Sustainable Growth in China

According to new research in The Chinese Economy by DCFR president Jennifer Warren and distinguished finance professor Andrew Chen, “the world’s economic system and ecosystem have everything to gain by teasing apart the issues related to infrastructure and climate change” in China. In the Sept/Oct issue, the authors suggest that large sums of capital will be needed to finance green infrastructure in China, and that traditional approaches warrant re-thinking. While cooperative approaches between government and the private sector are necessary, a more modern approach via capital markets can vet projects and minimize distortions and waste that current “contract finance” approaches tend to deliver.

China outpaced the U.S. in carbon emissions several years ago and is placed to overtake U.S. emissions by 34% in 2015, and 65% in 2030. Air and water pollution in China shave off roughly 2.3% of GDP, according to a May 2010 Economist survey report and other sources. To meet electricity demand in China to 2030, about $2.76 trillion is estimated as the required investment. The Asian Development Bank estimates that for the next ten years a minimum of $300 billion will need to be invested for infrastructure development in the Asia-Pacific region, a large part of which will be for water infrastructure. The authors parse China’s energy and water infrastructure to suggest a path of sustainable growth and development with dividends to the environment and Chinese economy.

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