ADB VP Ashok Lavasa and PRC MOF DG Cheng Zhijun on 9 May jointly presented the inaugural Private Sector Impact Green Carpet Awards. The awards honored 8 projects which promote global public goods, pandemic response, food safety, inclusive finance, and multiplication of development impact through co-financing. PSOD DDG Christopher Thieme chaired the ceremony, which was also attended by EARD DG M. Teresa Kho, and PRCM CD Yolanda Fernandez Lommen. The ceremony was co-organized by RKSI.
Zhang Li, Dean and Professor of Architecture, School of Architecture, Tsinghua University, will share how 2022 Beijing Winter Olympics have become a catalyst for long-term sustainable development in the greater Beijing area. SDG driven strategies in regional planning and venue design will be discussed.
RKSI attended the ADB-PRC TA Cooperation and Best TA Award Ceremony on 29 June in Beijing. We spoke to two awardees and the event organizer to find out what were some lessons worth sharing, and common qualities of the best TAs. This video kicks off the new East Asia Vlog Series.
The People’s Republic of China (PRC) rapidly transitioned over just 40 years from a low- to a middle-income country. While that has meant a better quality of life for the Chinese people, it has also caused serious environmental damage and harm to human health through pollution. If left unmanaged, these problems could limit or undermine future advances in living standards.
How can the PRC continue its economic growth while reducing that growth’s effects on its people and environment? By making wise investments in human, social, natural, and physical capital to enable a future of high-quality sustainable development.
Such development will require substantial investment in sustainable infrastructure to support new and clean technologies. These could include electric and hydrogen vehicle technology and further developments in solar power and battery storage on electric grids. The new infrastructure and new technologies will require new skills. Thus, they will require investment in education, a key element of human capital.
Artificial intelligence (AI) is likely to play a growing role in these technologies. AI can improve efficiency and allow new business models to be developed. But it will also reduce the need for low-skilled labor, which could result in lost jobs for some workers and lower wages for others. The PRC will need to invest in the necessary skills for AI and for re-skilling workers.
The health of the workforce will be important for it to be productive in the future. In the PRC each year, outdoor air pollution leads to about 1.2 million premature deaths. That one third of Chinese households use solid fuels, including coal, for heating and cooking causes an additional 600,000 deaths annually due to indoor pollution.
To solve these challenges, the PRC should offer its workforce:
- training in the skills required to work in new, clean technologies to support a sustainable transition,
- retraining for workers in industries replaced by these new technologies to ensure a just transition,
- training in skills that are complementary to AI and that cannot be replaced by AI to boost productivity in an increasingly automated world, and
- a better environment through radically reducing pollution to improve public health and well-being.
Education and skills are themselves crucial elements in wellbeing and the same is true of health, beyond their effect on productivity.
The PRC’s dramatic economic advancement over the past four decades has significantly reduced the number of people living in absolute poverty. But relative poverty remains a problem, and rural areas are frequently poorer than urban ones. Health and education services are also lacking in rural areas.
In addition, replacing polluting industries with cleaner ones without helping communities through the change could lead to problems. Communities could lose their sense of self and the social ties that keep members bonded. Trust in government can be eroded if people do not see a sense of solidarity and mutual responsibility.
To support social capital, government should ensure:
- strategies of reducing inequality, including through providing better education and health services to rural areas,
- help for entrepreneurs to start businesses in areas where the core industry is being replaced,
- relocation assistance to workers who would like to move through finance and relaxing the Hukou system, and
- social safety nets to help people reenter the workforce or to assist those unable to.
Social cohesion and a sense of worth are goals in and of themselves beyond any influence on productivity.
Natural resources provide essential services, from water management and safe water in the case of watersheds to sequestering carbon dioxide in the case of forests. Better stewardship of resources would improve these services. For example, reducing industrial runoff would improve fisheries and make land used for growing food less polluted.
To enhance its natural capital, the PRC can develop climate-smart agricultural approaches to sustainably make farming more productive. The country could also create policies that encourage replacing fossil fuels with cleaner technologies to improve public health and the environment. For example, adding a $70 carbon price in the PRC could prevent nearly 4 million premature deaths from air pollution during 2017 to 2030.
Pursuing smart urbanization projects that are compact, connected, and coordinated could protect natural resources and make communities more resilient to climate change. These projects can help unlock the power of cities to deliver clean development and stimulate economic growth by improving access to jobs and housing.
Protecting and investing in natural capital increases biodiversity with many benefits, including recreational, medicinal, and agricultural.
Infrastructure projects support essentials of modern life, such as reliable power, heating and cooling, transportation, water, and sanitation. The PRC’s infrastructure efforts build a foundation for growth. The country is expected to need $30 trillion in infrastructure investment by 2040 according to the World Bank. That’s more than half of Asia’s total needs and a third of the world’s.
