A consequence in every case of rapid industrialisation since the 18th century industrial revolution has been heavy pollution. China was no exception, and things came to a head in the early 2010s when heavy smog and PM 2.5 pollution started causing major respiratory illnesses nationwide. Since then, a clear and consistent policy priority has been on greener growth in the second half of the 2010s. This focus has paid clear dividends as pollution levels and carbon intensity of growth have dropped sharply over the past decade.
There are two major long-term goals for greener growth
There are two major long-term policy goals in terms of green growth: reaching Peak Carbon by 2030 and full carbon neutralisation by 2060.
The World Bank estimates this goal would require USD 14-17tn of new green infrastructure and technology investments. We believe that green infrastructure, while likely having a lower multiplier effect than traditional real estate or infrastructure investment, will nonetheless remain an area where Chinese fiscal policy can have productive investment.
China’s green development efforts have typically received praise, but one of the pointed criticisms pointed to China’s industrial policies resulting in overcapacity and dumping of exports to the global markets, eventually resulting in industry consolidation and large scale company failures. The example many point to is the solar industry in the 2010s, and there is discussion on whether the NEV industry of today is headed down the same route. Criticisms tend to centre on whether or not Chinese policy affects fair competition, and on the companies that end up failing along the way.
In our view, this critique misses the forest for the trees, as the approach remains effective from a big-picture perspective in making the country competitive in the key industries of the future.