Is China Finally Discovering the Limits to Growth?

05/11/2015 03:41 pm ET | Updated May 11, 2016
FRED DUFOUR via Getty Images

HONG KONG -- In February of this year Chinese President Xi Jinping publicly unveiled the "Four Comprehensives," his list of political goals for China. They are to "Comprehensively build a moderately prosperous society, deepen reform, govern the nation according to law and strictly govern the Party."

On one reading, this is business as usual for President Xi. He intends to continue "strictly governing the party," through the nationwide anti-corruption campaign that has come to dominate his time in office. And he also intends to continue on the path to achieving a "moderately prosperous society." This is a phrase with a long history in China, stretching back to the Confucian era, that took on renewed importance when Deng Xiaoping made it the eventual goal of Chinese modernization in 1978. Since then, the Chinese Communist Party's economic strategy has been explicitly designed to achieve this goal, and Xi's administration is no exception. The People's Daily called the Four Comprehensives "the guarantee to achieving the Chinese Dream."

But there is another, more radical, more interesting and more farsighted way of interpreting Xi's plan for China.

His landmark anti-corruption drive has done far more than simply purged the party of his political rivals, a charge leveled by some critics. It has come with the public admission that "systemic corruption" is a problem in China. This would be the equivalent of the U.S. president saying at the height of the financial crisis that the U.S. financial system is rigged by Wall Street. This was thus no small statement -- the same assertion was enough to get a recent Xinhua report scrubbed from the Internet. This is an admission that the system itself is flawed, with the direct implication that the Party has made a mistake and is part of the problem.

"More than half of China's water is so polluted it cannot be treated to the point where it is safe to drink."

The truly intriguing possibility is that corruption is not the only systemic problem that Xi wants to address. If reviving "moderate prosperity" 35 years after Deng means more than just admitting that China's days of double digit growth are behind it, then Xi might be the first major world leader to admit that on a finite planet, infinite and unrestrained growth, especially in the world's most populous country, will prove not just unsustainable but downright catastrophic. Could Xi be tapping into a global awakening to the fact that we have been in denial for too long about the unintended consequences of unfettered growth?

There are signs that point in this direction. Since 2012, the Communist Party of China has had as part of its constitution the directive for the "establishment of ecological civilization." Xi's actions so far have shown that he intends to make good on this, not least through an historic climate change accord last year with his U.S. counterpart President Obama. He has also publicly pledged not to sacrifice the environment to promote temporary economic growth, comparing caring for the environment to "caring for one's own eyes and life." Chinese Premier Li Keqiang has likewise joined Xi in promising to address pollution as one of his top priorities, going so far as to declare a "war on pollution."

All of this points towards an economic and environmental policy that if followed through will be admirably farsighted in comparison to that of many other major nations.

After all the China of today is no longer Deng's China, and public expectations and aspirations have changed accordingly. When Deng outlined his plan, China's GDP per capita was a mere U.S. $250, now it is U.S. $6,800. Then, it would have been unimaginable to give environmental concerns an equal standing with Deng's goal of "adequate food and clothing." Now, many in China would likely be willing to forego an economy that doubles in size every 10 years for an end to the air pollution that kills thousands annually in Beijing alone. According to China's ministry of environmental protection, more than half of China's water is so polluted it cannot be treated to the point where it is safe to drink and a quarter is so polluted it is unfit even for industrial use.

But the fact that Xi's emphasis on protecting the environment is necessary makes it no less impressive. Imagine the leader of a European democracy saying that he cannot deliver continuous growth and that in fact the population needs to be willing to accept building a post-modern society with an economy based on living within ones means. Lest one think that there is no need for an already "green" Europe to act, the European Environment Agency reported in March 2015 that in 2011 air pollution alone, mostly in the form of fine particulate matter, resulted in 400,000 premature deaths in Europe, where more than 95 percent of the urban population is exposed to unsafe levels of at least some pollutants.

India's First Air Quality Index

There are signs that the other giants of the developing world may be following China's example. India's Narendra Modi, for example, launched a new air quality index in April in a first step to addressing the fact that air quality in India is even worse than in China, and so bad it is reducing the life expectancy of up to 660 million Indians by an average of 3.2 years. Tellingly, Modi called for lifestyle changes and a move "away from consumerism." And late last year Indonesia's Joko Widodo signaled what has been deemed a "significant change of direction for Indonesia" when he announced a new plan to protect the rainforest and peatlands in his country, which currently suffers from one of the world's worst rates of deforestation.

Compare this with the progress in the developed world, where politicians, business leaders and economists, laboring under the illusion that such concerns are only a problem in less well-off elsewheres, continue to focus on stimulating economic growth in the narrowest sense, with the occasional concession to discussing how equitably that growth is distributed. This ignores the scientific reality that the export of Western consumption patterns to the rest of the world to sustain growth in the West would lead to disaster in as early down the line as 2050, when there will be around 9.5 billion people who need to be adequately fed, clothed and housed.

Still, changing China's attitude towards growth is far from a fait accompli, no matter how farsighted its current leadership may be. It is one thing to identify a problem and quite another to solve it, and at present, many of the imperatives of Chinese public policy still push in the direction of unsustainable consumption and under-pricing externalities. This remains the biggest political tension within policy-making circles. Take even the recently announced "One Belt, One Road," initiative to create a modern day Silk Road linking Asia and Europe.

"The individual desire to own a car must be secondary to the need to protect the collective welfare."

On the surface, it checks all the boxes of modern day public policy, promoting trade, openness, improving infrastructure and increasing connectedness between not just separate nations but separate continents. In reality, an overland route connecting Xian to Venice through Rotterdam and Istanbul would be one of the largest infrastructural products in human history, and come with concomitantly large environmental impacts as mountains are leveled, ecosystems disrupted and massive amounts of resources consumed in its construction. This, from a country which is already infamous from the scale of its production. As much as the U.S. might remain the engine of the modern world, estimates are that in the three years from 2011-2013 China used more concrete than the U.S. did in the entire 20th century. A Joint UN-ADB report predicts that by 2050 Asia's annual resource usage will be roughly twice that of the entire world today.

Avoiding environmental and social catastrophe in Asia and the world will therefore require addressing these tensions inherent in large countries like China and India, and indeed in every other modern nation. And meeting that challenge will require that China take the lead in refining its political systems, yet also avoid simply aping the western model of liberal democracy. It must opt instead for a system where collective rights are paramount. The individual desire to own a car, for example, must be secondary to the need to protect the collective welfare by ensuring livable levels of pollution, congestion and the mental and physical stresses those cause. There will be no way around the imposition of strict limits and major reforms which go against much of the current conventional wisdom, including about the unblemished virtue of liberal democratic states.

If Xi is serious about addressing these issues, he will be tackling the most difficult and important challenge facing the developing world in the 21st century. And that would make him the most revolutionary Chinese leader since Mao with a "great leap forward" of his own that could very well put China in good standing to navigate the very tricky future ahead. It would make Xi's China a model for the rest of Asia and the world to learn from and follow, rather than a cautionary tale to avoid.

Pollution In China