When China Rules the World (30 page)

China, still poor though it may be, will not have the option of postponing until the time it has achieved rich-country status two of its most pressing environmental issues. Willy-nilly, it will be obliged by cost pressures to shift towards less resource-intensive technologies. With the price of oil likely to increase considerably, at least in the medium term, China has already begun to seek ways of limiting its consumption of oil by, for example, imposing heavier taxes on gas-guzzlers and encouraging the development of alternative car technologies:
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in Shanghai, which is China’s environmental leader, it now costs around £2,700 to register a new car.
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Chinese economist Yu Yongding is certain the country will take action: ‘A billion Chinese driving gas-hogging SUVs is just a fantasy. Believe me, the Chinese are not so stupid. China has to and will reduce its reliance on oil imports.’
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The other irresistible environmental challenge is global warming. This will in due course oblige China to seek ways of limiting its production of CO 2 in the same manner that, in time, it will force every other country to seek alternative forms of growth.
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Like India, China has resisted the idea that it should be subject to the same constraints as rich countries, on the grounds that the latter have been pumping greenhouse gases into the atmosphere for much longer and therefore bear a much greater responsibility for global warming. The major contributor to China’s energy consumption, moreover, is not the domestic consumer, whose needs are minimal, but the export trade. The reality is that 40 per cent of China’s energy goes into producing exports for Western markets: in other words, the West has, in effect, exported part of its own greenhouse emissions to China.
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The minimal historical contribution made by the developing world to global warming was recognized in the Kyoto Protocol, which excluded them from its provisions, but the refusal of the United States and Australia to participate rendered the accord largely ineffectual. But with China having overtaken the United States as the biggest emitter of CO
₂
in 2007
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(even though its per capita CO
₂
emissions remain one-seventh of those of the US),
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the idea that countries such as China and India can be excluded from any future agreement is no longer plausible, especially as the effects of global warming - already very evident in China itself, with accelerating desertification, reductions in agricultural yields, changing patterns of precipitation, the increased incidence of storms and droughts, and extreme weather like the prolonged snowfalls in central China in 2008
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- grow ever more serious. The environmental impact of energy use in China is particularly adverse because its dependence on coal - of a particularly dirty kind - is unusually high (60 per cent compared with 23 per cent in the US and 5 per cent in France) and carbon emissions from coal are proportionately much greater than from oil and gas.
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Although the Chinese leadership has resisted the idea that the country should be subject to internationally agreed emission targets, it has accepted the scientific argument concerning global warming and, in both speeches and the growing volume of new environmental regulations, is displaying a heightened awareness of the problem.
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In fact on paper China already has some of the most advanced laws in the world on renewable energy, clean production, environmental impact assessment and pollution control, though these still remain widely ignored in practice.
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The government continues to resist the idea that environmental considerations should detract from the priority of rapid economic growth, but there is, nonetheless, widespread recognition of their urgency at the highest levels of the Chinese leadership.
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The need for China to embrace a green development strategy, rather than relying on the old intensive model, has been powerfully argued by the influential Chinese economist Hu Angang.
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China’s position on climate change is evolving rapidly. The two targets it has adopted as part of its 2007 energy security strategy will have a significant impact on reducing the growth in emissions - namely, decreasing the energy intensity of the Chinese economy by 20 per cent by 2010 and increasing the use of renewables from 5 per cent to 20 per cent of energy production by 2020. It is already the world’s largest user of alternative energies, including wind power.
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It is making huge investments in a wide range of clean-technology innovations, especially in wind, solar and hydrogen. Such is the scale of these investments that whatever technologies China develops in clean and renewable energies are likely in practice to become the new global standard. It could easily become the world’s leading manufacturer of renewable energy plants, and at a price, furthermore, affordable to other developing countries.
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It is widely believed that in the relatively near future some of the most exciting potential breakthroughs in photovoltaics (the use of solar cells for the generation of electricity) and hydrogen-powered vehicles may come out of China rather than the United States.
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The two largest Chinese car producers are in the process of launching hybrid models, and, encouraged by the government, they, together with other manufacturers, have ambitious plans to become world leaders in electric and other alternative-energy vehicles.
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Just as its economic development combines both the backward and the advanced, so the same could well prove to be the case with the environment, as the drastic action taken by the central government in advance of the Beijing Olympics to try and improve the capital’s appalling air quality, including major restrictions on the use of cars, illustrated.
