The Growing Pains of Rapid Expansion

As the end of another year approaches, China still has much to boast about. Since the Asian Financial Crisis of the ’90s, China has managed to rebound and experience a rate of growth unmatched by any other country around the world.

In 2004, the United States had a real growth rate of 4.4 percent while China had a growth rate of 9.1. The US trade deficit has also risen significantly since 1985, reaching up to 103.2 billion in 2002 because China committed to a fixed exchange rate regime.

Even with hurricane Katrina and rising oil prices, the US continues to import more good than exported to China because their goods in terms of prices are drastically undervalued. Today the US is feeling the threat and has ultimately resorted to political pressure, forcing China to allow its currency to appreciate against the dollar. China has become the ferocious dragon illustrated in myths.

Being able to achieve the impossible however has come at a cost.

The latest chemical explosions make it increasingly evident that China’s rapid growth comes at the expense of its environment. On Nov. 13th, one of PetroChina Co.’s chemical plants located in Harbin, capital of Heilongjiang (northeast China) suffered from a series of explosions that left the Songhua River (one of the seven largest) contaminated with dangerous amounts of Benzene. Furthermore, the Chinese government holds majority ownership of PetroChina Co.. On Nov 15, the company released a statement revealing that there were 5 deaths as a direct result of the blast. However, if the pollution cannot be contained, hundreds, maybe thousands, will die as an indirect result for benzene is linked to cancer.

The five individuals who died can be added to many who have died due to chemical related incidents. Last year an incident that involved the explosion of a gas field claimed 243 lives. Livable wages in China are significantly less than in the United States.

China’s lack of reinforced environmental policy will leave the country in shambles, just as a runner suffers mild knee injury today but cannot run years from now. Because of China’s growth hundreds of thousands of citizens have been moved out of poverty but there are still millions who remain. Long run growth will be impeded by China’s inability to increase its middle class because local economies will be choked by declines in demand and investment. This one incident alone knocked the air out of the local restaurants industry.

Eateries have suffered anywhere from 20 percent to 70 percent losses in sales and a local hotel reported a 30 percent decline in occupancy of its hotel. Rural areas however may be the hardest hit in both the short and long run.

In many villages bottled water was never received. The only way people can survive is using water from the underground wells and directly from the Songhua River, which is already amongst the most polluted water sources in the country. Chinese regulation states that the purity of water shall be judged based on a class 1 to 5 ranking system where 1 is the most pure and 5 is the most pollute, a class 3 ranking is the minimum level of polluted water deemed acceptable for human consumption. The Songhua River normally holds a class 4 ranking which often drops down to class 5 during the winter season. China should be concerned about its environment and its citizens before it continues to pursue a reputation as a global superpower.

If China allows the environment to deteriorate at the cost of big business interest, then those who least deserve it will die, those who have not yet above beyond the poverty level. As you read this about 100 tons of Benzene is moving into Russian territory via the Songhua. Russia has been plagued by political, economic, and more recently exploited, religious instability. China take a step back, commit to environmental policy reform, and increase enforcement. Take care of the people who make development possible, Chinese citizens, and don’t throw salt into the wounds of your neighbor.