CHINA SEES ELECTRIC vehicles as the way to leapfrog its way to leadership of the global car industry. Promoting green technologies will also help the country tackle its widespread and worsening pollution, even though the impact of electric vehicles will mostly be in mitigating the problem from getting worse.
Despite government backing since 2009, production is currently modest, to say the least. The goal is to be building half a million electric vehicles a year by the start of 2016 and twice that number by 2020.
To that end, the government has announced an industrial-policy boost. Central government departments and municipal administrations will have to allocate a third of their annual vehicle procurement to “new energy” vehicles. That covers hybrids as well as vehicles powered by hydrogen cells, but in practice means electric vehicles. Local authorities are also instructed to install charging stations — one for each electric vehicle on the road.
Some financial incentive for officials to follow these new directives seem inevitable, given the increasing pressure on local-authority budgets now land sales are a less readily available honeypot. Any subsidies will have to be carefully structured to ring fence them from any potential international trade disputes.
ENVIRONMENTAL PROTESTS ARE of even greater concern to the leadership of China’s Communist Party than the threat of domestic terrorism. For one, they are far more widespread. The violence that broke out on May 10th in Zhongtai, a township outside Hangzhou, at a demonstration against building a waste incinerator there, may have been untypically bloody, but such protests in themselves are far from uncommon. Tens of thousands occur every year across the country.
The annual numbers are rising at a marked rate as far as we can tell. Some like one last year against China National Petroleum Corp.’s plans to build a petrochemical plant in Kunming gain international attention, but most remain local affairs. Nor do most secure more than get a delay to the unwanted project. Last year’s cancellation of a proposed lithium battery factory in the Songjiang district of Shanghai following large-scale protests was an exception rather than the rule.
Nor can the authorities point at the finger of blame on outside agitators, as they can do with the recent knife and bomb attacks blamed on militants from Xinjiang — though this Bystander will not be surprised to see the 50-centers on social media and their equivalent official unofficial voices in the public prints doing just that with environmental protests. There is too large a slice of China’s middle class concerned about the environmental degradation that has come with economic development for authorities to crack down on them all. Surveys of public opinion suggest that three-fifths to three-quarters of the public want the government to do more to improve the environment, and particularly to lessen pollution.
There is nothing exclusively Chinese about demonstrations against development projects by those who don’t want them in their backyards regardless of the greater benefit to a broader society. Incinerating waste rather than burying it in landfills and using the energy created as an alternative to coal-burning power generation plants is net for net an environmental gain for Hangzhou and the rest of the eastern China seaboard. Zhongtai residents are more narrowly concerned that what would be Asia largest incineration plant will further pollute their air and contaminate their water.
For the leadership, the long-term threat is that environmental protests will be the kernel form which a political party could grow to challenge the Party’s monopoly on political power. That is one reason it has allowed so many environmental protests to proceed for as long as they remain relatively local and peaceful. Indeed, thousands of residents have been protesting against the planned incineration plant in Zhongtai for the past couple of weeks.
What the leadership will not tolerate is attacks on symbols of national authority such as police. That puts it on a slippery slope. Throwing a dragnet over the Zhongtai in a search for 15 men suspected of involvement in Saturday’s violent clashes with riot police is meant to show that the leadership will tolerate only so much dissent — and that that has to remain local and disorganized.
CHINA’S FIRST ONSHORE default since the corporate bond market was opened up in 1997 is at hand. Solar-panel maker Shanghai Chaori Solar Energy Science & Technology has technically defaulted on its 1 billion yuan ($163 million) five-year bond issued in 2012 after warning last month that it would be unable to meet in full a 89.8 million yuan ($14.7 million) interest payment due March 7. The company says it was only able to pay 4 million yuan on the due date.
By not coming to the issuer’s aid, and as they are doing with defaulting trusts, authorities are warning that the implicit guarantee that investors have assumed government gives to every issuance no longer holds true. Big money is at stake. Chinese companies had 8.7 trillion yuan of bonds outstanding as of end-January (up from 800 billion yuan at end-2007). That makes Chaori’s default a drop in the bucket, one reason that central government is letting it default. The ripple will be salutary rather than financial.
