China Eats the World: How America Learned To Bike And China Learned To Drive

[Woodmonkey]

The alarming environmental news out of China this week: according to a report issued by the World Wildlife Federation, the country now uses more than double the resources that its land and water can support. The report (here in PDF) says that the individual Chinese resident has an Ecological Footprint of 3.9 global acres.

The measurement needs to be taken in context: the average American needs a whopping 23.7 acres of global land each year to support his or her lifestyle. The U.S. is the second-highest consuming country by this measure, after the United Arab Emirates; China meanwhile ranks 69th in the world, using just less than Syria. (There are other reasons this measurement isn't quite fair either, which I'll get to later.)

Still, the thrust of the report deserves attention: If each Chinese were on average to consume as much as each American, "China would demand the available capacity of the entire planet.". To appreciate this, and how we've all ended up using so much beyond our means, it's worthwhile wondering what China's consumption has to do with us.

Recently a friend who lives near Los Angeles and belongs to an upper-middle class family told me she now relies on her bike to get around. She just can't afford to pay for gas. In the suburbs of Los Angeles, which were designed around the car, that's no minor feat. Fortunately, she's used to riding her bike, even along car-choked roads: she spent three years living in Beijing, where the bike is a way of life.

Back in Beijing, a Chinese friend of the same age, 25, with a job at a state-owned company, explained to me why he was eager to buy a car. Yes, he knew that car emissions were clogging the skies over Beijing, so severely in fact that the city plans to keep over a million cars off the roads in August in order to achieve a "Green Olympics." But the car was simply too convenient and too comfortable to avoid, he told me. If you have spent hours on a bus as crowded as the roads are, trying to get from one side of the city to the other, it's not hard to see his point.

Of course, more cars on the road means more traffic. In Beijing, one solution has been to build more roads and more city. Suburbs have proliferated outside the third, fourth and fifth ring roads. A sixth is on its way. Sounds an awful lot like Los Angeles, no?

Just as Americans are starting to realize the errors of excess, suffering at the gas pump and learning the virtues of saving energy, the Chinese are headed in the other direction: they're getting richer and using more resources than ever before. While Americans get back on their bikes and subways and commuter rails, Chinese are climbing into cars. In Beijing, they're doing so at a rate of 1300 new cars a day. (Yes, you read that right.)

While the global cost of gas means that a suburbanite in LA must resort to the bicycle, how can middle-class Chinese manage to give up the bike for the car?

One reason is because the government heavily subsidizes fuel prices: a gallon of gas in Beijing is $2.60, less than half the price in the U.S. The resulting high demand for fuel in China, says the International Energy Agency, helps explain why my friend in Los Angeles is now riding her bike.

The policy is part of the Chinese government's tacit bargain with its citizens: economic stability equals social stability. When prices rise, as they have recently for food, people get angry. When a Carrefour store cut prices by 20% on cooking oil in November, a stampede left 3 people dead.

Alongside an artificially low currency, the fuel subsidy also helps to keep costs of manufacturing and labor low, ensuring that the rest of the world remains China's customer.

But as with its controls over the RMB, the Chinese government has essentially promoted a policy that helps the country in the short term but may have very bad consequences down the road. It's a familiar narrative in economic development: in exchange for rapid growth, China has looked the other way as factories and cars pollute the skies and the waters. Meanwhile, inflation grows, and oil supplies dwindle. The outcome isn't pretty.

For a while, Americans looked the other way too. Sure, the US has long criticized China on the environmental score. But we have also reaped the benefits of this dirty arrangement, in the form of excessive spending on cheap Chinese goods. Instead of consuming resources and polluting at home, we let China do our dirty work for us. China's ecological footprint may be twice what its environment can support, but part of that deficit is due to the resources it uses and the CO2 it emits in order to fill store shelves in the U.S. In 2004, for instance, goods consumed in other countries accounted for 31 percent of China's carbon-dioxide emissions that year.

