THE BLOG

Report From Beijing: Dynamic Growth, Oil, Pollution, Trade Balances And The Price Of Gas

05/25/2011 11:55 am ET
  • Raymond J. Learsy Author, 'Ruminations on the Distortion of Oil Prices and Crony Capitalism'

I first visited this city in 1980. In those days, it was a radically different place. The roads were clogged with bicycles, and people dressed uniformly in Mao jackets and quilted overcoats. Only the Beijing Hotel was open to non Chinese. Its lobby was front office, business center, and newsroom headquarters rolled into one, and it was both bustling and messy, with newspapers and working documents strewn all over its coffee tables. If you wanted food other than local or traditional fare, forget it. Another memory that stands out in my mind: the road in from the one building at Beijing Airport. It was mostly two lanes replete with potholes and occasionally lined with trees and rice paddies and stretches paved with dirt. Hardly a building stood higher than six stories in "downtown" Beijing.

Now, of course, it is truly difficult to convey the changes made in the past quarter century. While Rome wasn't built in a day, it certainly wasn't built in a quarter of a century. But the new Beijing -- giving full homage to its great historical treasures, such as the Forbidden City -- has been, and that is much of its current fascination. The city is marked by towering buildings, modern highways, endless elegant 20-to-30-story apartment blocks, and busy traffic. The bicycles remain but are accommodated with an elaborate network of dedicated bike lanes. Upscale stores are everywhere, and restaurants offer virtually any cuisine you could wish for. The hotels are elegant and punctilious. And there is more to come. In preparation for the 2008 Olympics, architectural marvels are now under construction -- from the spell-binding Herzog and de Meuron Olympic stadium to the breathtaking Rem Koolhaas CCTV office tower and the Paul Andreau National Grand Theater. By 2008, this city's grandeur may well be in league with that of ancient Rome. Beijing is experiencing the perfect storm of dynamic leadership, willingness to take architectural risk within a context of brilliant design, and seeming willingness to spend whatever it takes. It is as if the soul of a nation and its people are committed to these and other projects to making Beijing great -- and to welcoming the world in 2008.

And yet, and yet not all is well in this boldly aspiring world-class metropolis. And therein lies a cautionary tale for all of us. As I look out of my hotel room window toward the ambitiously emerging skyline, nothing can be clearly seen. The city is swathed in an amber mist, the smog of unfettered and incautious economic development unchecked by environmental standards or until recently, concerns. As I have been told by those who live here, environmental deterioration is now China's most pressing problem. Years of plant emissions, both into air and rivers in the headlong rush to economic betterment -- one cannot forget the flip side, more than 300 million people have been lifted to the consumer class from abject poverty -- the growing fleets of cars and expanding fossil fuel emissions, notably from coal-fired power and industrial plants, are turning China into an ecological disaster.

The government isn't impervious to the problems, and policies are beginning to change. China is embracing non-air polluting nuclear energy with the goal of constructing up to 40 nuclear power plants by 2020. The goal is to reduce dependence on and emissions from coal-fired plants (see post "China Kissing OPEC Goodbye", 02/12/06).

In other cities, a glimpse of the future is already possible. An hour and a half's drive from Shanghai is the city of Suzhou. Suzhou is best known for its majestic gardens and as the ancestral family home of the celebrated architect I. M. Pei, whose credits include the National Gallery and the renovation of the Louvre. His brilliant new museum in Suzhou is nearing completion. But back to the point: The city is filled with motorized bicycles and motor bikes -- all powered by plug in battery electric power. No gasoline motorcycles or gasoline powered motorbikes are permitted within the city limits. Here is a real step toward abatement of pollution from fossil fuels. It is also an example that should be an inspiration to communities around the world.

Oh, something else I learned in China: Every time you buy a product from this country, you are putting upward pressure on the price of oil. How's that you ask? Well, you see, in China gasoline is both price controlled and indirectly subsidized. Refiners are losing money buying crude oil high and selling gasoline cheaply. But who owns, and or controls the refiners, directly or indirectly? Right, the government, and it can afford to do that because of its vast trove of dollars earned in selling us and others everything from clothes and household goods to electronic odds and ends. So the more Chinese products you buy the greater China's trade balance with us, the more oil they can buy on the world market in competition with us and others, the higher goes the price of oil.

Clearly, the more they subsidize, the more gasoline and crude oil is used here in China. Fear of inflation and social unrest make the government reluctant to let prices push higher other than in measured steps. Just the other day a new price increase was announced, bringing the gas price to about $2.10 per gallon equivalent. I'm thinking about tanking up before I go home.

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