CHINA’S DILEMMA ECONOMIC GROWTH, THE ENVIRONMENT AND CLIMATE CHANGE Ligang Song and Wing Thye Woo (eds) CHINA’S DILEMMA CHINA’S DILEMMA ECONOMIC GROWTH, THE ENVIRONMENT AND CLIMATE CHANGE Ligang Song and Wing Thye Woo editors ANU E PRESS ASIA PACIFIC PRESS BROOKINGS INSTITUTION PRESS SOCIAL SCIENCES ACADEMIC PRESS (China) ABOUT BROOKINGS The Brookings Institution is a private nonprofit organization devoted to research, edu- cation, and publication on important issues of domestic and foreign policy. Its principal purpose is to bring the highest quality independent research and analysis to bear on current and emerging policy problems. Interpretations or conclusions in Brookings pub- lications should be understood to be solely those of the authors. Copyright © 2008 ANU E Press, Asia Pacific Press, Brookings Institution Press, and Social Sciences Academic Press (China) All rights reserved. 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Printed in the United States of America Cover design by Teresa Prowse Cover photo by Jason Lyon, iStockphoto, File Number 2831996 Contents Tables v Fgures x symbols x Abbrevatons xv contrbutors xv Acknowledgments xv 1 chna’s dlemmas n the 21st century 1 Ligang Song and Wing Thye Woo Part I Economic growth: determinants and prospects 2 Wll chna fall nto stagflaton? 13 Yiping Huang 3 Amercan and european financal shocks: mplcatons for chnese economc performance 30 Rod Tyers and Iain Bain 4 Global producton sharng and Us-chna trade relatons 59 Prema-chandra Athukorala and Nobuaki Yamashita 5 rebalancng equty and efficency for sustaned growth 90 Justin Yifu Lin 6 rural–urban mgrants: a drvng force for growth 110 Xiaodong Gong, Sherry Tao Kong, Shi Li and Xin Meng 7 rethnkng thrty years of reform n chna: mplcatons for economc performance 153 Xiaolu Wang Part II Impact of environment degradation and climate change 8 chna’s rapd emssons growth and global clmate change polcy 170 Ross Garnaut, Frank Jotzo and Stephen Howes 9 chna can grow and stll help prevent the tragedy of the co commons 190 2 Warwick McKibbin, Peter J. Wilcoxen and Wing Thye Woo 10 The poltcal economy of emssons reducton n chna: are ncentves for low carbon growth compatble? 226 Cai Fang and Du Yang v 11 The envronmental consequences of foregn drect nvestment n chna 243 Qun Bao, Yuanyuan Chen, and Ligang Song 12 The mpact of global warmng on chnese wheat productvty 265 Liangzhi You, Mark W. Rosegrant, Cheng Fang and Stanley Wood 13 Understandng the water crss n northern chna: how do farmers and the government respond? 276 Jinxia Wang, Jikun Huang, Scott Rozelle, Qiuqiong Huang and Lijuan Zhang 14 The mpact of ar polluton on mortalty n shangha 297 Health and Mortality Transition in Shanghai Project Research Team Part III Energy use, the environment and future trends 15 energy and envronment n chna 310 Kejun Jiang and Xiulian Hu 16 chnese urban household energy requrements and co emssons 334 2 Jane Golley, Dominic Meagher and Xin Meng 17 can chna’s coal ndustry be reconcled wth the envronment? 367 Xunpeng Shi 18 emssons and economc development: must chna choose? 392 Peter Sheehan and Fiona Sun Index 415 v Tables 2.1 estmaton of chna’s cost dstorton 22 3.1 Growth of Us labour productvty n the non-farm busness sector 34 3.2 regonal composton n the global model 38 4.1 chna’s merchandse exports: composton and world market share, 1992–93 to 2004–05 63 4.2 share of parts and components n chna’s manufacturng trade, 1992–93, 2000–01 and 2005–06 64 4.3 Geographc profile of Us trade 69 4.4 commodty composton of Us trade by partner country 70 4.5 share of parts and components n Us machnery trade 74 4.6 determnants of Us manufacturng mports and exports: regresson results, 1992–2005 80 A4.1 data set used n regresson analyss: definton of varables, source and varable constructon, and the country coverage 88 A4.2 country coverage 89 6.1 census: mgrant numbers by cty 121 6.2 Industry dstrbuton of mgrant workers n 15 ctes 122 6.3 Famly and ndvdual characterstcs 124 6.4 Job characterstcs 127 6.5 earnngs and work-related welfare 129 6.6 Income, expendture and housng condtons 133 6.7 health and mental health 137 6.8 chldren’s lvng arrangements 138 6.9 Basc characterstcs of mgrants’ chldren 140 6.10 Parental-assessed chldren’s