Beautiful China 2020: Water & The 13 FYP

By Debra Tan 16 March, 2016

Tireless efforts lie ahead for water, environment and the economy in China's pursuit of a

Target reduction in water use per unit of GDP by 23% by 2020; also reduction in COD & NH discharge by 10% each
Expect more eco-red lines + tech & policy innovations. Insurance, green bonds & sponge cities also build resilience
Beautiful China is a social & economic vision - continued structural revamp in governance & economic mix expected
“We must work to build through tireless efforts, a Beautiful China where the sky is blue, the land is green and the water runs clear.”

Li Keqiang, Report on the Work of the Government, 4th Session of the 12th National People’s Congress of the Peoples Republic of China

Two years ago, Premiere Li Keqiang declared “the war on pollution” during his government work report. This year, in the work report on March 5, he focused on building a “Beautiful China”(美丽中国)during the 13FYP period.

It appears we still are quite far from a Beautiful China. The most recent MEP report on the state of the nation’s environment, has 61.5% of groundwater and 28.8% of key rivers classified as not suitable for human touch.

The next five years will no doubt require “tireless efforts” but at least a framework is now in place with harsher punishments under the revised Environmental Protection Law. There is also the “Air Ten” in 2014, followed by the “Water Ten” in 2015 and the much anticipated “Soil Ten” expected to be released in 2016.

Beautifying China’s waters

Priorities for 2016 are set. China will continue to tackle water pollution; key 2016 targets here are:

  • Water use per 10,000 yuan of GDP to fall by 5.1% (although water use will increase in absolute terms due to GDP growth of 6.5%-7%);
  • Chemical oxygen demand to fall by 2% and ammonia nitrogen by 2%; and
  • The proportion of water bodies with a water quality rating of Grade III or higher to reach 66.5%, while the proportion of those lower than Grade V to be kept within 9.2%.

Previously, we did mention that China will no longer tolerate monkey business but warned that it was not just about large fines or tariff hikes; watch out for water resource allocation through water use and water discharge permits. It is worth noting here that these permits are spelt out in in Li Keqiang’s work report.

“We must ensure that the newly revised Environmental Protection Law is strictly enforced, and those who emit pollutants beyond the limit allowed by their permit or without a permit are severely punished”. Expect more on permits in the next five years.

Ensuring the health and longevity of China with ecological red lines

“Health is the root of happiness” says Li Keqiang and his work report devotes an entire section to “Strengthen social development to promote people’s well-being”.

According to the Premier, the government has provided access to safe drinking water to over 300 million people living in rural China. A remarkable achievement of the 12FYP, considering the sheer numbers involved, and the complexity of the problem. New targets have been set to improve tap water access of 80% of the rural population in the next five years, indicating continuous investment on rural water infrastructure and service.

As such, wastewater treatment, agriculture non-point source pollution control and integrated basin management will continue to be the focus of water actions in 2016. Better use of water is expected to result in a reduction in water use per unit of GDP of 23% by 2020.

Ecological capacity to deliver safe water and food to the nation is also recognized
… more red lines will be drawn

In this regard, the ecological capacity to deliver safe water and food to the nation is also recognized. Red lines for water use and maintaining minimum farmland have previously been set and reiterated in this year’s No. 1 Document.

The March meetings indicate that red lines will also be drawn for forests, grasslands, wetlands and the oceans as part of “serious action to prevent and control air, water and soil pollution and intensify ecological conservation and restoration efforts”.
Contaminants in Clean Water

As parts of serious action towards “water runs clear”, further reduction of 10% in COD discharge is expected as is ammonia nitrogen discharge by 10%. But it’s not just in pollution we can see, Yin Zhang the head of the Water & Human Health Center at the Chinese Academy of Science, worries over those that are invisible to the naked eye like endocrine disruptors, antibiotics and other persistent organic pollutants in Chinese waters. More on these emerging contaminants in our interview with Yin on Clean” Water Contaminants. Perhaps China, like Europe will finally see the banning of certain hazardous chemicals used in textiles wet process in the 13FYP.

Aside from water, 13FYP “sky is blue” efforts include cuts in energy consumption and carbon dioxide emissions per unit of GDP of 15% and 18% respectively. As part of this and China’s commitments to COP21, energy reform (from generation, grid to delivery) needs to be accelerated.

In CWR’s joint-brief with IRENA, we found that an aggressive scale up of renewables and the adoption of dry cooling technologies by 2030 could lower carbon emissions intensity of power generation by 37% and reduce water intensity by 42%.

As for keeping land green, commercial logging in natural forests will be banned with forest coverage targeted to reach 23.04% by 2020. Farmland will also be maintained at 120 million hectares to ensure food security. Although there is much speculation over what is included in the upcoming Soil Ten, what is clear is central government’s decision to clean up 100 million mu of polluted arable land in the 13FYP. This amounts to approximately 6.7 million hectares; around 5% of the minimum area of farmland required to ensure food security.

