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Western companies should be blamed for China’s pollution

When talking with Chinese friends and co-workers about the pollution levels in Nanjing (awful compared to developed countries, but decent for Chinese cities), they are quick to point out that foreign companies in China are the ones that should be blamed for the filthy air. While it is absolutely true that foreign companies are adding to China’s environmental woes, I’m not convinced they should shoulder all the blame.

Today, I’d like to start by discussing three points related to this statement, and I hope you’ll continue the discussion in the comment section below.

Production for the West

This factor is undeniable. Western consumers have benefited from the destruction of China’s environment by purchasing cheap goods. If all of our environmental standards were enforced globally (and corporations actually complied), then the price of goods would be higher.

The latest example of this can be seen in the fact that Apple’s production facilities in China have created many environmental problems while making goods far out of reach for most Chinese consumers.

The problem I have with this argument, is that the destruction of China’s environment for the sake of producing goods for the West has also benefited many Chinese by creating jobs (from migrant workers to factory owners). The pollution has been seen as a by-product of development, without questioning how it could have been avoided.

However with the slow down in the global economy, one would expect that declining demand overseas would correlate to China’s yearly carbon dioxide emissions. Instead we see China’s emissions have continued to grow during this time, as there have been massive pushes to increase domestic consumption. It turns out cheap Chinese products made in polluting factories aren’t any less attractive in Chinese Walmarts than they are in the West.

While consumers in ALL countries have a responsibility to choose environmentally responsible products, due to the explosive growth of Chinese manufacturing, it would be very difficult to buy only “green” products.

Chinese Companies

Another important point against this argument, is that China was polluted before foreign companies arrived in the late 70’s. Foreign companies work largely through or with Chinese factories, and Chinese companies are among the world’s least environmentally conscious. The idea that western corporations are doing something different than Chinese companies is ridiculous.

Let’s take a quick look at two companies operating in China that have been attacked in the Chinese press:

In Apple’s case, Foxconn is their major supplier and also their major polluter. Apple clearly should be making greater efforts to practice corporate responsibility, but Foxconn should not be absolved of wrongdoing simply because it is working with a foreign company. Yet in Chinese papers you will always see Apple taking the majority of the blame.

The same is true of the recent oil spill involving ConocoPhilips. Both Global Times and People’s Daily railed against their environmental destruction, and both failed to mention that a state owned company owned the majority share of the project.

While blaming foreign companies might be more politically palatable, it does little to address the underlying problem.

Lax Regulations

Let’s be honest, when it comes to corporations, do we really expect them to take any actions that don’t add to their bottom line?

Corporations have a responsibility to their share holders to maximize profits, and few legal responsibilities to communities beyond paying taxes. This might be a fairly negative view of corporations, but it is not surprising that companies will dump as much toxic waste into rivers, and spew as much carbon into the air as governments will allow (if it is profitable).

While cheap labor is often cited as a reason for companies moving to developing countries, lax environmental standards are another major factor.

For example, in Nanjing there is a large chemical factory owned by a German multi-national that is often blamed for the smog in the air. The question I always pose to my Chinese friends is, “Why didn’t they build this factory in Germany?” The reason being that environmental regulations in Germany would make this kind of processing plant incredibly expensive to run. The Nanjing gov’t invited the company here because it would increase local GDP.

This is the major underlying problem. The pursuit of local GDP development (in return for promotions) has essentially aligned the interests of local government leaders with those of corporations, instead of the people they supposedly represent. While the Central government has created CO2 emissions targets and other environmental incentives, local leaders still recognize the fact that the key to promotion is GDP.

Perhaps the most troubling example is Huaxi (read my series on the richest village in China), instead of being condemned for it’s reliance on dirty industries like fertilizer production and steel, it has been lifted up as a national model of excellence.

Even in cases where factories have been “shut down” for violating the already lax environmental regulations, they are frequently allowed to continue their operations until people end up in the hospital (numerous examples of lead poisoning from “closed” factories have surfaced in the last year).

If local governments encourage the creation of heavily polluting industries, than they too must shoulder some of the blame for the resulting mess.

Ultimately, even if every multinational pulled out of China tomorrow, there is little evidence that this would actually bring an end to China’s pollution problems. Certainly the West is benefiting from this environmental destruction, but to pretend that this disaster is not largely of China’s own making ignores the reality of the situation.

For unbelievable photos of China’s environmental devastation and the toll it takes on China’s people check out this post from ChinaHush.com

Top China stories of the week 9/25 – 10/1

The top story this week was the Shanghai metro crash which I covered in a recent post. The accident reignited the debate about the speed with which China is building infrastructure. Adam Minter reflected on the greater meaning of the crash for Shanghai residents who have no choice but to commute to work on the subway in his piece “Shanghai rail commuters get onboard with a prayer“.

China also launched the first components of its new space station, which should be fully operational around the time the International Space Station is decommissioned. This great technological accomplishment coming on the heels of a needless crash creates an interesting contrast between technical achievements, and the ability to manage and maintain these systems.

