China lawmakers' pollution battle adds to growth challenges

[BEIJING] China's Lunar New Year celebrations typically feature visits to relatives. For provincial Governor Du Jiahao, day two of the biggest holiday on the calendar found him doing something altogether different.

The chief of central Hunan province went on a two-hour bicycle ride along the Xiang River, checking its water quality.

"It wasn't just for show," Mr Du, who said work to clean up the river is in its third year, shared last week on the sidelines of a gathering of lawmakers in Beijing. "I asked somebody who was fishing, 'Can you really catch any fish here?' He said, 'If I can't catch fish, why am I still standing here?' This is a piece of data from a plain civilian."

The good fortune of the Xiang River fisherman isn't shared by hundreds of millions of other Chinese exposed to air and water pollution that's becoming the focus of this year's annual legislative gathering. Premier Li Keqiang said pollution is a blight on people's lives and would be fought with "all our might" while provincial officials are touting their efforts.

"Legislators are emphasizing it further," said Jim O'Neill, the former chairman of Goldman Sachs Asset Management. "It is a few years now since the government started to make environmental protection a major priority, and given the evidence that's on the ground, the actual quality of the environment may have deteriorated further."

ADDITIONAL STRAINS

Measures to rein in pollution add to strains on an economy that is already contending with a weakening property market, overcapacity, and a crackdown on corruption.

Mr Li last week announced a target for this year's expansion of about 7 per cent, the lowest goal in more than 15 years, and stressed a "new normal" requiring structural adjustments to deliver "quality, efficient and sustainable development."

"If the development model doesn't change, China will stagnate," said Derek Scissors, a scholar at the American Enterprise Institute in Washington who focuses on Asia economies.

"To be valuable, the new normal must signify this new development model. Otherwise, it's just a slogan trying to cover for a weaker economy."

The fallout from three decades of rampant economic growth cost China close to 10 per cent of gross domestic product annually in the past decade, according to estimates from the Rand Corporation.

UNDER THE DOME

' The debate over the environment intensified before the legislative gathering when a documentary film Under The Dome, which criticises the government's handling of the environment, was released.

Viewed by more than 100 million people, it vanished from major Chinese websites March 6.

Some government officials had openly praised the film, with environment minister Chen Jining comparing it to Silent Spring, Rachel Carson's 1962 take on the environmental damage wrought by the US chemical industry that spurred a nationwide ban on the use of DDT in agriculture.

Thick smog regularly blankets China's cities, forcing many residents of metropolises such as Beijing and Shanghai to wear masks to try to protect against the toxins.

Ninety per cent of the 161 cities whose air quality was monitored in 2014 failed to meet official standards, according to a report by China's National Bureau of Statistics last week. About half of China's rivers have dried up since 1990 and those that remain are mostly contaminated.

'GROWING CONCERN'

"The government has to do something," said Chen Wenbin, a delegate from Fujian province on China's east coast.

"There is growing concern. Government cabinets have been under a lot of pressure to tackle it."

China will this year cut energy intensity by 3.1 per cent and target a range of pollutants, Li told legislators last week.

"The officials are as determined to clean the air as you and me because they breathe the same air and so do their children," said Tao Dong, chief regional economist for Asia excluding Japan at Credit Suisse Group AG in Hong Kong. "It's absolutely crucial to get the act together."

The main economic drag will likely begin a year from now and continue through about five years, because the government can't shut polluters like coal-burning power stations until alternatives are built, he said.

In contrast to former years, where faster economic growth was a badge of honor for provincial governors, officials this time around are boasting of their environmental activism.

Chen Guoying, head of Hebei's environmental protection department, pledged to win the war even if the province has to sacrifice economic growth in the short term. Hebei cut coal consumption by 15 million tons, closed 141 mines and stopped work to improve 478 mines last year, Chen said Monday.

ENVIRONMENTAL WINNERS

The prospect of new pollution laws prompted companies SPC Environmental Protection Tech Co and Beijing SDL Technology Co to rise to record highs last week after the "Under the Dome" documentary sparked renewed attention to the issue.

In the industrial city of Tangshan in Hebei province, two hours drive east of Beijing, the need to reduce emissions is causing the closure of plants, said party secretary Jiao Yanlong.

"Even though it hurts the bones and the muscles, and the cost is tremendous, the city has to do it," he said.

BLOOMBERG