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Green Will Be Factor in GDP Growth

In fast-developing China, economic growth has been both boon and bane for leaders at the provincial, county and township levels.

With gross domestic product (GDP) the most significant indicator in evaluating the performances of local governments, the advancement of local leaders depends heavily on the growth figures.


GDP growth can either help local leaders rise quickly up the ladder of hierarchy or be a stumbling block to their career.


That well explains why some ambitious local officials manage to cook up false GDP growth figures, which in turn have caused wide suspicion about the accuracy of China's overall national economic development in the past decade.


The country boasts the world's fastest-growing GDP, a broad gauge of economic activity, over the past two decades.


But Zhang Guorong, an inspection and discipline official with the National Bureau of Statistics (NBS), has disclosed that the overall GDP growth rate based on figures submitted by provinces outpaced the NBS' national GDP growth figure several years in a row.


Growth rate inflation


Both the central and local governments are trying hard to curb the practice of artificially inflating growth rates.


The Organization Department of the Central Committee of the Communist Party of China and the NBS are considering a new evaluation system for local governments.


Upon the adoption of the assessment mechanism, the significance of GDP will be greatly reduced to make the evaluation process more scientific and objective, sources say.


As the first step towards the establishment of the system, the NBS is joining hands with the State Environmental Protection Administration to look into the possibility of using a green GDP index.


The environmentally-adjusted gross domestic product, or green GDP, will be calculated by subtracting resource depletion and other environmental externalities from the GDP to better illustrate the interrelationship between the natural environment and the economy.


The green GDP index will evaluate the performance of local governments with the aim of fulfilling the top Chinese leadership's vision of comprehensive, balanced and sustainable development.


The new concept is expected to change the present growth mentality based on excessive consumption of natural resources and serious environmental degradation.


In fact, some local governments are spearheading the effort to promote a more healthy economic growth and taking radical steps to put into place a more effective assessment system for local officials.


The city of Huzhou in East China's Zhejiang Province, for example, will remove the GDP growth rate as a major indicator in its assessment system this year; instead, more detailed economic items such as per capita income of urban and rural residents, the growth of the rural economy and service industry will be listed in the assessment system to more accurately reflect the socio-economic development of the city.


Over-emphasis on GDP


In contrast with an excessive emphasis on GDP growth, the new evaluation system has four main evaluation aspects: economic potential, living standard of residents, balanced development between the economy and society, and government functions and administrative efficiency.


Yang Renzheng, Party secretary of Huzhou, says the new move will help evaluate the performances of local officials in a more realistic and scientific way.


"A long-standing preoccupation with GDP growth tends to spell trouble for economic development due to ignorance about the quality of economic development and efficiency," he says.


"There has been a common problem of economic development at the cost of environment in the country."


Citing Huzhou as an example, Yang says three counties and two districts in the city once set up 49 industrial parks altogether to boost their economic growth - the vicious competition sent the city into economic chaos and added to the difficulty of environmental protection.


Abandoning GDP as an assessment criteria for local officials has contributed a lot to economic restructure in the city because local governments feel less pressure to concentrate on economic development at all costs, according to Yang.


Liu Guofu, head of Changxing County in Huzhou, hails the new evaluation system as a timely policy that will certainly benefit a harmonious social development.


Grassroots officials used to pay too much attention to economic growth while turning a blind eye to industrial projects that pollute heavily, according to Liu.


"Since balanced socio-economic development, including environmental protection, has now been listed as an assessment standard, it will encourage local officials to place equal emphasis on qualitative as well as quantitative growth," he says.


The official, however, stressed that abolishing the GDP as an assessment item does not mean local officials will completely ignore GDP growth.


'Green index'


Professor Hu Angang says the planned introduction of a green GDP index as well as the proposed changes to the evaluation system of local officials signal China's transition from "black development" to "green development."


He describes the Chinese development model characterized by giving top priority to the GDP growth as an unbalanced strategy.


"The current development model of spurring economic growth at the cost of environment will eventually lead to ecological deterioration and unbalanced development," the professor says.


On the other hand, huger risks may come from a rising number of social problems that have popped up over the past two decades despite China's robust economic growth, according to Ding Yuanzhu, a researcher with the Institute of Macro-Economic Studies under the National Development and Reform Commission.


"Economic development will not necessarily help solve social problems if the government fails to chart a course of balanced development through a new development strategy," the researcher says.


A recent survey by Ding and his colleagues found that the country's spectacular economic growth has not only proved inadequate in solving mounting social problems but also deepened conflicts between different interests.


Ding warns that social problems in China are more serious than economic ones and pose a bigger threat to social order.


His survey lists outstanding social problems such as soaring unemployment, yawning gap between the rich and the poor as well as widening wealth disparity between coastal provinces and inland ones, between cities and the countryside.


Ding assumes the worst scenario would be that these persistent social problems would trigger more social conflicts, undermine political and social stability and finally lead to an economic recession.


By then the whole country may be dragged into trouble. If so, the country's ambitious goal of building a well-off society would be out of the question, the researcher says.


Professor Wang Dongjing goes further to suggest a complete disconnection between GDP growth and the promotion of local officials in the new assessment system.


He says introducing the green GDP as an assessment criteria seems to be a step forward from the old system.


A step forward


"But it is still an inefficient way of keeping local governments from sacrificing environmental and ecological resources in their pursuit of economic growth," says Professor Wang.


"As long as economic growth - whether it is GDP or green GDP - remains to be an assessment standard, local officials will not stop damaging the environment and overusing resources in a bid to boost local economic development."


He adds that the main role of any government should be to offer public services including infrastructure construction, maintaining social stability and reasonably allocating social resources to facilitate economic development.


Despite the acclaim for the move to remove GDP growth in the new evaluation system, some local officials cast doubts about the appropriateness of the change.


Ji Jianye, mayor of Yangzhou in East China's Jiangsu Province, says it is reasonable to take GDP growth as an indicator to evaluate the work performance of local governments, given the importance of economic development to the national strength of China.


"We have to admit that something is wrong with the old assessment system of officials because GDP growth alone cannot ensure a balanced and well orchestrated development of the whole society," he notes.


"But it will be equally inadvisable to deny the positive side of using GDP growth as one of the major assessment standards."


The mayor says the main problem at present is how to design a new assessment system in which the GDP growth will be given the right weightage.


(China Daily February 12, 2004)

Green GDP System for Healthy Growth
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