Water Pollution Could Lead to More Trade

By Wai-Shin Chan 9 April, 2014

HSBC's Wai-Shin Chan on why China's war on pollution & need to ensure food security may result in more trade

China has declared war on pollution. However, winning this war will take many years and require sweeping changes to the way pollution is viewed and regulated and, most importantly, how new rules are enforced.

“The rhetoric has been stepped up in 2014 as the environment moves higher up the political agenda”

 

Last year was the turning point, given the impetus of fresh leadership, public debate and the first signs of real enforcement. The rhetoric has been stepped up in 2014 as the environment moves higher up the political agenda. The declaration of war on all facets of pollution – air, water and soil – at the recent parliamentary sessions shows that China is beginning to put in place the appropriate mechanisms to deter illegal discharges by industrial plants and make it more difficult for local authorities to turn a blind eye. This should give the government the tools it needs to both encourage and enforce the transition to a more ‘beautiful China’.

Water will play an important part in this transition, in terms of both quality and quantity, as it is central to the issues of food safety and security. For example, the key agricultural region of the North China Plain (Hebei, Henan, Shandong, Jiangsu and parts of Anhui) accounts for around 30% of the country’s total agricultural output. However, the water supply is both polluted and scarce; some 70% of the region’s groundwater is so polluted that is it not fit for human touch.

“Ensuring the availability of water and food self-sufficiency requires the collaboration of various ministries (agriculture, land, water and energy)

… water is already becoming an increasingly important factor in agricultural policies”

Ensuring the availability of water and food self-sufficiency requires the collaboration of various ministries (agriculture, land, water and energy) to tackle water shortages, consolidate farmland, optimise grain yields and prepare for the effects of climate change. It is not easy for the government to balance these competing needs but water is already becoming an increasingly important factor in agricultural policies.

It’s easy to understand why. Agriculture accounts for 63% of national water consumption and also half of China’s water pollution through fertiliser run-off and livestock waste, indicating the scale of the problem. For example, China does not yet have the infrastructure to deal with all its agricultural waste, as shown by the thousands of pig carcasses found floating down rivers this year and last. Tougher pollution targets for both industry and agriculture are being set.

Following the release of the ‘Air Pollution Prevention and Control Plan’ in September 2013, the government is expected to maintain the momentum by announcing similar plans for water and soil this year. Crucially, the government has also mentioned the possibility of releasing water and soil pollution data for the first time later this year.

” … the pursuit of basic self-sufficiency, the need to protect water resources and the desire to improve pollution control could also result in a rise in agricultural imports”

We also think more policies to protect the agricultural industry, ensure basic food self-sufficiency and food safety are in the pipeline. The importance of agriculture to the country through employment and food security is much greater than its 10% contribution to GDP.

At the same time, what happens within the agricultural sector in China could completely change historical patterns of the global food trade. For example, China could save domestic grain production for human consumption and import grain for animal feed, as it has done with soybeans. Thus, the pursuit of basic self-sufficiency, the need to protect water resources and the desire to improve pollution control could also result in a rise in agricultural imports, as could any crop failures or yield erosion from events related to climate change.

As we said earlier, the war on pollution will take many years; 2014 is the penultimate year of the 12th Five-Year Plan and as work on the new 13th Five-Year Plan (2016-20) starts, we expect the environment to be given an even higher priority by China’s new leaders.

Further Reading

• HSBC – No Water, No Food – HSBC explores the implications of China’s quest for food safety and food security given current water scarcity and pollution issues in a newly released research report. China Water Risk was commissioned by HSBC Climate Change Centre to research and analyse the findings which form the basis of this report
• The State of China’s Agriculture – China’s limited water and arable land plus rampant water pollution not only exacerbate water scarcity, but also raises concerns over food safety & food security. Get the latest update on agriculture & water and see why these policies matter for global trade
• Heavy Metals & Agriculture – Check out China Water Risk’s overview of the status of heavy metals discharge into wastewater, priority provinces, overlap with agriculture sown lands, crops exposed and industries targeted for clean-up
• Crying Lands: China’s Polluted Waterscapes – Award-winning Photographer Lu Guang shares his journey into China’s polluted landscape and shows us the tangible linkages between industrial pollution and social issues with his insightful and apocalyptic photos
• The War on Water Pollution – Premier Li Keqiang has just declared war on pollution. Tan expands on the government’s stratagems & offensives and fundamental changes required to shore up the MEP’s arsenal in order to wage a successful war
• MEP Reform: From Mountaintop to Ocean? The MEP is currently regarded as too weak to punish polluters due to dispersed authority & overlapping functions. Given the ‘war on pollution’, is reform to make a Super MEP necessary to improve China’s ‘mountains, water, forest, farmland & lakes’?

Previous CWR Articles on Water Policies Affecting Global Food Trade:

• Water: Shaping China’s Food & Energy Choices Debra talks about key issues & new trends surfacing from the Fortune Global Forum roundtable and why she thinks the 12FYP Strategic Emerging Industries are the real Magnificent Seven
• Follow the UK: Import Water China & the UK have similar per capita water resources. Find out how the UK has managed economic growth by “importing water” through trade. Should China follow suit? Debra Tan muses
• China: Bullish on Food Imports  Debra Tan explains why depressing statistics on food, water pollution & scarcity and fake eggs paint a bullish picture for China’s food imports
• Agriculture: A Prosperous Ever After? With recent reports on by the Chinese government, FAO, HSBC and WEF all highlighting agriculture concerns, Debra Tan takes a closer look at food, property. the weather and potential strategies to ensure a prosperous ever after
• Food for Thought Would China import more chicken or corn from Brazil? Should farming regions swap beef with iPads? Will water hikes dampen demand for water? Debra Tan from China Water Risk muses