China’s slowing economy, while a potential risk to the world’s economic well-being, is nevertheless great news for climate change. As China’s economy is expected to continue to slow for the foreseeable future, consumption of resources and production of energy-intensive goods will decline as well, reducing carbon-dioxide (CO2) emissions. This is significant, because while the spotlight is usually on China’s exorbitant use of coal to fuel its white elephant economic projects, and the negative environmental and climate effects that coal combustion has, China’s cement industry likewise is responsible for substantial negative impacts on the environment.
Cement production is highly energy intensive and, according to estimates from the World Resource Institute, accounts for 15% of China’s CO2 emissions. In 2012, a Harvard study found that China was “the largest contributor to carbon emissions from fossil fuel burning and from cement production, being responsible for 25% of global carbon emissions.” Due to its rapid urbanization, China’s demand for cement has been staggering. As the producer and consumer of nearly half of the cement in the world, some estimates predict that half of all new buildings erected worldwide until 2030 will be located in China. Between 2011 and 2013, China produced more cement than the United States in the last hundred years.
However, massive cement production carries an equally massive price tag in the form of environmental damage. Conch Cement, Jidong Cement and Shanshui Cement are among China’s largest cement producing firms, making them some of China’s biggest polluters as well. Many former heavy industry production sites were hastily cleared to make space for urban expansion, leaving the soil and water in the areas heavily contaminated. A pesticide spill earlier in April highlighted in the words of one Greenpeace activist about how “dangerously lax China’s hazardous chemical management is.” Local officials, who often exhibit a blatant disregard for environmental regulations, perpetuate this careless attitude. The sentiment was most potently captured by a Guangdong official cited on pollution controls in The Economist, stating that, “We don’t think these decisions apply to us.” Similarly, a video produced by the Sierra Club showed how 21 Chinese companies flaunted environmental regulations and are now responsible for 10% of China’s CO2 emissions.
But now that China’s economic growth is slacking off, domestic cement producers are struggling. According to official figures provided by the National Bureau of Statistics of China (NBSC), in 2015 Chinese cement production fell by 4.9%. Not only do these numbers testify to Beijing’s official recognition of the fact that cement production is falling, but that the fast expansion of China’s heavy industry sector is finally coming to an end. Perhaps most importantly, they are symptoms of a crashing construction sector, in which the major players are facing drastic cuts in revenue. For example, China Resources Cement Holdings Ltd. recently reported a 99% plunge in net profit for the first quarter, “partly dragged down by weaker revenue.” Similarly, Tangshan Jidong Cement has seen significant losses as well, amounting to $260 million in 2015.
With the cement, steel and other energy-intensive industries becoming increasingly unsustainable, Beijing has taken steps to rectify the situation and adapt to the “New Normal”. First, in an effort to reduce the overcapacities in these industries – a main factor responsible for falling prices – China’s State Council began phasing out inefficient cement plants and promoting more energy-efficient production processes as early as 2009. In 2013, the State Council banned the expansion of cement production capacity in areas suffering from over-supply, barred banks from providing capital injections into such projects, and added new environmental requirements to increase cement plant efficiency. However, according to a new report by the European Chamber of Commerce in China, these measures merely “slowed down the rate at which the problem is expanding.”
Secondly, as part of its economic readjustment, China announced it would move away from demand-side policies and embrace supply-side policies. To this end, the 13th Five-Year Plan (2016-2020) places special focus on “technological innovation,” meaning that emerging high-tech industries will be promoted over the traditional iron, steel and cement sectors. Noteworthy in the Five-Year Plan is also the weight placed on energy and the environment, even calling for a 5 billion metric ton energy cap on total energy consumption.
Finally, the central government has provided Chinese companies with financial incentives to invest in high-technology sectors abroad. For investments into the semi-conductor industry, for instance, China operates a national fund, while Beijing and Shanghai have created their own separate semiconductor investment funds in support of local companies. This financial backing from the center has led to a wave of mergers and acquisitions (M&A) abroad, most prominently in Europe, the United States and Australia, where Chinese companies seek to acquire the technical know-how for sustainable growth. Accordingly, in 2015 Chinese firms finalized transactions worth $61 billion in the state-promoted sectors, including the financial, industrial, and high-tech industries, representing a 16% hike compared to 2014.
China is forced to adapt to new realities in its economy and has taken steps to reduce its carbon footprint and overall energy efficiency. However, these achievements mean little if Beijing does not succeed in reigning in local officials and profit-hungry businessmen, who carry most of the blame for the Middle Kingdom’s environmental crisis.
*Carrie Winters is a British environmental research officer currently residing in Singapore with extensive knowledge of the Southeast Asia region.