China’s new five-year plan favours green tech with a goal of achieving an ‘ecological civilisation’
The country’s services sector activity grew at its slowest pace in 10 months in February as firms struggled with sluggish demand and high costs
China, which long targeted rapid industrial growth despite its environmental consequences, now aims to become the global leader in “low-carbon tech for a carbonconstrained world” as it unveils its new five-year plan this week, China analysts said.
That shit is likely to include an accelerated pullback from its role as a major financier of new coal-fired power plants at home and abroad, Isabel Hilton, founder of China Dialogue, a nonprofit news organisation, told an online event on Monday.
China is today the world’s largest emiter of planet-heating gases, responsible for about 28% of total global emissions. Its 2021-2025 economic and social development plan is expected to reinforce a strong signal to Chinese industry to move away from fossil fuels and is likely to mean national emissions start falling within five years, predicted Li Shuo, a senior policy adviser for Greenpeace East Asia.
In a country that normally sets targets it can achieve or over-achieve, major industries this year must deliver plans on how they will cut emissions in line with China’s commitment last year to become “carbon neutral” by 2060, Li said.
But shiting rapidly from a focus on dirty industry to greener tech is a challenge everywhere and China is no exception, said Dimitri de Boer of the China office of Clientearth, an environmental law charity.
He described a “very active tug of war” between China’s environment and energy agencies, with uncertainty about whether nearly 37 gigawats (GW) of coal-fired power capacity approved in 2020 will still go ahead.
That, combined with the 38GW of new coal power capacity put into operation in 2020 and other projects in the pipeline, is enough to power all of Germany, international researchers said this month.
Still, De Boer noted “promising signals” China wants to decarbonise, particularly its controversial investments overseas, with an announcement possible before the delayed COP26 UN climate negotiations, now set for November in Glasgow.
Bernice Lee, founding director of think-tank Chatham House’s Hoffmann Centre for Sustainable Resource Economy, said the increasing bad publicity China has received for financing expansion of coal power around the world is forcing a rethink.
The Chinese model for development spending abroad “is under re-evaluation”, she said, with scientists saying use of coal for energy must rapidly end to prevent the worst impacts of climate change.
In particular, many projects in the Belt and Road Initiative, a Chinese-backed infrastructure development push in nearly 70 countries — including significant spending on coal plants — have received no new finance since 2019, she said.
But Andrew Norton, head of the Londonbased International Institute for Environment and Development (IIED), said China had yet to present a “comprehensive plan” to green its overseas investments.
Yunnan chen, a development finance researcher at the London-based Overseas Development Institute, said the expected green shit in China’s new five-year plan, due out Friday, was driven in part by its desire to appear to be doing the right thing, both at home and abroad.
“There’s really a desire for legitimacy. That’s a constant theme,” she told a separate online event on Monday run by IIED. Focusing on the environment is also “no longer seen as part of a Western imperialist agenda”, Sam Geall, acting head of China Dialogue, said during the same event.
China has framed its coming green push around the idea of achieving an “ecological civilisation” — a term now part of the title of a major planned international biodiversity summit China is scheduled to host later this year, he said.
With strong public demand to continue battling China’s choking air pollution, some green policies also are likely to be popular at home and reduce social pressure the government sees as a threat, analysts said. China sees ramping up green investment in things like renewable power, electric vehicles and batery storage as a chance to seize the lead in a growing global industry, they added.
As the Asian economic powerhouse tries to identify the technology of the future, it wants “to be a supplier of low-carbon tech for a carbonconstrained world”, said Hilton of China Dialogue.
“Whatever the policy is in the next three to four years, it’s not going to look at all like it did three years ago.”
China is set to unveil a new five-year plan and other socioeconomic targets for 2021 when its annual meeting of parliament, the National People’s Congress, begins on Friday.
China expected to propose a hike in the military budget as tensions mount. Beijing has vowed fiveyear plan dedicated to climate at the same time growth and security concerns also weigh.
During the session, China is also expected to unveil changes to the electoral system in Hong Kong, which would tighten Beijing’s grip over the city where it imposed sweeping new national security legislation last year.
Meanwhile, China’s services sector activity grew at its slowest pace in 10 months in February as firms struggled with sluggish demand and high costs, a private sector survey showed on Wednesday, prompting them to cut jobs.
The Caixin/markit services Purchasing Managers’ Index (PMI) fell to 51.5, the lowest since April, from 52.0 in January but remained above the 50-mark that separates growth from contraction on a monthly basis.
