Annual Conference 2014, Boao Forum for Asia
Session Summary
Boao Salon 7 April 10, 2014
Eco-Friendly: A New Type of Urbanization
Moderators:
· YANG Rui, Anchor, China Central Television
Panelists:
· HE Qiaonv, Chairman and President, Beijing Orient Landscape Co., Ltd.
· MA Weihua, Chairman of Wing Lung Bank and Former Executive Director, President and CEO of China Merchants Bank
· WANG Hao, Academician, The Chinese Academy of Engineering, China Institute of Water Resources and Hydropower Research
· WANG Rusong, Academician, The Chinese Academy of Engineering, Research Center for Eco-Environmental Sciences, Chinese Academy of Sciences
· ZHU Liming, CEO, China Real Estate Development Union Investments
· ZHU Minyang, Mayor, Yangzhou
Key Points:
· The extraordinary pace of growth and development in China has come at the expense of China's natural resources.
· The water crisis in China is on the brink of disaster – water resources and precipitation are unbalanced across the vast nation, polluted water is used to irrigate farmland affecting food safety, and highly dense urban areas are contributing to significant water contamination.
· China faces two key challenges: 1) treatment of the pollution already caused by its rapid growth and 2) government, business, and citizen ownership of responsibility to effectively implement eco-friendly initiatives.
YANG Rui, Anchor of China Central Television, began the discussion by noting that 97% of the Earth is covered with water, but around 50% of China’s fresh groundwater is contaminated, with thepercentage rising every year. The people of China need to act now before it is too late. China has paid a high price for its economic growth of the past three decades, with large-scale pollution from economic development. Environmental aspects of this development have not been properly regulated, with no laws or economic disincentives to penalize offenders. Reflecting that China as a whole can overcome the difficulties of water pollution, Mr.Yang asked MA Weihua, Chairman of Wing Lung Bank and Former Executive Director, President and CEO of China Merchants Bank for his view on the urgency of the water crisis.
Mr. Ma did not see money as being the problem when it comes to dealing with the water pollution problem in China.Rather, the main problem wasidentification of the source of the pollution. He suggested "green insurance" can be brought into play whereby companies which are found to be polluters have to pay high premiums.
WANG Hao, from The Chinese Academy of Engineering, China Institute of Water Resources and Hydropower Research, explained that Chinese water resources are not that abundant due to the following three factors.
1) Per capita water distribution is very low. Out of 192 countries, China is ranked #127, indicating that water is very scarce. China even ranks below Israel, a well-known water-poor country, in terms of cubic metre availability of water.
2) The continental monsoon causes water imbalance, with concentrated rainfall in specific parts of China like Harbin and Beijing such that over 50% of the annual rainfall for the region occurs in just 20 days of the year.
3) Rapid urbanization is exacerbating water pollution. 70% of Chinese people are concentrated on 12% of the eastern plain area.
WANG Rusong, from The Chinese Academy of Engineering, Research Center for Eco-Environmental Sciences, Chinese Academy of Sciencessaid water scarcity and pollution is a pivotal factor for humanity. The underground water in Beijing is reducing at a rate of 2% per year. Infrastructure must be well-built to manage our needs for oxygen,and treatment of garbage and sewage.
HE Qiaonv, Chairman and President, Beijing Orient Landscape Co., Ltd., noted that 300 million people cannot afford clean water and that some water can cause cancer, blindness, digestion, and fertility problems, so it is important to know about the type and standard of water being consumed.She cited the example of the U.S. spending a lot of money to clean up pollution in the Hudson River, where upstream discharge was causing infertility in those living downstream. Dirty water is also being used for irrigation, so this is negatively affecting agriculture as well. An estimated 150 million mu of food is polluted as a result of irrigation with dirty water. The cancer rate is risingcaused by smog and food pollution embedded in the planting and growing stages. The knock-on social effect of all this is that the Chinese people are sending their children abroad given the threats to their health.
Wang Hao agreed that pollution is very serious and that the government is committed to water resource management to achieve improvements drawn up on "three red lines: quality, quantity, and usage," with milestones to be achieved in succession by 2015, 2020, 2030 for all provinces in China. Officials will then be evaluated on their achievement against these requirements.
ZHU Minyang, the mayor of Yangzhou, posed the question of how we can mobilisecities to have better resource management. Urban areas have major water pollution resulting from rapid economic development and insufficient attention is paid to the treatment and protection of the environment. In addition, people also have bad habits. Clean-up should start with the government and the government has made a commitment to its citizens. Profitsare not accurate without accounting for the price being paid to deal with pollution, and a "green GDP" should be included in future.
ZHU Liming, CEO, China Real Estate Development Union Investments, considered the issue from an enterprise perspective, acknowledging the need to balance corporate efficiency with corporate responsibility. What should social responsibility should developers be shouldering given that new urbanization should be embracing: 1) prioritization of the ecosystem including water resource protection; 2) formation of eco-communitiesto efficiently treat water resources; and 3) development beyond mere property projects where business is tied to eco-system development?
