Opinion

Some truths about economy

By Lin Boqiang (China Daily)
Updated: 2010-02-27 07:55

China is undergoing an urbanization and industrialization phase that is marked by fast economic growth and rising energy demand. Compared with the development process of developed countries, China's economic development problems such as high energy consumption, high emission, fast GDP growth, heavy industry-oriented economic structure and low energy efficiency may appear out of place. But actually they are in line with its present stage of economic development. History shows a fast growing economy is usually extensive and cannot be efficient on all fronts.

People often understand economic transformation as economic restructuring. They thus place high expectation on the role of economic restructuring in energy conservation and emission reduction, and expect a country to focus nearly all its strategic planning on it. Theoretically, it cannot be disputed that changing the existing economic structure could lower energy consumption per capita GDP. But the economic structure of a country is highly related to its stage of development. So we should be prudent while stressing economic restructuring in China.

China's economic restructuring process cannot be changed according to the wishes of either the government or individuals for two reasons.

First, a country's economic structure has to be consistent with its resource endowment characteristics and the stage and regularity of economic development. As mentioned above, it is not possible to reduce the existing energy consumption levels by adjusting the high energy-intensive industrial structure. To boost low-energy consumption industries, the focus of China's economic growth should shift from the investment-driven growth model to a consumer-driven one. That is what academics say. But the proportion of the service industry in the overall economy has not grown sufficiently enough to realize that.

Second, in the international division of labor, China's position is clear. The ubiquitous "Made in China" tag has become a symbol of the era. In the short run, China is unlikely to reduce its dependence on low-end and energy-intensive exports, because this is something the country's existing employment situation will not allow. The government can strive to achieve that goal, but change in the international division of labor is a slow process.

In the long run, China is bound to adjust its economic structure, but a mandatory short-term restructuring may fluctuate or even hinder economic growth. Actually, apart from the transformation to a low-carbon economy, there should be no other major change in the growth pattern and energy structure during the 11th or the 12th Five- Year Plan if the current development pattern is followed.

Maintaining rapid economic growth and reducing social burden both need affordable energy supply. Coal is relatively cheap, but generates more carbon dioxide. Abundant reserves and cheaper price have made coal the major source of energy in China. Coal can help keep electricity tariff stable, which is conducive to improving enterprises' competitiveness and thus creating more jobs and maintaining social stability.

China's extensive growth model indicates energy conservation could be improved but fuel prices cannot be increased substantially if we want to maintain rapid economic growth. The country depends on imports for 52 percent of its oil consumption. That figure could rise to 65 percent at the current pace of growth in demand. Oil imports concern the country's energy security. Therefore, China's transformation into a low-carbon economy should be based on energy conservation, and supplemented by the development of clean energy and seeking of an alternative to oil to ensure energy security.

The country's transformation to a low-carbon economy during the 12th Five-Year Plan could be understood as promoting economic restructuring in the process of energy conservation and developing clean energy, and consciously seeking an alternative to oil. It is true that the current economic growth and energy consumption structure is inevitable in the process of China's economic development and energy demand will continue to rise fast. But it is also true that environmental problems are forcing us to save and conserve energy and reduce emissions by changing our production processes. Thus, the 12th Five-Year Plan period would be crucial for China's economic growth and transformation.

The author is professor with the China Energy and Economics Research Center under Xiamen University