The arrangement reminds me of an internal memo written in 1991 on behalf of Larry Summers, then chief economist of the World Bank. He argued that "the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that." After the memo was leaked, the response came from Brazil's secretary of the environment Jose Lutzenburger: "your reasoning is perfectly logical but totally insane."

China's arrangement with the U.S. - low gas prices, a cheap currency, cheap imports, and high natural resource use - is also looking pretty insane right about now. And it can't last for much longer.

On a number of levels, China just can't afford to keep its gas prices so low. The cost of reconstruction after the Sichuan earthquake has only put a bigger burden on the country's pocketbook. Sure, estimates say that China spends only 1% of its GDP on fuel subsidies. But subsidies also risk overheating the economy and exacerbate already growing inflation. And of course, they keep China from developing better public transportation and exploring more alternative energy sources (putting it at a disadvantage as supplies of oil tighten), while contributing to costly pollution and greenhouse gases, and propping up unsavory regimes like Burma or Sudan, where China gets much of its oil.

Of course, if China is to reduce its subsidies, as some predict may happen after the Olympics, it will need to do so without sparking social unrest. But the subsidies may lead to unrest too: aside from anger over inflation, a strain on the fuel supply has already led to hour-long lines at gas stations that are reminiscent of similar shortages in the U.S. in the 1970s.

China's leaders also need to remember that pollution from excess consumption of things like fuel can also lead to social unrest. In 2005, official figures show there were over 50,000 protests related to dirty skies and water. No wonder: Last year, the World Bank reported that 750,000 Chinese die prematurely each year due to pollution. As China becomes more connected, via internet and mobile phone, and a growing middle-class becomes environmentally-savvy, the number of protests is expected to keep growing.

There is another obvious reason why the average Chinese wants a car. The same middle-class that demands cleaner air also demands more comfortable (read: high-consumption, American-style) lifestyles. Cars are but one example: all those rising incomes mean higher demand for meat, milk, jewelery, computers and a lot of other stuff. In the month of May China's retail sales grow faster than they have in nearly a decade.

The big irony is that while we begin to reduce our own huge ecological footprint - theoretically putting less strain on China's environment - China's own small footprint is growing to look like our own. If China's environment summons images in our heads of pitch-dark coal piles, blackened skies and growing swaths of desert, it should now also call to mind more familiar scenes: backed-up highways, expansive suburbs, big box store aisles colored in the spectrum of brand names.

That China has an opportunity to forge a new path of development has become a mantra for environmentalists. But that doesn't just mean new ideas of developed-world living. Even if middle-class Chinese drive more efficient cars than Americans do, even if they trade in their plastic bags for tote bags, as a new law encourages them to do, they are going to demand more energy use, period.

The bigger opportunity may lie in technologies. If China can develop top-notch alternative energy - and companies like Suntech (STP) have showed that it can - then it won't just help reduce its energy consumption. It will make a lot of money selling green tech to the rest of the world.

Of course that's a big if. The U.S. can help. It can lead by example, by reducing its own consumption, and embracing measures to keep its own CO2 levels down. It can also keep pressuring China to cut its fuel subsidies and let its currency float. And it can also help wean China off the path that Americans have followed, by encouraging more technology transfer and advising on things like cap and trade systems, as they plan to do at this month's Sino-U.S. summit. For the most part, China's environmental officials are eager for help and serious about change.

But it is up to China's enigmatic economic policy makers to make the important decisions that will begin to temper China's unaffordable and dangerous love affair with high consumption. If they do so they might provide a good example to the rest of the world, from other developing nations to high consumers like the U.S.

If not, as incomes grow to U.S. levels in the next two decades, China's citizens will learn the dangers of living past their means. Given the state of China's strained environment alone, it could be a much harsher lesson than the one Americans are getting now.

The Source

[sabadgeman]

The age old problem of materialism. Your own comfort and well being will always come first until you reach the comfort zone where you realise that enough is enough the average Chinese labourer peasant is still a long long way away from that point!!

[Woodmonkey]

They've just started the journey.