When President Xi Jinping pledged that China’s carbon emissions would peak by 2030 and that carbon neutrality would be achieved before 2060, he set off a chorus of jubilation.
China accounts for 28% of all global emissions—double the U.S. share and more than three times that of the European Union. Todd Stern, the U.S. climate envoy in the Obama administration, called Xi’s promise at a United Nations meeting in September “big and important news.” The economist Adam Tooze said the Chinese leader “may have redefined the future prospects for humanity.”
Now for the reality check. Although full details of how China plans to get to net zero have yet to be unveiled, Xi announced a crucial number last week—the goal for installed solar and wind power by 2030—that implies a relatively slow-paced transition away from coal. The letdown comes with a layer of irony, since renewables generally provide cheaper power than coal. Thus, writes Bloomberg Opinion columnist David Fickling, Xi is sending the message that he may be willing to sacrifice efficiency, public health and the climate to support smokestack industries that would be threatened by a faster shift.
This week in the New Economy
For those who’ve been tracking China’s industrial management since Xi took power in 2013, this may not come as a great surprise. Despite his early advocacy of markets, he has firmly committed to the state sector that dominates polluting industries—coal, steel, cement, heavy machinery—for reasons of ideology as much as economics. State enterprises embody socialist virtues that the Communist Party believes will lead to true national greatness: patriotism, thrift, selflessness, obedience to the party.
This is the so-called “spirit of Lei Feng,” one of the early socialist worker-heroes whose museum in Fushun, a coal city in China’s industrial northeast, Xi visited early in his tenure.
In the aftermath of China’s successful battle with Covid-19, Xi is doubling down on state control. State enterprises, he said in a recent speech, “must be made stronger, better and bigger.” Woe betide private entrepreneurs who stick their necks out: When Jack Ma criticized state regulators recently, they hit back almost immediately by yanking the $34 billion dollar listing of Alibaba’s fintech startup, Ant Financial.
“The view that state planners are better at running a complex economy has gained currency this year,” writes Lingling Wei in The Wall Street Journal. In certain respects, it’s hard to argue with their conclusion. China has engineered a V-shaped recovery from the coronavirus. Foreign investment is pouring in. Brussels seems poised to strike a breakthrough investment agreement with Beijing that will bring in fresh torrents of capital. As a result, China is seized by a mood of nationalistic triumphalism. One Beijing artist depicted Manhattan in the year 2098 as a quaint tourist attraction draped in hammer-and-sickle flags.
The Economist magazine argues that China has pulled off an improbable success in part by blurring the lines between the state and private sectors. Public enterprises are being forced to run more along market lines, while private enterprises must bend to the party’s will. “It isn’t Milton Friedman, but this ruthless mix of autocracy, technology and dynamism could propel growth for years,” the Economist predicts.
Why, then, the hesitancy when it comes to making the transition to net zero carbon emissions? Belching coal plants are a legacy of China’s industrial past; green technologies are the wave of the future. China is already the world’s largest producer of wind and solar energy, with the opportunity to dominate related technologies like electric vehicles and battery storage.
As Brookings Institution economist David Dollar notes, innovation is more important than ever as a driver of China’s growth, given its inexorably rising debt-to-GDP ratio and looming demographic crisis. Chinese over the age of 65 will increase from 200 million today to 400 million by 2049, while the working age cohort shrinks.
Yet it appears Beijing may be more wary of the potential political and social costs of moving too rapidly. Meanwhile in the U.S., investors are abandoning coal projects, which means coal use is plunging at its fastest rate since the Eisenhower administration. Exxon Mobil has been booted off the Dow Jones Industrial Average and is now worth less than an upstart green utility in Florida. Tesla is worth more than General Motors, Ford, Toyota, Volkswagen and BMW combined.
It’s far too early to hail the victory of a muscular state capitalism, but markets can be ruthless, too.
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