health, educaton and other development outcomes by lvng arrangements 141 A6.1 dfferent poverty lnes 150 A6.2 dfferent poverty lnes 150 A6.3 detaled and broad ndustry categores 151 7.1 economc performance n chna and russa durng the reform perod 155 7.2 Farm output and ncome before and after agrcultural reform n chna 158 7.3 Proporton of products subject to market prces 161 7.4 Prce reform n the first decade: nflaton, unemployment and GdP growth 163 7.5 ownershp structure of the ndustral sector (share n gross output value) 164 v 8.1 A comparson of GdP, energy and carbon doxde emssons growth rates and elastctes for the world and chna, 1971–2005 172 8.2 Growth-accountng projectons for chna, 2005–25 176 9.1 Global economc and demographc changes, 0–2003 191 9.2 chna’s share of global energy consumpton and carbon doxde emssons, 1990–2030 197 9.3 Fossl-fuel augmentaton factors 217 A9.1 overvew of the G-cubed model (verson 80J) 225 10.1 summary statstcs of varables 231 10.2 economc development and sulphur doxde emssons: two-way fixed-effect model 236 11.1 selected lterature on the relatonshp between FdI and polluton 246 11.2 FdI and polluton emssons among dfferent provnces 249 11.3 Fve ndcators of polluton emssons n chna 250 11.4 Basc statstcal nformaton on polluton and FdI 253 11.5 Total sample estmaton results 253 11.6 The threshold effect of FdI for five pollutants 255 11.7 estmaton results of the three effects 257 11.8 estmaton results for coastal eastern regons 257 11.9 estmaton results for nland provnces 259 11.10 comparsons of the FdI–polluton nexus among dfferent regons 260 12.1 estmated wheat-yeld functon n chna, 1979–2000 269 12.2 comparson: mpact of 1ºc ncrease n growng-season temperature 271 12.3 Accountng for wheat-yeld growth 272 13.1 Farmers’ judgements of water shortages n vllages n northern chna 281 13.2 Water-supply relablty n vllages n northern chna 281 13.3 Adopton rate of water-savng technologes over tme n northern chna’s vllages 292 14.1 summary statstcs of mortalty outcome, ar polluton levels and meteorologcal measures by season 301 14.2 relatve rsk (rr) and 95 per cent confidence nterval (cI) of the best sngle lagged-day effects by lnear extrapolaton for a tenth– nneteth percentle change n pollutant concentraton, 2000–01 303 14.3 relatve rsk (rr) and 95 per cent confidence nterval (cI) of the best sngle lagged-day effects by lnear extrapolaton for a tenth– nneteth percentle change n pollutant concentraton, 2000–01 305 15.1 chnese energy output by fuel, 1990–2006 314 v 15.2 Gross and structure of chnese energy producton, 1978–2006 315 15.3 major polluton emssons n chna, 1995–2006 318 15.4 energy-conservaton projects approved by the chnese government n 2005 325 15.5 Prmary energy demand n baselne scenaro, mtce 328 15.6 Prmary energy demand n polcy scenaro, mtce 328 15.7 Fnal energy demand n baselne scenaro 329 15.8 Fnal energy demand n polcy scenaro 329 15.9 Polcy optons used n the modellng study 330 16.1 chna’s drect energy consumpton n 2005 340 16.2 shares of household consumpton expendture n total output 341 16.3 Indrect energy requrements for rural and urban households 341 16.4 energy and carbon ntenstes by sector n 2005 343 16.5 carbon coefficents by fuel 345 16.6 Average energy consumpton and carbon emssons by ncome decle 347 16.7 Prce per tonne of coal equvalent 348 16.8 determnants of household per capta energy consumpton 353 16.9 determnants of household per capta carbon emssons 355 A16.1 Breakdown of per capta expendture 364 A16.2 Aggregaton of survey sectors nto Table 16.4 sectors 365 A16.3 emsson shares of consumpton goods by ncome decle 365 17.1 summary statstcs of the panel data 375 17.2 estmated results of the fixed-effects sUr model 377 17.3 emsson ntensty and the appearance of the zero emssons pont 378 17.4 estmated results of the provncal dummy of the sUr model 379 17.5 summary of factors that affect the changes n sulphur doxde, smoke and dust emssons, 1997–2006 381 17.6 coal-based power generaton technology n chna 386 18.1 energy consumpton and value added by ndustry n chna, 2001–06 403 18.2 model parameters and assumptons for alternatve energy runs: specficatons for the base case and polcy optons to 2030 407 18.3 summary of unchanged polcy and alternatve polcy projectons 410 x