A full stomach makes a happy nation. Food security and safety remain key concerns and the Premier reiterates every effort from modern agriculture, soil remediation to monitoring systems for food “from the farm to the dining table” will be taken to “ensure that people have access to safe food and can have confidence in what they are eating”.

All these are not new concerns nor actions. They are merely necessary for “stability to be ensured in economic and social development” and as such will play a central role in the 13FYP.

Groundwater, desertification & the rise of sponge cities

It’s clear from the work report that safeguarding ecological security barriers is important to China. In particular, the nation’s groundwater. Here, the problems run deep (excuse the pun) – firstly groundwater contamination and secondly over-abstraction; both lead to further issues such as land subsidence, shrinking cities, desertification of grasslands as well as soil pollution and erosion.

To give an idea of the extent of the damage, the government has indicated that it will formulate and implement a plan to let cropland and grassland lie fallow. For 2016, 15 million mu of land currently used to grow grains are expected to be turned into forests, which can help reduce desertification and restore groundwater resources. The government’s work plan promises that “Trials to comprehensively deal with the over-abstraction of groundwater will be moved ahead”.

Moreover, many cities in China rely on groundwater. With urban population expected to grow from 56% in 2015 to 60% by 2020, China is rethinking the water supply to its cities. Sustainable urban water systems must be built as major cities now require more than one water source in case of contamination of supply. Enter the rise of “sponge cities”.
China Managed Aquifer Recharge

Sponge cities are cities that can collect, store, drain and purify rainwater run-off for later reuse when necessary. Support will be given to the protection and restoration of natural water systems in urban areas via the development of sponge-like buildings and housing areas, roads and squares, and parks and green spaces.

However, it is not just rain/storm water collection, higher urbanization rates also mean higher volumes of wastewater discharged. This is where China thinks “MAR”. Managed Aquifer Recharge (MAR) can help recharge groundwater and build climate resilience. Find out how MAR works from experts from China’s MAR working group as they discuss challenges and opportunities brought on by rapid urbanization here.

Building resilience against natural disasters & climate change – insurance & financing

As much remains “beyond our control”, building ecological buffers help build resilience to climate change. In 2015, natural disasters destroyed over 2 million hectares of crops, affecting close to 22 million hectares. Waterlogging & floods resulted in RMB98 billion of direct economic losses while droughts brought on further losses of RMB48.6 billion. There were 2,936 forest fires and typhoon hit China six times. Moreover, oceanic disaster cost China RMB7.2 billion and earthquakes an additional RMB18 billion.

In this regard, Li Keqiang mentions in his speech that China aims to officially establish catastrophe insurance in 2016. Since June 2014, China has launched several catastrophe insurance pilots in several cities – amongst them – Shenzhen, Ningbo and Chongqing. Although the current pilots are focused on earthquake and hurricane, catastrophe insurance must be more comprehensive. With increasing extreme events due to climate change, droughts, floods and snow storms should also be covered in the insurance system.
What Chinas New Green Bond Rules Mean

China’s climate-resilient future relies on such innovations but building resilient infrastructure also needs money. The Green Finance Committee of China Society of Finance and Banking estimates that RMB 2 trillion per annum is required to finance climate solutions and address environmental issues.

China new green bond rules could help achieve this – Chaoni Huang and Derek Ip of Trucost expand on what these new rules mean here.

Man-made disasters & stricter structural governance

However, the above just tends to natural disasters. There are also disasters triggered by human error and/or greed such as the Tianjin chemical explosion and Shenzhen ‘landslide’ caused by improper waste management. Even the ever present smog falls in this category.

Structural governance is still lacking but we remain optimistic

Structural governance is still lacking. Although there are plans to up environmental governance efforts including the reform of the current foundation environmental governance, the work report recognizes “There are still inadequacies in the work of the government. Some reforms, policies and measures have not been fully implemented.”   

We remain optimistic. The MEP announced an internal streamlining towards more comprehensive governance in tackling pollution. Divisions responsible for pollution prevention and control will now be realigned into air, water and soil to reflect the three-pillars of a Beautiful China.

Restructuring the MEP is a good start. High hopes are placed on the Minister of Environment, Chen Jining to bring about substantial change. That said, it is ultimately better to cut off the source of pollution than to deal with its control, prevention and clean up. Shifting China towards modern agriculture and changing economic mix away from heavy industries towards light industries and services does just that.

Aligning economy and environment through innovation

The structural revamp to bring about Beautiful China does more than revamp government departments, law, standards and so on. It is also comes down to a structural shift in the GDP mix of China.

