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China’s economic slowdown: Good news for the environment?

China’s “new normal” is supposed to be built on cleaner, less energy-intensive growth. But how the country’s leaders respond to a sudden, sharp downturn in heavy industry could have huge implications for the climate and local environments.

Karl Hallding / Published on 1 October 2015

Hallding, K. and S. Zhang (2015). China’s economic slowdown: Good news for the environment?. SEI discussion brief.

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Chinese workers in Shanghai take a break sitting on rolls of steel wire. Photo: Bloomberg

The economic growth that China has experienced since the turn of the millennium has exerted environmental pressures, domestically and globally, on a scale unprecedented in history. But now there are strong indications that China’s investment- and supply side-driven development model, which has been built around relentless growth in heavy industry, is faltering. While this presents major challenges for China and for the world in terms of lower growth expectations, it holds out the tantalizing prospect of a substantial decrease in the country’s massive carbon emissions and endemic air pollution. Whether these reductions materialize will depend on how the Chinese government responds to the slowdown, in particularly how it implements its recently announced grand strategy for outward investment, One Belt, One Road.

Although official economic reports appear to show that China is on track to meet its new target of 7% annual growth in 2015, statistics on coal consumption and heavy industrial output suggest that growth is probably much slower.

If this is the case, the government will need to find new drivers of growth in order to reach the target. There is a danger that these will include moves to sustain subsidy-dependent heavy industries, despite massive overcapacity – in particular through outward investments in countries along the “New Silk Road” and “Maritime Silk Road” routes under the One Belt, One Road initiative.

Download the discussion brief (PDF, 892kb)

Figure 1: China’s domestic coal consumption and net imports, 2005–2015

sei db 2015 hallding zhang china slowdown fig1 coal drop

Figure 2: The slowdown in China’s heavy industry

sei db 2015 hallding zhang china slowdown fig2 heavy industry

Figure 3: Indicative map of One Belt, One Road routes

sei db 2015 hallding zhang china slowdown fig3 obor map

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