natural resources.

Another way of thinking about environment andsecurity is that it brings out the potential of exam-ining problems from an adaptive, sustainabledevelopment approach rather than from anordered response approach. The latter employssolutions based on either use of military power orblunt instruments such as economic structuraladjustment to address serious problems.Environment and security are only beginning tobe linked in the case of China’s environment anddevelopment.35

In China’s global relationships, as analyzed bysome Western academics and those interested innew aspects of foreign affairs, the following topicsare examples concerning environment and security.It should be noted that while some of these topicscan be related directly to matters beyond China’sborders, in other cases, there is concern for insecu-rity within China including political, economicand social implications.

• Domestic destabilizing influences of con-flict over pollution incidents and improperland appropriation.


14

33 “Circular economy” is the way China describes its system of recycling, eco-efficient industry and other measures taken toreduce energy use and for introducing sustainable consumption and “cradle-to-cradle” approaches to cut material flow, espe-cially in manufacturing.

34 See Woodrow Wilson Center Environmental Change and Security Program, <http://www.wilsoncenter.org>; R.A. Matthews,Environmental Security: Demystifying the Concept, Clarifying the Stakes, Environmental Change and Security, Report 1 (Spring1995): 14–23; Institute for Environmental Security, <http://www.envirosecurity.org>; European Commission, GlobalMonitoring for Environment and Security (GMES): From Concept to Reality, COM (2005): 565,<http : / /www.gmes . info/ l ibrar y/ f i les /Reference%20Documents/COM-2005-565-f inal .pdf#search=%22environment%20and%20security%20china%22>.

35 Vaclav Smil, China’s Environment and Security: Simple Myths and Complex Realities, SAIS Review, 1997, 17(1): 107–126;Elizabeth Economy, Environmental Scarcities, State Capacity, and Civil Violence: The Case of China, 1997; Nathan Nankivell,China’s Threatening Environment, Japan Focus, 2006; Nautilus Institute, Asian Energy Security Workshop, Beijing, 2005,<http://www.nautilus.org/energy/2005/beijingworkshop/papers.html>; UNEP, The Fall of Water: Emerging Threats to theWater Resources and Biodiversity at the Roof of the World (ICIMOD, 2005), <http://www.unep.org/Documents.Multilingual/Default.asp?DocumentID=452&ArticleID=4916&l=en>.

• Impacts on China’s ecosystems, water andfood production arising from climatechange.

• Impacts on fisheries and ecosystems aris-ing from uncontrolled/unregulatedexploitation in disputed areas of the SouthChina Sea.

• Impacts of air pollutants from Asia(including China) such as persistentorganic pollutants (POPs) and heavy met-als on food chains for people and wildlifein Arctic areas.

• Purchase of natural resources such as oilor timber from countries with govern-ments considered likely to be repressive orwith a poor record of environmental sus-tainability.

• Purchase of natural resources such as agri-cultural commodities, timber, oil or miner-als where the result may be incursion intoglobally significant ecosystems, or ontolands from where indigenous people may bedisplaced (e.g., the Amazon, parts of Africa).

• Human, plant and animal diseases andinvasive species that are transformative intheir economic, social or environmentalimpact. Trade, travel of people and othermixing factors constitute threats to envi-ronmental security, although providingessential benefits.

The subject of environment and security related toChina will grow in significance over coming years,although these relationships require more analysisand statements need to be carefully considered,not blindly accepted.


15

Case Study 1 – International MarketSupply Chains

Agricultural Products

One of the most relevant issues in terms of globalimpacts of the Chinese economy is the question ofwhether China will continue its former policy ofself sufficiency in grain supplies. Two aspects are ofparticular interest in this regard:

• China’s grain harvests declined between1998 and 2005 by nine per cent, or 34 mil-lion tons. Falling water tables, the conver-sion of agricultural land to non-farm uses,such as urbanization, and the loss of farmlabour in rapidly industrializing provincesare at the source of this loss. Rice productiv-ity, in particular, has been attributed towater shortages.36 A study by a jointU.K./Chinese team released by U.K.’sEnvironment Minister Elliott Morley in2004 has shown that Chinese staple crops—rice, wheat and maize—may fall by as muchas 37 per cent by the end of the century,under current climate change projections.37

• Food consumption levels have beenincreasing with China’s growth and willundoubtedly continue growing with theincreasing wealth of the average citizen. Asa consequence, the demand for meat, fish,vegetable oils and diary products will riseas well, which in turn requires additionalquantities of grain for feed. China pro-duces nearly half of the world’s pork, is theworld’s second largest poultry and thethird largest beef producer.38

China already imports bulk commodities for itslabour-intensive food industry. China is a majorexporter of manufactured foods, animal products,fish, vegetables and fruit, mainly aimed at Asianmarkets. Although China’s demand for proteinmay be supplied largely by domestic producers oflivestock, those farms increasingly will rely onimported corn, soybeans and soy meal for feed.

Soybean and oil palm production in the tropics is ofparticular environmental concern because of themassive land conversion of tropical forests that thisoften entails. Plantations of these two crops alreadycover an area of the size of France and more forest isbeing cleared for this purpose every year. From 1993to 2002, the global harvest of soybeans increasedfrom 115 million tons to 180 million tons. Althoughproductivity per area was also improved throughnew varieties, the cultivated area in Argentina andBrazil increased dramatically, at the expense of thenatural savannah (Cerrado) and Amazonian forest.The recent increase of the rate of deforestation in theAmazon is mainly related to cattle ranching and soyplantations. By far the largest importers of soybeansfrom South America in 2001 were Europe (45 percent) and China (35 per cent).

The area under oil palm plantations has increasedbetween 1990 and 2002 by 43 per cent to 10.7 mil-lion ha. A vast new oil palm development projectin the highlands of Borneo, straddling the borderbetween Malaysia and Indonesia has drawn nega-tive reactions the world over.39 The area is stilllargely covered with primary forest and inhabitedby indigenous peoples. Forest clearing for oil palma major loss of some of the most diverse naturalhabitat in Borneo. A recent study40 has identified


16

3.CASE STUDIES

36 L.R. Brown, Plan B 2.0. Rescuing a Planet under Stress and a Civilization in Trouble (New York, London: Earth Policy Institute,W.W. Norton & Company, 2006).

37 DEFRA and Ministry of Science and Technology (China), Impacts of Climate Change on Chinese Agriculture (London: DFID,2004).

38 F. Gale, China’s Food and Agriculture: Issues for the 21st Century, U.S. Deptartment of Agriculture, Agriculture InformationBulletin No. 775, 2002.

39 E. Wakker, The Kalimantan Border Oil Palm Mega-project (Amsterdam: AIDEnvironment, 2006).

40 J.W. van Gelder, Financial Institutions Involved in the Heart of Borneo, Research paper prepared for WWF Indonesia, 2005.

investors possibly involved in this completelyunsustainable development would, because of therugged up-land terrain, lead to massive erosionand low yields, besides undertaking, including theChina Development Bank and the CITIC Group ofChina. At the Conference of the Parties to theConvention on Biodiversity (CBD) in March 2006,the three governments sharing Borneo—Indonesia, Malaysia and Brunei—made declara-tions in support of conservation efforts in the“Heart of Borneo.”

A new threat to the remaining natural forests ofSoutheast Asia, are various plans for biodieselfrom palm oil. Indonesia has announced the con-version of six million ha of lands for this purpose.The lands are supposed to be from land not in pri-mary forest, but the track record in Indonesia hasbeen illicit burning of natural forest for this pur-pose. While much of the biodiesel will be fordomestic use, it would be very surprising if therewere not willing importers, including China,which is promoting demand for biofuels, includ-ing ethanol and biodiesel, but will have a difficulttime meeting this demand if it relies solely on itsown sources.

Agricultural Products Synthesis

Clearly, China cannot be held accountablefor unsustainable agricultural practicesabroad. The fact that rising Chinese demandfor agricultural produce has led to a pricesurge for certain commodities, thus creatingincentives for uncontrolled agriculturalexpansion, is primarily related to weak landuse governance in producer countries. It is inaccordance with its WTO membership thatChina lowers tariffs, weakens state monopo-lies and increases the openness of importallocations, thus weakening the policy instru-ments the government has been using torestrain agricultural imports. However, assome authors41 have stressed, if China turnsincreasingly to the world markets for massiveimports of grain and other agricultural prod-ucts, this has the potential to change the

geopolitical situation, increasing the insecu-rity for sustainable supplies, and exposingChina to worldwide attention and criticismsimply because of the dimensions of China’sdemand.

Already today, large scars of deforested areasin the Amazonian states of Mato Grosso andRondonia in Brazil that can be attributed tosoybean plantations and are clearly visible bysatellite. It will therefore be necessary thatChina articulates its agricultural and invest-ment policies, ensures reliable statisticalinformation to accurately assess its develop-ment and participates in international fora toassess the impacts of markets on biodiversityand the natural resource base.

Forest Products

A considerable number of studies have beenundertaken as a consequence of the rapidlyincreasing Chinese demand for forest products,particularly after the introduction of the NationalForest Protection Program in 1998, which bannedlogging in ecologically-sensitive areas of China.These have been initiated by Forest Trends, theCenter for Chinese Agricultural Policy (CCAP) theCenter for International Forestry Research(CIFOR), WWF International and their numerouspartners in China. Although there remain uncer-tainties with regard to unreported logging as wellas import and export statistics, the level of under-standing of China’s forest products’ market ismore complete than for other resources.

The per capita use of wood products in China cur-rently is modest. The average person in the U.S.uses 17 times and an average Japanese six times asmuch wood as a person in China! In 2003, Chinaconsumed about 173 million cubic metres ofwood for its domestic use and for export. Of thisvolume, only about 79 million cubic metres logvolume was produced by China’s own forests andplantations. This figure includes the industrialtimber as well as fuel wood according to nationalstatistics, plus an estimate of undeclared industrialproduction. The State Forest Administration has


17

41 See, for example, Brown 2006.

recently estimated the amount of unreported log-ging to be as high as 75 million cubic metres peryear.42 Domestic need for wood required 138 mil-lion cubic metres, and 35 million cubic metreswere used to manufacture wood products forexport to other countries.43 In some instances,Chinese firms are able to take what is waste woodand re-process it into first grade material. This isapparently the case for some low-grade yellowcedar obtained from British Columbia,reprocessed, and then sold to Japan as high qualityproduct—China’s low labour cost advantage.

Rapid Growth of Timber Imports

In terms of size China’s wood market—includingindustrial timber, pulp and paper—is now the sec-ond largest in the world, after the massive U.S.market. To cover its demand, China has importeda rapidly increasing amount of wood. From 1997to 2005 China’s total forest imports in volume(round wood equivalents – RWE) more thantripled from 40 million cubic metres to 134 mil-lion cubic metres.44 The increasing demand fortimber imports can, at least partly, be traced backto the logging ban introduced in 1998 under theNational Forest Protection Program (NFPP).However, the decline in China’s own productionbegan already prior to the introduction of the log-ging ban and is a consequence of the depletion ofnatural forests over past decades.45 In response tothe reduced production capacity of natural forestsand the increasing demand for wood, China dou-bled its timber plantations from 14 per cent of thetotal forest area to 28 per cent in the 1990s. Chinahas now the largest area devoted to timber planta-tions of any country in the world.46 The Chinese

plywood industry increased its capacity dramati-cally in the past 10 years (plywood productionincreased from 2.6 million cubic metres to 21.0 mil-lion cubic metres), which partly explains why Chinaimports much larger quantities of raw logs today.

Origin of Imports

China’s three largest suppliers of timber in 2003were Russia, Indonesia and Malaysia, followed byNew Zealand, Thailand, the U.S., Papua NewGuinea and Myanmar. These trade statistics showthat most of China’s timber imports originatefrom countries where the forest estate is in declineand/or where forest governance is weak.

Russian Federation: In terms of volume, the mostimportant timber supplier is the RussianFederation, with 21 million cubic metres of logs andwood-based products exported to China in 2003.47

The aggregate demands for wood products fromJapan, South Korea and China have led to seriousover-logging in the southern part of the Russian FarEast and Eastern Siberia with irreparable damage inlogged permafrost areas, and forest fires.48

Indonesia: China’s imports from Indonesiaincreased gradually to reach about three millioncubic metres RWE in 2003. China also imports amore rapidly increasing amount of pulp and paperfrom Indonesia, which reached eight million cubicmetres RWE in 2002. The Indonesian pulp andpaper industry has a significant overcapacity thatoutpaces the supply of sustainably harvested tim-ber. The demand of the Indonesian pulp and paperindustry, which consumes about 20 million cubicmetres of round wood, is a major cause for illegalharvesting practices from natural forests.49 The


18

42 State Forest Administration of China, Communication by Vice Minister as cited in AFP, 18 January 2006.

43 Zhu Chunquan, Rodney Taylor and Feng Guoqiang, China’s Wood Market, Trade and the Environment (Science Press USA Inc.and WWF International, 2004).

44 Andy White, Xiufang Sun, Kerstin Canby, Jintao Xu, Christopher Barr, Eugenia Katsigris, Gary Bull, Christian Cossalter andSten Nilsson, China and the Global Market for Forest Products. Transforming Trade to Benefit Forests and Livelihoods, ForestTrends, 2006, 34 pp., <http://www.forest-trends.org/documents/publications/China%20and%20the%20Global%20Forest%20Market-Forest%20Trends.pdf>.

45 Zhu et al., 2004.

46 FAO, State of the World’s Forests (Rome: FAO, 2003).

47 Zhu et al., 2004.

48 Lebedev, A., The Wild East – The Timber Trade between Siberia, Russian Far East and China, Bureau for Regional OutreachCampaigns. Forest Monitor (Vladivostok: 2001); A. Kotlobay and A. Ptichnikov, Illegal Logging in the Southern Part of theRussian Far East (Moscow: WWF Russia, 2002).

49 C. Barr, Profits on Paper: The Political Economy of Fibre, Finance and Debt in Indonesia’s Pulp and Paper Industries (CIFOR andWWF, 2000).

official Indonesian export statistics record a signif-icantly lower volume of timber exported to China(20 per cent less in 2002), than recorded in China’simport statistics.50 However, the extent to whichChinese timber imports from Indonesia are fromillegal sources is open to debate and requires fur-ther analysis and evaluation of current data.51 Inrecent years, significant amounts of wood havemoved illegally from West Papua.52

Malaysia: The official export statistics show onlyhalf the volume of timber imported by China fromMalaysia. Some of the difference may be due toMalaysia’s free ports. On the other hand there issubstantial evidence that large amounts of illegallycut timber are smuggled into Malaysia fromIndonesia and re-exported to China.53

Increasing Timber Exports

In response to a rapidly growing demand for furni-ture, plywood, wood moldings and floorings, partic-ularly in the U.S., Europe and Japan, China has inrecent years become the world’s largest wood work-shop. Between 1997 and 2005, the U.S. increased itsimports of manufactured wood products fromChina by almost 1,000 per cent and reached 35 percent of China’s total export value of timber products.Europe’s imports from China during this period alsoincreased dramatically, by almost 800 per cent.54

Indeed, a very large part of the timber imported byChina is used to manufacture timber products forexport. The exported volume corresponds to over 70per cent of the timber imported by China. Much ofthe wood is made into furniture, and some intereston the part of furniture producers is developing forcertification processes, via the Forest StewardshipCouncil, now active in China.

Future Trends

According to White et al. (2006), forest productimports by China are likely to double in the next10 years, based on an assumed six to eight per centgrowth of GDP.55 One of their key findings sug-

gests that the domestic as well as the exportdemand for manufactured wood products willcontinue to grow dramatically, at least over themedium term. The same authors emphasize thatChina, given its large export potential, maybecome increasingly vulnerable to consumer pref-erences, with growing environmental awareness.European countries are already drafting policiesand implementing procurement procedures thatrequire verification of legal or even independentlycertified origin of wood products.

Wood Product Synthesis

A number of policy recommendations havebeen made in the past to reduce the impactof China’s increasing demand for woodproducts, domestically and for export. Thesefocus on the following aspects:

• Improving the productivity of the Chineseforestry sector to reduce its reliance onimports.

• Strengthening of China’s environmentalprotection initiatives, including throughgovernment incentives for farmers and localgovernments to protect and restore forests.

• Encouraging environmentally soundwood and fibre production and processingin China.

• Improving the efficiency of wood harvest-ing, distribution and use in China.

• Encouraging imports or purchases ofwood produced legally and from well-managed forests.

In light of the growing demand for timberproducts globally, including China’s massivemanufacturing and export capacity, a num-ber of policy recommendations are alsoaddressed to a broader range of importing


19

50 Zhu et al., 2004.

51 D. Brown, Regulation, Law and Illegal Logging in Indonesia (Jakarta: WWF-World Bank Alliance for Forest Conservation andSustainable Use, 2002).

52 Environmental Investigation Agency (EIA), <http://www.eia-international.org/campaigns/forests/reports/>.

53 Zhu et al., 2004.

54 White et al., 2006.

55 Ibid.

and exporting countries.56 Those includerecommendations on procurement policies;education programs for retailers and con-sumers; supply chain management and certi-fication; bilateral cooperation on illegal log-ging and trade; updating forest legislationand enforcement; and the promotion ofsmall-scale forest-related livelihood.

It is quite possible that a sustainable pathwaycould be created by a range of Chinese andother national actions. However, it is perhapsequally possible that action will be far tooslow to deal with issues such as rising inter-national demands for cheap wood and furni-ture products, by the difficulties of variouskey timber exporting countries to controltheir own situation, and for Chinese domes-tic demand to rise dramatically, making itvery difficult to put in place suitable sustain-ability strategies. As EU countries and othersstart implementing sustainable procurementpolicies, China likely will have to have systemsin place to maintain access to such markets.Being ahead of the game may be essential ifChina wishes to secure a growing marketpresence.

Fisheries and Aquaculture

China accounted for about a third of the reportedfish landings and production over the last decade,thus making it the world’s largest fish producingnation in the world. Its international trade inseafood soared from about US$1 billion to almostUS$8 billion in a decade. China is the world’slargest seafood exporter, with more than two mil-lion tonnes exported at a value of US$5.5 billion in2003.

It should be noted, however, that China’s aquacul-ture makes up a very sizable proportion of this

production. The surge in seafood exports is relatedto the increased production of farmed seafoodsuch as shrimp, scallops, eel, tilapia and crawfish.57

Moreover, aquaculture benefits from the hugeamounts of by-catch taken by Chinese fishingfleets, and used as feed. Due to its impressive pro-cessing capacity, which increased by 50 per centbetween 1996 and 2000, China takes in for pro-cessing and re-export a large part of the globallylanded value of fish. This has included species ofconsiderable conservation concern such asPatagonian toothfish (also sold as Chilean SeaBass) from Antarctic waters. The re-exported,semi-processed fish are sent to countries such asCanada for further processing and then sold inthese countries, or exported again to the U.S. orother markets under the Western country brandname. This process works particularly well forwhite-fleshed fish that lose their species identity,ocean of capture, and place of processing. In sucha situation it is very difficult to create a good chainof custody concerning any kind of reliable sustain-ability assertion or certification (e.g., by theMarine Stewardship Council).

Since the late 1980s, China’s own marine fisheryresources have been overfished. This has been anissue the Chinese government has taken seriously.Very considerable resources have been devoted toresearch and the rational utilization of its marineresources. A significant number of Chinese fish-eries scientists have assessed these stocks, e.g., Jin(1996); Yuan (1999); and Cheng et al. (2004).58

The “Fishery Act” of 1986 was subsequentlyamended by an “allowable catch quota” in 2000. Amoratorium on summer fishing was already previ-ously introduced in the Bohai and Yellow Seas andextended to all of the Chinese waters in 1998. Amandatory fishing vessel buy-back program wasalso introduced, albeit with modest success. Withthe widely used trawl nets and purse seiners by-catch is very substantial and it can be expected that


20

56 Ibid.

57 P. Redmayne, China: The Country That is Changing Everything, Industry Report, IntraFish Media, 2004.

58 Xian-shi Jin, Ecology and Population Dynamics of Small Yellow Croaker in the Yellow Sea, Journal of Fishery Sciences of China,1996, 3(1):32-46; Wei-wen Yuan, Fish Stock Assessment in South China Sea, in Jia Xiao-ping (ed.), Symposium on MarineFishery Research (Guangzhou: Guangdong Science and Technology Press, 1999), 82–87; Jia-hua Cheng, Lin Long-shan andLing Jian-zhong, Effects of Summer Close Season and Rational Utilization of Redlip Croaker Resource in the East China SeaRegion, Journal of Fishery Sciences of China, 2004, 1(6): 554–560.

fishing effort, dictated by the decreasing resource,will be greatly reduced in the coming decade.59

A number of fisheries scientists have reportedproblems with Chinese fisheries data, with impli-cations at the level of global catch statistics.Watson and Pauly (2001) demonstrated that over-reporting of catch by China (presumably todemonstrate production increases, which isimportant to local officials) led to substantial over-reporting of marine fish catches, creating a falseperception of good health in world fisheries.60 Anadditional difficulty has been reported with theprivatization of the previously state-owned marinefishing enterprises and the consequences of WTOaccession: the fisheries statistics system has fallenapart. Current statistics on catch are incompleteand inaccurate, which does not allow China tomonitor the sustainability of its fishery resources,and therefore with consequences for the world sta-tistics.

China’s fisheries fleet did not venture muchbeyond its own EEZ until about 1985. Thereafterits activities began to expand, particularly aroundthe turn of the century, and now span the world’soceans. In some cases, China cooperates with othercountries in patrols to monitor these offshore fish-eries, for example with the U.S. and Russia con-cerning drift net fisheries in the North Pacific, andwith Japan and Korea in waters closer to China.

Illegal, unreported and unregulated fishing (IUU)has become a serious global problem and is a majorobstacle to the achievement of sustainable worldfisheries. IUU accounts for US$4 to 9 billion invalue per year, or up to 30 per cent of the globalmarine catch. This loss is primarily borne by devel-oping countries that provide over 50 per cent of allinternationally traded fish products.61 An impor-tant element in IUU is the open registries or “Flagsof Convenience (FOCs)” for large-scale fishing ves-sels. Countries that operate an FOC registry cannotguarantee “a genuine link” required under the UN

Convention on the Law of the Sea (UNCLOS)between states and those authorized to fly theirflags. Consequently they cannot or will not takeaction against fishing boats damaging the marineenvironment or living marine resources. Effectiveflag state control is equally necessary to ensure safe-ty of life at sea, shipping standards and securing thewelfare of seafarers.

Over 1,200 large-scale fishing vessels were regis-tered to FOC countries in 2005 and the large-scalefishing vessels on the Lloyd’s Register with flagslisted as “unknown” has increased to 1,600 in 2004.This means that about 15 per cent of the world’sfleet of large-scale fishing vessels is flying FOCs orlisted as “flag unknown.” A recent study62 analyzedinformation available from the Lloyd’s Registry ofShips between 1999 and 2005 on fishing vesselsregistered to the top countries that operate FOCs.Belize, Honduras, Panama, St. Vincent and theGrenadines have topped the list of FOC countries,with the largest numbers of vessels registered to flytheir flag.

Despite the fact that China is the most importantfishing nation in the world, the use of FOCs bymainland Chinese companies does not seem to becommon. In fact, China undertakes some fisheriespatrols in international waters to police its ownfleets. Among the countries where companies thatown fishing vessels flagged to one of the FOCcountries are based, one finds Taiwan with thelargest number of vessels (142), as well as HongKong with 27 vessels. Members of the EuropeanUnion are also frequent users of this dubiousinstrument which is commonly used to concealillegal fishing.

Fisheries Synthesis

China is the country to reckon with now inworld fisheries and aquaculture. It hasachieved remarkable progress in terms of the


21

59 FAO, Code of Conduct: Rapid Appraisal of Compliance with Article 7 – Fisheries Management (Rome: FAO, 2005).

60 R. Watson and D. Pauly, Systematic Distortions in World Fisheries Catch Trends, Nature, 2001, 414: 534–536.

61 High Seas Task Force, Closing the Net: Stopping Illegal Fishing on the High Seas, Ministers of Australia, Canada, Chile, Namibia,New Zealand and the U.K., and leaders from WWF, IUCN and the Earth Institute of Columbia University, 2006.

62 M. Gianni, and W. Simpson, The Changing Nature of High Seas Fishing: How Flags of Convenience Provide Cover for IUU,Australian Department of Agriculture, Fisheries and Forestry; International Transport Workers’ Federation; and WWFInternational, 2005.

range of products produced from the sea,much of which is consumed domestically. Ithas indicated serious intent to regulate itsown fleets where they are operating withinnational and international waters. And ittakes seriously the need for good knowledgeto manage fisheries. However, the statisticalinformation provided has sometimes been oflimited value, or even counter to the real sit-uation. Furthermore, China, by actively tak-ing over a huge processing role for re-exportedfish products, has probably further loweredthe accountability of fisheries processors inother countries concerning the sustainabilityof their raw and semi-processed materials.Traceability appears to be difficult, at least forsome common forms of seafoods such aswhite-fleshed fillets.

The High Seas Task Force (HSTF) on Illegal,Unreported and Unregulated (IUU)Fishing63 presents a comprehensive menu ofproposals to improve prospects for monitor-ing and action to improve the situation inworld fisheries. China has not been a mem-ber of this Task Force, and is not at the pres-ent time committed to implementing theproposals. Indeed, China, along with Japanand Korea, are not among the 52 members ofthe UN Fish Stocks Agreement (UNFSA)that is the main guiding global governancebeacon for sustainable fisheries. In light ofChina’s vital interest in a sustainable use ofthe marine resources of the world, for its ownlong-term supply security either based onmarine catch or in support of the increasinglyimportant aquaculture, the proposals of theHSTF as well as other forms of internationalcooperation on these issues should be givenserious consideration by China.

Energy Resources

China is now the second largest energy consumerafter the U.S. Already the largest producer and

consumer of coal in the world, but now with risingdemand for oil and gas, China is a key player in theworld’s energy markets. In 2003, China overtookJapan as the second largest oil consumer in theworld.

Oil Demand

China’s oil demand in 2004 stood at 6.5 millionbarrels per day and is projected to reach 14.2 mil-lion barrels per day by 2025. This would mean thatimports would have to cover a net quantity ofabout 10.9 million barrels per day according to theEIA (2005).64 A lot of attention has been given torecent investments in foreign oil assets by Chinesecompanies. The China National PetroleumCorporation (CNPC) acquired oil concessions inAzerbaijan, Canada, Indonesia, Iraq, Iran,Kazakhstan, Sudan and Venezuela. The ChinaPetrochemical Corporation (Sinopec) also boughtoil assets in Iran (Yadavaran) and in Canada’s oilsands. The China National Offshore Corporation(CNOOC) purchased a stake in the Malacca Straitoilfield in Indonesia. However, these participationswill only be able to cover a small fraction ofChina’s projected oil demand. The country willthus remain largely dependant on imports.

Natural Gas

With the increasing concerns of the Chinese lead-ership about its energy supplies and the environ-mental advantage of using natural gas, China hasin the past years invested heavily in gas infrastruc-ture. In 2004, only about three per cent of China’senergy demand could be covered by natural gas,which is projected to double by 2010. China hasconsiderable reserves of natural gas, mainly in thewestern and northern provinces, estimated at 1.5trillion cubic metres in 2005.65 The developmentof these fields however requires the constructionof pipelines over large distances to aliment theurban centres of the east. Imported liquefied natu-ral gas (LNG) will primarily be used to convertexisting oil-fired power plants in the southern partof the country. In Guangdong Province, six gas-


22

63 High Seas Task Force, 2006.

64 Energy Information Administration (EIA), Country Analysis Brief on China, August 2005, <http://www.eia.doe.gov>.

65 Ibid.

fired power plants of 320 MW are currently beingbuilt and an import terminal near the city ofGuangdong is being built by BP.

Coal

China as the largest consumer of coal in the worldhas recently stepped up its coal production. In2003 it consumed 1.53 billion tons, correspondingto 28 per cent of the world consumption. Over thelong run, the proportion of coal in the energy mixof China is expected to fall; however, in absoluteterms, coal consumption is still projected to con-tinue rising. Very large numbers of coal-firedpower plants are under development. With theopening of China’s coal sector to foreign invest-ment, the prospects for investment in new, andenvironmentally more friendly technologies hasbeen rising. Of particular interest to Chineseauthorities is the potential of coal liquefactiontechnology, with recent U.S. cooperation estab-lished.66

Electricity

The early part of the new millennium saw a short-age of electricity supplies (estimated at 30 GW in2004). As a consequence of the shortage, theChinese government has approved a large numberof new power projects (including coal-fired powerplants, see above). Nuclear power generationincreased from two GW to 15 GW between 2002and 2005. An April 2006 deal with Australia tosupply 20,000 tons of uranium per year shouldallow China to develop its nuclear capacity byadding 27 GW by 2020, and thereby quadruple thenuclear part in the energy mix (currently 2.2 percent). China is committing US$1 billion and theefforts of 1,000 Chinese scientists to theInternational Thermonuclear ExperimentalReactor (ITER) located in France in the interest ofbuilding advanced science and technology capabil-ities for environmental protection and securingnew energy sources.67 Wind power and solar

power also are being added. China’s electricityconsumption is expected to grow by an average 4.3per cent annually for the next 20 years.68

Biofuels

China is number three in the world after Braziland the U.S. in terms of ethanol for fuel produc-tion. Plans are for vast increases in ethanol-gaso-line mixes. The four state-owned grain-basedethanol makers—China Resources Alcohol, HenanTianguan Group, Jilin Fuel Ethanol and AnhuiFengyuan Group—together produced 720,000tons of fuel a year in 2004 and planned to increaseproduction to more than one million tons by theend of 2005.69 China Resources Alcohol may builda 600 million yuan plant in Guangxi Province todistill alcohol from cassava and molasses. The bio-fuel capacity increase comes in response to a gov-ernment direction in 2004 addressed to fiveprovinces to include 10 per cent ethanol in theircar fuel. Now such fuel mixes are available in nineprovinces. The longer-term goal is for biofuel tobecome 10 per cent of all fuels by 2010 and 16 percent by 2020.70 This would mean increasingChina’s ethanol production by about 15 times by2020, to a level equal to the U.S. or Brazil’s currentproduction.

China already has experienced shortages in ethanol,which raises a longer-term issue of whether ethanolmight be imported, for example from Brazil.Ethanol will become a commodity on world mar-kets, with important implications for sustainableland use in countries like Brazil. Similarly, palm oilplantations in Southeast Asia may become sourcesof biodiesel, possibly at the expense of the remain-ing rainforests in countries like Indonesia andMalaysia. It is also possible that China and EUcountries will compete for any available tropicalcountry-produced biodiesel, perhaps includingsources from Africa. The EU is now discussing sus-tainability certification of biofuel imports, anapproach that China could also consider.


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66 U.S. Department of Energy, <http://www.fossil.energy.gov/international/International_Partners/China.html>.

67 China a Major Contributor to Global Nuclear-Fusion Reactor, China Daily, 30 November 2006.

68 Energy Information Administration (EIA), 2005.

69 Koh Chin Ling, China Seeks Boost from Biofuels, International Herald Tribune, 29 September 2005, <http://www.iht.com/articles/2005/09/29/bloomberg/sxfuel.php>.

70 A goal indicated by the National Development and Reform Commission (source: China Daily, 6 December 2006).

There are various points of view about the use offood crops—such as corn—for fuel, including envi-ronmental and net energy gain considerations.What is clear for countries such as China, the U.S.and Brazil, is that there are two prime values—fuelsecurity, and local rural benefits. Already, the strongstimulus of this new sector is on the price of sever-al commodities, including wheat, corn and soy,which China purchases on international markets.71

Energy Resources Synthesis

Among various concerns about the impact ofChina’s growth on the world’s market andthe global environment, its rapidly increasingenergy needs probably rank highest. Thereexist many legitimate reasons to take theseconcerns seriously: China’s energy needs arenot only of geopolitical relevance in terms ofthe increasing competition over access tothese resources, but also for the inflationaryprices, and the security aspects that are relatedto it. They are equally relevant in relation tothe rapidly increasing concerns over the cli-mate change impacts of China’s massive fos-sil fuel consumption. Moreover, it is inChina’s own best interest to reduce itsdependence on foreign energy resources inorder to guarantee a predictable develop-ment path, as envisaged by the Chinese lead-ership.

The conversion of energy generating systemsto new environmentally beneficial technolo-gies; the aggressive promotion of renewableenergy; and much higher energy efficiencystandards in all sectors of energy consump-tion, including building standards and low-energy transport systems, are probably theareas that could be of greatest benefit toChina. Unlike other markets with globalimpact, such as the import of commoditiesfrom countries with insufficient naturalresource management, the energy future ofthe country is largely in China’s own hands.Energy production and consumption can be

influenced to benefit the future of its ownsociety in parallel with a reduction of thecountries dependence from foreign resourcesas well as a reduction of negative impacts onthe global ecology. Incentives; investment;pricing; regulation and enforcement; train-ing and education for energy conservation,and for building advanced scientific capabil-ities for environment and energy conserva-tion will contribute to a sustainable energyfuture for China. Clearly, however, the prob-lems of China’s energy security also involve agreat deal of cooperation from abroad toensure that new technologies are made acces-sible in a timely way, and on reasonableterms, and to ensure that energy demands ofother nations do not make it impossible forChina to meet its legitimate and growingneeds.

Metals

Although China currently accounts only for aboutfour per cent of global GDP, its metal consump-tion is disproportionately larger, with 16 per centof the world’s consumption. China is the largestconsumer of copper, iron ore, steel, tin and zinc;the second largest consumer of aluminum andlead; the third largest consumer of nickel; and thefourth largest consumer of gold. China’s iron oreimports between 1990 and 2003 increased by a fac-tor of 10. The country now consumes 35 per centof the world’s iron ore. It produces more steel thanthe U.S. and Japan combined.

China depends on minerals imports whichreached US$140 billion in 2004. However, Chinahas large reserves of some minerals: 54 per cent ofthe world’s manganese reserves; 23 per cent of thelead reserves; 22 per cent of silver reserves; 12 percent of coal reserves; 11 per cent of vanadiumreserves; and six per cent of copper reserves.72

Nevertheless, commodity prices have risen to his-torical peaks, as global mining efforts cannot keepup with the demand of Chinese mills, building


24

71 Ethanol Output has Corn Prices Popping, China Daily, 6 December 2006.

72 Minerals Council of Australia, Fact Sheet – The Australia China Minerals Trade, April 2005, <http://www.minerals.org.au/__data/assets/pdf_file/8829/MCA_aus-china_fact_sheet_april1.pdf#search=%22Minerals%20Council%20of%20Australia%2C%202005%20china%20mineral%20reserves%22>.

sites and car factories. According to Lin Hai, amanager at Guotai Asset Management, Chineseinvestment abroad has become a necessary step toensure preemptive rights on raw materials and tokeep costs low. The competition for Australianmineral resources is particularly fierce betweenChinese companies, the South Korean steel makerPosco, and the Japanese companies Nippon Steeland Mitsubishi. Henry Wang from the Australiangovernment agency Invest Australia has been citedto state that from all Chinese iron ore imports,China currently has some kind of involvement in25 per cent of the suppliers, and it intends toincrease this to 50 per cent.73

The massive demand for steel caused a temporarydoubling of prices which peaked in 2004 atUS$700 a ton, but prices have come down againsince then. This has been seen as a consequence ofstepped up steel production from Chinese produc-ers and government efforts to slow down the realestate and construction industries. Constructionaccounts for 67 per cent of steel consumptionaccording to Baosteel, the biggest Chinese steelproducer.74 With the increasing steel productionin China (forecasted to reach 348 million tons in2006), the country may soon become a netexporter of steel which would mark a drastic turn-around from the situation in 2004 when China wasthe biggest steel importer!

This transformation is deeply troubling to the U.S.steel industry. In July 2006, the American Iron andSteel Institute released a report called The ChinaSyndrome: How Subsidies and GovernmentIntervention Created The World’s Largest SteelIndustry.75 It marked the start of a campaign toplace tariffs on Chinese steel entering the U.S. onthe grounds of subsidized production, workerconditions and poor environmental controls. Ineffect, the charge is that the U.S. industry is imper-iled and 30 years of investment in environmentalquality improvement will be lost in favour of lowcost, unsustainably-produced steel imports.

Metals Synthesis

China’s consumption of metals is moredirectly related to construction of infrastruc-ture than is the case with natural resourcesand even fossil resources. The surge ofimports and the massive increase of China’sown production are largely driven by thecountry’s rapid urbanization. As urbaniza-tion is projected to continue over the next 15years or more, and may reach a level where55 or even 60 per cent of the Chinese popu-lation will live in cities, a sustained high levelof metals consumption will exist. China willundoubtedly try to cover this demandincreasingly from its own production andparticipation in overseas operations.

Unlike natural resources (particularly timberor fisheries products) the origin and condi-tions of exploitation of mineral resources aremore easily verifiable, and are thus less proneto illegal exploitation practices. AlthoughChina’s huge consumption of metals maycause price reverberations on the world mar-ket, its impact on the global environment,biodiversity conservation and regional devel-opment prospects in other parts of the worldis less severe than is the case with natural andfossil resources. It is also less evident, howefficiency gains could contribute to lowerconsumption levels by comparison to thecase with fossil resources.