WANG Haoemphasised the need to lay a good foundation and infrastructure for water to address: 1) water safety issues,such as protection against flooding, sufficient water supply, and improvement of water quality; 2) water incorporated into the landscape; and 3) promotion of a "water culture," citing Ming and Qing dynasty depictions of a culture surrounded by water. He also cited cities whose fame and charm is associated with water, such as Paris' Seine River. Once the water culture is developed, there then needs to be a focus on integration between water and cities, including the safeguarding of water, including making it recyclable and diversifying its use.
In response to MA Weihua'sassertion that more funding is needed for water management and public education, HE Qiaonvestimated that RMB5 trillion is needed and pointed to the government'swater action plan which requires all provinces and municipalities toinvest RMB10 billion in the implementation ofwater treatment facilities.
Mr. MA and HE Qiaonvboth considered possible measures to stop continuous water pollution, referring to the financial sector for viable measures.MA suggested that the first one is to issue credit,examining whether the customer can treat the pollution first. Mr. Ma reflected that, when he was at CMB, he worked to veto loans to those who donot meet pollution prevention requirements. The second tool that the financial industry has is the capital markets, citing an example of listed SEC companies who are rated on a pollution index and cannot do an IPO without meeting the index requirements. He also described "green shares", the issue of securities or funds for green funding and insurance, an instrument used in Sweden and the UK.
Ms HE proposed a superfund in charge of pollution. In the state of Florida in the U.S., there is a tax imposed when car owners fill up their petrol tanks, and certain plants are taxed for resource consumption. China should have a new bank that deals only with pollution.
China could also issue eco shares to foreign companies given that green funds in overseas countries have high returns, so many people may be keen to join. In addition, Ms. HE noted that there is already a carbon market and there may be room for a water discharge market to incentivise companies that protect water resources.
Mr. Ma followed with a quote from Henry Ford, the founder of Ford Motor Company: “The difference between a good enterprise and a great enterprise is that a good enterprise produces a good product while a great enterprise not only produces a good product, but also makes the world a better place." He concluded that if we promote companies that follow environmental laws, then other companies will follow suit.
ZHU Minyangrelated the Chinese tale of nine dragons that banded together to treat flooding, noting that China must be more systematic in its approach, with the market playing a larger role and government policy guiding the situation more adequately. Public utility needs and city operations should be coordinated. The market can then play its role through investing, with the government ready to step in to enforce measures. If the market can play a better role, then the market should be allowed to do so. If the government can play a better role, then the government should.China must reform its administrative system, with functions requiring proper coordination, such as the water office and the ecological office working together, which will also create jobs.
Mr. Ma responded that we have to incorporate all factors, but that a bank solely for pollution is not possible given that there would be a gap in terms of funding, but allowed that taxation is necessary, with funding then spent on treatment. He noted that "carrots" offered to companies with good policies may be effective, especially where Small to Medium Enterprises (SMEs) would be prevented from loan and deposit services if they do not meet certain environmental criteria.
HE Qiaonvcited another example from the U.S., where they have been treating water pollution since 1970s beginning with legislation called the Clean Water Act, Clean Soil Act, and Clean Air Act. The U.S. tracks 500,000 water points and has a unified standard for different types of water (e.g., irrigation, drinking, flushing, etc.). She noted that President Xi Jinping said China needs to be more beautiful.
The panel then fielded questions from the audience. The first question asked how the the Third Plenum's reference to the market playinga bigger role in allocation resources, applied to the remote areas of China, where the market cannot deliver such high returns?
ZHU Liming responded thatthe new type of urbanization looks beyond an individual city, at an entire city chain." In the western part of China, it will be necessary to work with local government, and there may be funding questions. If there is a whole industry chain involved, then a combination of government policy, industry supply and money market borrowing is required.
In answer to the next question on the new factors to make a good ecosystem a reality, WANG Rusongacknowledged that a systematic problem exists and China needs to make everyone accountable. He compared China to a building without building management offices to deal with air, soil, water, and waste problems, and suggested that we draw upon the experience of the U.S. to solve the impending question of balancing environmental considerations with the urbanization of 300 million people, including 100 million in the middle and western areas of China.
The next question was framed with reference to the Nordic countries success in reducing energy consumption and pollution, and providing abetter quality of life over the past 40 years. This was achieved through legislation, education, and carbon taxation. Though Denmark only has 5 million people, 80% of them ride bicycles and the population is listed as top of the global happiness index. By 2040, Denmark will exist without reliance on fossil fuels such as oil, coal, and nuclear power. He stressed that this is possible for China, too, but enterprises have to participate, and the government has to lead and offer its full support.
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