Building New Capital Cities: Amaravati and Xiong’an

Ms. Ramya Kannan, Research Intern, Institute of Chinese Studies

A look into the development of major cities in India and China would yield very different results. While the former has for the most part seen organic growth of urban centres based on opportunities for differentiated labour, the latter is known for its unique model of planned expansion (Euromonitor Research 2013). In keeping with its ‘urbanization with Chinese characteristics’, Xi Jinping administration announced the building of a subsidiary capital in the Beijing-Tianjin-Hebei economic triangle last year, called Xiong’an New Area (雄安新区 Xióng’ān Xīnqū). The development of a city from scratch is not new in China, where the government has often allocated resources to specific city-building projects (Gere 2017). What is interesting is that the state government of Andhra Pradesh (AP) in India committed itself to a similar project in 2015 with the announcement of a new capital city in Amaravati. While Xiong’an signifies an attempt to downsize an overpopulated city with too many functions, Amaravati seeks to expand the very notion of a capital city in India. Nevertheless, strong political motives, new policy measures and large investments underlie these capitals in the making.

Amaravati was envisioned as a world-class metropolis modeled on various cities, including Singapore and Shenzhen, which would redefine urbanization in India and establish AP as an important region. Continue reading “Building New Capital Cities: Amaravati and Xiong’an”

A China Gazer’s Random Musings – No. 3

Kishan S. Rana (IFS Retd.), Emeritus Fellow, Institute of Chinese Studies, Delhi

Environment management: the relevance of China’s experience

At the Paris Accord of 2016 and later, China has taken the high road of a responsible environment protector. Behind this pose, which burnishes its international credentials, especially after President Trump’s rejection of that accord. But it seems that within China, environment regulations are now being applied with more rigor than before, and the ‘real cost’, in terms of loss of economic momentum and impact on industrial prices, is less than estimated earlier. This is of relevance for India.

The Diplomat recently wrote: ‘In China,a major campaign against environmental violations has so far penalized more than 30,000 companies and over 5,700 officials…These changes represent a fundamental shift… We expect that the deep-seated public unease about the quality of food and water will be addressed through the advent of a more systematic approach to surveys and enforcement.’ Some environmental organizations, as NGOs, are now permitted to bring public interest lawsuits against violators of norms, again a shift for this authoritatian country.  (‘China cleans up its act on environmental enforcement’, 9 Dec 2017, An article in The Economist made similar points, adding that while only 60% of steel blast furnaces are now operating, the biggest economic surprise has been ‘how muted that impact has been’; that also applies to price increases which ‘show little sign of spreading widely’. (‘Towards a greener future’, 6 Jan 2018).

This has direct relevance for India. Our environmental regulations are easily circumvented; tighter enforcement is opposed on the argument advanced by vested business interests about how this would impact on the economy. In that manner, industrial units in cities, notably Delhi, operate with impunity, and pollution worsens continually. In contrast, Beijing with a much worse pollution record is now witness to a visible lowering of PM2.5 levels, having closed shifted out wide swathes of polluting units.

India’s support for the PRC’s UN seat  

As well-known, India remained consistent in its principled position on seating the PRC at the UN, all through the 1950s, up to the 1971 UNGA, when Beijing won that right, that the PRC was the legitimate representative of China, not Chiang Kai-Shek’s rump regime in Taiwan. We may also recall that despite temptation, and persusaion by Western powers, India also did not shift its position at the UN vote, refusing to treat this as an ‘important question at the General Assembly (which would have required a two-thirds majority mandate for the PRC, not a simple majority). This was a triumph of principle over pragmatism.

In Diplomacy at the Cutting Edge (2015) I wrote of the scene in 1070-72:

Premier Zhou Enlai appeared frequently at receptions for visiting foreign leaders. It was his custom to walk down the lineup of foreign envoys, shaking hands with each, and their spouses. He was invariably alert and perceptive, and would lock gaze with each person; we used to say that the warmth of that handshake was in proportion to the bilateral political relationship of the day. The evening the news broke of People’s Republic of China’s gaining its seat in the UN, he was at an embassy national day reception. Clutching a glass of Mao Tai, he went to every table to clink glasses with each guest. At my turn, I said to him in Chinese: Congratulations on China’s success, Excellency; he responded with an expansive gesture with an arm and shoulders. Zhou has remained the most enduring of Chinese leaders, in the perception of its people.

