China & EVs: A closer look at the 'dream'

There’s a great piece this week from the Associated Press, highlighting how electric vehicles have failed to catch on in China, despite grand plans from the government and the efforts of automotive companies like BYD, which we visited in Shenzhen.

“China's Dream Of Electric Car Leadership Elusive”
http://www.npr.org/templates/story/story.php?storyId=151257037

"China's leaders are finding it's a lot tougher to create a world-beating electric car industry than they hoped. In 2009, they announced bold plans to cash in on demand for clean vehicles by making China a global power in electric car manufacturing. They pledged billions of dollars for research and called for annual sales of 500,000 cars by 2015.

Today, Beijing is scaling back its ambitions, chastened by technological hurdles and lack of buyer interest. Developers have yet to achieve breakthroughs and will be lucky to sell 2,000 cars this year, mostly taxis. The government has hedged its bets by broadening the industry's official goals to include cleaner gasoline engines."

This has occurred despite government plans calling for "paying buyers rebates of up to 60,000 yuan ($8,800) per car the following year in five cities including Shanghai."

The article also touches on issues of intellectual property and the conditions under which international vehicle manufacturers enter the Chinese marketplace. For example, the government "strained relations with the United States and other trading partners by rolling out rules limiting access to its auto market unless foreign developers shared technology to Chinese partner."

One manufacturer, Daimler, "said it formed its venture with BYD not due to official pressure but because it wanted to create a low-cost brand for China." However, "other manufacturers such as Nissan Motor Co., maker of the electric Leaf, and General Motors Co. have chosen to pay the higher taxes required to import electric and hybrid vehicles rather than disclose expensive know-how to Chinese partners that might become rivals."

Saving China's Capital ... from itself

A post today from EMBARQ (WRI's sustainable transportation research organization).

China Transportation Briefing: How to Save China’s Capital?
http://thecityfix.com/blog/china-transportation-briefing-how-to-save-china%E2%80%99s-capital

"In February 2012, the number of cars in Beijing exceeded 5 million. Given the problematic levels of traffic congestion and air pollution in the Chinese capital, few people hailed the milestone as an 'achievement.'"

The article cites congestion and air pollution among the hazards of the situation, and then suggests a few potential fixes.

More on Hukou (household registration)

Last week, several students were interested in finding out more about the "hukou" household registration system, which was adapted from the Soviet Union's internal passport scheme. The latest issue of Business Week has a good explanatory article about the system (http://www.businessweek.com/articles/2012-03-15/china-may-finally-let-its-people-move-more-freely), detailing its impact on urbanization, the provision of social services and the resulting life choices of Chinese workers.

"The hukou, a small red passbook, contains key information on every family, including marriages, divorces, births, and deaths, as well as the city or village to which each person belongs. What comes attached to the hukou [pronounced hoo - ko] are benefits including health care, a pension, and free education for one’s children. These benefits are only available if a Chinese citizen lives where he or she is registered. Not having a hukou for where one lives makes it more difficult to get a driver’s license, buy a house, or purchase a car."

You may live and work in Beijing, but without an urban hukou, you and your children won't have access to the services and benefits provided by the municipality. According to the article, there are four ways of obtaining an urban hukou for out-of-towners:

1. Employment. For example, "6,000 hukou were given to Beijing companies last year." [The city's current population is about 19.6 million.]

2. Black Market. "Buying one on the black market can cost ￥150,000" [Over US$23,000]

3. Inheritance. "If one or both of your parents were born in Shanghai or another big city, you're in luck!"

4. Marriage. "You can get the same hukou as your spouse, but have to drop your original registration."

It's interesting to note that household registration may actually be holding back the formation of a larger middle class in China's cities, a phenomenon which normally springs from -- and contributes to -- economic growth. Experts find that it influences consumer patterns (less consumption, more savings), restricts the mobility of labor markets (somewhat worrisome, given the country's aging demographics), and often keeps families apart (parents stay in the city, while kids go back to the countryside).

The issue is ripe for reform, and the State Council "announced plans to make it easier for rural migrants to obtain a city hukou" last month. However, "this doesn't mean the hukou system will be swiftly dismantled: Authorities fear that would trigger a nationwide flood of migrants into the biggest cities and raise the prospect of mass unrest. Providing social welfare benefits to new urban residents will also be costly."

Also see the piece in Caixin magazine advocating a major overhaul of household registrations (http://english.caixin.com/2012-03-08/100365919.html).

Air Pollution in China and Factors Constraining China's Economic Growth

Air Pollution Could Become China's Biggest Health Problem

http://www.guardian.co.uk/environment/2012/mar/16/air-pollution-biggest-threat-china

Unless major efforts are made by the Chinese government to monitor and report smog levels, air pollution will become the biggest health threat in China. Currently the Chinese government is reluctant to monitor and report on the country's poor air quality and related health consequences, and thus most Chinese citizens are unaware of the threat China's air pollution poses. However, pressure is mounting and several provincial and municipal governments are beginning to record and report its air quality. The health consequences of China's high concentrations of air pollution include lung cancer and cardiovascular illness, which are both on the rise due to vehicle exhaust, factory emissions, and cigarette smoke. On particularly smoggy days, one doctor in Guangdong reports a 10% increase in patients. Air quality levels directly correlates to human sickness; for instance, cases of cardio failure increase by 1.28% for every 10 micrograms of PM2.5 (particulate matter smaller than 2.5 microns) per cubic meter. Thus it is advised to wear a face mask and reduce exercise on heavily polluted days. However, the first crucial step necessary to solving the air pollution/public health problem is through government transparency.

China's Aging Population and Deteriorating Natural Environment will Constrain Growth

http://www.nasdaq.com/article/china-stats-chief-must-strengthen-reform-to-maintain-steady-growth---report-20120317-00005

Ma Jianting, the head of China's National Bureau of Statistics, declared that the country's aging population and environmental problems will hamper China's economic growth. These remarks were made at the China Development Forum in Beijing a week after China lowered its GDP target growth in 2012 to a seven-year low of 7.5%. China's aging population has resulted in the labor force to overall population ratio dipping for the first time in 2011. While natural resources per capita is limited, China's large energy and resource consumption is resulting in high costs to control the severe pollution. Ma concluded that in order for China to maintain steady but rapid economic growth, efforts in reform and restructuring need to be increased.

Doubts Raised Over China Hydro Project in Nepal

 This has been talked about a little bit in class, but here's an article talking about the $1.6 billion proposed hydro project in Nepal. As you could imagine, there is incredible untapped potential for hydropower in Nepal due to the huge elevation differences caused by the Himalayas. The delay seems to be a result the Nepal government blindly accepting the bid from China without consideration of international competition to create a bidding war on the project. Other proposed projects by China in the last few years have been halted, such as the Myanmar government halting a $3.6 billion hydro project by citing environmental and human rights concerns.

Here's the link.

http://online.wsj.com/article/SB10001424052702304724404577291311760939638.html?mod=googlenews_wsj

Great NYT Article to Complement "Ghost Towns"

Here's a great complement to Kevin's post from this weekend: http://www.nytimes.com/2012/03/18/magazine/architects-in-china-building-the-american-dream.html?_r=2&pagewanted=1&hp

Western architects are flocking to China, and have been for some time, because there's so much building going on there (and very little in the U.S.) and because the speed and flexibility is so much greater. There are landmark "status projects" (e.g. Bird's nest and China Central Television Tower), but much of the building is being done as quickly and cheaply as possible. Many of these designers are young and less experienced or even unlicensed, but this is not a barrier in China. The article follows a few young, U.S. architects who moved to China over the past few years - some with a job, and some without. Some find themselves playing a new role, often providing the creative inspiration that wins a job, but being left in the dark as the project winds through China's murky real estate development process.

The article also raises questions about the long term sustainability of much of this boom, from a social point of view as well as simply a concern about the quality of construction. There's a pretty amazing description of an in-progress commercial property in Chengdu: Under a single roof covering an area of about 25 football fields, Ocean Park is designed to include hotels, shopping malls, aquariums, amusement parks and a simulated ocean with a white-sand beach. (The ultimate “Truman Show” touch: the 660-foot-wide video screen that will allow beachgoers to enjoy brilliant digital sunsets, even when clouds and pollution block the real thing.)

Some may recall a similar migration of professionals, including architects and engineers, to Dubai which ended, in 2009, with a mass exodus, as the government started clamping down on foreigners when their economy went South. See the following for article from that time: http://www.nytimes.com/2009/02/12/world/middleeast/12dubai.html?pagewanted=all and just for fun, here's a video of a bunch of abandoned luxury cars and supercars in Dubai from that time: http://www.youtube.com/watch?v=OIjQIO5_DX8

Ghost towns in Inner Mongolia

A report from Ordos, one of the largest mining town in Inner Mongolia, which we visited on the last China Energy trip.

Ordos: The biggest ghost town in China http://www.bbc.co.uk/news/magazine-17390729

"In Inner Mongolia a new city stands largely empty. This city, Ordos, suggests that the great Chinese building boom, which did so much to fuel the country's astonishing economic growth" could be drawing to a close.

Chinese developers continue to open up new tracts of land and build infrastructure -- the cranes are everywhere! -- but the question is whether anyone is moving in when these projects are completed, especially in middle-of-nowhere places like Ordos. In our visit, we definitely saw the large blocks of empty apartment buildings described in this article, even as construction continued to sprout everywhere, pushing up against the dry dusty outskirts of town. Our experience in the hotel was indicative of Ordos' mode of development: the showers didn't drain properly, flooding the bathrooms whenever they were used; students encountered seedy behavior in shady corners; and the lobby was dominated by banners welcoming a mining conference, the industry that's pumping money into this region.

Many local governments "seem to have become dependent on the proceeds of big land sales to developer" and may have an incentive to encourage still more construction, to keep the cycle going on -- and revenues rolling in -- as long as possible. "Western financial experts who fear a bursting of the Chinese real estate bubble point out that the Chinese economy is more dependent on house building than the United States economy was, before the sub-prime lending bubble burst in 2007." On the other hand, "Chinese economic commentators seem much less concerned" and are "still confident that the technocrats in Beijing...will soon be able to balance supply and demand in the housing market."

In many Chinese cities, the wealthy actually buy multiple apartments as a form of investment, since building prices keep rising. Real estate can also seem safer than stocks -- for example, a physical development may be less subject to the revelations of fraud that periodically pop up for listed companies in China (sigh). Someone from NRDC mentioned that some municipal authorities stumbled upon estimates of unoccupied luxury apartments because a certain proportion of flats would have energy bills that were always zero, month after month, demonstrating that no one lived there. (Which is a little ironic, because many ordinary people are still having difficulty affording a place in the big cities.) So whether there's a bubble or not, the housing market still has imbalances that need to be resolved.

It's just that continuing to feed the construction boom in Inner Mongolia may not be the solution. Here's another great feature in Foreign Policy magazine on the topic:

China's High-Growth Ghost Towns
Visiting the eerily vacant epicenter of unsustainable progress, far out in the grasslands of Inner Mongolia.
http://www.foreignpolicy.com/articles/2010/02/18/chinas_high_growth_ghost_towns

UPDATE: Al Jazeera English had a video today referencing the building boom as well.