THE BLOG

China: Ecological Civilization Rising?

03/02/2015 04:23 pm ET | Updated May 02, 2015

Returning to China for the first time in a quarter century this month was equally awe inspiring and terrifying. The observation deck of the truly gorgeous Shanghai World Financial Center is breathtaking, a fitting testament to China's rise. But it was the unexpected sense that we might be experiencing history at DeTao Group's summit in Shanghai, "Future New Economy: Sustainable Model Toward an Ecological Economy," that left an indelible mark on me.

I had the honor to address the DeTao Group summit on the topic of regenerative investing in natural capital. Inspired by the vision and leadership of DeTao Chairman George Lee, it was an extraordinary experience. The warm hospitality and genuine appreciation and respect extended to all the visiting "experts" was quite exceptional. As George told me, "in Chinese culture, we honor our teachers."

The context of the summit was of course China's unprecedented quarter century boom that has seen China emerge the second largest economy in the world, lifted two hundred million people out of poverty (so I'm told), and created middle class lives for many and immense wealth for more than a few. But this newfound wealth and power has come at a significant cost.

China is now the world's largest carbon emitter, the result of the west's outsourcing manufacturing production to a location where environmental standards are lower, and cheap, plentiful coal is the power source of choice. I'm told that eighty percent of the population has no access to clean water, and virtually all of the productive soil is toxic. The now infamous air pollution is making people sick and reducing life expectancies. The environmental crisis is not a special interest issue; it is omnipresent.

It was quite significant, therefore, when the 18th National Congress of the Communist Party wrote the construction of an "Ecological Civilization" into the Constitution in 2012, requiring a shift away from the industrial civilization modern China had become. Of course in an authoritarian State with single party rule, a change like this gets translated directly into policy, albeit slowly and unevenly. Note how clear China's President Xi is with respect to the real source of wealth:

"We value both natural landscape and resource as well as material wealth. The former overrides and promises the latter." - Chinese President Xi Jinping

I can't pretend to know how serious China's leaders are with respect to their stated goal of achieving an "ecological civilization," and one certainly can't help but notice the irony when looking at the pollution belching out of smoke stacks as you travel to and from the airport. But I was impressed with what I saw at this summit. Here are a few highlights:

  • The conference highlighted the work being led by ecological economist Dr. Robert Costanza in Sanya City ("the Miami of China") to create the first natural capital balance sheet for one of the world's major municipal governments. In his speech, Sanya City Vice Mayor Li Baiqing stated that "it is difficult for an entire society to think in a different paradigm," and "this [management of natural capital] project is our destiny."

  • Mr. Long Yongtu, who negotiated China's entrance into the World Trade Organization and is now Secretary General of the Boao Forum for Asia, gave a remarkably honest assessment, stating that, "China is at a crossroads. After thirty years of development, people are getting wealthier but are not feeling happier."

  • And Chairman George Lee closed the conference with a notable speech, calling for a "new economic system" in which investing in natural capital will be the doorway to the new economy. He has a vision for private capital working in collaboration with the public sector, enhancing the efficiency and speed of capital deployment for the shared benefits of healthy ecosystems, and the pathway to a "green mountain" to complement the "gold mountain" that has been built.

Now of course the devil is in the details. (For more on that, see my thought piece Limits to Investment.) Unleashing huge surpluses of investment capital in the name of "natural capital investment" can do as much damage as good, and much more is needed than unlocking investment capital. Indeed, Long Yongtu himself cautioned that investment had become "the bad guy" but felt it didn't need to be. I understood what he meant when I peered from atop the Shanghai World Financial Center across endless nondescript concrete blocks of apartment buildings that stretch as far as the eye can see.

But what struck me most as I listened to the presentations and even more in the private conversations was that I was experiencing history in the making. Unlike so many conferences in the West where there is a lot of talk, and then everyone knows little will change, in Shanghai, I felt the tide shifting under our feet. I felt that a force was being unleashed, that began, no doubt, with the amendment to the constitution in 2012, in response to profound ecological and human crises.

Authoritarian leadership, like it or not, has pointed to a spot on a distant horizon and set change in motion. Five-year plans were affected, and transitioning the economic system will require an ability to plan (take note, America!). Reward systems have been adjusted. Experts are called in for their ideas. Old paradigms that brought great success in the past are put on the table and critiqued in light of the new context. No ideological debate casts a shadow, only debate about how to engineer solutions. We may not like all the answers (200 nuclear power plants are in the pipeline). No doubt there will be ups and downs, and likely crisis. Success is far from certain.

Yet powerful mainstream Chinese interests appeared interested to learn, not defend. Successful and practical business leaders like George Lee, now a practicing Buddhist, have taken up the reins and are initiating action. The mayor of a major city is establishing a natural capital balance sheet and will begin monitoring its rise or fall as "destiny." Others will follow. We all signed a bold joint declaration, despite an imperfect translation. The media was present in full force doing interviews and reporting on the substance of the event. History was unfolding.

Notes to self: It's in our collective interest that they get this right. Remember the name George Lee.