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China should include ecological services in computing economic growth indexes and prepare for the possible drop in the value of polluting assets as it faces the unprecedented challenge of curbing emissions while maintaining a relatively high growth rate, a senior advisor to the People's Bank of China told MNI in an interview.

Liu Shijin, a member of the PBOC's monetary policy committee, said that assessing clean energy development through measures such as Green GDP and Gross Ecosystem Product was crucial and would serve as an incentive although the country would still face major uncertainties in meeting both climate and growth goals.

"It is like you want a horse to run faster without feeding him adequate grass," said Liu, who is also deputy director of the Economic Affairs Committee of the Chinese People's Political Consultative Conference National Committee, the country's top advisory body.

He emphasised preparation saying producers of traditional energy in Shanxi and Inner Mongolia provinces, and industries such as steel, nonferrous metals, chemical engineering and cement, would be hard hit by the transition to an energy efficient economy. Regulators should arrange for the orderly withdrawal of high-carbon-emission industries, introduce new technologies, manage laid-off workers and reorganize bankrupt companies to safeguard financial systems, he said.


According to Liu, a major handicap in efforts to measure green services is the deficiency of market-oriented pricing and the lack of alignment in measurement units. A research team he leads is experimenting with a new method for green accounting in a bid to address the issues, he said.

In a world first, the city of Shenzhen, China's technology hub, recently adopted the GEP, a total value of ecological goods and services, underlining Beijing's focus on its green ambitions.

Liu, one of the first economists to suggest that China's growth rate had slowed, said China should pilot a "green responsibility account" for each emitter, such as the central government, local governments, firms and individuals, classifying the emissions as debt.

He noted that the country's per capita carbon emission stood at seven tons, exceeding that of the EU. Beijing wants to reach peak emissions by 2035 while growing per capita GDP to USD30,000-40,000 by that year from the current USD10,000.


Despite the challenges, China can benefit from the large scale and systemic technology shift involved in fostering green development, he said.

Innovation can help improve productivity, lower carbon emission even to zero and reduce cost. For instance, the cost of solar photovoltaic cells has dropped by 80% in the past 10 years and is expected to fall further to half of that of coal power generation in a few years, Liu said.

The country's projected growth rate of about 5% over the next decade and even beyond means demand for green products and related innovation will have time to grow and become entrenched.

For example, China has 173 passenger cars per 1000 people, compared with 845 in the U.S., 423 in the EU and 575 in Japan when their carbon emissions peaked. So there is room to popularise new energy automobiles, he said.

"Without a pragmatic and efficient withdrawal system and replacement of technology and industry, the mission of carbon reduction is not sustainable," he said, noting that the transition to a green economy is a structural adjustment.

MNI Singapore Bureau | +65 9 632 1991 |
MNI Singapore Bureau | +65 9 632 1991 |