Recycled Materials

China is driving the waste trade in the world.76

China’s imports of paper, scrap metals, plastics,electronics and other materials are leading to sig-nificant increases in the proportion of materialsre-used in the world, and are relieving the burdenof local jurisdictions and industries facingdemands for increased recycling. Even some of the


25

73 China Hastens Quest for Metals, International Herald Tribune, 22 September 2005.

74 China’s Demand for Steel Slows, but Mills Keep Churning, International Herald Tribune, 20 July 2005.

75 Alan H. Price, Christopher B. Weld, D. Scott Nance and Paul Zucker, The China Syndrome: How Subsidies and GovernmentIntervention Created the World’s Largest Steel Industry (Wiley Rein & Fielding LLP, 2006), <http://www.steel.org/AM/Template.cfm?Section=2006&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=15993>.

76 The UK’s New Rubbish Dump: China, The Guardian, 20 September 2004, <http://www.guardian.co.uk/print/0,,5019767-110826,00.html>.

steel from the ill-fated New York World TradeCenter was sent to China for recycling. This will-ingness by Chinese industry to purchase recycledmaterial is a benefit for the world, and a means forChina both to generate employment and to meetshortfalls in raw material for manufacturing. But itcomes with a cost.

Some of the trade is illegal under China’s ownlaws, and some of the exported material to China,for example, electronic waste from the U.S., wouldnot be allowed from countries that have ratifiedthe Basel Convention on the Control ofTransboundary Movements of Hazardous Wastesand Their Disposal. The problems of computerdisassembly are considerable, with a limited num-ber of small towns in China being converted intohazardous waste sites.77 It has been suggested thatmost of the world’s “high-tech trash” ends up inChina, despite official bans. A recent case involvedsome 27 companies in eastern Canada that sentcomputer components in some 50 shipping con-tainers destined to China. The amount of plasticand metal waste totalled more than 500,000 kg.These were seized at the Port of Vancouver. Thecompanies were fined only a nominal amount byCanadian authorities and their names were notmade public.78

There are questions raised about the sanitation ofsome materials such as plastic bottles sent toChina. And there are problems in China and else-where with ship-breaking, which involves manyhazardous materials such as asbestos and heavymetals in electronics.79 China has been cautiousabout some forms of recycled materials, for exam-ple textiles. This is a topic of active discussion onthe part of the Bureau of International Recycling(BIR) which in May 2006 held its World RecyclingConvention in China for the first time.80

Recycled Materials Synthesis

China is experiencing the same double digitgrowth in a great variety of recycled materi-

als that it has seen for other resources. Thereare benefits to poor people by providingemployment in China, and also to the veryrich. It is said that the richest woman inChina made her fortune by importing andreprocessing waste paper, developing newsupply lines, and taking advantage of low-cost shipping provided by empty containerships on their return voyages. Recycling hasbeen a means to expand sources of supply forvital commodities, meaning less pressure onforests and landscapes, and perhaps lowerenergy costs. It is a means for China toextend its concept of circular economy to aglobal level.

It is quite likely that China can lay claim tobeing the world leader in the import of recy-cled material. In addition, given its growingresource demands and focus on a circulareconomy, China should have a clear anddirect interest in ensuring the “recyclability”of the products it produces. Environmentallysmart product design and production alsocould help ensure Chinese access to increas-ingly sensitive international markets definedincreasingly by “responsible producer” lawsas well as by the European Union WEEE andROHS regulations now coming into effect fore-waste products. Five or 10 years from nowwill China have the advanced environmentaltechnologies to ensure that it carries outrecycling in the safest, most efficient andeffective ways? If so, the world, as well asChina, will have benefited immensely.

Some General Conclusions about China’sMarket Supply Chains

Market supply chains have various junctionswhere important interventions could take place inorder to promote sustainable consumption, pro-duction and trade. Certainly China, in its remark-ably varied and very dynamic international


26

77 See references in Yingling Liu, China’s E-Waste Problem: Facing Up to the Challenge, 2006, <http://www.worldwatch.org/node/3921/print>.

78 27 Firms Caught Exporting Toxic Waste to China, Victoria Times Colonist, 22 December 2006.

79 Greenpeace, <http://www.greenpeaceweb.org/shipbreak/documents.asp>.

80 Bureau of International Recycling, <http://www.bir.org>.

relationships, is already starting to re-shape con-ventional thinking about market economics. Itcould do so in relation to sustainability concernsas well, and indeed, is doing so in relation to atleast some forms of recycled material imports.Much more work needs to be done in order tounderstand the opportunities and sustainabledevelopment needs concerning China’s marketsupply chains. This is a relatively unexplored topicat the leading edge of environment, trade andinvestment. Below, a number of conclusions,organized around five main points, are offered onthis subject:

(1) China is a major commodity transformer.

• China has rapidly become the world’slargest consumer and producer of manydifferent commodities.

• For a number of commodities, China hasmade a rapid transition from being a leadingnet importer to becoming a net exporter,often via value-added finished products.

• China’s own consumption often does notentirely explain the increased resourcedemand. In the case of certain commodi-ties (timber, some fish) China could moreappropriately be seen as the “world’sworkshop” as opposed to the nation thatuses up the world’s resources.

• Although China has an unmatchedgrowth in terms of speed and duration,resource use is surging in many otherparts of the world. Therefore its compara-tive advantage is a dynamic matter, and soare issues such as source and substitutionpotentials of raw materials.

• A very large part of the biocapacity ofChina, domestic or imported, is consumedby end-users in Europe and the U.S.

(2) China’s domestic consumption is growing rel-atively slowly, although that may well change.

• The per capita footprint of the Chinesepopulation is still relatively modest, evencompared to some other Asian nations. Itis the speed of development and the size ofits population that create the concerns.

• China’s rapid urbanization and changinglifestyles of the urban population drivemost of the domestic consumption issues.

(3) Rapid growth in natural resource demandmakes regulation of supply chains difficult.

• Concerns over China’s natural and fossilfuel resources use are much more promi-nent than concerns over the consumptionof metals or other geological resources.

• High demand for natural resources isincreasing illegal activities in countries oforigin with weak governance systems, orin the global commons.

• Supply chain analysis, declaration of ori-gin, certification and labelling can miti-gate this difficulty and will becomeimportant aspects for consumers inChina’s client countries.

• The responsibility of countries exporting toChina and to consumer nations importingfrom China to take environmentally-appropriate action cannot be overstated.

(4) China has undertaken some very responsiblesustainable development actions in dealingwith international supply chains.

• Efforts of the Chinese leadership to showresponsibility for global resource use andthe environment (e.g., fuel efficiency stan-dards) are always noted and well perceivedin other countries.

• Self-sufficiency in terms of resource use,when justified on an economic and envi-ronmental basis, should remain a princi-ple, but needs thorough, ongoing analysis.

• Resource and energy efficiency gains and arecycling economy are not only in the bestinterests of China itself, but also are themost effective measures to reduce globalimpacts.

• Perhaps the single most promising focusfor alleviating China’s global environmen-tal impact is through the adoption andpromotion of new, resource-efficientenergy technologies that also reduceChina’s CO2 emissions.


27

• Close involvement in and cooperationwith international conventions (e.g.,UNFCCC, CBD, CITES, UNCLOS, FishStocks and other marine agreements) aswell as with international NGOs canincrease transparency and confidence, andlead to policy change.

• International cooperation (whether in theform of international commodity agree-ments, multilateral environmental ortrade agreements, or “public-private sup-ply chain initiatives”) offer key opportuni-ties for improving the transparency andpredictability of trade impacts.

(5) International cooperation and improvedChinese research on environment and sustain-able development implications of market sup-ply chains are needed.

• Many authors regret the decreasing qualityof statistical information from China, fol-lowing privatization in many sectors. Thegeneral lack of high quality data does nothelp to support China’s case of improvedefforts towards a satisfactory sustainableconsumption, production and trade rela-tionships.

• Similarly, there is a great need forimproved scientific and impact informa-tion regarding the extent and severity ofChina’s external impacts arising frommarket supply chains and related prob-lems such as long distance transport ofpollutants generated in China to othercountries and continents, and from otherimpacts such as inadvertent export ofinvasive species through trade.

In summary, China does have a responsibility, byvirtue of its importance and growing power overinternational supply chains, for ensuring that pro-duction is done sustainably. A sustainable view ofChina in the world needs to be built on more thanmeasures adopted within its own jurisdiction. Thereis a special opportunity and obligation for China, incooperation with others, to play a special role inguiding international supply chains towards sustain-able practices. Indeed, it would be surprising if, in thefuture, the world was not looking to China for guid-ance on governance for international supply chains.

Case Study 2 – Trade in IllegallyProduced, Harvested or TransportedMaterialsThis subject has been introduced in sections deal-ing with forest products, fisheries and recycling ofe-wastes, but it merits additional attention, sincesome of China’s impacts are very substantial, andhave been of concern for many years, and especiallywith increasing purchasing power within China. Italso is important to recognize that progress hasbeen made through concerted efforts on the partof both China and the international communityon certain concerns, for example in ivory tradeand on CFCs. Also, it is important to recognize thesubstantial number of international agreementsthat cover various illegally traded materials.

These international agreements include: theConvention on International Trade in EndangeredSpecies (CITES); The Framework Convention onBiological Diversity (CBD) and the CartagenaProtocol on Biosafety; the Montreal Protocol cov-ering CFCs; the Basel Convention, which coversmovement of toxic materials; various WTO agree-ments; FAO Responsible Fisheries and otherregional or global fisheries agreements; and phy-tosanitary and sanitary measures, including thosedesigned to reduce risks associated with spreadingof infectious diseases. Bioterrorism issues are alsopart of the picture, although this subject is notcovered.

China as a Consumer of Illegally CaughtWildlife and Products

China is the largest market for illegal trade inwildlife from Southeast Asia, and also a majormarket from other countries such as Russia,Mongolia and India. Animals traded includesnakes, pangolins, lizards, birds and turtles as wellas endangered animals such as tigers, leopards,bears and wild ox. According to a study by Chinesescholars, the increased trading activity betweenChina and Vietnam has led to the development ofa trading network involving some Chineseprovinces, Vietnam, some other Southeast Asiannations, Hong Kong and Macau. Wildlife fromLaos, Thailand, Cambodia, Myanmar and Vietnamis first transported to border cities in Vietnam. Thewildlife is then taken to the purchase stations in


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the Chinese border areas and then redirectedthroughout the country. The insatiable demandfor wildlife and products in China has causeddetrimental effects in those supplying countries.

China’s consumption of global wildlife has literallypushed the conservation efforts of many suppliercountries into total crisis. The trade in tiger andleopard skins, bones and parts from the Indiansub-continent into Tibet and thence down toSichuan and other markets in China, is decimatingtiger populations in those countries. The increaseddemand for antelope meat and horns (e.g., sableantelope) from Mongolia and Russia has caused ahuge upsurge of poaching in those countries. Thedemand for reptiles and other wildlife productsfrom the Indochina region has wiped out much ofthe wildlife.

The absence of an agreement regarding the sover-eignty of the Spratly Islands, which are claimed byseveral ASEAN countries, leads to overexploitationof resources, and a complete lack of protection ofthose important marine environments. Entirecoral reefs are dredged up and taken to Hainan forlime, while collectors of shells, pearls and raregrouper fish have decimated other reefs. Theimport of live tropical fish for ornamental fishtrade or exotic foods is growing fast in Hong Kongand southern China, putting pressure on reefsthroughout Indonesia and Philippines and leadingto some terribly destructive collecting methodssuch as coral blasting and cyanide fishing.

There are mechanisms being designed internation-ally and domestically to handle these types ofmarine use problems. For example, there is amarine aquarium fish certification process. Hainanhas struggled to develop as an eco-province dedi-cated to principles of sustainable development. AndChina indicates that where marine boundaries arestill in dispute, resources will be used but in a sus-tainable way. China has been a prominent andactive partner in the Global Environment Facility(GEF) sponsored program called PEMSEA(Partnerships in Environmental Management forthe Seas of East Asia).81 For some activities, such asmarine use zoning, and shipping port clean-up,

there have been major successes within Chinathrough PEMSEA. But dealing with regionalmarine biodiversity protection is very difficult.

More could be done to improve transborder man-agement of Protected Areas (PAs) and control ofillegal wildlife trade routes especially on the bor-ders China shares with Mongolia, Russia, Vietnam,Myanmar, Pakistan and North Korea.

Ozone-depleting Substances (ODS)

In 1999, the State Environmental ProtectionAdministration (SEPA), the Ministry of ForeignTrade and Economic Cooperation (MOFTEC) andthe General Administration of Customs (GAC),jointly issued a circular on the Licensing of Ozone-depleting Substances (ODS). The circular stipulatesthat SEPA and MOFTEC are responsible for register-ing companies engaging in ODS trade, and responsi-ble for annual export and import quotas for all ofChina as well as individual companies. MOFTEC isalso responsible for issuing ODS trade licences, whileGAC is responsible for giving clearance to ODS bylicences issued by MOFTEC. Also, China’s CountryProgram on ODS Phaseout has now considered thecontrol of production and consumption of ODSthrough foreign direct investment.

In some ways, China’s efforts under the MontrealProtocol have been a model effort of internationalenvironmental cooperation. China has been per-mitted to produce and to import CFCs to 2010 asa developing country. It has been proactive indomestic efforts to produce CFC-free refrigera-tors, and to take other steps to eliminate use ofODS. Licensing rules were established in 1999 bythree Chinese government agencies concerningODS trade, and controls exist for production andconsumption of these substances in foreign directinvestment activities within China. China hastaken an earlier than required commitment date of2007 for a halt in domestic production.

But the problem of illegal trade in ozone-depletingsubstances involving Chinese firms has been verydifficult to solve. China set out a plan to controlthe “Three Illegals” (production, consumption andtrade) in 2004. Still, operating apparently from


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81 Chua Thia-Eng, The Dynamics of Integrated Coastal Management. Practical Applications in the Sustainable Coastal Developmentin East Asia (Manila: PEMSEA, 2006), 431 pp.

only two ports, Shanghai and Ningbo, traders fal-sify documentation and send ODS shipments tomore than a dozen countries. China is consideredthe main source of illegal CFCs in the worldaccording to the Environmental InvestigationAgency,82 a position it has held since 1998. Chinahas been the world’s largest producer and con-sumer of these substances. With the ending ofODS production, stockpiles in China shoulddiminish rapidly. Yet there may well be contrabandsources that could fuel continuation of this trade.Following the release of the recent EIA report,China at the 17th Montreal Protocol Meeting ofthe Parties “made a commitment to change theirdomestic export policy, take action against thesmugglers and implement measures to put a stopto the black market operations.”

This example illustrates the difficulties faced ineliminating a global environmental scourge, evenwhere there is strong national and internationalwill backed up by considerable financial expendi-tures from both China and international sources.Part of the problem lies with the nature of theinternational agreement itself, related to bothlicensing and tracking arrangements. For example,large discrepancies exist between export numbersfrom China and ODS import numbers fromIndonesia.

Conclusions on Eliminating IllegalActivities

Even where mature international agreements, suchas CITES, are in place, it has proved to be very dif-ficult to eliminate all the important abuses. Onsome problems, such as the import of elephantivory, there has been great progress. But many ofthe world’s wildlife species and plants remain athigh risk and with the expanding wealth in Chinaand some other countries, the situation could getworse. Clearly there needs to be even more inter-national cooperation, including stepped-up sur-veillance and enforcement for this form of trade tobe stopped. But it is also a matter of public educa-tion and behavioural change that is needed withinChina. As long as there is a high level of demand,smuggling and other illegal acts will take place.

In the case of economic resource activities such asfisheries and timber trade, there are many oppor-tunities for China to take more effective actionunder existing cooperative agreements signed withvarious nations such as the U.S. and Indonesia,and in the case of marine protection, throughregional partnerships such as PEMSEA. It is alsoimportant that in establishing new arrangements,for example, with Latin American and Africannations, and in the conduct of Chinese businessesabroad, that best practices and corporate socialresponsibility be exercised.

Porous borders, especially in western China, andthe massive volume of trade make regulation diffi-cult. China has tried to crack down on trade inendangered species, and on various other tradeflows. The struggle to reduce and eventually elim-inate ozone-depleting substances illustrates justhow difficult it can be to stop a lucrative illegalactivity—one that has ranked at the level of someillegal narcotics trade during the past decade. ButChina’s role has been quite exemplary, and this isone topic where there is some cause for applause.While victory is not complete, China deserves allthe recognition that it has received for a massiveeffort of value to all countries. It would appearfrom this particular effort and from some others,that action to address a serious illegal problem willtake at least 10 to 15 years for substantial progressto be made. In the case of CITES, it is an ongoingproblem even after three decades of implementa-tion. There is a need to reduce this time and to seekbreakthroughs.

It is hard to avoid the reality that many of theactivities branded illegal are in fact not well cov-ered under existing international legally bindingagreements, or occur in countries with weak gov-ernance and enforcement regimes. Thus self-regu-lation by Chinese authorities, accompanied bycapacity development abroad may be the mostsensible route. This can involve a range of meas-ures from well-enforced bans on some materialsand sources, to environmental and sustainabilitycertification such as the Forest StewardshipCouncil (FSC) certification.


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82 Environmental Investigation Agency, China Exposed as Lead Player in Global CFC Smuggling Racket as Ozone Damage Worsens,Press Release, 13 December 2005.

Case Study 3 – Biosecurity andBiodiversity ProtectionOver the past decade the world has grown smaller inmany ways. One aspect is the ease with which bio-logical problems seem to move from being local tobecoming regional or even global concerns. Thesehave many economic, health and food safety reper-cussions, and also affect natural ecosystems and bio-logical diversity. The most recent example is avianinfluenza, which moves with ease from tropics tosub-Arctic regions and across great latitudinal dis-tances, at least partly due to migratory waterfowl.The elaborate precautions necessary for food safetyare becoming codified in drastic revisions to traderules. Problems of alien invasive species are impor-tant for all importing and exporting nations, includ-ing China. Biodiversity protection is a matter closelyaligned with climate change, and with tourismpotential of nations. This case study surveys each ofthese topics, although not in great detail.

Animal to Human Disease Transmissionand Epidemics

Zoonoses worldwide (“mad cow disease,” foot andmouth disease, swine fever, several tropical Africanfevers, schistosomiasis, etc.) demonstrate that dis-ease routes between wildlife and man are ofincreasing significance. There is a need in China tobetter understand the potential pathways for infec-tion. In addition to accurate mapping of routesand dates used by migrating birds and marineorganisms, there should be a careful study ofmajor trade routes of other wildlife products andfoods and also maps of the major domestic animaltrade patterns. Such basic data will prove valuablein accessing risk and also in planning controls inthe event of further outbreaks of animal/humandiseases.

