Resource Constraints and China’s Modernization

From: English Edition of Qiushi Journal Updated: 2012-03-31 11:02
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 Since the middle of the 20th century, worldwide calls for resource conservation and environmental protection have become increasingly loud along with the spread of industrialization, the increased exploitation and utilization of natural resources, and the excessive damage to environments that has occurred in the concentrated industrial areas of some countries. Some people have argued that zero economic growth is the only way that human economic activities can be kept within the limits of resources and the environment. Despite this, however, the fact remains that the majority of countries in the world are following in the footsteps of developed Western countries to promote industrialization—an approach that will inevitably come up against increasingly severe resource constraints.

 I. Resource constraints in the process of China’s industrialization

 The large-scale exploitation and utilization of natural resources were the initial conditions that allowed China’s process of industrialization to commence. However, that is not to say that resources are the sole condition of China’s industrialization. Industrialization is not decided by the amount of resources that are input, but by the technological capacity to better convert materials into resources. No country, regardless of how rich its natural resources are, could possibly achieve sustainable development if it relied entirely on the input of resources for its industrial growth. Everyone is aware that China, given its huge population, will not always be able to rely on its natural resource advantage. Fundamentally speaking, at China’s current stage of industrialization, industrial technology and the capacity for innovation are of greater significance than the input of resources.

 To a large extent, the complex relationship between China’s industrialization and resource constraints at present is the result of a unique conflict between the huge size of China’s population and the shortcomings of the rules of economic globalization. It is, after all, totally unprecedented for a huge economy with a population of 1.3 billion people to achieve industrialization. Moreover, China’s industrialization is taking place against the backdrop of flawed rules for economic globalization, rules which only emphasize the freedom of trade and investment, but place strict constraints on the transfer of technology and especially people. As a result, the effective allocation of productive factors for China’s population of 1.3 billion cannot easily be achieved through the mechanisms of economic globalization under the current global economic system.

 Therefore, the fundamental natures of China’s industrialization can be summarized as follows: on the one hand, China cannot skip any of the major stages that other economies inevitably had to go through to achieve industrialization. It cannot follow a completely different path, nor can it divorce itself from the backdrop of economic globalization or international economic rules which are dominated by capitalism. This indicates that China’s overall industrialization must progress on a course that conforms to the objective rules of world industrialization. On the other hand, China is a developing country whose industrialization began at a relatively late stage, and thus the conditions and features of China’s industrialization are different from those of developed countries. Therefore, we must address resource constraints with more effective advances in science and technology and more effective industrial innovation.

 In fact, the essence of all industrial productive activities is a process of physical transformation. Specifically, this involves the transformation of materials from the form of a resource to the form of a product. Therefore, the basic logic of industrialization is to address resource shortages through the highly efficient exploitation and utilization of resources. As a mode of production, industry is more capable of conserving land, water and other resources in comparison to traditional agriculture. Industrial production allows us to transform materials which are useless in traditional agriculture into scores of valuable resources. Therefore, in order to achieve industrialization and industrial civilization, China must address the shortage of resources it currently faces through the more efficient exploitation and utilization of resources, and by no means should the conservation of resources be achieved by abandoning industrialization and industrial civilization.

 A manufacturing plant for the production of wind power generators at the Xinjiang Goldwind Science & Technology Co., Ltd. With its abundant wind power resources, Xinjiang has 9 major zones for wind power generation that cover a total area of 150,000 square kilometers. These regions boast more than 24 billion kWh in exploitable wind power resources and are capable of accommodating a total installed capacity of 80 million kW, which is 4.5 times greater than the installed capacity of the Three Gorges Dam. / Photo by Xinhua reporter Zhao Ge

 At present, China has arrived at a new starting point in its process of industrialization. In this new era of industrialization, China cannot bypass the path that must be followed, nor can it skip the inevitable stages of development. We must address our resource issues in an active fashion, and under no circumstances can we evade this problem. This is the basic reality of China’s industrialization. Only by squaring up to this reality and responding rationally to the problems we face will China’s industrialization be successful. The coming two decades, in particular, will be a crucial period in China’s drive to industrialize, and we cannot afford to miss this strategic opportunity to essentially complete our industrialization.

 II. A new path of industrialization that is cleaner, more economical, and more refined

 As of the present, only around 60 of more than 200 countries and regions in the world have completed the process of industrialization to become industrial societies. This means that the world as a whole is yet to complete the process of industrialization. Although there has been talk about the end of the fossil fuel era, the fact is that the world is still at the peak of the fossil fuel era. At the same time, the world is beginning to witness the emergence of new industries, which are represented by high-tech industries and modern service industries. In an era where traditional industries and new industries are interwoven, a developing China must seek the comprehensive development of traditional industries, high-tech industries, and modern service industries.