Investors have had time to prepare. Chaori’s bonds were suspended from trading last July and its equities, listed on the Shenzhen exchange, last month. Authorities, though, will be hoping now the day of default has come it does not turn into “China’s Bear Stearns moment” as analysts at Bank of America have warned, referring to the way investors reassessed credit risks when the U.S. investment bank had to be bailed out by Washington in 2008 triggering a chain of events that led to the crash of Lehman Bros. and the global financial crisis.
Another reason to let Chaori go is the dire state of the solar panel industry where the government is promoting the consolidation of weaker players to remove excess production capacity. (Another solar panel maker, LDK Solar, has previously been allowed to default on its offshore bonds and to go to the brink of bankruptcy, a precipice that Wuxi SunTech went over.) Nonetheless, four companies have scrapped bond sales that would have raised an aggregate 1.27 billion yuan while yields on Chinese junk-bonds have jumped in the wake of Chaori’s default.
Getting lenders and investors to better price risk in domestic credit markets and corporate managers to better understand what is a realistic return on their investments in plant and equipment is exactly what President Xi Jinping and Premier Li Keqiang meant when they said market forces would be allowed to play a greater role in the Chinese economy. This Bystander expects more low-key corporate bond defaults to come in other industries suffering from excess capacity such as steel, metals and shipbuilding.
Solar panels in Qingdao, Shandong Province. Photo credit: Xinhua
SIX MONTHS AGO, China’s policymakers set a new goal of more than quadrupling the country’s solar power generating capacity by 2015. The objective came against a background of an industry wracked by overcapacity and falling prices that has pushed companies like LDK Solar and JA Solar to the edge of bankruptcy, and Sun Tech over it. It was intended to restore the ailing industry’s health — more solar power plants will require more photovoltaic panels — and draw the sting from a series of trade disputes. It also fits with an overall goal of diminishing the country’s dependency on polluting fossil fuels.
Now the industry ministry has announced measures to help reach that goal, largely by driving industry consolidation and promoting standardization. It is also pushing the local generation of solar power in small-scale installations not connected to the power grid. That should promote technical innovation, as will R&D into batteries to store solar power. The package of measures is intended to avoid creating the trade frictions with the U.S. and the E.U. that China’s earlier support for its solar exporters caused. It will potentially provide more domestic work for China’s solar companies which together provide more than half the world’s solar panels — and have been accused of dumping them on international markets at below cost. Both the U.S. and the E.U. have imposed anti-dumping penalties.
China’s total installed solar power generating capacity increased by 8 gigawatts (GW) in 2013, of which 6 GW were at power plants and 2 GW were at decentralized installations, according to the China Photovoltaic Industry Alliance. If that initial estimate is confirmed it would mean capacity doubled last year. The raising last July of the country’s goal for 2015 to 35 GW from 21 GW requires another doubling of generating capacity over this year and next.
CHINA HAS LONG been steadily losing farmland to urbanization, soil erosion and environmental degradation. Now authorities say 3.33 million hectares of the arable land the country still has are too polluted to grow crops. By way of comparison, that is an area almost equal to the size of Taiwan. Vice-minister for land and resource Wang Shiyuan says “tens of billions of yuan” is being thrown at pilot projects to rehabilitate contaminated land and water supplies tainted by the same source.
Officials are particularly concerned about toxic metals getting into the food chain. This Bystander has heard reports of rice being sold in Guangzhou that contains dangerous levels of cadmium. Once in the ground, such metals can persist for years, and government land surveys are still turning up traces of pesticides banned in the 1980s.
China is skirting the 120 million hectares of farmland considered to be the minimum needed to ensure the country’s food security. A newly released national land survey says the country’s arable land was down to 135.4 million hectares as of the end of 2012. The current five-year plan calls for more than 50 million hectares of new farmland to be created by 2020, so every little bit of reclaimed contaminated land helps.
WHAT IS EXPECTED to be China’s largest and the world’s second-largest carbon trading market has opened for business. First-day’s trading on the China Emissions Exchange in Guangzhou was roughly double the opening day’s volume on its predecessors in Beijing, Shanghai and Shenzhen.
Exchanges in Chongqing and Tianjin, and the province of Hubei are planned to follow in the next few months as Beijing clamps down on CO2 emissions from heavy industry. Beijing is planning to run the seven exchanges for three to five years as pilots for a national scheme.
