War on Pollution is hurting GDP

Some have estimated that China’s economic growth might be close to zero if considering the amount of damage it has done on the environment. In another word, these GDP numbers are mostly illusions about economic development. Earlier in this blog, we have also mentioned that Hebei province government have had requested for Beijing’s extra funding, because their industries were required to shut down because of the pollution in the air that circles around Beijing. 

After Premier Li Keqiang declared “war on pollution” at the National People’s Congress in March amid mounting public concern. At Quartz, Gwynn Guilford explains that the Chinese government’s efforts to mitigate air pollution have partially backfired, slowing down the economy as a result:

…, recent analysis of economic data by Wei Yao, an economist at Société Générale, found that “Chinese policymakers are getting serious about air pollution.” So serious, in fact, that those efforts are already hurting GDP performance—something the government has so far shown to be its biggest priority. Yao says GDP will slow 0.35 percentage points cumulatively from 2014 to 2017 because of air pollution mitigation efforts, and she expects the economy to take the biggest blow this year.

The biggest indicator comes from China’s industrial output—the output of China’s manufacturing, mining and materials sectors—where growth has slowed significantly since September, when China’s cabinet rolled out its air pollution action plan. Last August that indicator hit a 16-month high of 10.4% growth versus the same month in 2012, but industrial production expanded only 8.7% last month. That’s the slowest since March 2009, just after the financial crisis hit:

That slowing of output comes disproportionately from high-polluting northern provinces, which accounted for three-quarters of the 1.7-percentage-point slowdown in national industrial production since September. “Our comparison of all regional data shows that the more polluted the region, the greater the slowdown,” writes Yao. [Source]

 

 

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