Approaching this need for infrastructure in thoughtful and sustainable ways can offer many benefits. Low-quality or old-fashioned infrastructure projects should not be supported; these can pose financial and economic risks and lock in decades of polluting development. Upgrading long outmoded industrial processes to clean, modernized production can dramatically increase efficiency and reduce waste.
The PRC has successfully invested in solar power and become the world’s largest producer of solar cells. Continued support of sustainable infrastructure such as the solar photovoltaic industry would help create a healthier, cleaner, and more sustainable economy. The PRC must also manage its physical capital well, to allow more efficient and clean technology to come through, for example via its electricity grids.
Achieving these investments
Sound government policies, including those that incentivize sustainable development will be needed. The PRC’s financial systems should be strengthened to allow for a range of effective public and private financing for sustainable projects. Successful change will make possible the PRC’s transition to a high-income country whose citizens live in harmony with both the natural environment and each other.
Measuring a country’s economy solely by its output in terms of GDP misses the human, environmental, societal, and other costs caused by the production or use of the output, and hence fails to capture important aspects of wellbeing. The education and health of people, the health of the natural environment, inequalities, and how well communities function should all be part of the measurement of social welfare and development.
The People’s Republic of China (PRC) faces a series of social and environmental challenges caused by its rapid industrialization, highlighting the “high input, high consumption, high emission, and low efficiency” nature of its economy. It is recognized that the old growth story is coming to an end.
As the country moves towards a “new normal,” adopting the objective of high-quality sustainable growth offers a clear and valuable response to these challenges. Prioritizing such growth with wellbeing, social and environmental quality, and sustainability at the center stage will not only help the PRC, but also help it to take its place in a changing world and offer a model of a cleaner path forward for developing countries. This blog focuses on the environment and social consequences of the past model of growth in the PRC and how they can be overcome.
Pollution from a history of reliance on coal and other fossil-fuel resources has fouled the air in the PRC’s cities as well as its soil and water. It has also contributed to climate change, which has and will continue to pose enormous risks to the country and the world.
There is growing evidence suggesting that the threat of irreversible climate change must compel immediate international action to control carbon emissions. To curb climate change’s worst effects, countries that signed the Paris Agreement agreed to limit warming to well below 2°C and ideally to just 1.5°C.
To achieve the 1.5°C target, the world must reach zero-net carbon emissions around mid-century, with all greenhouse gas emissions brought to net-zero in the following two decades. Given the PRC’s large share of the world economy and global emissions, its emissions must be cut dramatically for this to happen.
Climate change is fueling more severe weather that damages lives, livelihoods, and physical infrastructure. It also disrupts financial systems through high costs to insurance providers and other companies. If countries including the PRC continue to invest in fossil fuels-based infrastructure and economic activities, warming could increase well beyond 3°C—a level not seen for 3 million years. This involves enormous risks and would be devastating for humanity. And it is the poor people who are hit earliest and most severely by the effects of climate change.
Social inequality is a pressing concern in the PRC. Poverty remains a persistent problem in rural areas and in those with industries in decline. In addition, the county’s population is rapidly aging and will need more health care services. However, unlike more advanced countries, social welfare and health spending in the PRC are still low as a share of its GDP.
The PRC’s economy has changed dramatically in the past four decades and is continuing to change. Once dominant globally in low-cost manufacturing, the country has shifted toward services and higher-skilled activities. Going forward, artificial intelligence and robotics are also likely to transform some sectors.
These changes can be very positive if structured well. This will involve investing in skills for both automated activities and those where automation plays a less important role. Areas where industries are in decline will need help to ensure a just transition. In large measure this involves investing in people and their training and skills, in places to create new opportunities, and in social safety nets.
The way forward? Sustainable development
A focus on sustainable and high-quality development is at the core of an effective response to these challenges. Prioritizing and supporting such development will help drive a shift towards technology and services through investment in research, development, and innovation.
Areas for growth could include technologies for modern service sectors, such as health, education, transportation, and communications, and sustainable technologies and design that improve how modern cities function as well as the infrastructure needed for these technologies and design. All could offer a wealth of new positions for a more-skilled workforce. The PRC’s management of the necessary rapid changes to labor markets will require investing in the retraining of current workers and the provision of continuing education or lifelong learning.
Improving how cities function would reduce environmental damage and help people feel more connected to each other. Cities could be made up of socially mixed neighborhoods, comfortable, efficient, and climate-smart housing, green spaces, and environmentally friendly public transportation networks. The World Resources Institute found that globally, such improved cities could reduce urban emissions 90% by 2050.
Sustainable development also offers the potential to reduce social inequality. For example, making public transportation green, efficient, and extensive would particularly benefit lower-income people without their own cars and make them better able to find jobs and get services. And a coal phaseout, with effective transition management, can provide a better quality of life for millions of current coal workers and improve the environment in areas intensive in coal and its use.