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At present, China’s comparative advantage lies in low-end manufacturing, where it is able to exploit the huge supply of cheap unskilled labour and thereby produce at rock-bottom prices - or ‘China prices’, as the new global benchmark has become known - for the world market.
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In the longer run, there are two inherent problems with this. First, in terms of the total costs of getting a product to market, the proportion represented by manufacturing is very small - around 15 per cent of the final price - with the bulk of costs being creamed off by design, marketing, branding and so forth, tasks which are still overwhelmingly carried out in the developed world.
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Second, most of China’s exports are produced by Western and Japanese multinationals, with Chinese manufacturers cast predominantly in the role of subcontractors. In other words, China’s role is basically as the low-end manufacturing subcontractor in the multifarious global operations of multinationals based in the developed countries.
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There is, however, plenty of evidence that China is steadily climbing the technological ladder. Like all newcomers, it has been obliged to make it up as it goes along and find its own distinctive path. One avenue used by China to gain access to new technologies has been a combination of copying, buying, and cajoling foreign partners in joint-ventures to transfer technology in return for being granted wider access to China’s market. The lure of the latter has proved a powerful bargaining counter, especially with second-tier multinationals.
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In a short space of time, China has already overtaken many South-East Asian countries in important areas of technology, and its ability to drive a hard bargain with foreign multinationals has been a major factor in this. While Proton, Malaysia’s national car company, has been unable to persuade any of its various foreign partners - most notably Mitsubishi - to transfer key technology, the Chinese car companies have, one way or another, been rather more successful. The bargaining counter of size carries great clout: China has fifty times the population of Malaysia.
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There is another route by which China has been negotiating its way up the technological ladder: when foreign multinationals move their manufacturing operations to China, there is a strong tendency for other functions to follow so as to take advantage of economies of scale, for reasons of convenience, and because highly skilled Chinese labour is plentiful and cheap.
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The textile industry in Italy, for instance, has progressively migrated to China, starting with manufacturing, followed by more value-added processes like design.
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Microsoft, Motorola and Nokia have all established major research and development centres in Beijing, while Lucent-Alcatel has done the same in Nanjing. As a consequence, Chinese professionals will become increasingly important players in the R & D activity of such leading-edge multinationals.
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In the longer term, however, the key to China’s technological potential will lie in its ability to develop its own high-level research and development capacity. Because China’s growth has hitherto relied overwhelmingly on imported technologies, only 0.03 per cent of Chinese firms own the intellectual property rights of their core technologies. Moreover, Chinese companies spend on average only 0.56 per cent of turnover on research and development, and even in large firms this only rises to 0.71 per cent.
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However, enormous efforts are being made to change this state of affairs, with the aim of increasing R & D spending from $24.6 billion (1.23 per cent of GDP) in 2004, to $45 billion (2 per cent of GDP) in 2010, and $113 billion (2.5 per cent of GDP) in 2020.
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Considerable progress has already been made in a very short space of time. China has become a major player in the production of scientific papers, its contribution rising from around 2 per cent of world share in 1995 to 6.5 per cent in 2004.
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Citation rates, although very low, are also rising exponentially.
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The overall figures hide strengths in particular areas, most notably material science, analytical chemistry and rice genomics. A recent analysis of nanoscience publications shows that China ranked second behind only the US in 2004.
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Not surprisingly, publications are concentrated amongst a handful of elite centres such as the Chinese Academy of Science, Beijing University and Tsinghua University (also in Beijing), which China is seeking to develop as world-class institutions.
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Among China’s strengths is the fact that it possesses a large number of highly educated professionals as well as a strong educational ethos.
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The country is now producing over 900,000 science, engineering and managerial graduates every year. In addition a significant number of Chinese students are educated at the top American universities, although a sizeable proportion choose to stay on and work in the US afterwards: Chinese, for example, account for around one-third of all professional and technical staff in Silicon Valley.
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The Chinese government has been intensifying its efforts to persuade overseas Chinese to return home: 81 per cent of the members of the Chinese Academy of Sciences and 54 per cent of the Chinese Academy of Engineering are now returned overseas scholars.
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Overall, it is estimated that around 20 per cent of Chinese professionals working overseas have now returned, thus repeating a similar pattern that occurred with earlier Korean migration.
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