This is China! blog

One of the nicer aspects of the turn to Spring in the Yangtze River Delta is that I won’t have to be running the electricity bill further up to keep warm. But at least I have electricity. Yunnan, and much of southwest China, has been suffering a drought that is drying its reservoirs. This is unfortunate as the southwest relies on the dams at the reservoirs to generate electricity. Unfortunately, the region may see electricity supply fall by as much as 20% during the first five months of the year.

As the WSJ points out, melting glaciers and drying riverbeds will affect China’s overall attempt to rely more on hydropower than on coal-generated electricity. As water becomes more dear, companies in the southwest and northwest of China can expect higher electricity bills – or grayer skies.

Previous posts:

Addicted to Cheap Water

The Real Feel

Precious Little to Go Round

I just received my electricity bill for the last couple months of winter. Whoever said coal-generated power in China was cheap hasn’t lived in Greater Shanghai. Now I really understand why so many Chinese south of the Yangtze River don’t even turn on their heating, even in the depths of winter. Save money!

Western countries seem to be standing aside and allowing China to capture the cost-effective end of the renewable energies market. According to the New York Times, China already produces the most solar panels and wind turbines in the world. “Yet many Western and Chinese executives expect China to prevail in the energy-technology race,” the Times writes. Domestic subsidies to buyers and energy producers (as well as the occasional diktat) the society already investing in less-polluting sources of energy than America and Europe. The sheer size of the market serves to further drive prices down. Of course, little is said about the processes and energy-efficiency of the manufacture of the renewable energy devices.

Now, from a global markets point of view, the country seems to be able to export the products to countries that have been politicking about investing in low-cost energy alternatives. But, as Ma Lingjuan, deputy managing director of China’s renewable energy association notes, “Every country, including the United States and in Europe, wants a low cost of renewable energy. Now China has reached that level, but it gets criticized by the rest of the world.”

My, aren’t we sensitive.

Further reading: NYT

I swear every day I take a drive around Suzhou or Shanghai I see at least one new construction project is starting up. If anything’s clear, China’s simply going to need more steel to keep up the pace of building. Typically, though, the biggest buyer has the upper hand in negotiations. Not so in the latest round of iron ore negotiations, in which Australian mining companies found Chinese buyers too annoying to deal with. The Australians said they’ll go on to set benchmark prices for this year’s iron ore with the Japanese, who are shrewd in their own right, and polite, to boot. Meanwhile, Chinese steel producers – of which there are many – need to organize their own thinking about a benchmark price to present to the Australians; and they need to separate politics from international business – difficult to do without a loss of face given the arrest of Rio Tinto employees in Shanghai last summer on spying charges (steel production costs are national secrets).

This particular case makes the point that international companies should not necessarily take at face value what Chinese companies insist on – as opposed to propose. And that Chinese companies have been frozen out of negotiations that have far-reaching global implications indicates the Chinese have not yet fathomed international norms of engagement: the belief that the same sort of bullying tactics that work domestically should be effective internationally has been proven wrong – and will be shown to be wrong again and again as the Chinese try to get international detente right.

The world, it seems, will continue to rule China for some time to come.

Further reading: FT

Steely-eyed

The new Silk Road has no camels, no caravans, no adventurers, traders, ne’r do wells nor princesses. The cargo of the new Silk Road, though, is amongst the most precious in the world: natural gas. The leadership of China and Kahzahkstan recently opened the Kazakhstan portion of the 7,000km (4,300 miles) pipeline, which starts at a gas field in Turkmenistan and will end in Xinjiang when completed in 2013. The route the pipeline takes helps make some Central Asian countries more independent from Russia’s resource whims.

Russia can be none to happy that former Soviet territories are gravitating into Chinese orbit. If only, though, those same Central Asian countries took a look at their Muslim neighbor to the east, already enmeshed in China’s sphere of influence, they’d get some idea of the true cost such intimacy.

