There have been eight major phases in modern Chinese history:
1911 – Chinese Revolution of 1911 – ended nearly 2,000 years of dynastic rule and spawned the first of several different political/economic systems – the Republic of China (ROC) was formed by the Nationalist Party and was later joined by the Communist Party, which was founded in 1921.
1927 to 1937 – First Civil War – triggered by a philosophical and political split between the Nationalists and Communists amid accusations of rampant corruption in the ROC.
1937 to 1945 – Second Sino-Japanese War – marked Japanese occupation of large sections of eastern China – the Nationalists and Communists suspended their civil war to fight their common enemy.
1945 to 1949 – Second Civil War / Chinese Revolution – essentially a resumption of the First Civil War between the Communists and the Nationalists. In 1949, the Communists defeated the Nationalists, who fled to Taiwan.
1949 to 1976 – Mao Era – a period of true communism. However, the country suffered from many of Mao’s attempts to sustain a revolutionary culture, fend off political enemies within the CCP and introduce industrial reforms (see Attempts at Industrialization below).
1980 to 1997 – Deng Xiao Ping Era – began around 1980 (the leadership transition from Mao to Deng was a rocky one). Deng’s reforms gradually led China away from a planned economy and opened it up to foreign investment and technology. This was a pivotal point in China’s environmental history (see Market Reforms below).
2001 to 2012 – WTO / Integration with Global Markets – China formally joined the WTO in 2001, sparking 12 years of rapid integration with western markets, industrialization and the world’s largest ever infrastructure buildout.
2012 to present – Xi Jin Ping Era – began in 2012, when Xi Jin Ping consolidated power across all branches of government and initiated massive changes in domestic and foreign policy (see Belt and Road Initiative below).
It’s important to understand that China was essentially an agrarian society until Mao attempted to industrialize the newly founded People’s Republic of China. China’s population in 1950 was already 550 million people and the per capita income was less than $90…per year. China was truly an impoverished nation. While the US began implementing environmental laws in the 1970s, China was still struggling to bring its citizens out of poverty.
Mao attempted to industrialize China with several ill-planned (and ill-fated) programs – the most notable was the Great Leap Forward, which resulted in the deaths of some 30 million people from starvation. Officially, the cause was famine from drought, but some historians believe Mao sold “surplus” rice and wheat to the Soviets in exchange for nuclear weapons, while peasants were forced to live off of 1250 calories per day.
Deng Xiao Ping’s “Reform and Opening Up” program in the 1980s was a massive departure from the original planned economy of the Mao era. The government started with small free market reforms in 4 “special economic zones”, which operated with few restrictions.
After Deng’s death in 1997, China continued its aggressive campaign to modernize its economy. It joined the WTO in 2001 and became the “world’s factory” with a no-holds barred approach to industrialization and its attendant pollution. The combination of cheap, but industrious, labor and minimal environmental compliance costs made a compelling case for many manufacturers to move their factories to China. It’s difficult to imagine the scale of China’s factory economy – mega factories in Guangdong are self-contained cities with worker populations that can exceed several hundred thousand people.
In less than 30 years, China has become an economic powerhouse - per capita GDP has risen to approximately $12,670 per year and it will soon be the largest economy in the world. It is the greatest (and fastest) economic transformation in world history.
Xi Jin Ping and the Party leadership have long recognized the limits of a low-cost manufacturing / export economic model. The Made in China 2025 (MIC 2025) strategic plan proposed in 2015 is intended to transform China from the world’s factory to a high-tech economy that moves upstream to product design and innovation. MIC 2025 is discussed in greater detail in a separate research paper (see Related Posts below), but in the context of China’s dependence on coal-based energy, the shift away from low-cost manufacturing to a blended products and services model will provide some relief (at least in terms of CO2 intensity per unit of GDP).
Although many western politicians still refer to China as a “communist country”, in fact it is really more of a hybrid centrally-planned / free market economy. The US has more socialist programs than China, which has few social safety nets. This is an important factor in any discussion of pollution.
Chinese are natural mercantilists who place a premium on self-sufficiency – to wit, the common Chinese idiom: “the man who tends his rice field every day will never go hungry”.