Serious epidemics of two wildlife-related diseases,SARS and avian flu, in recent years—both accompa-nied by loss of human life as well as enormous finan-cial losses due to restrictions on travel (SARS) anddestruction of poultry—bring to prominence theever-present dangers associated with movement ofanimals. Whether by natural migration or domestictrade, or through the dangers posed by close associ-ation between human beings and animals in condi-tions of less than satisfactory sanitation, the dangersare likely to be of increased concern within China

and internationally. The continued, increasingdemand for wildlife foods, the breeding of wildlifefor foods or medicinal use, and the close associationof domestic and wild animals all pose dangers tohuman health. The continuing losses of adequatenatural forests, wetlands and grasslands increase thedegree of interaction between domestic and wildanimals and add to these risks.

The idea of culling wild waterfowl has been voiced inseveral countries including China. The idea hasmany drawbacks, including: wasteful and unneces-sary destruction of valuable wildlife; culling leads toatypical and accelerating dispersal patterns by sur-viving birds which may hasten the spread of the dis-ease; culling may also cause a local vacuum whichaccelerates the immigration of new wild populationsinto the culling area and may also increase ratherthan decrease the rate of spread of the disease. Mostevidence of timing of spread and direction of spreadindicates that, to date, wild bird migration hasplayed only a small part in the distribution of thedisease so it is better to concentrate on the majorcause, which is human trade in poultry and rearingconditions that promote fast disease spread throughdomestic poultry populations.

The number of humans affected by avian fluremains low, transmission rates between humansseem zero to low, maybe because the disease tucksin deep in the lungs rather than in the nose andthroat from where sneezes and coughs transmitmost other flu viruses. The danger is seen that fur-ther mutation of the avian flu could render it apotential pandemic disease. Thus governments,including China, are spending considerable sumsof money to prepare for the possibility of this par-ticular problem going global. China and otherAsian nations will face considerable pressure in theyears ahead to address weak points in the relation-ship of people and livestock, and possible action toaddress expensive, regionally and globally signifi-cant infectious disease issues. China has taken thematter seriously, closing public access to somemajor nature reserves on bird migratory routes(e.g., at Qinghai Lake).

Safety, Quality and Competitiveness ofFood Supply Chains

If China is to maximize the potential benefits fromits food chain (domestic and export markets), it


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will have to generate crops, animals and foods thatare of equal safety/quality to comparable goodsoffered in trade by its competitors. Specifically, itwill have to:

• Reduce residues in animal products. Fiftyper cent of China’s food chain exports areaquaculture products. The limiting factorcausing problems in first tier markets(U.S., Japan, EU) is chemical residues.

• Create a “Disease Free Zone (DFZ)” forfoot and mouth Disease and hog choleraand use it to ship pork to first-tier markets(U.S., Japan, EU). The current idea is touse Hainan Island as a DFZ to get exportsup and running from this island to createcredibility in the international market,before trying to export to the first-tiermarkets from DFZs that China is trying tocreate in Sichuan, Shandong and Jilin.These latter DFZs have little credibility forinternational trade as they have porousborders that allow disease to spread. Nomeat can be exported to first-tier marketswhile China has diseases like those listedabove. Pork is probably the next animalproduct that China should try to export asit has half the world’s hogs and can pro-duce at lower costs than developed coun-try competitors.

• Improve quality in its crops (e.g., meetJapanese specifications for vegetable qual-ity); animals (e.g., produce lean pork forMalaysia—a predominantly Muslimcountry with a 30 per cent Chinese minor-ity who want pork); and food (e.g., intro-duce a grading system like the U.S. andCanada for all animal species, thus provid-ing graded pork, beef, etc.).

• Safety and quality are important deter-rents to China maximizing its opportuni-ties in these post-WTO accession times.China is now the world’s third largestimporter of food and agriculture productsand the fifth largest exporter. It is on trackto becoming the third largest importerand exporter in a few years. While it only

imports and exports a small proportion ofnational production, national productionis so large that this small proportion is stilla large quantity. China now sends someaquaculture products and vegetables tofirst-tier markets (with ongoing residueand other quality problems!). However,less well known are its exports to second-tier markets along its borders (e.g.,Mongolia and Russia), which are lessdemanding regarding safety and quality,but who pay second-tier prices.

• Adherence to international standards willbe important for exports of food products,but also for protecting the domestic marketagainst import competition. As the afflu-ence of urban Chinese consumers grows, sowill their demand for safety and qualityassurance of food products. If this assur-ance comes with imported food rather thanfrom domestic supplies, food imports willgrow at the expense of domestic producers.

• The 11th Five-Year Plan commitment inthis regard is stated as: “We will pool ourresources to launch special campaigns topromote food safety, strictly control mar-ket access for food products, and strength-en oversight and management of theentire production and distributionprocess to assure the people of the safetyof the food supply.”

Alien Invasive Species

China may be the recipient of invasive speciesproblems or be a contributor to their occurrenceelsewhere. While the number of documented inva-sions coming out of China and adversely affectingother countries remains rather small, the reverselist is growing every day.

The problems faced by invasive species in Chinaare potentially enormous and increasing. A specialWeb site remains dedicated to this subject as alegacy of the work of the CCICED BiodiversityTask Force,83 which lists details and maps for 123of the most serious invasive alien species in China.A book on invasive species has been published


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83 China Species Information Service, <http://www.chinabiodiversity.com/search/aspecies/english/ealist.shtm>.

based on this work and several international work-shops have subsequently taken a deep interest inthis topic.

Invasive alien species are most aggressive in colo-nizing degraded and dynamic ecosystems of whichChina is one great example. China is particularlysusceptible to invasion because its range of habi-tats and conditions are so great that any speciesgaining entry into the country will probably find asuitable living habitat. The fast pace with whichChina is being exposed to new potential invasivespecies is a result of China’s phenomenal growth inworld trade. China is now importing raw materialsfrom all corners of the world and many containersremain sealed until they reach destinations deepwithin China’s territories.

A continuing lack of awareness or interest in thethreat leads to complacency by local governmentagencies. Even botanical gardens that should knowbetter continue to bring into China as many newspecies as they can out of scientific curiosity andcompetitive pride, but without concern as to therisks involved in such introductions.

New agricultural or forestry pests, and new fishand other aquatic species get noticed because theyaffect economic sectors directly but species able toinvade open spaces, forest ecosystems and otherwild lands pass completely unnoticed.

China is poorly equipped to tackle such problemshaving few taxonomists to recognize or deal withinvasive species. Newly recruited and poorly trainedguards stationed in the very extensive ProtectedAreas system are unable to spot or react to the arrivalof new species. There is a need to put in place appro-priate and sound sanitary and phytosanitary meas-ures for import control at China’s borders.

Existence Value of Protected Areas andSpecies in China

The numbers of international visitors to Chinagrow at a spectacular pace. The publicity of the2008 Beijing Olympics will carry over for yearsafter the games, drawing visitors to China. Chinaalso increasingly markets its biological diversityand unique natural areas as reasons to become atourist in remote areas of the country.

But the lure of visiting China’s natural areas andgrowing system of protected areas is a large part of

China’s attraction and the rare and famous speciesfor which China is justly renowned all add theirweight to the equation—giant panda, red panda,takin, golden monkeys, elusive tigers, alligators,dolphins and rare pheasants all have their devo-tees. Specialists set off in search of equally spectac-ular butterflies, birds, rhododendrons and otherornamental plants.

These are economic magnets that can theoreticallyserve China for many decades with value growingas the world offers ever fewer safe wild places toexplore. But despite a huge increase in the area andnumber of protected areas for wildlife, and nowmore than 5,000 scenic sites that cover about 15per cent of the land surface of the country, man-agement standards and law enforcement remain soweak that wild populations continue to dwindleand the lure of the wild may not endure unless arenewed effort is placed on saving them.

Climate Change, Human Activity andBiodiversity

There can be little doubt that China and othercountries with vast land and water areas will facemany ecological impacts of climate change. Theseimpacts will be costly to address, whether throughadaptation or mitigation. China on its own can-not prevent climate change, nor has it been themajor contributor to greenhouse gases that haveaccumulated since the industrial revolution. It isthe impact of the rest of the world plus China thatcounts. However, climate change will not act inisolation. Local activities and various nationaldevelopment and other policies will be important,affecting ecological services and biological diver-sity. An example of how these factors might inter-act is shown in Box 4 concerning the QinghaiPlateau.

The worldwide concern for China’s biodiversityand ecologically sensitive areas is part of therationale for the Global Environment Facility’s(GEF) substantial investments for protection ofChina’s biodiversity. Also, for programs in Chinafunded by aid organizations of the EU, and bycountries such as Norway. International concernfor nature conservation and sustainable use of bio-diversity has drawn other organizations intoChina, including WWF, The World ConservationUnion (IUCN) and Conservation International.


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Conclusions about Biosecurity andBiodiversity Conservation

Although China is investing considerable effort indealing with these topics, it is difficult to be highlyoptimistic about outcomes over the short run.China’s situation is of interest to the world for rea-sons of both public health and conservation. Thetwo interests are intersecting to a greater extentthan ever before, but they are also coming upagainst entrenched economic interests as well asthe problems of dealing with rural poverty. Whileit is possible to take steps such as setting areas offlimit, carrying out culls and prohibiting the sale ofwildlife for food or for other uses, it is quite anothermatter to create an effective enforcementapproach.

A large part of China’s problems with biodiversityprotection can be linked to trade. It has been diffi-cult to make CITES work well, and the rapid rise inimports and exports has created problems of inva-sive species. In the future, domestic and interna-tional tourism to China may create additionalproblems (although also certain opportunities) forbiodiversity protection.

The international conservation community, andnow the international public health authorities,play an important role in international percep-tions about China concerning its efforts for con-servation and disease control. There is a need tobackstop these external communications effortswith additional research and cooperative workwith Chinese experts. Almost certainly majorefforts will be needed to understand more clearlythe impacts of climate change on biodiversity,plant, animal and human disease vectors, andother difficult topics about which there is limitedknowledge today.

Case Study 4 – RegionalEnvironmental Impacts – River andMarine Water IssuesIn November 2006, the Songhua River in northernChina was contaminated by a serious spill of ben-zene, aniline and nitrobenzene from the JilinPetrochemical Corporation, in Jilin Province. Thecontamination plume flowed past the city ofHarbin, and eventually affected the largeHeilongjiang River, a natural boundary with


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Box 4. Drying up of the Qinghai Plateau:

biodiversity concerns.

Temperature has risen two degrees Celsius whilerainfall has decreased by 10 per cent over recentyears in this ecologically unique area of China. Thishas disastrous significance. The single most limit-ing factor on an otherwise rosy future of develop-ment is water supply. The water draining off theplateau is falling very fast. Water levels in QinghaiLake are dropping several metres and water supplyto the Upper Yellow River is severely reduced.Several explanations can be made for this. Thelocal agencies mostly blame global warming. Infact, global warming should raise rainfall levels onthe plateau so why is this not occurring? Someinteresting studies and analyses are warranted.Overgrazing stems from government policies aboutsedentarizing; enclosing and draining various partsof ancestral rangelands; and conversion to plantedgrasslands using exotic seeds. The results of thesefactors of change are reduction of the ground veg-etation; raised ground temperatures; reducedcloud, frost, dew and snow retention; increasedlevels of evaporation and salinization; and erosionof surface turf, leading to direct wind erosion intothe sandy subsoil. Poisoning of voles and pikasleads to the spread of toxic plants, loss of turfhealth, loss of aeration, and water drainage thatallow a higher proportion of rain/snow to penetrateinto the ground and loss of secondary biodiversi-ty—animals that use pika holes for shelter andbreeding.

(Observations from Dr. John MacKinnon)

Russia (the Amur River within Russia), eventuallydischarging into Russian coastal waters of the Seaof Okhotsk.84 This event led to a temporary shut-down of the drinking water supply for several mil-lion people, and raised public and diplomatic con-cerns on both sides of the Sino-Russian border.

The event has now passed into environmental histo-ry, but it has become a significant turning point forChinese authorities and perhaps for the Chinese peo-ple, in terms of domestic and international disclosureand in developing emergency responses to environ-mental incidents. In the Songhua incident, full detailsdid not emerge until days after the event, and therewas clearly a lack of preparedness. However action,once initiated was swift, punitive to officials involvedand conciliatory towards its important neighbour,Russia. Fortunately, the health impacts appear tohave been minimized in both countries, and ecolog-ical effects are being carefully monitored in the inci-dent. But the event highlighted what is clearly a sig-nificant problem for China—cross-border impactsin waterways arising from river use, including marineand coastal effects.

China does not have robust regional agreementson environment and development like those thatexist between some European nations, for exam-ple, concerning the Rhine; or institutionalarrangements like the International JointCommission (IJC) between Canada and the U.S.,which addresses various air pollution and waterissues. The Mekong River, with headwaters inwestern China, is a natural starting point. Lowerbasin cooperation is long-standing among countriessuch as Cambodia, Vietnam and Thailand, and therehas been some level of overall cooperation since1992 via the Greater Mekong Subregion (GMS)agreement. However it is only since 2005 that GMSofficials, including China, have been meeting onenvironment and development matters.85

On ocean and coastal management, China is anactive member of PEMSEA (Partnerships inEnvironmental Management for the Seas of EastAsia), a successful regional initiative to improveintegrated coastal management. A prime exampleof China’s commitment is its work with others onthe Bohai Sea Environmental Project. The objec-tive of the project is to develop effective collabora-tive actions among adjacent provinces and munic-ipalities to reduce waste discharges and to addressenvironmental problems across the administrativeboundaries.86

This case explores the problems of water use inChina at their source, and some of the regionalimplications. The key current water quality issueabove all others is the massive non-point sourcepollution created by heavy use of agriculturalchemicals. However, this problem is interactivewith others such as untreated industrial andhousehold sewage. Also of growing significance isthe interaction between airborne pollutants andwater quality. Emissions of nitrous and nitricoxides from coal burning, automobiles and othersources are deposited as acid rain or by dry depo-sition to the China Sea, forming about a third ofmarine pollution. The case study, prepared byProf. David Norse of the University of London,and drawing upon work by CCICED and others,considers potential outcomes to 2020.87

Land-based Sources of Marine Pollution

The Global International Waters Assessment(GIWA) project identified agricultural develop-ment and economic growth as the most significantcause of transboundary pollution (TBP).88 Chinais not an exception to this conclusion. The domi-nant pathway for waterborne TBP is river runoffinto the East and South China Seas (about 60 percent of China’s annual runoff). It is China’s largest


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84 UNEP, The Songhua River Spill, December 2005. Field Mission Report (Nairobi: UNEP, 2005), 26 pp., <http://www.uneptie.org/PC/apell/disasters/china_harbin/unepmr.pdf >.

85 Greater Mekong Subregion Economic Cooperation Program, GMS Environment Ministers Meeting, Senior Officials Meeting,Highlights of Discussions, 24 May 2005, <http://www.asiandevbank.org/Documents/Events/2005/GMS-Environment-Ministers-Meeting/sommeeting-minutes.pdf>; ADB to Hold Environment Ministerial Meeting of Greater Mekong Subregion inShanghai, Peoples Daily Online, 17 May 2005.

86 PEMSEA, <http://www.pemsea.org/abt%20pemsea/sites/demo_hotspt_bohai.htm>.

87 The full case study is available from CCICED, David Norse, Direct Physical Transboundary Effects of Economic Growth –Downstream Effects on Water Quality and Flow, 2006, 24 pp.

88 UNEP, Challenges in International Waters – Regional Assessments in a Global Context. Final Report of the Global InternationalWaters Assessment (GIWA), (Nairobi: UNEP, 2006), 150 pp.

contribution to TBP of international waters and hasbecome a major issue during the past 10 to 15 years.Lesser pathways of such pollution are to India (17per cent), the Russian Federation (six per cent) andMyanmar (four per cent). The main pollutants arefertilizer and pesticide residues from crop produc-tion; nitrogen and phosphate from livestock anddomestic wastes; and heavy metals and persistentorganic pollutants (POPs) in industrial effluents.

Looking ahead to 2020, it seems likely that TBPfrom agriculture in China will increase, that fromthe domestic sector it will stabilize and industry’scontribution will decline. Nitrogen and phosphatefrom crop and livestock production will continue tobe the major concern, primarily through theirimpact on eutrophication and the incidence of redtides in the China Sea. On the other hand, structur-al change in the economy will lead to a furtherdecline in the heavy industries of the primary sec-tor, greater technical sophistication in the secondarysector, and growth of the tertiary sector. Thesestructural changes will be associated with or paral-leled by greater investment in pollution control andstricter enforcement of environmental standards.

It can be questioned whether much of the TBP is adirect effect of economic growth. There is no doubtthat economic growth is the driver for many of theactivities whose residues and discharges are thecause of the pollution that is carried out of China inriver runoff. However, where there are cost-effectivemechanisms for pollution control, which is com-monly the case, one could argue that the causes ofTBP are policy and institutional weaknesses ratherthan economic growth per se. Similar argumentscan be made regarding TBP arising from industrialaccidents (e.g., the Songhua incident) that are theresult of institutional weaknesses.

Initially, the main pathway was the outflow fromthe Yangtze (Changjiang), Yellow (Huanghe) Pearl(Zhujiang) and Red Rivers that drain the maincrop production areas, but rapid urbanization andindustrialization have led to coastal areas becom-ing an important source of TBP. In the 1970s and1980s, the main pollutant was dissolved inorganic

nitrogen (DIN) from agriculture, and this remainsimportant. POPs and heavy metals from agricul-ture and industry are of growing concern. Also ofconcern now is the expansion of coastal aquacul-ture, another large DIN source. The chief conse-quences of this TBP are eutrophication of coastalwaters, which is the cause of the rapidly rising fre-quency of algal blooms (red tides), and the accu-mulation of POPs and heavy metals in marineecosystems and commercially exploited fish.

River Outflow

The Changjiang, Huanghe and Zhujiang Riversaccount for about 55 per cent of China’s annualrunoff and at least 25 per cent of the world’santhropogenic inputs of DIN into marine ecosys-tems. Prior to the 1980s, the DIN concentrationswere relatively low but doubled during the1980s.89 This increase is related to the rapid rise innitrogen fertilizer for grain production from about1978 onwards (Figure 2). A positive correlationwas established between nitrogen fertilizer use inthe Changjiang River basin and the DIN levels inthe river for the period 1980–1989.90

Figure 2. Grain production and chemical fertilizeruse in China from 1949 to 2002.