The cost of development was also seen in the Air Quality Index numbers released this week by the WHO. Of the Chinese cities included in the report not a single one qualified for the label of “healthy”. Interestingly, many of the most polluted cities were in sparsely populated Western China, caused in part by coal mining and dust storms (partially caused by coal mining). Another report showed that China is set to overtake the US in per capita carbon emissions by 2017.

Bonus: Asia Society has an amazing video series about China’s environmental challenges and what is being done to address them  that is well worth your time.

Poorly built infrastructure was also one of the underlying themes of the other major development this week, governments are growing increasingly wary of Chinese projects in their countries-

Canada is pushing forward a lawsuit again Chinese SOE Sinopec for violating worker safety standards that left two Chinese workers dead in an oil sands project in Alberta. It has raised a number of questions about Chinese business practices in other countries when using Chinese laborers.

Myanmar (one of China’s closest regional allies) decided to stop the construction of a dam on the Irrawaddy. While China had pushed the project forward on grounds that it would help control flooding and provide electricity, activists argued that the environmental impact was too great to justify. Much of the dams power was going to be used in China.

In Zimbabwe (another very important ally), the gov’t banned the export of chrome by seven Chinese companies because they had failed to set up smelting plants within the country as they had promised. The companies asked for another 5 year grace period, but were denied out of fear that the extraction would be nearly complete by then.

Read more about China in Africa in my three part series on the subject (The goodthe bad and the Ugly)

The biggest event in foreign relations though happened in Zambia, where the people elected a vocally anti-China president. Despite China sending millions in “aid” to the country, concerns about Chinese business practices and penchant for tempting officials with bribes overruled the Party’s efforts. Within a few days of the election one Chinese mining company raised workers’ wages 85%, which might convince neighboring democracies that it’s time to get tough. Howard French from the Atlantic wrote a great piece on the subject titled, “In Africa, an Election Reveals Skepticism of Chinese Involvement.”

It’s a theme that I think is going to become an increasingly important topic, and the outcome will have huge impacts in how China rises.

The Upside of All These Projects

Today we’ll be looking at a few of the upsides of these projects, and why they are for the most part appreciated by the people, despite the corruption and problems these vanity projects can cause (read my updated post on some of the problems).

Jobs

As the US entered the recession questions were raised about Keynesian economics, could gov’t spending really be the answer? While we battened down the hatch for another long debate as to whether or not it might be effective, and then moved on to how much to spend, China pushed ahead with massive spending.

While the long-term results are unclear (10 trillion rmb in local debts is worrying), the immediate benefits were obvious. Not only did several cities launch plans for expanding desperately needed mass transit, but thousands of locals got jobs that made up for factory closings. To date this has helped keep unemployment lower than we have seen in the US.

note: unemployment in China is incredibly difficult to measure, since a laid-off factory work from the countryside simply gets re-listed as a farmer.

This floating population of 221 million people rely on these projects for work, and the gov’t knows that keeping this segment of the population employed is key to maintaining stability. Each of these massive projects also come with unending upkeep, the new High-Speed Rail for example employs more than 1,300 “guards” just to keep an eye on the track (they are positioned every 1km all the way from Shanghai to Beijing).

Ultimately most of the wages paid out for these projects trickles down to the countryside, that now functions largely on remittances.

Access

While we have been focusing largely on China’s more ambitious projects, it is important to note that China only recently completed the backbone of its national highway system in 2008. These kinds of projects (unlike bullet-trains), are effective in improving the standards of living for large numbers of people.

While they don’t get many headlines overseas, these smaller projects are really the most important. As I discussed in my post on Longzhou, the fact that we were bypassed by the freeway meant shifting from a key town to a forgotten backwater. Freeways mean that local people can get their goods to market, and are necessary for factories to even consider establishing new plants an a region (this is not without new problems).

Opportunities

Finally, and perhaps most importantly, these projects give Chinese state-owned enterprises (SOE’s) a chance to demonstrate to the outside world their abilities. China’s companies are building dams, freeways, and trains throughout the world (largely in South America and Africa, but spreading to Europe and the US). These projects help bring more money back to China, and should be considered when discussing the costs of some of the projects (although often the money ends up in the pockets of these company’s leaders).

In the past week there were two major pieces of news corresponding with large-scale projects. The worrying piece of information was that a Chinese company had massively underestimated the cost of constructing a freeway in Poland. The Chinese company complained that material prices had unexpectedly increased, and that the standards were higher than they had though. The company had to forfeit the contract, and is barred from bidding for another two years.

On the other hand, a Chinese company today completed the construction of a bridge for California, they completed their work 5 months ahead of schedule. The company opted to make a name for itself, instead of seeking profits on this project. One step they took to ensure quality was requiring their employees to get US qualifications in welding. It was loaded onto ship this morning, and will later be assembled by American workers.

These projects (and future ones) are worth hundreds of millions of dollars, and are helping to grow China’s GDP, but only time will tell if they were worth the cost.