In addition to the benefits such development has to offer the PRC, taking a sustainable path would provide a blueprint for others. Many of the countries in the Belt and Road Initiative are economically where the PRC was 20 years ago. By emphasizing sustainability, the PRC could show these countries a cleaner and greener way forward.
This year, the agenda of the National People’s Congress, the PRC’s top legislature, includes a critical item that is only discussed once every half a decade, a new five-year plan. The 14th Five-Year Plan (2021-25) is bound to be one of the most transformational plans since the founding of the PRC, as it departs from the emphasis on economic growth and restructuring that was characteristic of past plans to focus on the sustainability of growth and the quality of life.
To this end, the 14th Five-Year Plan outlines renewed efforts to close the rural-urban income divide, promote innovation, and move faster toward low-carbon development. These objectives are reinforced by the longer-term perspective ingrained in the PRC’s Vision 2035, which lays down the path for the PRC to become a moderately developed country by 2035 and a global leader in innovation. It also foresees domestic demand to be a main driver of future growth under the “dual circulation” development paradigm.
The 14th Five-Year Plan aims to advance the quality and sustainability of the PRC’s development, by addressing the social and environmental challenges that have emerged after decades of rapid growth. Given the country’s size, carbon footprint, and growing regional and global role, the plan’s success is not only important to the PRC, it is also important to the region.
Implementing the plan will require new policies and reforms to deepen social inclusion in the context of rapid population aging, and mainstream environmental sustainability into the development paradigm. The plan’s main policy guidelines will be refined, and implementation blueprints will map out the envisaged reforms. Making the right policy choices is essential for the PRC’s successful transition toward higher quality development. Social inclusion, population aging, and low carbon development are all priorities that deserve attention.
But despite remarkable achievements in extreme poverty eradication, income inequality remains a challenge and hampers social inclusion. Addressing inequality requires policy actions to close the rural-urban divide by reducing gaps in the economic, environmental and social conditions between regions, provinces and cities.
As economic reforms progressed in the PRC, State distributive mechanisms weakened. And funding to local governments has not kept pace with decentralization and the increasing responsibility to provide public services. Reforms in taxation, however, provide a means to increase revenues for government services, and they can promote a more balanced distribution of income and greater social inclusion.
International experience suggests large fiscal transfers for health, education and pensions are effective in reducing inequality, as sizable redistributive impacts can be achieved through increased public expenditure. Reforms to broaden the tax base and increase the progressivity of taxation have also been successful in other countries. In the PRC, increasing social spending and sufficient transfers of fiscal resources to local governments will ensure a more equitable income distribution and greater opportunities for lower-income households.
Social safety nets, too, are a powerful equalizing tool, especially when accompanied by further reforms of healthcare and pension systems, which in turn are essential to address demographic challenges.
The PRC’s population is aging rapidly and brings a new dimension to the challenge of social inclusion. The number of people aged 60 years or above is expected to reach 30 percent by 2050, the highest share in the world. Aging has broad repercussions beyond fiscal sustainability and long-term care costs. If left unaddressed, labor shortages and imbalances could undermine economic growth and future development.
Moving forward, there is a recognized need to prioritize the development of inclusive long-term elderly care systems. Efforts in this direction include establishing a sustainable financial framework, as well as expanding the provision and quality of eldercare services with adequate medical facilities and human resources funded by both public and private sources.
The PRC’s aging population also calls for labor market reforms. It is imperative to increase labor productivity to arrest the decline in the labor force and skills, and gain competitive advantages in innovation-intensive industries. The 14th Five-Year Plan’s call for the PRC to become a global leader in innovation requires higher-skilled workers. So improving the productivity of workers needs to be prioritized over protecting lower-productivity jobs, and greater efforts are needed to improve the efficiency of research and development spending and upgrading the quality of secondary and tertiary education.
Besides, an evolving labor market should accommodate the need for workers’ mobility by further relaxing the hukou (household registration) system, thereby ensuring greater opportunities for all and a more optimal allocation of resources.
The new government agenda to achieve green, high-quality development also emphasizes environmental protection and low-carbon development. The 14th Five-Year Plan builds on the remarkable environmental achievements of the 13th Five-Year Plan (2016-20) and provides a pathway to achieve peak emissions before 2030 and reach carbon neutrality by 2060. These ambitious goals require determined policies and innovative approaches to accelerate low-carbon development.
To contribute to inclusive sustainable development, the PRC’s low-carbon framework is also aligned with efforts to better manage urbanization and the country’s natural resources. The impacts of environmental degradation fall disproportionately on the vulnerable, especially in rural areas, where residents depend on forests, water, wetlands, fields and pastures for their livelihoods.