Nearly 74% of Chinese do not believe in the concept of God – in lieu of worrying about a spiritual existence after death, Chinese concentrate on accumulating wealth that can be passed on to future generations. Lack of religious beliefs also informs a somewhat pragmatic attitude when it comes to moral issues.
The combination of a cultural emphasis on making money, the residual trauma from the Great Leap Forward and the lack of a social safety net can have a profound impact on environmental considerations.
When China joined the WTO (and during the Deng Era), the government made a conscious decision to prioritize economic growth over environmental concerns – the environmental cost has been catastrophic:
China’s economic situation has improved markedly in the last 20 years and the government is now intent on remedying the environmental sins of its earlier policies. It has already started shutting down some of its worst polluting factories. And, similar to the challenges the US faces with its coal mining industry, China has had to find a way to support displaced coal mining and infrastructure workers. The government has many creative ways to deal with sector downturns – for example, idle steel factories and shipyards have been tasked with building the world’s largest navy (mission already accomplished).
China’s Belt and Road Initiative (BRI) is a 35-year, $7 trillion infrastructure project that will link countries from SE Asia all the way to Europe – it’s stated goal is to create the largest integrated commerce system in history. But it also has many sub-threads:
Chinese companies have built (or are building) over 300 coal-fired plants outside of China. Other projects include open pit coal mines in places like Pakistan, railroads in SE Asia and port facilities in Europe (China operates Greece’s largest port) and Africa.
Regardless of China’s long-term commitment to renewables, the government recognized in 2010 that urban air pollution was becoming intolerable – a key feature of almost all northern Chinese cities was the use of coal-fired steam for winter heating. Power and steam plants were actually built inside city limits – vast networks of steam pipes connected apartment complexes with urban steam generation plants. Pollution from these urban coal-fired plants was so bad that even indoor particulate pollution was a major problem, with a fine silvery-gray dust coating apartment interiors.
To deal with urban pollution, most cities mandated that heating systems could only operate between November 15th and March 15th – every November 15th the skies in Beijing and other cities would suddenly be filled with billowy clouds of brown smoke (many of these coal plants used lignite).
Beijing was the first northern city to completely replace its coal-fired steam generators with natural gas. Other cities have since followed suit. But net energy demand has only increased, so electricity generation has been relocated to nearby rural areas, which have lax enforcement of environmental laws.
Pollution from ICE autos has also been a huge problem, given that: a) China has the largest auto market in the world; and b) many Chinese cities have populations of 15 – 25 million people.
Initially, local governments attempted to restrict the number of cars on the road – in 2009, Beijing implemented a policy where cars could only be used every other day (based on license plate number). Other affluent cities use licensing fees – the cost of a license plate in Shanghai is more than $10,000.
But these policies were ineffective in light of the number of cars already on the roads. So, the federal government has imposed a mandate on automakers requiring that electric vehicles (EVs) make up 40% of all sales by 2030. China already has the largest EV market in the world.
Note that, while the EV policy will reduce local urban pollution, it places even more pressure on China’s electric power grid, which will rely on coal-fired power plants for the foreseeable future.
From time to time, SINOLOGIX offers third-party content that complements our core focus. The authors we endorse are subject matter experts and thought leaders in their respective fields. We strive to offer a diverse range of perspectives on any given topic and these contributors help us achieve that objective.
Soares, Andre; The interest of Chinese Electricity Companies in Brazil (2016); from Beyond Borders
Why Is China Placing A Global Bet on Coal? (2019); from NPR
Understanding the Chinese Coal Industry (2010); Coal Age
Report Extract – Supply (2020); from EIA
China is both the world’s largest producer of greenhouse gas emissions (GGEs) and the world’s largest producer of renewable energy. From a climate change perspective, China is the 800-pound gorilla in the room – no matter what the rest of the world does in terms of GGEs, as China goes, so goes planet Earth. If China fails to reign in GGEs, catastrophic climate change may be inevitable.
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Data Source – World Bank
Data Source – World Bank
Data Source – World Bank
Western media is starting to pay attention to China’s efforts to influence members of the so-called Global South, or more specifically the BRICS+ and Shanghai Cooperation Organization (with substantially overlapping membership), to denominate international trade in the Chinese Renminbi (RMB), aks the Chinese Yuan (CNY) and/or other local currencies. For very different reasons, Russia has promoted the idea of an entirely new currency for trade settlement. This is an accelerating trend among countries that have formed close economic and political relationships with China.