Companies have to have a carbon permit for every tonne of carbon dioxide emitted. Most permits will be issued for free initially, but companies will have to pay for 3% of their expected emissions in the first year of the scheme, with that percentage gradually rising in the future. The Guangdong scheme covers the province’s big power generators, cement, iron and steel producers, a group of 242 companies that have been capped at 350 million tonnes of CO2 emissions. Textiles, pulp and paper and metals industries will be added later.
When all the carbon trading markets are up an running they will regulate 800 million tonnes of emissions, equivalent to Germany’s annual emissions. Beijing’s goal is to cut its greenhouse gas emissions per unit of GDP to 40-45% below 2005 levels by 2020, not just to limit the effects of climate change, but also as part of its drive to become more energy efficient and to deflect the negative criticism that comes with being the world’s biggest polluter.
The death toll from the heavy rains lashing southern China has reached 53 with several other people reported missing. At least 22 of the deaths have been in Guangdong, the worst-affected province, state media report. Some reports put the death toll there as high as 36. More than 650,000 in the province have been affected by the flooding and landslides. A further 200,000 have been affected in Guangxi. Last week, 19 people died there and in Hunan and Guizhou as a result of heavy rains and floods that caused widespread property damage.
Being granted observer status at the Arctic Council is a significant step forward for China’s trade and energy ambitions on the roof of the world. A northern route through the Arctic would lessen the costs and dangers of shipping Chinese goods to Europe via the traditional and lengthier sea routes through the Moluccan Straits, the Indian Ocean and the Horn of Africa.
Global warming makes alternative northern routes feasible, at least in the summer months, which offer the promise of an ice-free northwestern passage to Europe. It also makes drilling for oil and gas a practical possibility. The region may hold up to a quarter of the world’s untapped fossil energy reserves.
Beijing has been beefing up its Arctic research and is building a new high-tech polar expedition ice-breaker due to be in service next year. China already has the world’s largest non-nuclear icebreaker, the Ukraine-built Xue Long (Snow Dragon) which last year made the first passage from China to Iceland through the far north. Chinese mining companies are starting to invest in Greenland’s mineral resources and last month Beijing signed a free trade deal with Iceland, with which it is also cooperating on geothermal energy.
The full members of the Arctic Council — the Nordic countries, Canada, the U.S. and Russia — all have an Arctic coasts, which China self-evidently does not. Observer status, which it now shares with Japan, India, South Korea, Singapore and Italy, gives China the right to listen in on meetings and propose and finance policies.
China’s regional push into Africa and the Indian Ocean has met some resistance. Beijing is likely to continue to move cautiously if determinedly in the Arctic, not least because Russia, with its long Arctic coastline, sees itself as the regional power and energy bridge between Asia and Europe. But as we noted before, few can doubt that China’s mariners, fishermen, scientists and petroleum engineers will be plying the increasingly less icy waters of the Arctic in ever greater number.
For those looking for a location map of the 7.0-magnitude earthquake that hit Lushan county of Ya’an city in Sichuan Province on the morning of April 20th, 2013, we offer this map from the United Nations’s Office for the Coordination of Humanitarian Affaris (OCHA).
Up to 29 aftershocks have been reported, with the biggest one at magnitude 5.3. The death toll had climbed to 192 by Monday evening, state media reported, with hopes fading for 23 people still missing. The rescue effort is now turning into a relief operation for the more than 2,000 injured and around 120,000 people who have been evacuated from the immediate area.
If pigs could fly. Well, they do float. At least when dead. More than 2,000 bloated pig carcasses have been fished out of the Huangpu River at Songjiang on the outskirts of Shanghai. It is not unusual to see all sorts of pollutants in China’s rivers, including dead pigs, if not on this scale. It is not clear how the pigs got into the river, or who dumped them in it, but there are plenty of pig farms upstream. Authorities say there is no cause for concern over the quality of drinking water taken from the river, but this unusual case seems set to become a touchstone for popular concerns about environmental pollution.
Update: Authorities say the number is now up to 2,800 dead pigs, that the animals came from Jiaxing City in Zhejiang, and that the pig virus, PVC (porcine circovirus, which is not known to infect or cause disease in humans), had been found in one water sample.