Polluted China

Seated by the window of the restaurant on the top floor of the CapitalMansion, one of the tallest office buildings in Beijing, many nearby buildings are barely visible through the smog. China is enjoying rapid industrial growth. But the price is pollution.

The total energy consumption in China is the third highest in the world. Coal is China's number one source of energy, accounting for 73% of commodity energy, 75% of industrial fuel and power, 65% of chemical material as well as 86% of civil fuel. Coal burning, however, causes flying ash and the emission of SO2, both of which are responsible for China's air pollution problem. China produces more than 14 million tons dust annually, averaging 1.5 tons per sq. kilometer, more than double the average of 0.7 tons per sq. kilometer worldwide. The annual emission of SO2 inChina is 15 million tons, averaging 1.6 tons per sq. kilometer, 60% higher than the world average of 1 ton per sq. kilometer. Many areas in China are severely harmed by acid rain resulting from SO2 emission,

Rivers that are also the drinking water sources for many people become sewage channels because

many cities can not reach the discharge standard for disposed waste water. By the end of 1993, there were only 108 sewage disposal plants with an annual capacity of 1.1 billion cubic meters for China's 750 cities and only 5.5% waste water could be treated. It is estimated that the economic loss caused by water pollution is around RMB 90 billion (US$10.8 billion) annually.

With the rapid growth in China's urbanization, villages are becoming cities and cities are growing larger. The total number of cities increased from 262 in later 1980s to 750 in 1995. By the end of the year 2000, the number of cities with 500,000 people or more will reach 100. The volume of domestic garbage is increasing explosively. Domestic garbage treatment in China, especially for about 400 million urban residents, has become a severe problem challenging people's daily life.

Green Engineering Blueprint

To improve environmental quality, the government launched the Green Programs, a 15-year program with several phases. The Green Program covers only the most urgent projects needed to be done. During Phase I from 1996 to 2000, the Green Program will cover 1,035 projects with a total investment of RMB 153.66 billion (US$ 18.5 billion). Table 1 outlines details of Phase I of the Green Program.

Table 1: Green Program Phase I Projects

For Phase I water pollution projects, the highest priorities are given to seven rivers, three freshwater lakes and 14 coastal cities. The seven rivers include Huaihe, Shonghuajiang, Liaohe, Haihe-Luanhe, Yellow River, Pearl River and Yangtze River. The three freshwater lakes are DianchiLake, ChaohuLake and TaihuLake.

Air pollution projects will focus on the control of SO2 and dust emissions. Clean air action will be conducted first in China's 25 largest cities. Regulations on discharge standards for dust and harmful gasses will be established and enforced.

537 projects related to domestic and industrial waste water treatment facilities along seven major river systems are scheduled to be completed during 1996 - 2000 with a target of reducing 3.32 million tons of COD annually and increasing waste water treatment capacity by 20.68 million tons per day.

Preemptive environmental protection is also on the Chinese government's agenda. Currently, there are 360 environmental standards issued. Since industrial pollution is the major source of environmentaldamage,newlawsand regulations to reduce industrial pollution will be issued. An environmental fee will be assessed on various industries. For high pollution industries such as chemical, power, petroleum, construction materials, metals and pharmaceutical industries, special supervisory and control measures will be introduced. The special focus of Phase I will be on projects designed to improve people's quality of life. Projects include drinking water treatment, coal-use reduction for cooking and heating, and domestic waste treatment. In addition, water pollution control is on the top priority with an investment RMB 109.5 billion, 71% of the total budget. Table 2 and Table 3 show the distribution of Green Program's projects and investment by province and government ministry.

Table 2: Green Program Phase 1 Projects and Investment by Province

Source: State Environmental Protection Bureau, Sept. 1995

Table 3: Green Program Phase I Projects and Investment by Ministry

Source: State Environmental Protection Bureau, Sept. 1995

Financing the Green Programs

The Green Program, however, represents only 38% of the total RMB 400 billion (US$ 50 billion) budget, for environmental projects during the 1996 - 2000 period. How will China finance its green dream?

The Green Program projects will be financed mainly by three sources: the Chinese central government, local government and foreign funds. For the 1,035 projects with a total investment of RMB 153.66 billion (US$ 18.5 billion), RMB 121.4 billion will come from the domestic sources: RMB 20 billion from bank loans, RMB 1.39 billion from the central government's budget, RMB 70 billion from local governments, RMB 20 billion from corporations and RMB 10 billion from fee collections.

Five hundred and eighty projects will need foreign investment. The confirmed sources for foreign funds are: US$ 1.5 billion from the World Bank, US$ 750 million from the Asian Development Bank, US$ 880 million from the Japanese government, US$ 400 million from the Canadian government, and other bilateral collaborations, around US$ 500 million.

It is not clear where the rest of the budget for environmental projects will come from. However, it presents many opportunities for domestic and foreign players in the environmental industry. Currently, there are more than 2 million sets of industrial boilers operating in China but only about 0.01% of them installed with dust-collecting equipment and very few of them meet the newly issued emission standards. This converts into a huge market for dust-collecting equipment manufacturers.

Considering the lack of know-how among management and small-scale operation of the Chinese environmental companies, many foreign industrial leaders with knowledge of technology and management expertise have clear advantages in the Chinese environmental market.

Table 4: Funding Sources for the Green Program Phase I Projects

Source: State Environmental Protection Bureau, Sept. 1995