Daily Management Review

Fight for clean air in China will slow the economy growth


10/05/2017


China's desire to reduce air pollution can affect already declining economic growth in the country by 0.25 percentage points over the next six months, and, at the same time, increase production inflation, Bloomberg reports citing Societe Generale SA.



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Reducing production activity to lower emissions and tightening environmental standards will support profits of large industrial companies as producer prices will soar, said Yao Wei, chief economist for China at SocGen. She noted that the campaign of the Chinese authorities will lead to a noticeable shock in the supply.

"The Chinese government is very serious about the fight against pollution," - wrote Yao. This will be "more than a temporary goal for the current leadership." A slowdown in growth will be a necessary sacrifice for maintaining social stability in the medium term, the economist is sure.

According to Yao, Chinese leaders will endure economic growth rates below 6.5% in 2018 and subsequent years. Precisely this level of growth has become the benchmark for the period until 2020.

Annual growth should be at least 6.5% in the next five years to realize the goal of doubling GDP in 2010 and per capita income by 2020, said China's leader Xi Jinping in 2015.

Now, if China's economy can grow by 6.8% this year, the growth rate necessary to achieve Xi Jinping's goal is only 6.3% in the next three years, Yao said. In a December report, she wrote that China is ready to abandon its growth target by 6.5% over two years, as the leaders seek to curb asset bubbles and financial leverage.

As previously reported, Beijing will suspend the construction of major public projects in the city this winter in an attempt to improve air quality in the capital. The construction of roads and water facilities, as well as the demolition of housing will be banned for the period from November 15 to March 15 in six major areas of the city and the suburbs.

This period covers four months, when houses and other buildings of the city are supplied with heating.

For the fourth year, China has been trying to fight urban air pollution in order to reverse the damage caused by decades of unhindered economic growth and to eliminate fears that the dangerous moss and widespread water and soil contamination annually lead to hundreds of thousands of early deaths.

source: bloomberg.com






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