A sub-index for employment stood at 47.9, slipping into contraction ater six months of growth, as businesses laid off workers, the survey showed. New export business also shrank ater expanding for three months.
The loss of momentum came as China faced coronavirus flare-ups at the start of the year, while overseas demand continued to be hit by the COVID-19 pandemic. The findings were largely in line with an official survey released on Sunday.
“The momentum of post-epidemic services recovery further weakened,” said Wang Zhe, senior economist at Caixin Insight Group, in a statement accompanying the data release.
“Service providers cut staff to reduce costs as weakened market sentiment had a knock-on effect on the job market.”
The services sector, which had been slower to recover initially from the pandemic than the industrial sector, is more vulnerable to social distancing restrictions.
Domestic COVID-19 cases have however been stamped out in China since early February and analysts expect a strong rebound in full-year growth.
February also saw the Lunar New Year holidays, when many workers return to their hometowns, although this year saw far fewer trips amid coronavirus fears.
Costs for services firms continued to grow quickly, although at a slower pace than the month before.
But Chinese services firms remained optimistic about the year ahead, with business expectations over the next 12 months rising from January.
Meanwhile, China stocks posted their biggest one-day gain in three weeks on Wednesday, led by banking and commodity shares, as hopes of domestic economic growth offset fears of tighter monetary policy.
Some traders also atri but ed the market strength to bullishness ahead of the annual gathering of the National People’s Congress, which starts on Friday.
The blue-chip CSI300 index jumped 1.9% to 5,452.21, while the shanghai composite index gained 2% to 3,576.90 points. Both indexes notched their best performance since early February.
China’s top banking watchdog said on Tuesday regulators were studying effective measures to reduce the risk of foreign capital inflows. The remark is interpreted by some as pointing to Beijing’s litle willingness to lit interest rates, a move that could invite more inflows.
Investors also shrugged off results from a private-sector survey showing China’s services sector activity grew at its slowest pace in 10 months in February.
“We expect manufacturing and services PMIS to recover in March, as the COVID-19 situation was quickly brought under control in recent weeks. Beijing may gradually relax some social distancing rules in coming months and some pent-up demand could be released,” Nomura wrote.
Larry Hu, an economist at Macquarie Capital, said that there’s no need to worry about inflation in China.
“For 2021, we expect China to see reflation, but not high inflation,” Hu wrote. “The reflation trend is great news to COVID losers such as financials and industrial companies.”
Cyclical stocks rose sharply, reflecting investor optimism toward economic growth. Banking shares jumped nearly 5%, while energy stocks rose over 3%.
Separately, Chinese steel rebar futures surged more than 5% on Wednesday to their highest level in about a decade, as the country’s plan to take more environmental-protection measures stoked worries about a cut in production.
Besides the industry ministry’s pledge to cut crude steel output this year, heavy pollution alerts issued in Hebei province and the upcoming annual parliament meeting will also affect steel products’ output in the short term, Sinosteel Futures said in a note.
Seven blast furnaces in the top steel-making city of Tangshan were required to be shut down by March 10, which might likely lower pig iron output by 5,000 tonnes a day, according to GF Futures.
The most-actively traded rebar contract on the Shanghai Futures Exchange, for May delivery, closed up 3.9% to 4,842 yuan ($749.11) per tonne. It surged as much as 5.6% to the highest level since August 2011 earlier in the session.
China’s trading volume for steel products used in construction stood at 196,800 tonnes on Tuesday, the highest daily transactions since Jan.4, according to Mysteel consultancy.
Hot-rolled coil futures, used in cars and home appliances, jumped 3.5% at close to hit a record high of 5,026 yuan per tonne.
Prices of steelmaking raw materials also gained. Benchmark iron ore futures on the Dalian Commodity Exchange rose 1.8% to 1,154 yuan a tonne.
Dalian coking coal surged 6.2% to 1,525 yuan per tonne and coke increased 0.8% to 2,520 yuan per tonne.
Stainless steel future son the shanghai exchange fell 2.1% to 14,685 yuan a tonne.
China’s yuan inched up against a weaker dollar on Wednesday, with market sentiment recovering from comments made by a top banking regulator a day earlier about managing capital inflows.
China’s top steelmaker Baowu Steel Group and regional producer Fujian Sangang Group have signed agreements to invest 20 billion yuan in two separate steel projects in the southeastern Fujian province, local media reported on Tuesday.