As mentioned in our 5 trends for 2016, revamping old industries and Made in China 2025 will play a central role towards this. These were mentioned in the work report. China also indicated that it will continue to tackle overcapacity in across polluting & energy intensive industries (we identified these here) as it simultaneously works “to foster new industries and upgrade traditional ones”.

China to take a path that leads to both economic development and environmental improvement

In the longer term, Li Keqiang’s work report reiterates the intention of growing the economy but not at the expense of the environment. “Pollution control and environmental protection are important to both the health of our people and sustainable development. So we must work hard moving forward and resolve to take a path that leads to both economic development and environmental improvement.”

Environmental clean-up as a strategic emerging industry is also expected to contribute to the services economy. In short, it is envisaged to be pillar of economy and society; “Beautiful China” is both an economic and social vision.

“Beautiful China” is both an economic and social vision.

The challenges here are both complex and daunting. China is frank about these, admitting: “A comprehensive analysis of all factors shows that China will face more and tougher problems and challenges in its development this year, so we must be fully prepared to fight a difficult battle”, states the work report.

Innovations are required. By 2020, China want’s its investment in R&D to reach 2.5% of GDP. Historically, we innovate when our backs are against a wall which can either be caused by an actual constraint or one imposed by regulations. Incidentally, ‘Task No.6’ of the eight tasks for 2016 is: “Step up environmental governance efforts and work to see breakthroughs in green development”. Plus this year’s CPPCC meetings saw the attendance of an unprecedented number of private sector entrepreneurs. Make no mistake – no more monkey business will mean be green and prosper.

To this end, we advised that it was best to: “Avoid monkey-see, monkey-do: think disruptive but think comprehensive”. Comprehensive solutions are in the form of policies as well as technological innovations. The March meetings signal that these comprehensive solutions must deliver triple wins – (1) protect all ecologicial red lines (from water, air, soil to forests and oceans – often one solution for one causes unintended consequences in another), (2) generate income towards the services sector of GDP, and (3) provides jobs.

Now that is a big ask. At least the size of the market is alluring, for despite RMB5.6 trillion spent on the “management of water conservancy, environment and public facilities” in 2015, we are clearly still far from a Beautiful China. Yes, “tireless efforts” lie ahead for there is indeed much work to be done in the 13FYP.

Further Reading

  • China Water Risk’s 5 Trends for 2016 – Prioritizing environment alongside employment signals a reshuffle. To show it’s serious, China will “kill a chicken to warn the monkey”. The Year of the Monkey brings with it wild swings, so check out our top 5 trends in water for 2016 for it is better to be in a position to disrupt than be disrupted
  • Key Water Policies 2015 – 2016 – Over the last year China has released multiple of key water-related policies ranging from tackling the war on pollution, monitoring, food & energy security, green finance to promoting circular economies and more. Stay on top of them with China Water Risk’s review
  • Contaminants In “Clean” Water – Yin Zhan, the head of the Water & Human Health Center of the Chinese Academy of Science, talks to China Water Risk about endocrine disruptors, algal toxins, antibiotics & other emerging contaminants in Chinese waters
  • China Needs Managed Aquifer Recharge – Managed Aquifer Recharge (MAR) can help better manage China’s water resources and increase climate resilience. Zheng, Wang, Zheng & Dillion from China’s MAR Working Group, discuss opportunities & challenges in the face of rapid urbanisation
  • What China’s New Green Bond Rules Mean – China’s new green bond rules can make it a major player in the global green bonds market. Trucost’s Huang & Ip expand on their Chinese characteristics and how they can help raise the annual requirement of RMB 2 trillion for climate solutions & environmental clean up
  • Groundwater Under Pressure – New official survey says that China’s groundwater quality has yet again deteriorated. Can the Water Ten Plan turn this around? Who will be affected? Find out what’s at stake & why the next 5 years are crucial
Debra Tan
Author: Debra Tan
Debra heads the CWR team and has steered the CWR brand from idea to a leader in the water risk conversation globally. Reports she has written for and with financial institutions analyzing the impact of water risks on the Power, Mining, Agricultural and Textiles industries have been considered groundbreaking and instrumental in understanding not just China’s but future global water challenges. One of these led the fashion industry to nominate CWR as a finalist for the Global Leadership Awards in Sustainable Apparel; another is helping to build consensus toward water risk valuation. Debra is a prolific speaker on water risk delivering keynotes, participating in panel discussions at water prize seminars, numerous investor & industry conferences as well as G2G and academic forums. Before venturing into “water”, she worked in finance, spending over a decade as a chartered accountant and investment banker specializing in M&A and strategic advisory. Debra left banking to pursue her interest in photography and also ran and organized philanthropic and luxury holidays for a small but global private members travel network She has lived and worked in Beijing, HK, KL, London, New York and Singapore and spends her spare time exploring glaciers in Asia.
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