October 7, 2008

Feature: Changes and Challenges With China’s 30 Years Reform and Opening Up (4)

Feature: Changes and challenges with China's 30 years reform and opening up (4)


Despite the new-found wealth, prosperity has come at a price. One negative effect is serious environmental damage.

Chinese Academy of Sciences Professor Shi Mingjun said exploitation of natural resources, ecological degradation and environmental pollution, has outweighed China's economic benefits in recent years

Under a research program, Shi said the cost of environmental damage was 2.75 trillion yuan (401.7 billion U.S. dollars) in 2005, while the growth in gross domestic product (GDP) for the same year was 2.24 trillion yuan.

"As the nation's growth pattern has changed little over the past two years, the conclusions are likely to be the same for 2006 and 2007," Shi said.

"It is impossible for China, a country of 1.3 billion people, to follow the old model of the developed countries by consuming large quantities of energy at the expense of the environment,"Chinese Vice Premier Wang Qishan said.

Another problem is the uneven distribution of wealth. Official data from 2007 showed the country's Gini Coefficient , which measures the inequality of income distribution, has surpassed the warning mark of 0.4, with the per capita GDP of eastern coastal Shanghai standing around 76,000 yuan (11,102 U.S. dollars), more than 13 times that of the rural southwestern Guizhou province.

"The growing income gap among people could increase tension in society, and could nourish wrong developments in terms of crime," former Dutch ambassador to China Van den Berg warned.

Regional disparity remains big. After 30 years of reform and opening up, China's coastal area has moved from the primary industrialization stage to high-grade industrialization. The western inland is still in the preliminary stage of big economic development.

Meanwhile, economic operations in China now face a series of challenges and uncertainties.

Industrial output in the Pearl and Yangtze River deltas, the nation's two most important growth engines, rose at a markedly slower pace. Many small- and medium-sized companies, particularly exporters of low-end products, are faced with increasing labor costs.

Also, coastal areas are feeling the pressure of inflation. The price of finished oil remains high, the transport capacity of coal, electricity and oil is tight and prices of raw materials keep rising.

Companies also suffer from decreasing overseas consumer demand, a result of the troubled world economy. "It shows we are not at the end of the reform process," said Chi Fulin, Executive President of the China Institute for Reform and Development. (more)

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