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China´s Challenging Economic Growth Process: New Insights about Greener Economy

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It is good to remember what happened in 2006. The 6th
Plenium of the 16th Central Committee of the Communist Party of China
(CPC) concluded on October 11, 2006 with the commitment to establish a
harmonious society by 2020. The obvious situation analysis in 2006 was that the
present major social, economic and political trends are not leading to a
harmonious society. Other interpretation is that current trends are not leading
Chinese society to this goal fast enough.

Wing Thye Woo is an expert on the East Asian economies, particularly
China, Indonesia and Malaysia. Woo has advised the U.S. Treasury Department, the
IMF, World Bank and the United Nations. He has specialized in exchange rates,
economic growth, regional economic disparity and financial sector development.
Recently he presented very interesting situation and foresight analyses for
China. Wing Thye Woo (2011) outlined in a recent BOFIT Discussion Paper an
interesting analysis about China´s challenging future growth process. He noted
that China is like a speeding car facing three potential failures.

Firstly, there is potential hardware failure from the breakdown of an
economic mechanism, a development that is analogue to the collapse of the
chassis of the car.

Secondly, there is a threat of a software failure from a flaw in
governance that creates frequent widespread social disorders that disrupt
production economy-wide and discourage private investment. This is a situation
similar to a car crash that resulted from a fight among the people inside the
speeding car.

Thirdly, there is potential for a power supply failure from hitting
either a natural limit or an externally-imposed limit, a situation that is akin
to the car running out of gas or to the car smashing into a barrier erected by
an outsider agent.

China´s fiscal position can become vaguer because of the repeated
recapitalization of the state banks. This can cause hardware failure to become a
bigger problem for China. For software failure, outmoded governance structures
of China can be problematic. This kind of problems may lead China to social
disorder. The biggest source of power supply failure is China´s chronic trade
imbalances and the physical constraints posed by China´s rapidly deteriorating
natural environment. Both sustainable development and green economy are real big
challenges in China. Financial Times reported in 2007 that “about 750 000
people die prematurely in China each year, mainly from air pollution in large

In July 2004 in Financial Times, Pan Yue, the deputy head of the
State Environmental Protection Agency, summed up the situation in China: “If
we continue on this path of traditional industrial civilization, there is not
chance that we will reach sustainable development. China´s population,
resources, environment have already reached the limits of their capacity to
cope. Sustainable development and new sources of energy are the only road that
we can take

Thus China´s “future roadmap towards sustainability” means also much
to the Mekong River countries which are developing partnerships with China. As
China, the Mekong River countries cannot in no way underestimate the challenges
of green economy and renewable energy.

As recent UNEP Report “Towards a Green Economy: Pathways to
Sustainable Development and Poverty Eradication”
notes green economy is not
any more an exotic discussion topic. It is necessary economic growth strategy to
our common better future.  

Sources of information:

Wing Thye Woo (2011) China´s economic growth engine: The likely types
of hardware failure, software failure and power supply failure. BOFIT Discussion
Papers 8/2011. BOFIT – Institute for Economies in Transition. Helsinki: Bank of
Finland. Web:

Brookings Institution:
Wing Thye Woo. Web:

UNEP Green Economy Web: