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Management in Practice

Where are the Boundaries for Economic Growth in China?

With global population projected to rise to 9.6 billion by 2050, the pressure on natural systems that provide food, energy, water, and other resources necessary for human life is a major strategic challenge for business and society. China, with its large population and rapid economic development, is a big piece of the puzzle.

As part of the Opening Conference of the Yale Center Beijing, Sir Peter Crane, dean of the Yale School of Forestry & Environmental Studies, moderated a panel on the challenges of economic growth in the face of environmental limits.

Marian Chertow ’81, associate professor of industrial environmental management at Yale FES, outlined nine planetary boundaries for the physical systems that sustain human life; they include land use, fresh water, climate change, and chemical pollution. “We, as a planet, are over limits in two areas. First is the rate of biodiversity loss for species, and the second is chemical buildup from cycling nitrogen,” Chertow explained. She added that we are also approaching a third boundary: the concentration on CO2 in the atmosphere, a critical driver of climate change.

Zhang Xinsheng, former vice minister of education for China, president of the International Union for Conservation of Nature, and executive chairman of Eco-Forum Global, highlighted the fact that China’s development has been uniquely successful in bringing hundreds of millions of people out of poverty. “Unfortunately, in terms of economic and urbanization growth, it is the same as the rest of the world,” Zhang said. “That is, first pollution, then cure. First development, then environmental care and protection.”

Zhang cautioned that countries that have failed more often because of environmental causes than political ones. “For China, a major way of dealing with that is a comprehensive policy,” he said. Zhang described the policy as a shift from a commercial focus to an ecocivilization where environment, economic, cultural, social, and political development work together toward long-term sustainability. Zhang sees that including a low-carbon, circular economy that emphasizes sustainable consumer consumption. 

Chertow explained a key reason why what happens in China ripples across the global economy. The country has 20% of the world’s population but just 7% of the world’s fresh water resources and 9% of the arable land. While this has meant greater efficiency in China in its water use and agricultural production, the country’s demand for resources shapes global commodities prices and development patterns. “Basic resource endowments bring countries and companies to different starting points and strategic directions. Pressure on planetary boundaries reminds us of the inevitable need to work together.”

China’s scale means that even impressively large efforts may not have transformative impact. Xizhou Zhou, director of the China energy practice of the consulting company IHS CERA, said that China has installed 39% of the wind power built in the world over the last five years. At the same time, he noted, that accounts for only 15% of the new power production in the country. “Clean energy alone is not going to be enough to meet the demand challenge,” he said. 

More than one panelist emphasized that solutions won’t come from China alone. Zhou said that over 50% of China’s power is used for industrial production. That figure is 28% globally and 18% in the U.S. If China transforms to a service economy without seeing a global shift toward sustainability, other countries will take over as industrial producers and there won’t be a reduction in the pressure on the planet’s natural systems.

Zhou explained the need for rethinking core approaches. “The cleanest form of energy is not using energy at all,” he said. “That means we have to have fundamental changes in the way we consume, the way we build cities, and the way we organize businesses and communities so that we can lower the energy trajectory of many countries.” There is a positive side to such radical change, he noted: “That, for business, is a huge opportunity.”

Watch the discussion.