World Energy Outlook 2007

several times since the beginning of 2006. 8 The National Development and
Reform Commission has used a range of administrative controls on
overheated sectors. A decree was jointly issued by several ministries in April
2006 calling on banks to stop signing packaged loans with local governments.
In addition, the central government recently provided for local environmental
improvement to be a crucial indicator for assessing local government
performance.
Environmental degradation is a major and growing problem that is forcing
China to adjust its economic structure in favour of less resource-intensive
economic activities. Most of China’s electricity is produced from coal and
most coal-fired plants are far dirtier than those found in OECD countries.
Environmental charges are generally too low to reduce pollution significantly.
Many pollutants, including nitrogen dioxide and mercury, are largely
unregulated. The central government is increasingly taking environmental
considerations into account in policy making, but enforcement of most
resulting legislation by the provinces and local authorities, who typically focus
more on economic goals, is often poor. Air pollution is estimated to cost
China in the range of 3% to 7% of GDP each year (OECD, 2007b). China
contains 20 of the world’s 30 most polluted cities (World Bank, 2007b). Acid
rain, water shortages and desertification are all pressing concerns, while global
climate change – to which China is increasingly contributing – carries further
economic and social costs.
Poverty and Inequality
Economic growth in China has been impressively fast, but it has been uneven
– across sectors, across regions (see Chapter 13) and across sections of the
population. Breakneck rates of economic growth since the late 1970s have
helped to lift hundreds of millions of people out of poverty (Figure 7.5).
Employment has increased roughly twice as fast as population, thanks to an
increase in the proportion of the population which is of working age and an
increase in the participation rate of women. A new urban middle class has
sprung up in China. Although their incomes are modest by OECD
standards, urban middle-class Chinese nevertheless constitute the world’s
biggest market for many products, from toothpaste to mobile telephones 9 ,
and the second-biggest market (after Japan) for electronic goods and
information technology.
8. Many of China’s biggest state enterprises and private enterprises have large retained earnings,
which are reinvested, dampening the impact of higher interest rates.
9. There are 420 million mobile phones in China today, a number that is increasing by around
4 million per month.
252 World Energy Outlook 2007 - CHINA’S ENERGY PROSPECTS