A similar, but less clear, correlation was observedfor the Huanghe and Zhujiang Rivers. Increasednitrogen fertilizer was not the only driver for thehigher DIN concentrations. During the same

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89 J. Zhang et al., Chemical Trend of National Rivers in China: Huanghe and Changjiang, Ambio, 2005, 24: 274–278.

90 D. Shuiwang, Z. Shen and H. Hongyu, Transport of Dissolved Nitrogen from the Major Rivers to Estuaries in China, NutrientCycling in Agroecosystems, 2000, 57: 13–22.

period there was a significant increase in industrialand domestic wastewater discharges in theChangjiang river basin—they increased by over 10per cent during this period.

These trends have continued. There are no readilyavailable analyses specifically for China but a globalstudy using data from the mid-1990s confirms theseriousness of the situation.91 The Changjiang Riveris estimated to be the largest source of transbound-ary anthropogenic nitrogen in the developing world(Table 2) with some 83 per cent of the nitrogenexports to coastal waters coming from agriculture,and only eight per cent from domestic sewage.However, for the heavily urbanized Huanghe Riverbasin, the dominant source of nitrogen is estimatedto be domestic sewage (59 per cent).

Industrial fertilizers and domestic sewage are notthe only source of DIN. Income growth over thepast 10–20 years has led to greatly increaseddemand for livestock products, fish and shellfish,which, in turn, has driven the development ofintensive livestock and aquaculture operations.The output of these operations has doubled over

the past 10 years or so and they generate wasteswith high DIN concentrations. The waste dis-charges from intensive livestock operations are sel-dom controlled and those from aquaculture arevirtually impossible to control.

The issue is that these estuarine inputs do not staywithin territorial waters. The plumes of DIN andsediments carrying heavy metals and other pollu-tants can stretch out several hundred kilometresfrom the coastline. The Yangtze River effluentplume, for example, may travel some 300–400 kmfrom the river mouth and spread over some80,000–90,000 square kilometres of ocean.92

Coastal Inputs

Much of China’s economic growth has been cen-tred on the Pearl and Yangtze River deltas and thecoast of the Bohai Sea. The Pearl River delta con-tains several large cities, including Dongguan,Foshan, Guangzhou, Huizhou, Jiangmen,Shenzhen and Zhongshan with substantial dis-charges of untreated domestic and industrialwastes.93 DDT concentrations in sediments in thePearl River delta are high although its use was


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Table 2. Nitrogen inputs and exports to major rivers and coastal waters and the percentages of N com-ing from agriculture.

River (Country) N inputs to rivers N exports to coastal watersAnnual input From agriculture Annual export From agriculture

kg N km-2 % kg N km-2 %

Mississippi (USA) 7,489 89 597 63Amazon (Brazil) 3,034 17 692 6Nile (Egypt) 3,601 67 268 37Zaire (Zaire) 3,427 18 632 9Zambezi (Zambia, Zimbabwe

3,175 47 330 25and Mozambique)Rhine (Germany) 13,941 77 2,795 49Po (Italy) 9,060 81 1,841 56Ganges (India) 9,366 81 1,269 55Changjiang (China) 11,823 92 2,237 83Huanghe (China) 5,159 88 214 24

Source: adapted from G. van Drecht, A.F. Bouwmann, J.M. Knoop, and C.R. Meinardi. 2001. Global Pollution of Surface Waters fromPoint and Nonpoint Sources of Nitrogen. The Scientific World. 1(S2): 632-641.

91 G. van Drecht, A.F. Bouwmann, J.M. Knoop, and C.R. Meinardi, Global Pollution of Surface Waters from Point and NonpointSources of Nitrogen, The Scientific World, 2001, 1(S2): 632–641.

92 J. Qu, Z. Xu, Q. Long, L. Wang, X. Shen, J. Zhang and Y. Cai, Global International Waters Assessment East China Seas: GIWARegional Assessment 36, University of Kalmar on behalf of UNEP, 2005.

93 K.W. Chau, Characterization of Transboundary POP Contamination in Aquatic Ecosystems of Pearl River Delta, MarinePollution Bulletin, 2005, 51: 960–965.

banned in 1983. The concentrations of most otherPOPs, polycyclic aromatic hydrocarbons (PAHs)and polychlorinated biphenyls (PCBs) are lessserious but still may be transported into interna-tional waters where they may bioaccumulate. Thesituation appears somewhat better in the YangtzeRiver delta with higher levels of investment inwastewater treatment in and around Shanghai.

The problems on these coastal zones include:microbial pollution adjacent to heavily populatedcoastal areas, and particularly where the growth ofurbanization outpaces investment in sewage treat-ment facilities; development of pollution hotspotsclose to point sources like major industrial orurban wastewater outfalls; and pollution and otherproblems arising from excessive density of China’s,burgeoning aquaculture operations.

Marine Impacts of River and CoastalInputs of Pollutants

The most serious and geographically extensiveimpacts arise when the increased nitrogen andphosphate levels in seawater stemming from theriver and coastal inputs cause eutrophication. Thelatter arises when the increased nutrient inputsstimulate excessive plant growth, disrupt theecosystem and create oxygen-depleted zones. Thishappens not only in semi-enclosed seas like theBohai Sea but also in the open waters of the ChinaSea that are important international fishinggrounds for North and South Korea, and Japan.This TBP-induced eutrophication is most evidentin the major increase in the incidence of red tides(algal blooms). These occurred about 10 times peryear in the 1960s and affected relatively smallareas. Their frequency and extent have grownappreciably since then. They now occur about 100times per year and affect around 15,000 sq. km ofocean, with the East China Sea being the mostbadly hit.94 Some of the algae (dinoflagellateplankton) release toxins that can kill fish and con-taminate shellfish such that they become poison-ous to humans. The economic losses from red

tides in 2001 were estimated to be about one bil-lion RMB95 but can be as much as three millionRMB in a single incident.

Another important impact is on fisheries produc-tivity and particularly on the health of spawninggrounds that are vital to the maintenance of fishstocks. This damage to spawning grounds is theresult of POPs and polycyclic aromatic hydrocar-bons (PAHs). According to SEPA, about half ofChina’s offshore seawater is polluted to the pointwhere the marine environment is damaged.

These TBP impacts are globally significant. TheSouth China Sea, for example, accounts for about10 per cent of the world’s catch from capture fish-eries, and more than 50 per cent of shrimp andother aquaculture products.

Prospects to 2020

TBP from agriculture is strongly related tothe overuse of nitrogen fertilizer and theexpansion of the livestock sector. The prob-lem is well-studied.96 Given current policiesand technologies, nitrogen and phosphatefertilizer use will continue to grow, as will theflow of nitrogen and phosphorous into theChina Sea, thereby intensifying the red tideproblem. By 2020, all of the major riverbasins will be have a serious nitrogen sur-plus.

The fertilizer problem will be compoundedby the growth in livestock wastes. In 2002,the total amount of organic waste from live-stock was already four times greater than thatfrom industry. Income growth will continueto drive the demand for livestock products,such that livestock populations will grow twoto four-fold by 2020. A significant propor-tion of this increased livestock productionwill be based on imported feed grains (mainlysoybean and maize) which will favourexpanded production in the coastal zone that


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94 State Oceanic Administration, Marine Environmental Quality Bulletin, 2005, as quoted in China Daily, 13 March 2006,<http://www.china.org.cn/english/environment/161297.htm>; see also, China Institute for Marine Affairs, Report of theLegislative Framework of Environmental Management of Bohai Sea Area, State Oceanic Administration and PEMSEA, 2005.

95 State Oceanic Administration, Marine Environmental Quality (Beijing: SOA, 2002).

96 See, for example, the 2006 Special Issue on Aquatic Ecosystems of China: Concerns, Technologies and Management, AquaticEcosystem Health and Management, 9(1).

close to ports along the China Sea. Given thecoastal zone already has a serious nitrogensurplus because of the overuse of nitrogenfertilizer on crops, further expansion of live-stock production in this zone will intensify theTBP problem. A number of factors may ame-liorate this situation. For example, there arediscussions about using planning laws to dis-courage or even relocate intensive livestockenterprises in peri-urban areas and thecoastal zone. Large-scale units improve theeconomics of pollution control and make iteasier to monitor compliance with environ-mental regulations. Nonetheless, the intro-duction of these possibilities face substantialfinancial, institutional and technologicalconstraints and hence there may be littleprogress in the next 10 years or so.

The situation regarding domestic and indus-trial wastes and their contribution to TBP ismore promising. It seems unlikely that therewill be any slowdown in the rapid urbaniza-tion of the coastal zone, but in recent yearsthere has been substantial investment inwaste treatment facilities. For example, over80 per cent of the industrial wastewater inthe major cities of the Pearl River delta isnow treated. Wastewater treatment rates willcontinue to improve and the quality stan-dards will continue to be tightened.

Shared River Basins

Major rivers flow from China into Bhutan, India,Laos, Myanmar, the Russian Federation, Thailandand Vietnam (Table 3). Long-run transboundary

pollution carried by these rivers is generally lessserious than the marine pollution stemming fromland-based source, although short-term accidents,such as the Songhua incident in November 2005,can be of major concern.

China is the source of major rivers that are impor-tant to the water supply of its neighbouring coun-tries (Table 2). As yet there have been no majortransboundary impacts that can be related to eco-nomic growth. There are concerns that over thenext 10–20 years, dam building in China on inter-national rivers could have impacts in neighbour-ing countries by reducing dry season water flows.For example, there are plans (currently blocked byPremier Wen Jiabao) to erect 13 or more largehydropower dams on the Nujiang/Salween Riverthat would restrict flows into Thailand andMyanmar. Similarly, there are plans for dam con-struction in Yunnan on the Lancang/UpperMekong that would have similar impacts in Laosand Myanmar.

The water quality issues relate mainly to POPs,particularly pesticides, and industrial chemicals,PCBs and hexaclorobenzene, and PAHs formed bythe combustion of organic compounds. The dan-ger to the environment arises from their stabilityand the fact that many of them can accumulate upthe food chain. However, although pollution fromthese organic chemicals and from the non-pointpollution from nitrogen and phosphate fertilizerdiscussed above is a serious problem within China,it tends not to be a problem within the territoriesof the neighbouring countries. This is because (1)the rivers commonly originate in Chineseprovinces or parts thereof which are not heavilydeveloped, e.g., Tibet and Yunnan; and (2) any


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Table 3. Major rivers flowing from China to neighbouring countries.

River Destination Mean annual flow % of neighbour’s into neighbour (km3) total runoff

Suifen, Songhua and Amur Russian Federation 119 n.a.Yarlung Zangbo (Brahumaputra) India & Bhutan 165–347 9–19Miscellaneous rivers in south and west Tibet India 182 n.a.Nujiang (Salween) Myanmar & Thailand 69 n.a.Lancang/Upper Mekong Laos & Myanmar 74 38 for Laos

3 for MyanmarYuanjiang (Red) Vietnam 48 5Rivers in west Yunnan Myanmar 31 n.a.

pollutants from China are substantially diluted byriver flows from within the neighbouring coun-tries.

These two ameliorating factors also apply to TBParising from industrial accidents, as with the inci-dent at Jilin, Helongjiang Province in November2005 when some 100 tonnes of benzene, nitroben-zene and other compounds were released into theSonghua River At the time it was thought that thespill would cause serious TBP, but natural dilutionand the construction of a diversion dam preventedappreciable flows of polluted water into Russia.

Prospects to 2020

There are three possible developments toconsider. First, what is the likely impact ofclimate change on any of the rivers, but espe-cially the rivers rising in the Tibetan-QinghaiPlateau? This is a major concern for Chinaand downstream countries. It is a separateand complex topic from those discussed inthis case study, but will be of potential signif-icance. Second, will agricultural develop-ment in Tibet and Yunnan lead to greaterflows of nitrogen, phosphorous and pesti-cides from crop and livestock production?The answer is probably no because theseprovinces have no appreciable comparativeadvantage. Third, is the discharge of indus-trial pollutants, or their loss through acci-dents, likely to increase on internationalrivers? Again the answer is probably no. Thegovernment of China is supporting theprovinces of northeast China in their effortsto modernize their industrial base, and it isnot unreasonable to expect progressiveimprovements in the application of pollutioncontrol legislation, particularly after the Jilinaccident affecting the Songhua River.

Conclusions about China’s RegionalTransboundary Water Issues

The future of China’s relations with its borderingneighbours will certainly be more focused on envi-ronmental matters than in the past. There are var-ious mechanisms by which this may happen, but

the institutional framework for regional environ-mental protection is still very weak—laggingbehind both the need, and also the level of sophis-tication that might be expected of such relation-ships today.

The mix of pollutants and the varied sources alsopresent a major problem. Cleaning up industrialand urban sewage will help, but the prime prob-lems are related to agriculture and, to some extent,aquaculture. In addition, the pollution-loading ofrivers and coastal waters will be affected by air-borne sources, including cars and trucks. Giventhe continued rapid economic development with-in China, downstream and coastal impacts seemlikely to worsen over the short term.

Specifically, most of the environmental actionstaken under the 11th Five-Year Plan will not havea great deal of impact on the main cause of TBP,which is agriculture. Without additional actions tocontrol water pollution from the overuse of chem-ical fertilizers for crop production and poor live-stock management, the discharges of N and P intocoastal waters will rise.

In the longer term, between 2010 and 2020, thereis more hope, as the numerous initiatives beingtaken by China to improve water quality achievesuccess. However, even with effective managementof today’s problems, there still loom the uncertain-ties of water flow associated with climate change,and with the extensive water engineering under-way or proposed by Chinese authorities.

Finally, it is worth noting that within China thereis considerable debate about the best means forintegrated river basin management, and also con-cerning ecological compensation—payments forenvironmental services safeguarded by upstreamusers. At present, these debates are within China,and certainly do not contemplate any extension toocean impacts, or to downstream situations affect-ing other nations. The TBP of international watersis, of course, not unique to China within theregion, and its significance is a problem for all thenations draining into the China Sea. Greaterregional collaboration is therefore required to findsatisfactory solutions. China’s efforts will be a keyto making such collaboration successful.


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Case Study 5 – Learning From andSharing Environmental ExperienceIt is difficult to summarize the range of interna-tional contacts and initiatives China has developedon environment and development. These extendback to the time of the 1972 StockholmEnvironment Conference, which China attended.Two leading veterans of that time, Maurice Strongand Qu Geping, are still active participants inChina’s Environment and Development.97 Themost active period in China’s efforts started in1992 and continues today. It can be argued thatChina gained more than virtually any other nationat the Rio Earth Summit, since it almost immedi-ately developed a comprehensive China Agenda21, which has helped to make sustainable develop-ment become a well-embedded approach withincentral agencies of government. At the 2002Johannesburg Summit, China was an active partic-ipant, with well-formulated views on many sub-jects.

Just as China gained from its international contactand cooperation, it might now be expected thatChina should be in a position to share its own rap-idly developing experience on environment anddevelopment with others. And China will increas-ingly become an active and key participant ininternational environmental negotiations andprocesses.

China has indeed been increasing engagementwith developing countries, including in Africa,offering a mixture of aid, trade and investment—incentives to build political alliances. This sharingwith very poorer countries is not be entirely altru-istic, since China, like many other nations, is inter-ested in building trade and access to resources, andfinding others who might share common positionsin international decision-making circles. Mostimportantly, China now has the wealth to becomeinfluential as a development assistance donor (seeBox 5) and as an active participant in businessjoint ventures abroad.


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97 Qu Geping went on to become China’s first environment administrator, and continues to be influential as a senior statesmanon this subject within China, including serving as a Vice-Chair of the CCICED. Maurice Strong maintains a residence in China.In 2004 the two reviewed the long path and changing attitudes on environment during a gathering arranged by SEPA (seeChina Daily, 29 March 2004, <http://china.org.cn/english/environment/91507.htm>).

Box 5. China as a responsible stakeholder in the

international system?

China is increasingly aware of its growing profile asa major development player and the increasedscrutiny of international opinion, and is makingefforts to be a responsible stakeholder in the globalsystem. China’s leaders have shown that they arekeen to engage in development assistance.

For example, China is beginning to contribute tomultilateral mechanisms and disaster relief.Particularly noteworthy were contributions ofUS$50 million to the replenishment of the AfricanDevelopment Fund; US$30 million to the AsianDevelopment Fund plus US$20 million to the AsianDevelopment Bank to create the “China specialfund for poverty reduction and regional coopera-tion”; and US$25 million to the reconstruction ofIraq. China responded very quickly to the tsunamiin the Indian Ocean, pledging US$63 million infinancial assistance and contributing medical andother personnel to the relief effort. China was oneof the first countries to act after the Kashmir earth-quake, pledging US$5 million and sending a searchand rescue team within the first 48 hours. Chinaalso has started to participate in ConsultativeGroups, such as the one for Vietnam, and it hasjoined donor coordination groups in Kenya andTanzania.

Advice and Assistance to China

China has received environmental advice and/orassistance from the World Bank and from the UnitedNations Development Programme (UNDP), as wellas from various bilateral donor organizations and theEuropean Union. There have also been joint activitieswith government environment organizations such asthe U.S. Environmental Protection Agency (EPA)and Environment Canada; the United NationsEnvironment Programme (UNEP) and other UNbodies; as well as with international organizationssuch as the Ford Foundation; World Wide Fund forNature (WWF); the Natural Resources DefenseCouncil (NDRC); World Watch Institute; andresearch bodies such as the InternationalDevelopment Research Centre (IDRC); the WorldBusiness Council on Sustainable Development(WBCSD); the World Resources Institute (WRI);and the International Institute for SustainableDevelopment (IISD); plus many academic bodies,including Harvard University. There are long-stand-ing international cooperation activities throughoutChina on watershed management, various urbanenvironmental infrastructure initiatives, etc. As well,there are many scientific joint ventures andexchanges, often arranged through national acade-mies. In recent years China has begun to activelyengage with the OECD on environmental matters.

These international efforts can be classified intoseveral categories, including those related to policydevelopment; capacity building and humanresource development; technical and operationalimprovement; scientific research and develop-ment; and various reviews aimed at performanceassessment and improvement. As well, there aremany important transfers of experience takingplace through the private sector. It is beyond thescope of this paper to consider the wide range oftechnology transfers underway, and the accompa-nying difficulties associated with intellectual prop-erty rights, and other terms under which moderntechnology is developed or brought into China.The role of the international private sector isexceedingly important in virtually every major

field related to industrial production and to envi-ronmental technology applications in transporta-tion, urbanization and some resource sectors.There is likely to be more international private sec-tor involvement in some of China’s environmentaltechnology R&D, for example in most energyapplications such as coal gasification and in car-bon dioxide emissions reduction.

