How will China’s sweeping pollution crackdown affect its economy?

by Jane Cai/ Sept 14, 2017/ SCMP

An unprecedented campaign against environmental pollution has led to 18,000 companies being punished across the country since last summer and more plant shutdowns. But the crackdown’s economic implications are just beginning to unfold.

While there’s no official data to measure the economic impact of Beijing’s drive for clean air and water, the government’s environmental campaign has become a key consideration in analysing China’s prices, employment, growth and economic structure, analysts said.

“This time China is very serious about environmental inspection,” Tianfeng Securities analysts led by Liu Yuhui, an economist with the Chinese Academy of Social Sciences, wrote in a note. “It will wield influence to the economy for a long term.”

China intensified its environmental work after President Xi Jinping told the country’s provincial governors and ministers in July that pollution treatment is one of his top three priorities for the coming years, along with controlling financial risk and reducing poverty.

An army of 5,600 inspectors, from not only China’s environment ministry but also the Communist Party’s anti-graft watchdog and personnel unit, were dispatched to the provinces to check whether local cadres were doing their jobs to protect the environment. This unprecedented action caused many local officials to overreact by shutting down all possible pollutant sources.

Liu and his colleagues concluded that China will sacrifice 0.2 percentage points in economic growth this year for the sake of having clean air around Beijing, Tianjin and Hebei alone and about 40,000 workers will lose their jobs.

Prices of Chinese commodities are surging thanks to supply limits tied to environmental restraints.

China’s Producer Price Index inflation rose 6.3 per cent year on year in August, up from 5.5 per cent in July. Prices of coal, steel, non-ferrous metals, petroleum and chemical products rose strongly, partly because these industries are easy targets for the pollution crackdown. Read more…


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