Strategic Outlook '09 The central government moved swiftly to cushion the country against the widening economic crisis with its 4 trillion yuan (HK$4.53 trillion) stimulus package. However, despite the promise of massive spending by local governments, doubters are asking how the mainland will live up to its promise of sustainable development. While central and local governments have tossed out headline numbers on the billions of yuan planned for infrastructure across the country, they remain, however, equivocal on the green commitment despite the promise by Premier Wen Jiabao to step up environment-related investment. The lack of meaningful details, including the size of investment and incentives budgeted, casts a cloud over the green pledge. Concern is mounting among some observers that policymakers' single-minded pursuit to build public infrastructure to create jobs and consumer demand to counter the downturn, will come at the expense of further environmental destruction. The rush to construct new roads, railways, dams and factories could inflict severe ecological damage by pushing up use of fossil fuels, and deplete resources. Consequently, environmental concerns may be put on hold, warned activists and officials. 'The urgency of the need to reinvigorate the economy has apparently affected the way the government views the environment risk of new industrial and infrastructure projects,' said Wang Yongcheng, the head of Green Earth Volunteers, a Beijing-based non-governmental organisation. The Ministry of Environment Protection reportedly granted approval to 93 proposed projects in the first week of this month, a pace activists described as an 'anomaly'. The full list remained shielded from the public, but China Times reported it included a mega steel mill in Hubei, a chemical plant in Guangdong and a power plant in Liaoning, among dozens of similar undertakings. Liu Guiyun, an official with the ministry's investigation department, confirmed that they had speeded up mandated assessment procedures in response to the urgent need to create more jobs and demand. 'But we mainly cut back the red tape and would not facilitate the economic rescue at the expense of environment hazards,' he said. Still, some of Mr Liu's colleagues could not hide their anxiety. Ren Yong, the deputy head of the Environment and Economy Policy Research Centre, a ministry-affiliated think-tank, admitted that the dire economic situation might obscure environmental risks. 'The stimulus package requires the investment be doled out promptly,' he said. 'I'm worried that insufficient advance investigation into the environmental implications of proposed projects, limited by the urgency, could wreak damage that would [be very] palpable in the future.' Until five years ago, mainland industrial and infrastructure contractors did not require a licence to validate the environmental viability of their work. It was only recently that the vetting power was centralised in the hands of the ministry, a relatively neutral agency compared with local governments that usually have vested interests in the investment projects. The mechanism of a pre-emptive policy against environmental hazards is a result of the hard lesson learned from the last round of massive government investment-driven economic expansion on the mainland after the 1997 Asian financial crisis. The boom in energy-intensive heavy industries, inadequate regulation of big emitters and an exponential growth in urban car ownership has created adverse by-products such as toxic rivers and hazy skylines. Water quality in the mainland's longest river - the Yangtze, whose banks are dotted with about 10,000 chemical plants - is deteriorating. Yet cities along the waterway including Shanghai, Jiangsu and Zhejiang provinces last year posted growth of 13.3 per cent, 14.8 per cent and 14.5 per cent, respectively, surpassing the national level. Mainland cities, including Beijing, have been regular entries in the United Nations' annual rankings of the world's 10 most polluted cities. The country has also overtaken the United States as the world's top carbon dioxide emitter, according to the Netherlands Environmental Assessment Agency. In 2006, Zhu Guangyao, the deputy minister of the then State Environment Protection Administration, estimated that economic damage from environment deterioration cost the nation 10 per cent of its gross domestic product annually. This time around and in the face of a bigger economic crisis, even as environmentalists warn of a repeat of missteps, they argued that the country had the option and technical know-how to overcome the crisis in a greener way. 'I'm cautiously optimistic about the prospect of China seizing the opportunity to drive its economy in an environmentally friendlier way ... but not without worries,' said Wen Yibo, the chairman of Beijing-based Sound Group, a company specialising in alternative energy and sewage disposal. To Mr Wen and his peers, their reservation comes as Beijing has not given details of its spending to improve the environment. Under the stimulus package, authorities have only given a vague outline of more sewage plants, refuse disposal works and greater efforts to restore ecological balance in major rivers, something Mr Ren sees as the government's lack of a clear vision. But observers point out that even the declared areas of interest are off the mark. 'For the health of Chinese waterways, the key issue is not building more sewage treatment plants,' said Ms Wang, whose Green Earth Volunteers specialises in water pollution. Many of the existing plants, especially those in the hinterland financed by the central government or overseas donors, were underused because few local governments could afford the high operation costs, she said. 'I think Beijing should provide the facilities with operational subsidies in the first place instead of placing priority on building new ones.' According to Luo Jianhua, general secretary of the China Environment Service Industry Association (Cesia), a guild of over 50 privately owned environment industry players, government investments in refuse disposal and sewage treatment is estimated to eventually reach 260 billion yuan in two years. Environmentalists were also quick to point out that the government's outline lacked renewable energy-related materials, although it had earlier estimated that it would take 2 trillion yuan of investments to realise its targets on generation capacity. Industry players say that energy efficiency projects are highly lucrative, with return on investment capable of reaching as much as 200 per cent, though the norm is about 30 per cent. The mainland's shortfall would appear more conspicuous after United States president-elect Barack Obama mapped out the green stimulus for the world's biggest economy. He vowed to refit public buildings with millions of high-efficiency fluorescent light bulbs and greener heating systems, which would create hundreds of thousands of new jobs in the environment industry. Should the Chinese government initiate a similar drive, every rural household could achieve carbon dioxide savings from incandescent bulbs equal to emissions from four gigawatts of coal-fired electric power, and generate enough jobs for migrant workers laid off in the sharp contraction in the manufacturing hubs in the coastal areas, according to an estimate by Environment Defence, a US non-governmental organisation with operations in Beijing. Add an additional 30 million solar water heaters for rural households and the nation would save greenhouse gas emissions equivalent to another 7 gigawatts. Along with the light bulbs, more than 16 per cent of last year's emission increase from power generation would be cancelled out. 'I'm still trying to see through the smoke with scant details available at the moment,' said Roman Shaw, the managing director of DT Capital, a private equity firm with a portfolio in wind and solar power equipment manufacturing. 'Yet, though without specifics, we still see some policy hints that could be translated into good news for the sector,' he said, citing the launch of construction of a 166-megawatt solar power plant in Yunnan this month that will be the biggest of its kind in the nation when completed. Mr Shaw said the 9.1 billion yuan project could indicate the government's interest in championing more similar projects. Mr Wen, who is also Cesia's chairman, said the country had already seen its environment-related industry grow into a critical mass. Yet most of the output seemed to cater to export demand. For instance, industry players estimated that the mainland has less than 1 per cent of the global photovoltaic power demand, yet it produces 30 per cent of the world's solar photovoltaic cells. 'To be honest, domestic consumers and corporate clients have yet to get used to environmentally friendly products,' Mr Wen said. 'More incentives like tax rebates or direct subsidies are needed to encourage the fledgling demand of going green.'