Further reading: BBC

The average Chinese I talk with could care less about carbon emissions caps; that is, unless they figure it’s yet another Western plot to spoil China’s ascent. The bill before Congress placing tariffs on imports based on their carbon emissions is fundamentally a good idea that needs to be equally applied to imports and domestically produced goods. The bill essentially penalizes imports that were made with “dirty” technologies or that have “dirty” components.It would certainly spur China to actually put its policy where its mouth is in terms of forcing its heavily polluting (and wasteful) industries to meet the stricter carbon requirements the central government continues to tout. After all, if its second largest customer (after the European Union) says it wants to change its buying habits, well … the customer is (nearly) always right.

On the other hand, for the United States government to hand free emissions credits to its own dirty industries does smack of protectionism as well as gives the finger to global efforts at reducing carbonemissions – hardly the sort of trend-setting actions the rest of the world looks to the United States for. Instead of encouraging industries that need to clean their collective acts up, congressional efforts should be encouraging industries that want to clean the Earth up. The consumer backlash consumer advocatespredict is, well, predicatable.Let’s face it, though:, don’t Americans have enough stuff?

Tackling climate change is going to require big changes in habits that in a mere 65 years have become a part of national American mythology that has also become embedded in the national psyches of othercountries: that is, that this earth is ours to do with as we please.

The earth, though, has greater considerations.

Further reading: China Briefing

Just days before, He Yafei, China’s vice-foreign minister, had accused Todd Stern, the US special envoy on climate change, of a “lack of common sense” and said the developed world’s attitude towards China’s footing its own bill for climate change initiatives in its own backyard was “extremely irresponsible”. Of course, this rather undiplomatic outburst is singularly unhelpful in developing a global response to climate change. However, with China having blurred the lined between what constitutes a developing country vs a developed country (see previous post), new thinking will have to come to pass to qualify who pays and who gets money from richer nations.

Though China seems to have changed tack and is no longer pushing to have developing countries bankroll its emissions reductions implementation, the CCP still continues to play that “poor pitiful us, look what those rapacious Western countries did to us (and are still doing to us),” card. Unless, of course, Mr He is simply a devoted viewer of the pap CCTV and local Chinese TV stations insist on airing in China about how victimized the Chinese have been over a century and a half (with, of course, blind spots to their own self-inflicted social disasters large enough to push an Olympics stadium through).

China wants to have its industry and eat its pollution, too. One day, however, as a modernized and – in gross terms, at least – increasingly wealthy country, it will one day soon find itself clearly on the “developed” side of the line. What then will it tell its poor relations when they come cap in hand?

Further reading:

FT (Dec 11, 2009), FT (Dec 14, 2009)

New Prescription Needed: Blurring a Bi-polar World

It’s tough to lend a helping hand when you’re not sure what’s happened to your hand afterward. It’s just recently been revealed that the United Nations board that approves issuance of credits for carbon trading to developing countries has since the summer stopped providing credits to Chinese manufacturers in the wind power generation industry. Apparently, the UN has issued nearly US$1 billion to Chinese companies in a bid to help the companies build wind farms that would not have been built without the credits. The credits trade on international bourses, like stocks, and have real value. They are one of the developed world’s ways of helping modernizing countries curb power generation projects that produce a great deal of carbon-related pollution. The UN has refused approval on 50 Chinese projects.

China has received over 50% of the carbon credits the past five years, while at the same time ramming up wind turbines at an ever-increasing volume each year. Suppliers for turbines have gone from over 95% foreign-owned in 2000 to nearly 60% domestic suppliers in 2007. European manufacturers in particular such as Vestas and Siemens have been crying foul the past year in the face of a projects-bidding system they claim the State has rigged against international players.

Indeed, the largest wind turbine producers in China were unbundled from State Owned utilities companies, and are still heavily guided by the State: Guodian, Datang, Huadian, CPI and Huaneng produce more than half the wind turbines in China today, according to the Danish Wind Energy Development Program.

So, one can only imagine international wind turbine manufacturers sighing a bit of relief at the UN moratorium. With governance and shareholdings in large Chinese companies that have heavy State legacies as opaque as the smoke that billows from coal-powered generators, it may be some time before the UN actually figures out where the credits are going, and whether they’ve done any good.

