2015-03-15

China Is In Deep Trouble If This Is The Growth Plan

China is planning on spending as much as 10 trillion yuan on environmental clean-up efforts, but is it also deluding itself on the economic impact.

Environmental protection a key growth driver: minister
Environmental protection is an important growth driver for China and the demand for investment would be huge in the years to come, Minister of Environmental Protection Chen Jining said here Saturday.

Chen said at a press conference on the sidelines of the the National People's Congress annual session that total investment demand for environmental protection in China will be around 8 trillion yuan ($1.3 trillion) to 10 trillion yuan over the next few years.

Such investment provides "good" momentum for economic growth as it has no repeated construction and yields long-term returns, Chen said.
China's excessive pollution definitely has costs to GDP that do not show up in the statistics, but one reason why China grew rapidly was because it didn't hamper the economy with environmental regulations. Environmentalism does not grow the economy, it retards growth. If China's plan is to spend trillions on cleaning up the economy as a way to generate GDP, then a bigger than expected slowdown is coming. Capital will be drawn away from productive investments with higher returns and spent on projects that will consume capital and slow the overall economy.

That's not to say cleaning up the environment isn't a good idea, but anyone who's selling it as a path to growth is lining their own pockets. It is a luxury good which is affordable to highly productive capitalist economies. China to this point has chosen growth over health and environmental concerns. If they choose to finally tackle these problems as a way to increase growth, they will enjoy the benefit of a cleaner and healthier environment, but GDP growth will slow faster than expected.

iFeng: 媒体:三大战役将拉动超10万亿投资 成经济新增长点

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