Coincident with the pivot to the RMB for trade settlement is a growing sentiment among the BRICS+ and SCO members that holding USD as their primary reserve currency poses a risk in the event the US declares sanctions and/or freezes a country’s assets, as happened with Russia and Belarus in 2022.
The combined effect of these two trends should be observable in a country’s US Treasuries holdings, and that’s exactly what we’re seeing in the chart above – China’s USD and Treasuries holdings peaked at $1.277 trillion in 2013 and declined by more than 32% in 2022.
Things change “slowly at first, then all at once”...
The so-called “de-dollarization” phenomenon is really a reflection of China’s ascendancy to superpower status – there can be no question it is the main driver behind the emergence of increasingly powerful inter-regional economic organizations, innovative trade agreements that circumvent the USD’s role as the world’s primary currency for trade settlement, and conceivably, the demise of the USD as the world’s de facto reserve currency. In this Part 1, we summarize the key factors that might trigger a future change in currency usage by China and its trading partners.
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While not as closely watched as the recent summit in Moscow, where President Xi tacitly threw his weight behind Russia and its SMO in Ukraine, Brazil’s newly (re)elected President Lula da Silva’s recent state visit to China was in many respects much more significant, as it further pulls the US’ most powerful Latin American ally away from its sphere of influence and into China’s orbit.
While China is a driving force in the Global South’s pivot away from the USD, the rapid expansion of inter-regional economic organizations made up of Asian, Central Asian, Middle East, African and Latin American countries has accelerated the shift in political and economic power that threatens to upend more than 70 years of US dominance on the world stage.
The so-called “de-dollarization” phenomenon is really a reflection of China’s ascendancy to superpower status – there can be no question it is the main driver behind the emergence of increasingly powerful inter-regional economic organizations, innovative trade agreements that circumvent the USD’s role as the world’s primary currency for trade settlement, and conceivably, the demise of the USD as the world’s de facto reserve currency. In this Part 1, we summarize the key factors that might trigger a future change in currency usage by China and its trading partners.
On March 22, China’s President Xi Jinping concluded a very visible state visit to Moscow, where he met for three days of discussions with Russia’s President Vladimir Putin on a number of topics of interest not only to both China and Russia, but the US and its EU allies as well.
In a historic turn of events, China has successfully brokered a groundbreaking agreement between long-standing rivals Saudi Arabia and Iran, marking a significant shift in the geopolitical landscape of the Middle East. The agreement, which focuses on reestablishing diplomatic ties, ending proxy conflicts, and enhancing economic cooperation, highlights China’s growing influence in the region and its expanding role as a global power.
The last few weeks have seen remarkable changes in China – the (reported) COVID numbers have stabilized and even declined in some provinces, 2022 Q4 GDP numbers (vastly) exceeded analysts’ expectations, a projected 5.2% GDP growth target for 2023 is driving demand for oil, and the latest Bureau of Statistics reports confirm a population decline. A lot to digest…
To put China’s massive pollution problem in perspective, it’s important to understand that China’s transition from an agricultural to an industrial economy happened over a span of less than 40 years. While the US and other western countries gradually adapted to industrialization over a 150-year span, China has had to deal with industrialization over a much shorter period and at a scale that dwarfs that of the US.
As the multi-polar Global South movement accelerates, there is now a consensus that the time is right for strategic alternatives – banks, financial messaging systems, and possibly even a new currency. In this Part 03, we examine recent changes to the financial infrastructure proliferating amongst BRICS+ and SCO+ members.
While not as closely watched as the recent summit in Moscow, where President Xi tacitly threw his weight behind Russia and its SMO in Ukraine, Brazil’s newly (re)elected President Lula da Silva’s recent state visit to China was in many respects much more significant, as it further pulls the US’ most powerful Latin American ally away from its sphere of influence and into China’s orbit.
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Due to the recent COVID outbreak in the downtown Puxi District, the Shanghai office is closed to outside visitors. Please feel free to contact us via email or phone to schedule an online meeting.
Due to the recent COVID outbreak in the downtown Puxi District, the Shanghai office is closed to outside visitors. Please feel free to contact us via email or phone to schedule an online meeting.
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