 Therefore, China does not have so-called “sunset industries” at the present, and the country’s industrial development is still characterized by the consumption of large amounts of fossil fuels. This inevitably brings about two prominent issues: first, fossil fuels are a non-renewable source of energy and will continue to diminish as our use of them continues; second, the consumption of fossil fuels causes a certain degree of environmental pollution. Faced with these issues, China must accelerate the transformation of its pattern of economic development and commit to a new path of industrialization. Most importantly, as we are developing resource-intensive industries, it is essential that we create mechanisms for technological innovation in energy conservation and environmental protection.

 Due to the large scale of its economy, China’s economic development has been highly conducive to increases in the efficiency of resource and energy utilization both domestically and globally since the introduction of the reform and opening up policy. Faced with increasingly severe resource constraints in recent years, the principle of efficiency in China’s industrialization has been more prominently manifested in the conservation and efficient utilization of natural resources, especially non-renewable natural resources. At the same time, China is in urgent need of major breakthroughs in the development of new technologies regarding new energy sources and new materials, so as to promote the emergence and development of strategically important emerging industries. In addition, making industrial production cleaner and more refined is also an important means of raising industrial efficiency. Refined and clean methods of industrial production embody more developed industrial technologies, more rational industrial structures, and more advanced industrial civilization, and thus have the effect of significantly increasing efficiency in resource utilization.

 In summary, the feasible approach for China to address its resource constraints is by following a new path of industrialization, one that is cleaner, more economical, and more refined. Following this new path of industrialization, we can expect that China will play a significant role in guiding the orientation of global industrialization towards optimum resource utilization.

 III. Feasible approaches to energy substitution

 Judging from the current situation, Chinese industry, including its resource-intensive sectors, will become cleaner and more resource-efficient at a significantly faster rate than the world average. At the same time, China is also set to switch to alternative energies at a significantly faster pace than other countries on average. However, we must be aware that the development of new energy sources relies on the development of traditional resource-intensive industries, and that the emergence of new energy industries cannot occur without the support of traditional industries. Therefore, the substitution of new energy sources for traditional energy sources and the development of resource-intensive industries are both objective trends that will run parallel to each other during the course of China’s industrial development in the future.

 At present, the world is still at the peak of the fossil fuel age. Fossil fuels such as oil and coal are still the safest, most economical, and most easily obtainable energy sources, and they will still be developed and exploited for a considerable period of time. Despite the increasing calls for research into alternative energy sources and the progressively apparent shortage of fossil fuels, the historic transition to alternative energies will be an extremely arduous process riddled with challenges. There are three crucial problems that China must resolve in its efforts to pursue a new path of industrialization.

 First, we must cross two thresholds in the development of new energy sources. The first is to achieve the positive net yield of new energies. This means that the amount of new energy being produced is greater than the amount of fossil fuels and other resources that were consumed to produce it. The second threshold is to approach and eventually surpass the economic efficiency standard of fossil fuels, making the cost of new energy sources lower than that of fossil fuels. Before we cross the first threshold, the development of new energy sources will cost more than it generates; and even after the first threshold has been crossed, the new energy industry will remain uncompetitive until the second threshold can be crossed. Therefore, the government should subsidize the new energy industry and formulate other supporting policies in order to promote its rapid development.

 Second, we must focus on the development of core technologies. There are still many problems surrounding the key technologies for the development of new energy sources as well as the technological means for their application in industry. As such, blind investment in new technologies that lacks effective technological guarantees could result in serious risks. We must be cautious to avoid the overly rapid growth of investment in the exploitation and utilization of new energy sources when core technologies are still lacking and market demand remains uncertain, as this could potentially destroy the market conditions for substantive advances in core technologies and lead the technology roadmap for energy substitution off course.

 Third, we must establish incentive and constraint mechanisms for the rational bearing of costs. Energy substitution is an arduous process that involves huge costs and high investment risks. Therefore, the development of new energy sources must be supported by effective incentive and constraint mechanisms as well as a rational system for costs to be borne or shared. In particular, technological innovations in regard to energy substitution are extremely prone to generate spillover benefits. Therefore, without rational institutions, mechanisms, and policies, it will be very difficult to achieve substantive technological advances in energy substitution, and technological innovations in this regard might even lead to seriously distorted market behavior and the waste of resources.

(Originally appeared in Qiushi Journal, Chinese edition, No.18, 2011)

Author: Research Fellow and Head of the Institute of Industrial Economics of the Chinese Academy of Social Sciences

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