CCICED – A Unique Policy Advisory Body

In 1992, when China was beginning to implementthe results of the Earth Summit, and to design itsdomestic environmental laws, it started an organi-zation which is not like any in other countries. TheState Council (China’s cabinet) saw a need for anadvisory body from which it could draw reliableadvice reflecting a combination of internationaland national expertise—a body that would reportannually and directly to the Premier of China, andbe chaired by a senior member of government,currently Zeng Peiyan, the Vice-Premier of Chinawho acts as a spokesperson on sustainable devel-opment. The China Council for InternationalCooperation on Environment and Development(CCICED) members (generally about 25 Chineseand 25 international members) are invited byChina to serve five-year terms. Task forces areestablished on topics considered of high relevanceto Chinese policy-making on environment anddevelopment. These report to the Council after ayear or two of work, and recommendations areforwarded to the State Council for follow-up.

The CCICED98 has played an important role incertain topics of environment and economy,including natural resource pricing; environmentand trade; and law and policy for a circular econo-my. It has provided guidance on policy for biodi-versity conservation, energy alternatives andadvanced models for use of coal such as gasifica-tion. The CCICED also helped to develop environ-mental aspects of approaches to sustainable ruraldevelopment and sustainable urbanization. In therecent past, it has introduced concepts for ecolog-ical compensation; improved policies for river


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98 In 2006 a review of the work of CCICED during the past 15 years was conducted, along with a prospective examination ofChina’s environment and development needs over the period to 2020. This special Task Force report is available on the CCI-CED Web site, <http://eng.cciced.org/cn/company/create/page2102.htm?siteid=1&lmid=2102>. Also see CCICED, PolicyRecommendations to the Government of China on Environment and Development (1992–2005), (Beijing: CCICED Secretariat,2006), 481 pp.

basin management; inter-urban sustainable trans-portation policies; and policies that could beintroduced to strengthen a national system ofenvironmental governance.

While there are many national and internationalvoices competing for attention on many of thesesame themes, CCICED has become established asa senior voice consulted, and listened to, by China’stop administrators. This is a remarkable positionof trust, and one that is quite unique in the world.No other country has such a mechanism. CCICEDis now entering its fourth five-year phase. Supporthas been provided by China and by several donors,such as Germany, the U.K., Japan, Sweden, Norwayand others, with the lead being provided by theCanadian International Development Agency(CIDA). International members have includedheads of organizations such as UNEP, IUCN – TheWorld Conservation Union, WWF, as well as rec-ognized leaders in environment and developmentfrom a variety of countries including India, theU.S. and some OECD countries.

CCICED plays to Chinese pragmatism—a desire toreceive solid information with a minimum of pos-turing and an expectation that it will be deliveredwithout vested interests or biases. It has been judgedby China to be a success. The obvious question is whyit should continue to be funded in part from externalsources, since China is now at a point where it is wellable to fund whatever it really wants. The best answeris probably the most obvious. CCICED is actually apartnership, and one where the benefits flow in bothdirections. It is a means to understand the complexdynamics of policy change in China in this field, andalso to see exactly where progress is and is not beingmade. The CCICED provides a bigger view than canbe put together by any one of the internationalorganizations individually. China explicitly considersit of importance to be better understood abroad interms of Chinese actions for environment and sus-tainable development.

Improving China’s Capacity forEnvironment and Development

China has sought inputs concerning many aspectsof its environmental initiatives, and engages in

efforts to upgrade operational capacity at all levelsfrom national to local, and a surprising range ofinstitutions. For example, the Central PartySchool, which has a capacity to reach out to some2,500 locations across the country from thenational to county levels, is introducing environ-ment and sustainable development into its leader-ship training for Communist Party cadres. In theprocess of doing so, the Central Party School isseeking to learn from various countries’ experi-ences and teaching methods for these topics.

Environmental governance is a topic of particularinterest to SEPA and others. This topic has beenexamined as part of an overall OECD review ofChina’s governance.99 China also requested thatOECD review environmental governance usingthe approach followed every half decade for OECDnations. The result was some 51 recommendationsthat are now under consideration by China.100

The point here is that China is under no interna-tional compulsion to undertake this type of assess-ment, but it desires to do so, not only for provid-ing operational suggestions, but also to providebenchmarking consistent with internationalassessments conducted elsewhere.

China has made great strides in legislative and regu-latory reform and innovation, drawing on interna-tional best practice. For example, China’s WaterLaw—which was revised in 2002 with assistancefrom the U.K.—is widely considered to be amongthe most advanced of its kind. Many recentlyenacted or promulgated special laws—including theEIA Law; the Cleaner Production Law; theRenewable Energy Law; new legislation on theManagement of Protected Areas; and the CircularEconomy Law (which is being drafted)—haveexplicitly drawn on international expertise andexperience. They clearly signal the importance ofenvironmental protection, and have helped to closesome important loopholes. As a result, a strong legaland regulatory framework is now in place to supportachievement of environmental objectives.

Another effort that appears to be quite successfulhas been the introduction of UNEP’s “cleaner pro-duction” approach into Chinese industry. This has


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99 OECD, China in the Global Economy: Governance in China (Paris: OECD, 2005).

100 OECD, Environmental Performance Review of China. Conclusions and Recommendations (Final), (Paris: OECD, 2006), 12 pp.The Main Report is due to be released in February 2007.

been accomplished with the assistance of variousdonors, and involved the establishment of bothsectoral and regional initiatives.101 Since 2003there has been a Cleaner Production PromotionLaw in China. A number of sectors includingchemicals, breweries, eco-industrial parks, pulpand paper, and textiles have participated. The pres-ence of Cleaner Production Centres in a numberof provinces provided beachheads during the mid-and late-1990s for introducing basic pollutioncontrol concepts. This has been followed up withother ideas derived from international experience,including ISO 14001 certification, and now a widevariety of other domestic and international efforts,including those associated with multinationalfirms involved through foreign direct investmentin China’s industrial base.

Chinese officials and experts have been active par-ticipants in international learning and lesson-sharing on the use of economic instruments forenvironmental management,102 and indeed Chinahas made significant progress in this regard. Therecently revised Pollution Levy System (PLS) isone of the most comprehensive in the world. Theintroduction of Total Emission Control, and theimplementation of the Emission Permit System,provided the basis for experimentation with emis-sions trading schemes.103 The Chinese govern-ment has fully embraced the concept of chargingof tariffs for cost recovery and has formally adopt-ed the polluter-pays principle.

A Task Force on Environmental Pricing andTaxation was set up under the CCICED in 2002 inresponse to growing recognition at the centre ofgovernment that environmental policy can makemore use of fiscal instruments. Where resourcescarcity is a growing problem (e.g., water), therehas been a shift towards greater consideration ofpricing as a powerful demand management tool(as opposed to traditional supply side solutions).

Recent trends show improved utility pricing poli-cies in terms of purely financial performance—while not explicitly for environmental purposes,the resulting improvements in resource use effi-ciency are clearly consistent with environmentalobjectives. Ongoing discussions about an eventualfuel tax also provide a unique opportunity foraddressing externality issues related to fuel use.

On the public expenditure side, there has also beensignificant progress. There has been a steadyincrease in environmentally-related public expen-ditures over the past decade. During the period1998–2002, 38 per cent of total public long-termdebt was invested in environmental protection andecological construction projects.104 The propor-tion of GDP spent on environmental protectionhas increased to 1.5 per cent for the 11th Five-YearPlan period. Most significantly, an EnvironmentalFiscal Expenditure Account will be set up in 2007under the public budget. This could be a majorstep forward in terms of improving the efficiencyof public spending on environmental protection atthe national level. This focus on a comprehensiveapproach to environmental economics has comeabout, in large measure, through internationalinputs to the government, and from the adapta-tion to Chinese conditions of practices developedlargely in OECD countries.

It should be clear from this brief overview oflearning from overseas experience that Chinabelieves in learning from the best internationalexperience and then adapting that experience toChinese circumstances rather than directly adopt-ing it. And there is no doubt that this is a wiseapproach. For example, rather than stopping atrecycling, which is the mantra of countries such asCanada and the U.S., China has gone further, tak-ing the broader concept of a circular economy,borrowed and adapted from Japan and Germany.Indeed it is difficult to suggest to China that there


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101 Cleaner Production in China, <http://www.chinacp.com/eng/cpdonors/cp_unep.html>.

102 Chinese officials from the State Taxation Administration, the Ministry of Finance and SEPA have been engaged in a long-termdialogue with the OECD on Environmental Taxation since 1996. The CCICED Task Force on Environmental Pricing andTaxation (previously the Working Group on Environmental Economics) has been another important vehicle for lesson-learn-ing in this area.

103 The year 2002 saw the official launch of emissions trading demonstration activities, covering seven provinces (municipalities)and one business conglomerate.

104 Including: urban environmental infrastructure, protecting the “three lakes, three rivers,” the Sloping Land ConversionProgram, etc.


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Box 6. Lessons from Japan’s experience.

Japan embarked upon a massive industrialization and reconstruction program in the 1950s, and soon faced prob-lems of the type confronting China today on how to reconcile economic growth with environmental protection.Following catastrophic human health impacts of industrial pollution in the 1960s and 1970s, Japan dramaticallyimproved the environment while undergoing a sustained period of rapid economic growth. While problems remain,Japan’s experience offers much guidance on actions that can be successful within a fairly short time.

The successful actions include the system of voluntary agreements; the role of the industrial pollution control man-agers who are nationally certified and legally mandated for major industrial sites; improved energy and water pric-ing policies; and various technical and policy support mechanisms for small business and local governments.

In terms of environmental legislation, regulations and institutions, or indeed standards, Japan is not particularlyunique, and indeed its formal mechanisms are largely matched by China. The distinguishing characteristic ofJapan’s environmental performance is its implementation record on environmental regulations and standards—pos-sibly the key issue in China. It is here that China has the most to learn from Japanese experience, but the implica-tions are that the responsibility for change goes well beyond the mandate of environmental agencies such as theJapanese Environment Ministry, or the Chinese SEPA, and involves much more profound societal issues.

The main lesson is that explicitly environmental management policies and actions are only part of a much biggerpicture. Japan’s success is to be found, not so much in formal environmental legislation enacted at the nationallevel, but rather in the effectiveness of local agreements and action, and in the existence of such basic conditionsas public awareness of environmental problems and impacts; freedom of expression including local anti-pollutionprotests; community participation; high level of technical education; and decentralization of decision-making.

Government and industry responded quickly and efficiently to well-informed public pressure, mobilizing institutionaland financial resources to address problems, and, of major importance, minimizing corruption in the inspection,monitoring and licensing process. There was also substantial effort for technology innovation, and to ensure thatprivate sector firms employed pollution control managers whose advice is respected. Implementation of technicalimprovement, sophisticated environmental investment programs and policies would have been much less effectiveif these fundamental conditions were not in place.

There have been ongoing positive impacts from these earlier efforts. Japanese industry leads the world in terms ofenergy efficiency; auto companies are world leaders in producing hybrid cars; and there has been complementaryaction in transportation and for the circular economy.

But there are a number of areas where Japan’s environmental policies do not constitute a model that should be fol-lowed by China, for example: Japan’s early “grow now, clean up later” policy; its slowness in adopting economicinstruments for pollution control and parallel subsidization of industrial environmental investment; and Japan’s envi-ronmental record abroad of industrial, forestry and international fishery operations.

Source: J. Warford. Environmental Management Experience in Japan – Relevance to China. Background Paperavailable from CCICED.

is any single country that offers a perfect parallelsituation or model. Perhaps the one that comesclosest is Japan, in part because it was able to tran-sition rapidly to a resource-efficient, circular econ-omy at a time of rapid economic activity (see Box6.) But even in this case, at least part of the learn-ing is what to avoid, since a part of Japan’s successwas achieved at the expense of exporting dirtyindustries to countries outside of Japan, and byexploiting the forests of others while making Japanthe country with the greatest proportion of itsland under forest cover.

China’s Development Cooperation withAfrica

In November 2006, China drew 48 countries ofAfrica to Beijing, including many national leaders,in order to express its interest in Sino-African rela-tionships, including development cooperation andtrade. The point is repeatedly made by interna-tional media and analysts that China has strongvested interests in both finding new markets, andin securing reliable sources of energy and otherresources, and therefore Africa is a highly attrac-tive region. But there can be little doubt that Chinacould radically revise development cooperation byits larger presence in Africa. It has pledged overUS$10 billion in low interest loans and debt reliefover the coming two years to poor countries inAfrica, Latin America and Asia.105 The level ofdevelopment assistance commitment in Africa byChina is such that it will exceed that of the WorldBank on that continent,

These observations need to be set in the context ofa growing economic interdependency betweenChina and African countries (see Box 7.) Chinesetrade with Africa is projected to rise from a level ofUS$40 billion in 2005 to US$100 billion by 2010. Adecade ago the level was only US$5 billion. Otherfeatures of economic and technical cooperationinclude: providing some US$3 billion of preferen-tial loans and US$2 billion in buyer’s credits; set-ting up a US$5 billion China-Africa development

fund to encourage and support Chinese compa-nies to invest in Africa; opening Chinese marketsto a range of African goods tariff-free; conductingtraining and cross-cultural exchanges and provid-ing technical expertise in a number of fields.

Strong complementarities exist between theChinese and African economies:

• China’s continued economic growthdepends on imported energy and rawmaterials. Africa supplies around 28 percent of China’s imported oil. African min-eral imports are critical to support contin-ued industrial expansion. China is theworld’s largest consumer of copper andimports most of it from Africa. Same istrue for African ferrochrome, platinum,cobalt, iron, gold and silver.106

• With the exception of South Africa (man-ufacturing) and Mauritius (manufactur-ing and tourism), most African countriesparticipate in the world economy asexporters of raw materials and soft com-modities. For 27 out of 49 African coun-tries, fewer than five products (mostlycommodities) account for more that 75per cent of exports. Crude oil accounts for35 per cent of the continent’s total exportsaccording to OECD figures.

Overall, this increase in economic relationsbetween China and Africa appears to be beneficialto African countries:

• China is a major contributor to Africangrowth through trade and investment.China accounted for one third of Africa’sgrowth (i.e., two per cent) in 2005. Theprivate sector has been a key actor inChina’s engagement with Africa con-tributing to employment and businesslinkage creation.


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105 China Opens Debate on its Rising Status, International Herald Tribune, 9–10 December 2006.

106 It should be noted that often, trade deals for these commodities are associated with the provision of infrastructure (by Chinesecompanies) in the exporting countries.


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107 See L. Wild and D. Mepham (eds.), The New Sinosphere. China in Africa (U.K.: Institute for Public Policy Research, 2006),<http://www.ippr.org.uk/ecomm/files/china_africa_intro_conclusions.pdf>; R. Kaplinsky, D. McCormick, M. Morris, TheImpact of China on Sub-Saharan Africa, Report for DIFID, 2006.

108 Harry G. Boardman, Africa’s Silk Road: China and India’s New Economic Frontier (Washington: World Bank, 2007).

Box 7. The recent growth in trade, aid and investment relations between China and Africa.

Trade – China’s trade with Africa is expanding rapidly. Between 2001 and 2004, two-way trade quadrupled, reach-ing almost US$40 billion in 2005. This is expected to rise to US$100 billion by 2010 (NB: this expectation is basedon the commitment made at the China-Africa Forum to double trade by 2010.) China is now Africa’s third largesttrading partner (after the United States and France). China scrapped tariffs on 190 kinds of imported goods from28 African countries in 2005 and has signed a host of trade and double taxation agreements across the continent.It is currently also negotiating a free trade agreement with South Africa. China’s traditional trade surplus with Africaturned into a deficit in 2005, reflecting rapidly growing imports from Africa (+50 per cent year-on-year on averagesince 2002). China will remain hungry for commodities over the coming 15 years.

Investment – Chinese investments in the two regions will also increase. Driven by economic, political and strate-gic considerations, Chinese firms have increased investment activity abroad. At the China-Africa Summit, 16 com-mercial contracts worth US$1.9 billion were signed, covering natural resources, infrastructure, finance, technologyand communications. Chinese investment at the end of 2005 was reported to be US$6.3 billion.

A number of high-profile investments in the African oil sector have recently grabbed the headlines: US$2.3 billionfor a stake in a Nigerian oil field; US$4 billion for drilling licenses in Nigeria; and a US$6–10 billion loan to Angola inexchange for a long-term 10,000-barrel-a-day supply agreement. Africa is estimated to supply 28 per cent ofChina’s oil supplies and 60 per cent of Sudan’s oil exports go to China. China also invests heavily in related infra-structure such as refining and transportation. Seventy per cent of Chinese investment in Africa is in oil-producingcountries. Nigeria, Angola and Mozambique are the biggest recipients of Chinese investment. China is the biggestforeign investor in a number of countries including Sudan and Kenya.

Aid – China offers significant development assistance, including a promise to double aid (with no strings attached)by 2009. In the margins of the China-Africa Summit earlier this month, the government pledged US$5 billion in pref-erential loans and credits to African countries and a further US$5 billion for a new investment fund to supportChinese companies in Africa (the Africa Development Fund). Geographically, Africa is the main receiver of China’said and an area of strategic importance to China. The most important sub-region in terms of the number of tech-nical assistance projects started is West Africa, with 44 per cent of all projects. Next is East and Southern Africatogether (18 per cent), followed by the Pacific (14 per cent) and South East Asia (nine per cent).

(Sources: Kaplinksy et al., 2006;107 World Bank “Silk Road” report;108 and DFID briefs.)

• There is a strong correlation betweenAfrica’s total exports and its major com-modity exports to China, although the lat-ter have been growing at an even higherrate. The share of oil, iron ore, cotton, dia-monds and logs in total exports to Chinagrew from less than 50 per cent in 1995 tomore than 80 per cent in 2005, with oilgrowing most rapidly. The importance ofChina as an export partner for a numberof commodity-exporting fragile statessuch as Angola, Sudan and the DRC is par-ticularly significant.109

• China’s support is delivering crucialinvestments in priority sectors, particularlyinfrastructure.

• At the China-Africa Summit in November2006, African delegates were unanimousin welcoming China’s assistance, invest-ment and the opening of its markets toAfrican commodities.

But China’s growing presence in Africa has alsogiven rise to some legitimate worries:

• There are concerns that Chinese companiesare securing energy assets in a non-trans-parent and developmentally-adverse man-ner, thereby exacerbating poverty, conflictand corruption. The provision of “oil-backed loans” poses a special problem.

• Similar concerns apply to the massive andgrowing Chinese investments in infra-structure projects in Africa, where“responsible” companies are losing out toChinese firms, with some being consid-ered “less responsible.”