Read More: FT

Hundreds of residents recently protested the Guangzhou government’s plans to place a garbage incinerator in their neighborhood (Reuters). Apparently, residents of another such incinerator built in Likeng village, near Guangzhou, suffered mightiliy from the carcinogenic toxins the place spewed out. Of course, this all leads to the logical question: where and how to dispose of the waste of a billion and a half bodies on their way to a better life, Western-style? This isn’t just a question for Guangzhou, but for the entire Mainland Chinese society.

Of course, there’s always “other people’s” backyards. Way out West.

Remember: there is no “away”.

Whilst all eyes are gravitating toward the Copenhagen Summit on Climate Change, and China’s contribution to reducing carbon emissions that are changing the earth’s ecosystem, little is being said about the huge disruption to life and society in North China due to dramatic water shortages. Northern China makes up 19% of China’s water resources, with a little less than half all China’s population. What with Beijing sinking at 8mm per year because its sucked dry its own underground aquifers, and the farmers and fishermen of surrounding provinces stomping around on cracked, dessicated soil that was once farmland and fishing holes, rationing of water is becoming more commonplace.

China has just one-quarter the amount of water per person compared with the world average, and uses 65% of its water irrigating farmland that only yields 15% of the countries GDP. Yet, US$.31 per cubic meter, the cost of water in China is amongst the lowest in the world, at less than half the cost of the United States, and a tenth that of Germany. The cost of agricultural use of water in 2000 in China was a mere US$.01, compared to US$.15 for city dwellers and US$.16 for industrial use. The agricultural sector in the US uses water at US$.23 – still considered cheap by international standards. Cheap water has only encouraged farmers in the north to use water in abundance – and to waste accordingly: only 45% of this water allocation ever reaches the farm plots. Farmers waste nearly three-quarters of the water they use to irrigate their farms.

So, though, efforts to raise water prices will help somewhat with conservation, sustainable models of agriculture need to be developed and implemented. Quickly. Piping water from the south to north will simply buy the north some time – but not much, given the wasteful ways of northern farmers – and the climate catastrophe to its west.

The glaciers that provide the water to China’s greatest rivers are melting at an alarming rate. Indian and Chinese scientists estimate China (and India, as well) have merely 20 to 30 years more their societies can rely on melts from ice sheets. They are working together to see what can be done to stem the glacial recession. The Dalai Lama mid-November implored the Chinese government to set political differences aside to tend to the issue. According to Reuters, he said, ”
“A political solution (for Tibet) may take time, but that’s okay, we can wait.”

Much of the success of a sustainable model of water usage is in educating farmers on how to use the water, appropriate amounts and kinds of fertilizer and the kinds of crops that are appropriate to a geography that is rapidly changing.

Water – or rather, the lack thereof – is rapidly becoming the Chinese leadership’s greatest challenge. Not energy. Not even carbon emissions. Try to float your boat on that priority.

Further reading: Reuters, Daily Reckoning, WSJ, Green Leap Forward

Matthew Engel recently wrote a piece in the Financial Times I found quite funny in light of the way we in China live compared with the expectations for quality of life in the United States. It seems a woman in a small town in Pennsylvania has been told twice by city fathers her neighbors are upset with her hanging her clothes to dry in her yard – including her bloomers. Americans figure its weird, if not a bit distasteful, to be hanging your (albeit clean) laundry out to dry. Of course, when I was growing up in the sixties and seventies, that’s pretty much anyone ever did in the neighborhoods in which I was raised. In the Asian neighborhood in which I lived as a kid in Hawaii, there was even a public clothes line upon which all the neighbors in the block hung their underpants to dry.

Now, though, nearly every American has a dryer to do the job wind power once performed; ironically, on properties that on average are far larger than they were in the sixties and seventies. A battle of seemingly religious proportions has broken out Stateside, with non-electric drying types accusing electric-drying types that electric-dryers claim 6% of electricity usage in the USA.

Of course, in China, which has a smaller energy footprint per capita than the States, it would be odd to look at a bank of apartment buildings anywhere in China and NOT see rows of wet clothes saluting drivers and pedestrians alike. Including my own. It makes me think that if the U.S. really wants to gain a role as a world leader in a global green movement, it may find itself one day forced to air its laundry – clean, hopefully.