People's Republic of China: Inclusive and Green Economic Growth

Article | 27 September 2012

After decades of breathtaking growth that put a strain on the environment, the People's Republic of China (PRC) is moving toward a greener and more inclusive development path. Robert Wihtol, Director General of ADB's East Asia Department, explains how ADB is supporting the PRC in its effort to achieve more environmentally sustainable growth.

The People's Republic of China (PRC) appears to be moving toward a greener and more inclusive development path. Why is there such an emphasis on 'green growth'?

Since the 1970s, the PRC has grown at a breathtaking rate of nearly 10% a year, lifting 500 million people out of poverty and becoming the world's second largest economy. This growth required an enormous amount of energy, some 70% of which comes from coal.

Over the same period of time, the PRC went through a rapid process of urbanization. Today, some 50% of the country's 1.34 billion people live in cities. Experience tells us that we can expect this share to continue to grow for the next 15 to 20 years.

This rapid industrialization and urbanization has had serious consequences for the environment in terms of pollution and water management. The PRC's greenhouse gas emissions are currently among the world's highest, and its cities face enormous challenges in water and solid waste management. The PRC government recognizes the challenge faced by the country: they understand that growth alone is not the answer. Growth also has to be green to be sustainable.

How is ADB supporting the PRC in its effort to achieve more environmentally sustainable growth?

ADB is working together with the PRC at two levels: policy and projects.

Setting the right policy framework is essential to achieve green growth. For example, in 2007 ADB carried out the PRC's first environmental analysis. Among other things, we recommended to upgrade the country's agency in charge of environmental issues to a ministry, which was done a few years later when the Ministry of Environmental Protection was created. Another example is the assistance we have given the PRC to establish a water and waste water tariff policy in the country, which is a crucial element that needs to be in place to attract investments in this sector.

At a project level, ADB works with line ministries and many of PRC's provincial and local governments. Our projects emphasize piloting new approaches to problem solving, and developing knowledge-based solutions that can be applied in other parts of PRC and, ultimately, shared with other developing countries.

What are the priority areas for ADB's assistance to the PRC?

ADB's portfolio in the PRC is 65% geared toward green growth. We expect this to rise to around 85% during our current country strategy period, which goes up to 2015.

We are involved in many projects in several areas. In Tianjin, for example, we financed a coal gasification-based power plant, which was the first ever to be built in a developing country. We have helped the PRC with a coal mine and coal bed methane project, which has the double benefit of using a potent greenhouse gas, i.e., methane, to generate energy while at the same time ridding coal mines of a gas that is often lethal for workers. This approach has been replicated widely in PRC.

We also invested in renewable energy, as well as water and waste water management projects. For example, ADB helped the PRC develop its first generation of waste water treatment plants. We are now looking at the next step, where sludge is also treated, and at converting waste to energy. Many of our urban investments include district heating plants, which are much cleaner and more energy-efficient than having old-fashioned furnaces in each building.

The PRC is rapidly moving toward becoming a middle-income country. What does this mean for ADB?

While the PRC has an extremely diverse economy, there is growing consensus that the country is quickly eroding its economic advantage based on cheap production costs, in particular low-cost labor. The challenge for the PRC now is to move up the value chain: it can no longer be a factory of cheap products; it has to transform itself into a factory of innovative products.

For ADB this means that our cooperation with the PRC will have to shift toward knowledge management issues. I would like to mention our cooperation with the PRC in a soft sector, ie, vocational education. As the PRC steps up its production technology, human skills will need to keep pace.

Where does ADB's assistance to the PRC fit in its strategic role as a development bank for Asia and the Pacific?

ADB's cooperation with the PRC is crucial to our future as a broker of knowledge and experience. We hope that the cutting-edge knowledge ADB accrued over the years in the PRC will help other Asian countries learn from the PRC's remarkable economic achievements.