• Increased commodity exports and risinginvestment inflows may lead to problemsof “Dutch disease” (i.e., an overvaluationof the currencies making it more difficultfor the manufacturing sectors to competein export markets). Such difficulties mightbe exacerbated by China’s tendency tokeep the downstream and processingactivities at home and only import the

basic raw materials. South AfricanPresident Mbeki recently voiced concernsthat cheap Chinese production of goodssuch as textiles and shoes could under-mine Africa’s weak industrial base.

• At a political level, China’s principle ofnon-interference masks China’s willing-ness to engage politically and economical-ly in countries with poor governance andhuman rights track records withoutaddressing these fundamental barriers topro-poor change. In some cases (e.g.,Angola, Sudan and Zimbabwe) thisapproach risks undermining the interna-tional community’s reform efforts.

• Also China’s growing presence poses anew challenge for aid effectiveness. Onerisk is that the commodity boom in someAfrican (and Latin American) countries,driven by surging trade with China, mightgive rise to a sense of complacency, whichmight prevent governments from under-taking the necessary measures to makegrowth sustainable in the medium term(i.e., investment in human capital andinfrastructure, institutional reform, etc.)Chinese investments could also exacerbateconflict and corruption (although theopposite might also be true). Some worrythat the increasing importance of China asa donor and investor may interfere withefforts to improve donor harmonization.

Growing economic interdependence has been bol-stered by strengthened political ties:

• China published its first White Paper onits Africa Policy in January 2006. Thispaper lays out the key framework for itsgrowing engagement on the continent,highlighting the need for “win-win” eco-nomic cooperation, sharing developmentexperiences and mutual support withinthe United Nations. Beijing’s “One China”policy and the principle of non-interfer-ence in internal affairs underline all ofthis.


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109 Kaplinsky et al., 2006.

• The Government of China dubbed 2006“the year of Africa” with a stream of high-level visitors to Africa including PresidentHu Jintao and Prime Minister Wen Jiabao.In November, the fourth Summit of theForum for China-Africa Cooperation(FOCAC) was held in Beijing. (FOCACwas launched in 2000, formalizing long-running informal relations between Chinaand Africa on wide ranging political, eco-nomic and social cooperation. It hasbecome a mechanism and important plat-form for enhancing China-Africa collec-tive dialogue and cooperation.)

• The formal outputs of the Summit were theBeijing Declaration and Action Plan. TheDeclaration sets out a vision of China andAfrica’s “new strategic partnership,” basedon “political equality, mutual trust, eco-nomic win-win cooperation and culturalexchanges.” Both sides undertook toincrease high level visits to promote politi-cal cooperation. They also called for theenhancement of South-South Cooperationand North-South Dialogue to promote“balanced, coordinated and sustainabledevelopment of the global economy.”

Where do environment and development fit intothis potentially encouraging new extension ofChina’s international presence? The answer is notvery clear at this time, but there are some signals.First, China-Africa environmental cooperation isnot new. The China-Africa Environment Forumwas set up in 2000 to strengthen cooperation withAfrican countries on environmental protection. Atthe 2006 Summit, China said that it would givehigh priority to African concerns on environmen-tal protection and sustainable development, andhelp African countries “turn their advantages inenergy and resources into development strengths.”

Vice-Premier Zeng Peiyan has recommended rein-forcing dialogue in fields such as biodiversity, pol-icy-making and legislation on environmental pro-tection. So far, however, cooperation on environ-ment and development has focused mostly onissues such as development and application ofappropriate technologies in agriculture, capacity

building (mainly personnel training), rural devel-opment, communications, etc.

Under agreements reached at the Summit andthrough other recent initiatives, the followingactivities that might broadly be construed as sus-tainable development initiatives will be undertaken.

• The Chinese government has funded theestablishment of the UNEP China-AfricaEnvironment Centre. China and Africahave agreed to multilateral cooperation inenvironmental protection under UNEP.

• China and Africa have agreed to dialogueand exchanges in environmental protec-tion and cooperation in human resourcesdevelopment. Over the next three years,China will increase the number of envi-ronmental protection administrators andexperts from Africa to receive training inChina. The two sides will work with theUNEP for multilateral cooperation inenvironmental protection.

• China has established cooperation incapacity building, prevention and controlof water pollution and desertification,maintenance of biodiversity and thedevelopment of environmental protectionindustry and demonstration projects.

• China has set up in Africa 10 demonstra-tion centres of agricultural technologywith special features.

• China has stepped up cooperation withAfrica in extending applicable technolo-gies and human resources training in agri-culture. One niche for China is technical/engineering support. A second Chineseniche is in agriculture. For example, theChinese have been trying to encourageGhanaian use of new more productivestrains of rice.

• President Hu announced that Chinawould work with Africa to set up three tofive special economic zones there, agreedto build more Confucius Institutes andapproved a further nine African countriesas tourist destinations for Chinese citizens.


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• China has announced that it will expandthe African Human Resources DevelopmentFund (AHRDF) to train some 15,000 pro-fessionals between 2007 and 2009.

• At least 3,000 Chinese scientists will spendthree years working in rural communitiesin developing countries to help improvetheir food security. The arrangement ispart of a strategic partnership betweenChina and the UN FAO that was agreed atthe FAO’s Regional Conference for Asiaand the Pacific in Jakarta in May. Chinahas already sent more than 700 expertsand technicians to at least 20 countriesmostly in Africa and Asia.

These activities represent a starting point, but byno means exhaust the potential of China to workcooperatively with African countries to improveenvironmental conditions, based on Chinese expe-rience in sustainable rural and urban develop-ment, and in fostering sustainable natural resourceand sustainable industrial development.

Conclusions about China’s InternationalLearning and Sharing

China has a 35-year record of exchange of viewson environment and development with the inter-national community. It has demonstrated an abil-ity to take on board radical new ideas as part of itsoverall opening up to the world. The characteris-tics of this learning include the following features:

• a clear idea of what is wanted/needed, andfrom whom China can learn;

• adaptation to Chinese context and needsthrough experimentation;

• an experimental approach to policy: “feel-ing the stones in crossing the river”;

• effectiveness in scaling up successful pro-grams;

• careful sequencing; and

• openness to dialogue.

The task is made easier by the reality that Chinacan pick and choose its sources. China has dealtwith the huge supply of expertise available fromgovernments; international organizations andNGOs; business consultancies and multinationalfirms; and others, in a very strategic and consid-ered way, identifying which organizations theywant to work with on which issues, based on com-parative strengths and capacities but always keep-ing China’s own needs and priorities front andcentre.

Yet, while China has been very good at learningfrom, adapting and incorporating internationalbest-practice, at the same time the Chinese havebeen somewhat weaker at learning from their ownexperience: they have not developed and systemat-ically applied good methodologies for analysis andevaluation of their own policies. This is an areathat needs to be strengthened. Perhaps most diffi-cult has been the capacity to develop a compre-hensive and effective approach to the use of eco-nomic incentives for matters such as industrialpollution control and for enhancing resource useand energy efficiency.

China also has found useful ways to draw on inter-national expertise, for example via the CCICED.And only weeks after the release of the report tothe British Government by Sir Nicholas Stern oneconomic aspects of climate change,110 he trav-elled to China to meet with senior policy-makers.To say that China is broadly engaged with theinternational community as it plans and imple-ments its domestic environment agenda is anunderstatement. What will become more apparentin the years ahead is a growing influence on thepart of China within global fora.

The role of China in international cooperation willcontinue to be a complex matter, involving a num-ber of motives on the part of other countries and onthe part of China. China is aware of its increasingprofile as a major player and that its behaviour isincreasingly scrutinized by international media andobservers, and it wants to be perceived as a respon-sible stakeholder in the international system.


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110 HM Treasury, Stern Review on the Economics of Climate Change, 2006, <http://www.hmtreasury.gov.uk/independent_reviews/stern_review_economics_climate_change/sternreview_index.cfm>.

China is an emerging key player in “South-South”lesson learning, technical exchange and technolog-ical transfer. While Africa is one key partner andclient, much of this will take place in Asia and per-haps Latin America. There likely is a role for Chinato learn from third parties such as bilateral andmultilateral donors, and perhaps from bodies suchas the Development Advisory Committee ofOECD, and from international non-governmentalorganizations, and also UN agencies. But China’sexpanded presence and efforts could provide fresh

approaches. Certainly it is likely that China will bewelcomed in Africa and elsewhere as an additionalsource of assistance, but even more for the possi-bility of trade ties. It is only a beginning, however,in relation to environment and developmentpotential, and, in Africa and other developingregions, there will be much need for monitoring ofwhether the new relationships will have net posi-tive environmental benefits. This is a challengethat China could readily address in coming years.


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China is gradually assuming the responsibilities ofa leading producing and consuming nation. Anation that will be playing an ever-more signifi-cant role in global environmental affairs. In thissection we explore 10 issues important for Chinain developing an internationally-satisfactory,domestically-productive environment and devel-opment relationship.

Issue 1 – Enhancing DomesticPerformance on EnvironmentalRegulation and Enforcement,Pricing, and Environmental Planningand Management within ChinaThe reality for all nations is that effective domesticaction is essential as the basis for solving regionaland global issues. China is no exception. Betterenforcement of existing laws and regulations, fur-ther implementation of taxation and pricingmeasures, and improvements in environmentalgovernance and institutional coordination, areareas that everyone realizes have to be improved.The years ahead will bring the additional challengeof integrating provisions from a number of MEAsinto domestic environmental management. Thiswill require significant new measures related tomany sectors such as energy, transportation, agri-culture, industry and water resources.

As the case of compliance under the MontrealProtocol reveals, basic implementation of anymajor agreement will take a decade or more. Theagreements tend to become more stringent overtime, so that full implementation may well take 20to 30 years or more. CITES is still not meeting itsgoals even after such a long time span. The hardissues associated with the Climate ChangeConvention are still in the future. We can presumethat the period after 2010 will be exceedinglyimportant for China to address a complex, highlyinteractive set of domestic and international envi-ronment and development implementation needs.

Increasingly, the world will view China as a majoreconomic force and innovative leading industrialnation rather than as part of the developing world.

There will be rising expectations concerning envi-ronmental stewardship in all of China’s actions.

Issue 2 – Reducing the Impact ofChina’s Activities on GlobalResource and EnvironmentalConditions The review of market supply chains in Case Study1 reveals just how significant China is becoming inits draw upon natural resources from many partsof the world. There is little question that Chinawill have a major impact on sustainable resourceuse. The impacts are not necessarily negative. Ifsome lands can be turned into more productiveuse, there may be major benefits. But the pressureon tropical forests, coral reefs, ocean fisheries andsome agricultural lands is likely to be severe, andbiodiversity losses high. There are three key points:

• How China can continue to access theresources needed for its high rate ofgrowth, while strengthening its owndomestic capacity for efficient use of rawmaterials and improving environmentalprotection.

• How China can deal with individual sup-ply sources to reduce supply chain envi-ronmental impacts created in meeting itsdomestic and export-oriented economicneeds.

• How global and regional environment andsustainable development efforts can befurthered through Chinese commitmentsand involvement.

These are big points, all relating back to China’s dualrole of meeting the material needs of its own peopleand secondly, continuing to be “workshop to theworld,” but perhaps under more stringent environ-mental conditions. It is inescapable that China underthese circumstances needs to pay particular attentionto its ecological footprint—in considerably moredetail than most other developing nations. Many ofthe issues described below relate back to particularaspects of the three points mentioned above.


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4.TEN ISSUES

Issue 3 – Avoiding Pathways Takenby High-consuming NationsThe unrestrained appetite for consumer goods inregions of North America, Europe and elsewhere isunsustainable. But applying the brakes at the pres-ent time on China’s role in supplying cheap goodswould damage China’s economic engine, at least inthe short run. It cannot be China’s burden orresponsibility to ensure sustainable consumptionpatterns on the part of all trading partners.Arguably, China’s low production costs have abettedthe continued growth of global consumerism bylowering the cost of goods. Certainly there is anaccumulating environmental deficit growing insideChina, regionally and even globally as a conse-quence of limited environmental management asexport-oriented production escalated within China.Even if China were now to address these concernssatisfactorily, some other developing countrieswould take over and emulate the Chinese economicgrowth model of the last decades. Thus, while full-cost pricing and better trade and investment rulesshould help, if implemented fairly around theglobe, these do not constitute a sufficient solution tounsustainable consumption. The responsibilityshould remain primarily with measures taken bythe consuming nations.

And in this regard, China itself must find a virtu-ous path of sustainable domestic consumptionthat does not trace the unsustainable route takenby wealthier, high-consuming nations. This is likelyto become more difficult over the coming decade,given the growing Chinese wealth and policyemphasis on expanding the size of domestic mar-kets. However, China is well-placed to become anexample for other countries, with its high savingsrates, low per capita consumption patterns at pres-ent, and its considerable latitude to increase energyand material efficiency. The general notion ofXiaokang111 promoted by current leaders is help-ful, but this concept needs to be made as opera-tional as possible with appropriate capacity toaddress situations where it is not working.

Issue 4 – Improving Market Accessand Promoting Sustainable Trade Improving market access will continue to be theconcern of the Chinese government and businesses.In the past few years, Chinese exporters havesometimes been thwarted by higher environmen-tal, health and safety standards in developed coun-try markets. According to a 2003 MOFCOM(Ministry of Commerce) report on the Impacts ofForeign Technical Barriers to Trade on China’sExports, the Chinese exports most commonly fac-ing difficulties are those of animal origin such aspoultry and marine products, vegetables and otherplant products including tea, peanut and tobaccoproducts. The countries that most commonly raisedifficulties are the European countries, Japan andthe United States.112 According to the same report,major difficulties faced by Chinese exportersinclude: lack of information and awareness of rap-idly changing requirements; lack of financialresources to undertake renovation or to obtaininternational certification; lack of information onpotential technological solutions for meeting therequirements of importing countries; and difficul-ties in meeting the supply chain requirements thatinvolve compliance of many different manufacturersand actors of a product life cycle.

Despite the difficulties that foreign environmentalmeasures present to Chinese exporters, thesemeasures may represent trade and developmentopportunities as well. They can, for example, pro-vide an incentive to accelerate the development ofgreen products, the introduction of cleaner pro-duction technology or the expansion of environ-mental services. They can prompt domestic enter-prises to strengthen their environment manage-ment, to adopt new technologies and processesand to lower energy and raw material consump-tion. This will ultimately increase the competitive-ness of their products. It is not only conducive toovercoming green barriers to trade, but is alsocompatible with China’s sustainable developmentstrategy.


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111 Xiaokang is an old Chinese concept of a modestly well-off situation for all in society. It introduces a concept of equity in cur-rent development directions, but also, perhaps, sustainable levels of consumption.

112 MOFCOM, Department of Science and Technology Development, Investigative Report on the Impacts of Foreign TechnicalBarriers to Trade on Chinese Exports (Beijing: MOFCOM, 2003).

There is a need in China to accelerate trade ingreen products, environmental technology andenvironmental services. Indeed, some enterprisesin China have realized that there are green oppor-tunities in overseas markets and have committedto cleaner production through foreign-fundedprojects. However, these enterprises suffer fromlack of information relating to foreign environ-mental requirements and relevant WTO rules.They have identified the need for practical guid-ance on environmentally-related WTO require-ments and on existing or planned national envi-ronmental requirements related to their exportproducts.

There is also a need to assist China’s own effort toimprove market access in response to increasinglystringent health and environmental standards andincreased demand for environmentally friendlyproducts in developed countries’ markets, and toaddress actual and perceived difficulties faced byChinese exporters wishing to get greater access todeveloped country markets. This could be accom-plished through creating the basis for sustainabletrade, including supporting access to informationon foreign environmental and health safety stan-dards; establishing local networks to disseminateinformation and organizing training for promot-ing sustainable trade; and establishing an interna-tional network to facilitate international certifica-tion and standard conformity. It could also beaccomplished through supporting Chineseexport-oriented enterprises in acquiring technicalinformation on technological solutions for meet-ing chain supply requirements and information onpossible foreign financial assistance to promotesustainable trade, and to promote corporate socialresponsibility in China.

Issue 5 – Aligning Production andManufacturing with InternationalEnvironment, Health and SafetyApproaches, Standards andPerformanceThere is a real need to improve access to informa-tion on environmental, health and safety standards

of countries that are the target of Chinese exports,and to provide technical assistance to address realand perceived difficulties of Chinese exporters.The examples provided below demonstrate that itis possible to make progress through a combina-tion of government efforts and business initiative.While the initiatives described should have envi-ronmental benefits, they have been promoted forpragmatic reasons—market access, and in somecases, to avoid import competition.

Environmental Management Systems

In 1997, China adopted five ISO 14000 standardsthat were first published by the InternationalOrganization for Standardization. The StateCouncil approved the establishment of theNational Accreditation Committee forEnvironmental Management Systems to overseeChina’s authentication work of ISO 14000. As oflate 2004, Chinese enterprises and organizationsaccounted for some 70 per cent of the world’s74,000 ISO 14001 registered facilities.113 This isquite a remarkable achievement, which demon-strates responsiveness on the part of both anational government to a useful tool for improv-ing environmental performance. The ISO 14001effort has laid groundwork for other types of envi-ronmental certification involving Chinese prod-ucts and processes.

FSC and MSC Certification

Perhaps the most stringent of various environ-mental process and product certifications is theForest Stewardship Council (FSC), which has beenactive since 1993 at the international level, andnow is moving into domestic markets as well. Bothaspects are relevant, since Chinese exporterssource their raw wood materials from such a vari-ety of sources. Both Chinese domestic purchasersof wood products and purchasers abroad have aninterest in knowing that these products are derivedfrom sustainably grown and harvested sources.Both chain of custody certification and forestmanagement certifications are important. Since2003 these two types of certifications have beenintroduced within China through the FSC China


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113 Sangbum Shin, The Role of the Government in Voluntary Environmental Protection Schemes: The Case of ISO 14001 in China,Chinese Electronic Periodical Services (C.E.P.S.), Issues & Studies, December 2005.

National Initiative. Currently there are 150 enter-prises holding chain of custody certification,including a number of furniture manufacturers,and four wood producers hold the forest manage-ment certificates for domestic natural and planta-tion forests totaling some 400,000 ha. The hugechallenge is to convert these beginnings into morewidespread efforts domestically, and to ensure thatthe majority of wood imported into China is inter-nationally certified either through FSC or throughequivalently-stringent certifications.

A similar certification process operates interna-tionally for seafood via the Marine StewardshipCouncil (MSC). No Chinese fishery or processorhas been certified by this Council. This would be acomplex process for wild fisheries since seafood issourced from many locations for processing inChina and re-exported to many international mar-kets, sometimes with final processing in thirdcountries such as Canada before export to finaldestinations such as the U.S. It might be a some-what easier effort for China’s massive and diversi-fied aquaculture industry.