Developing a circular economy, more livable cities and low-carbon transport, and better managing natural resources cannot be achieved by the government alone. So there is a need to expand sources of green and blue finance and increase private sector investments in sustainable infrastructure, new technologies, and digital solutions.
Consistent with The PRC’s focus on sustainability, the Asian Development Bank country-level support has moved away from investments in physical infrastructure to focus on green, high-quality development.
The ADB’s new country partnership strategy for The PRC is aligned with the main priorities of the 14th Five-Year Plan and supports environmentally sustainable development, adaptation to and mitigation of climate change, as well as the challenges of health security and an aging society. Given that these areas of partnership will also contribute to regional and global goods, The PRC’s development strategies and plans for the coming years foretell a more inclusive and sustainable future for the country, the region, and the rest of the world.
The 14th five-year economic Plan presents a unique opportunity to transition toward high-quality development by addressing the social and environmental challenges that have emerged after decades of rapid growth.
Five-year plans have been instrumental in the socioeconomic transformation of the People’s Republic of China. Carefully designed as planning blueprints, each plan guides policy making for half a decade.
While the country’s greatest development achievements are associated with the successful process of reform launched in 1978, economic modernization started in the early 1950s. It was triggered by the First Plan (1953-1957), which established the industrial base that set the country on the path to development.
Improved connectivity was also key, and the First Plan fostered the construction of railways across the country. On a smaller scale, but with great impact on people’s daily life, the number of bicycles increased from 80 million to 1.2 billion in five years. While this achievement might appear simple at first sight, bicycles meant a lot to families. The greater mobility they brought about facilitated access to jobs, health care, and education, among other public services.
Plans are dynamic and change over time. Their focus is shaped by development milestones and emerging challenges. For instance, the most recent plans unleashed a decade of far-reaching structural reforms to promote sustainable inclusive growth.
The 12th Plan (2011-2015) paved the way for a consumption-oriented growth model where innovation-driven industrial policies gained prominence. The 13th Plan (2016-2020) introduced a second wave of market reforms and launched the concept of the ecological civilization, a green revolution backed by ambitious targets for environmental protection and climate change.
And this brings us to the 14th Plan, with high-quality and green development at its core. By emphasizing the importance of inclusive sustainable growth and a more sophisticated concept of personal well-being, the new plan is poised to be the most people-centered of all the plans to date. Having achieved upper-middle income status and eradicated extreme poverty, the People’s Republic of China can now place people’s well-being at the center of policymaking.
The 14th Plan presents a unique opportunity to transition toward high-quality development by addressing the social and environmental challenges that have emerged after decades of rapid growth. This transition requires greater efforts to deepen social inclusion and strengthen the environmental sustainability of the development model. The magnitude of the environmental challenges and the impacts of climate change imply that high-quality development under the 14th Plan must be green.
The country’s transition to a development model that emphasizes environmental sustainability and personal well-being, requires new steps in ongoing institutional reform. New policies and institutions could yield dramatic advances in the quality and sustainability of development.
Progress on institutional advancement is vital at the local level and in less-developed regions, where most of the efforts to support high-quality development will be delivered. New initiatives and policy actions to foster social inclusion and promote green development are a must to achieve the ambitious objectives laid down in the 14th Plan.
Tackling income inequality, a key objective of the 14th Plan, is critical to strengthen social inclusion. Rural areas suffer from limited access to public services including education, job opportunities, and health care. Narrowing the inequality gap requires actions to reduce the disparities in the environmental, social, and economic conditions to close the rural-urban divide.
Actions are also needed to mitigate the impact of the country’s rapid population aging, which is aggravated by the exodus to urban areas that leaves the most vulnerable behind. Income redistribution policies, including a more progressive taxation system, and strengthened social protection can ensure more inclusive growth for higher quality development during the new plan.
The 14th Plan builds on the remarkable environmental achievements of the previous plan and takes the country’s commitment to new heights by aligning its objectives with the government’s pledge to peak emissions by 2030 and reach carbon neutrality by 2060.
These ambitious goals require innovative approaches to accelerate low carbon development, including the circular economy, smart infrastructure, and state-of-the-art clean energy interventions. Greater strides in green and blue finance will be instrumental to manage plastic waste for the sake of the ocean’s health, an area where the country can lead in the delivery of a vital public good to the world.
ADB will be doing its part to support the key priorities of the 14th Plan, particularly in the area of high-quality, green development. This includes promoting environmentally sustainable development and climate change adaptation and mitigation initiatives, as well as addressing other critical issues, such as an aging society and health security.
The 14th Plan can yield dramatic advances in the quality and sustainability of development in the People’s Republic of China. Given the country’s size, carbon footprint, and growing regional and global role, the plan’s success will resonate in the country and across the region and the world.