Ecolabelled Products and “Green Food”

Up to June of 1996, there were only 12 categoriesof products that had been awarded the ChinaEnvironment Label, and there were 43 productsbeing certified with the environmental label. Nowthere are some 21,000 products produced by 1,300enterprises that have obtained China’sEnvironmental Label certificates. Since 1997,“green food” has been gradually popularized,industrialized, commercialized and exportedwidely. It has now become one of the major exportproducts actively promoted by China Import andExport Company of Cereal and Edible OilProducts. In December 2006, the Ministry ofFinance and SEPA announced plans to begin greengovernment procurement, first at national andprovincial levels, and, in 2008 by all levels of gov-ernment. This will be a major incentive for shiftinginto “greener production” if implemented fully.114

Issue 6 – Alignment withInternational SHE StandardsAs China’s new industrial base matures, and asmore domestic and international attention isfocused on issues such as safer production and useof coal, the many issues related to safety, healthand environment (SHE) in China will receivegreater international scrutiny. Success with eco-nomic growth strategies focuses attention onChina as a competitor, as the cause of lost jobs inEurope, North America and elsewhere, as well asthe source of environmental problems such asmercury or other distantly-transported pollutants.Labour activists, environmental lobbies and indus-trial interests abroad will place considerably morepressures than at present for SHE improvements,while leaving China vulnerable to internationalclaims that its economic growth leads to undercut-ting of hard-won social and environmental bene-fits elsewhere.

These concerns will not be addressed by simplyadopting international standards, or better; theemphasis will be on verifiable performance andtransparency in dealing with problems. And thisissue is, of course not restricted to strictly domes-tic operations, but also to performance of Chinesemultinational companies in their operations inother developing or industrial countries.

China is certainly engaged on SHE concerns atpresent, but not at a level of effort commensuratewith the scale and range of problems. It is an areawhere the large body of experience in other coun-tries can be of direct value, also of WBCSD andother international business organizations, inter-national NGOs and international organizationssuch as the OECD, ILO and UNEP.

Issue 7 – Dealing with New Types ofEnvironmental ProblemsEach decade brings with it new environmental andsustainable development issues and surprises. Wecan presume that more will emerge (see Box 8 for


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114 A certified product “will pose minimal or no harm to the environment and human health during its life cycle, from the design,production, packaging, transportation, and use stages to the item’s ultimate recycling, reuse, or disposal.” (See iNSnet<http://www.insnet.org/ins_headlines.rxml?cust=&id=3759>).

Box 8. Emerging issues of environment and development.

Biosafety – The problems associated with invasive species, zoonoses (diseases passed from animals to humanssuch as avian influenza, BSE and SARS, but also malaria and other parasitic diseases) and deliberate infections,including bioterrorism acts, will be of increasing concern. These need to be assessed as environmental risks anddealt with in a way that minimizes harm to wildlife while protecting human health and economic activities such asanimal husbandry and tourism. Biosafety will become even more significant in the future, and demands an inte-grated ecological, public health, safety and economic framework of analysis, policy and action.

Climate Change – This subject is very complex, with a number of key issues: China’s effective participation in theClean Development Mechanism (CDM); development of climate change adaptation and mitigation strategies; car-bon taxes; domestic and international emissions trading; implementation of coal gasification and other sustainabledevelopment technologies that reduce greenhouse gas emissions and energy consumption; China’s role and com-mitments in post-Kyoto climate change action; and gradual transformation from a fossil hydrocarbon to a bio-prod-uct economy.

Environmental Assessment of Innovation Technologies – Biotechnology and nanotechnology are potentialdrivers of future economies. They will therefore have a pervasive influence in industrial processes, consumer prod-ucts and on environmental technologies. They require sector-wide environmental assessment and monitoring inaddition to specific health, safety and environmental review of specific products. Massive investment in biofuels andother innovation technologies require careful monitoring to ensure cost-effective, environmental benefits.

Environmental Fiscal Reform – Consideration of pricing, environmental taxes, government expenditures andsubsidies has, in most countries, been done in a rather ad hoc way. There is increasing interest in taking a moreintegrated approach involving all of these categories to develop a more strategic and comprehensive use of eco-nomic instruments for environmental protection and improvement. With such an approach, benefits should be moreeasily monitored since the various elements can be aligned to work together in support of key environment andsustainable development objectives.

Financial Sector and Environment – Environmental guidelines for domestic and foreign direct investment; bankloans and mortgages to business; and insurance that recognizes the liability associated with production of haz-ardous and toxic materials and pollutant impacts, are examples of how the financial sector can influence environ-mental protection outcomes. As well, in the stock market, there is now an international effort on the part of invest-ment firms to examine environmental performance of companies. These measures have had limited impact withinChina, but major effects on multinational companies in Europe and North America in particular.

Gender and Environment – This topic is of increasing concern in both developing and industrial nations. Thereare a number of important considerations including: maternal health and pollutants in the body affecting the child;indoor air pollution impacts on women at home; female participation in decision-making; female access to educa-tion; environmental health and safety in the workplace, especially for migrant males working in cities or in occupa-tions such as coal mining; gender-specific participation in natural resource management such as forestry; accessto market-based environmental opportunities and credit; and gender, poverty and environment.


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Mercury – China is considered to be the largest source of elemental mercury release into the environment today,with possibly even greater levels in the future as a consequence of coal burning, gold mining and other activities.There are concerns related to bioaccumulation in people and animals both within China and inter-continentally,since mercury is transported via air currents and in rivers and the ocean. There is growing interest in internationalregulation of trade and reduction at source. Understanding the movement of mercury locally and to distant loca-tions is complex and demands more environmental and health analysis than in the past, both in China and abroad.There will be major investment needs to address the problem.

Ground-level Ozone – This pollutant, found in the lower atmosphere as a consequence of automobile use andother ground-level emissions, is of increasing concern as a public health matter, and for its role in transforming otherpollutants into biologically-reactive, forms. Ozone was at first thought to be mainly a local issue, especially aroundmajor cities. But it is now recognized to be a pollutant that can travel great distances, with Asian sources con-tributing to pollution on the west coast of North America, for example.

Indoor Pollution – Air quality in homes, offices and factories is now recognized as a major environmental healthconcern. Building design, release of toxic gases from building products, improper construction that affects ventila-tion and other factors can contribute to “sick building syndrome.” These can be problems even in major skyscrap-ers and apartment buildings. In homes, coal burning, poor ventilation and use of materials that may contain toxicmaterials are problems that influence health. Often, poorly constructed buildings will also be energy inefficient andunsafe in other aspects. There is growing interest in many countries for sustainable buildings meeting LEED (U.S.Green Building Council Leadership in Energy and Environmental Design) standards.

SCPT (Sustainable Consumption, Production and Trade) – How to govern these three aspects of environmentand economy in an integrated way is a key challenge for the future. They are particularly important for China, as acountry seeking to stimulate domestic consumption, dependent on maintaining a high level of exports, and on mar-ket supply chains for raw materials, and making major efforts towards having a circular economy and eco-efficientindustrial production. SCPT depends on a mix of command and control; economic incentives; voluntary and con-sumer-driven approaches such as environmental certification; industry stewardship programs; and environmentally-sustainable procurement programs on the part of governments and large industry. SCPT as an integrated topic forenvironment and sustainable development is still in its infancy but can draw upon available experience of the maincomponents.

SHE (Safety, Health and Environment) – Combining these three aspects into occupational, health and environ-mental inspections and in industrial management is now commonplace in some OECD countries. In China theseare topics still treated separately and insufficiently by comparison to international standards. There will be growingpressures from international consumer, labour and environmental organizations, and in trade arrangements toensure compliance to good standards, especially for production of internationally-traded products. There is also astrong move to ensure that SHE covers industrial impacts on nearby ecosystems and communities as well as theworkplace.


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examples that are highly relevant to China): someassociated with new technology development suchas biotechnology and nanotechnology; the pushfor novel forms of resource extraction such as oilsands, frozen ocean methane deposits, deep oceandrilling for oil and gas; various biosafety issues,including bioterrorism, zoonoses that may createepidemiological crises and alien invasive species;and, of course, the unknowns associated with climate change. In addition, with new knowledge,chemicals and industrial processes formerlythought to be safe may need new regulatory andphaseout measures. In all the cases cited, there arelikely to be significant international considera-tions. As the case with ozone depleting substancesdemonstrates, managing the transition on any oneissue is complex, likely played out over decades.

On most new issues, it may be presumed thatChina will be directly affected and involved in thesolutions. Even for development issues such as oilsands located in North America, China will have astake since it invests in these new energy sources. Itis an important outcome of globalization thatproblems become shared. And certainly China willface some critical regional concerns such as thechanging moisture conditions associated with theloss of glaciers and snow melt in the shared“rooftop of the world.”

Some of the strategies to deal with novel concernsand their implications within China and in China’sinternational relationships are: proactive measuresto anticipate and take early action on emergingproblems; incorporation of environmental assess-ment into R&D efforts and commercialization ofnew technologies, both nationally and cooperativelywith international organizations; alignment ofChinese and international regulatory efforts for newtechnologies and environmental monitoring; pro-motion of corporate social responsibility on the partof Chinese business and investors; and participationin major international assessments conducted byorganizations such as UNEP and OECD.

Issue 8 – Fast-track of Innovationsfor Sustainable DevelopmentChina is building its future around innovation,with an investment in scientific development andR&D that already exceeds that of Japan, and manycountries of Western Europe. But innovation does

not automatically lead to pathways of sustainabledevelopment. The time frame for innovationsmoving from concept to widespread practice hasbeen on the order of 15 to 30 years. With needssuch as coal gasification, alternative fuels for trans-portation, improved plants able to thrive underchanged soil moisture conditions, etc., this timeframe must be significantly shortened. China’s callfor technology leapfrogging, concessional arrange-ments for new technology and partnerships toaddress issues such as carbon sequestration, arebeing answered, but not yet at the level of activityrequired.

Innovation of many sorts is required, in additionto introduction of new technologies, for example,changes in governance, management, publicengagement and financing. These are matters thatcan be addressed domestically and internationally.China’s constructive engagement with innovationalmost certainly can be enhanced during the 11thFive-Year Plan and beyond. It is a bright light bothdomestically and for the world.

Issue 9 – Information QualityKnowledge needed for global environment anddevelopment decisions depends on the quality ofnational-level data and information. The qualityof information from China suffers in a number ofways: declining quality of monitoring in recentyears; misleading information “manufactured” atlocal levels to meet expectations; and inadequateanalysis, a need for more timely reporting of prob-lems and a lack of transparency. These problemsare certainly not restricted to China, but no othernation faces such rapid development changes,where accurate information plays an exceedinglyimportant role. At times, these national-level prob-lems have created global-level issues, for examplein relation to world fisheries statistics, SARS andother public health concerns, and specific environ-mental matters such as traffic in illegally harvestedgoods sent from other countries to China, includ-ing timber and wildlife. In addition, since Chinahas not developed a reliable, internationally-com-patible system of national environmental accounts,comparability of performance with other nationsis limited.

It is very difficult to assess China’s actual contribu-tion to cleaning up global and regional pollution


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concerns such as GHG production; mercury con-tamination; POPs in the Arctic and elsewhere; andvarious other long-range transboundary pollu-tants without accurate assessments of environ-mental loading, behaviour of pollutants in theenvironment and the effectiveness of controlmeasures. Each of these aspects requires good datacollection, proper analysis and sharing of informa-tion—all matters where international cooperationis important.

While there may well be justified concerns thatdata improvement will create problems for China,especially if it is discovered that China’s contribu-tions continue to rise, without such informationChina will be vulnerable to assertions by othersaround the world about its contributions to prob-lems elsewhere. An example is the assertion thatsome 50 per cent of mercury contamination inU.S. lakes and rivers arises from Chinese sources.

At a grander scale still are the information qualityand quantity needs required to refute concerns thatChina may turn into the world’s largest pollutionhaven. Whether this hypothesis will take hold is asignificant matter for China’s trade relationships aswell as domestic perceptions. It will not be persua-sive enough to point out the major investments inpollution control and other environmental manage-ment initiatives. Credible and independently verifi-able signs of actual progress will be needed.

Issue 10 – Capacity to Share China’sEnvironment and DevelopmentSolutions GloballyChina’s expertise for solving many domestic envi-ronment and development problems, and for

addressing international-level resource and envi-ronment matters, including those associated withmarket supply chains and other trade matters, willbe in high demand. The three most significantsources of this demand are likely to be:

• developing nations, especially those withsignificant natural resource and othertrade ties to China;

• nations adjacent to China; and

• nations in partnership with China on spe-cific environment and development prob-lems or other alliances.

While arrangements will be dictated by specificcircumstances, all will require financial, scientificand managerial support, perhaps at levels aboveand beyond China’s current commitments andcapabilities.

The benefits to China may be considerable,although longer-term. There should be benefits toChina’s rapidly developing environmental industrysector. Quite likely, China will be a net recipient ofother benefits, including a number of intangiblessuch as international goodwill towards Chineseenvironmental problem-solving approaches; morerapid and cost-effective sharing of advanced tech-nology and management between other parts ofthe world and China; and, perhaps, favourableterms for resource access or other benefits soughtby China.


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China does not have the time to learn by trial anderror. It needs to identify and act on core responsi-bilities related to environment and developmentwhere results will be highly significant to Chinaand to the world. A good example has been China’srole in the Montreal Protocol restriction of CFCs.

Between now and 2010–2012, China will facesome major issues in terms of its potential globalenvironment and resource impacts—where it willbe expected to be a high performer. Among theseissues are:

• China’s rapidly rising greenhouse gasemissions;

• prevention and control of human diseasesoriginating in China (SARS, avian flu andothers);

• corporate responsibility for Chinese busi-ness and state activities abroad, especiallyrelated to environment and social aspectsof market supply chains;

• influence of China on global patrimony/heritage, including sites and structures,natural habitats and species of globalinterest located within China, and areasthat China might be affecting throughactivities abroad; and

• influence of China in shaping, adequatelysupporting and implementing interna-tional environmental agreements.

China can take various steps towards strengtheningits role as a responsible producing and consumingnation dedicated to resource and environmentalstewardship. These steps could include:

• working towards prevention and elimina-tion of major problems rather than seekingpalliative measures;

• promoting upward movement of stan-dards and performance;

• consistently making effective and innova-tive international interventions, includingsupportive and leading action;

• implementing domestic policies, regula-tions and enforcement activities harmo-nized with international environmentaland other agreements; and

• working cooperatively to remove illegal,cross-boundary activities.

There are many opportunities for China to learnfrom the rest of the world’s 30 to 40 years of envi-ronment and development experience. There arecaveats to this experience. None parallels the rapidrate of economic development experienced byChina, nor the size of population, and thereforemeeting both demands and very complex gover-nance considerations. Nevertheless there areimportant lessons, good and bad. China’s neigh-bour, Japan, is an important source, albeit not theonly relevant example. In fact, China has donequite a good job at learning from others so far, andin drawing on international efforts such as Agenda21.

China also must be prepared to address emergingenvironmental concerns such as those shown inBox 8. This list is drawn up based on internationalexperience including concerns not fully describedin the text. It will make sense to cover these issuesin an internationally cooperative way in the com-ing years inside and outside of China.

Over the past decades, China has maintained a rel-atively low international profile, not overtly takingon leadership positions internationally. This isconsistent with Deng Xiaoping’s admonition thatChina should “hide its ambitions and disguise itsclaws.”115 It has been the Chinese way in relationto international environment relations as well as inmany of its economic development ways. Yet theresults of the economy are such that this approachis becoming increasingly untenable. It can now be


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5.CONCLUSIONS

115 This point of not taking an overt leadership role is repeatedly stressed during meetings with Chinese officials, but it does notmean inaction. The International Herald Tribune notes that this approach may be emphasized less in the future (China OpensDebate on its Rising Status, IHT, 9–10 December 2006).

argued that the same is true for environment anddevelopment.

The emphasis from China in the future will likelybe that it wishes to be seen as a responsible,wealth-creating country, willing to shoulder itsshare of international burdens, but wanting for theworld to recognize that it is also still a developingnation. This duality needs to be respected, certainlyin relation to environment and development.

China’s environment and development relation-ships within its region, with poorer countries inother regions such as Africa and with richer OECDnations will each take on their own complexion. Ata global level, it is proper to expect that China will

move towards considerably more action to reducecarbon emissions, control pollution and intensifyefforts to be a good steward of resources at homeand abroad. It should be in China’s best interests toinsist that other nations do their share as well.

It was popular in the 1970s to describe all coun-tries as passengers in a single lifeboat called PlanetEarth. There is no escaping the impacts of any onepassenger on the others. It will be one of this cen-tury’s greatest challenges to keep a steady trim onour lifeboat. China, by its size and increasing globalrole, can play a huge role in safeguarding the jour-ney for all nations and for all people.


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ONE LIFEBOATCHINA AND THE WORLD’S ENVIRONMENT AND DEVELOPMENT

The climate is changing; biodiversity is being reduced; quality of land, waterand air is compromised. Indeed, our global environment is a stormy sea ofeffects known, unknown, unpredictable and perhaps unimaginable—a stormysea we navigate together in one lifeboat. And like a real lifeboat, when one pas-senger moves, everyone feels the effects.

With a massive population, substantial resource base and unprecedentedeconomic growth, China occupies a prominent position in the lifeboat. Thecountry’s environment and development impacts can be felt around the world.By 2020, China expects to quadruple its GDP over the year 2000, whilebecoming an “environmentally friendly, resource-efficient society.” These goalspresent an enormous challenge, with outcomes of growing significance for allnations.

China’s role as the “world’s workshop” complicates relationships of its ecolog-ical footprint and market supply chains. There are pressures that are movingthe Chinese people away from their traditionally low consumption patterns. ButChina’s new wealth presents major opportunities for rapid improvement notonly within China, but for tackling global environment and development issues.

China has demonstrated its commitment to environmental stewardship by par-ticipating in major international agreements and by investing in improved envi-ronmental performance domestically. It’s projected that between 2006 and2010 alone, China will spend US$243 billion on environmental protection andmanagement. Yet economic growth outpaces environmental efforts, and aweak international environmental governance system hinders progress.

This report looks at the international environmental implications of China’sgrowth, and the role played by China in international environmental coopera-tion, including its regional and global efforts and its growing role in develop-ment assistance.

As with a real lifeboat, we learn that there is little room or time for trial and error.There is only room and time for cooperation and effective action. Only thenmight the lifeboat sail smoothly. China, with the help of its fellow nations andtrading partners, must improve its environmental performance and find waysto maximize the return on its investment in environmental protection. And thecountry must use its substantial sway to encourage its regional and globalpartners to improve their own performance.


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The Knowledge to Act - One Lifeboat: China and The World’s … · 2016-01-18 · ONE LIFEBOAT...

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