Has Beijing ever expressed appreciation, much less gratitude for that Indian stand? Not as far as I know; perhaps someone with information on this could correct me. What I do recall is a  discussion around late 1964 or early 1965, at the Chinese Foreign Ministry when First Secretary AK Damodaran, deputy to our head of mission Jagat Mehta, called on the Deputy Director of the Asia Division. Damu alluded to India’s consistent support for the seating of the PRC at the UN, as an example of India’s principled action, despite the difficulties in bilateral relations. That Chinese official went pyrotechnic, snapping back: what India has done is no more than its duty; do not expect us to show gratitude for that. The real issue is India’s duplicitous actions on the border issue, its support to the illegal Dalai clique…etc.

Tansen Sen, author of the imprtant recent work India, China, and the World: A Connected History, wrote in an article in The Times of India that ‘Nation states have failed us: to improve relations China and India must allow their people to interact freely’. He wrote of niche groups that work in both countries, and elsewhere, to foster understanding, and tackle the large trust deficit. Among them, the Indian standpoint is well understood, for sure. See:

Indian Cancer Drugs in China

A film released in China in 2018, ‘Dying to Survive’ has had remarkable success. It is based on the true story of a Chinese businessman who 5 years back imported a generic cancer drug from India, faced a trial and was released after a pubic furor. The film made $390m in its first two weeks. It is about a leukemia patient who cheap generic drugs from India, and has struck a major chord with publics. Chinese Premier Li Keqiang has called for cheaper and more accessible cancer drugs. A BBC story on the film is at:


Post Shangri La Dialogue: Powerplay in the South China Sea

Mr. Saurav Sarkar, Research Intern, Institute of Chinese Studies

Just a day before the commencement of the 2018 Shangri La Dialogue (SLD) (1-3 June), the United States military’s Pacific Command changed its name to the Indo-Pacific Command. This name change came after the US had disinvited China from the 2018 Rim of the Pacific (RIMPAC) naval exercise as a consequence of its continued militarization of the South China Sea (SCS). The US-China relations have hit a new low in recent months as China perceives American activities in the SCS to be aimed at countering its growing presence in what it considers to be its sovereign waters.

Lieutenant General He Lei, head of China’s military delegation to the 2018 SLD, reportedly drew a parallel between China’s militarization of the SCS to the deployment of troops to Hong Kong in 1997 to project its sovereignty. The US, however, expects China to adhere to international law in the SCS before engaging with it in any military exercise hence the reason for disinviting China from RIMPAC. US Secretary of Defense James Mattis has defiantly insisted that the US would continue its freedom of navigation operations to enforce the United Nations Convention on the Law of the Sea. China, however, does not view cessation of its military activities in disputed areas of the SCS (which it perceives to be completely legal) as a pre-requisite for participating in war games like RIMPAC. Hence, it has developed significant military capabilities in the SCS in an attempt to enhance its power projection capabilities in the region and beyond.

Implications of militarization in SCS islands

In the backdrop of this strained period in China-US relations, the military activities of both countries in the SCS are significant. Woody Island occupied by China in the disputed Paracels is now capable of conducting takeoff and landing of the H6-K strategic bomber which can even carry nuclear weapons. However, its nuclear capability is secondary to its primary role of conducting aerial attacks on approaching enemy ships using air-to-ground cruise missiles and anti-ship missiles. Woody Island is in close proximity to the Yulin naval base in Hainan province which is home to the People Liberation Army Navy’s (PLAN) nuclear ballistic missile submarine (SSBN) fleet. About 1028 km south from Yulin is Fiery Cross Reef in the Spratly Islands. This makes the defences at Fiery Cross Reef important as it sits in the middle of the southern access zone to the SCS and will, therefore, be vital to disrupting enemy movements into the SCS. In addition to Fiery Cross, there are air and naval defence platforms on Mischief and Subi Reefs as well. This arc of military installations from the Paracels to the Spratlys is designed to protect the Yulin submarine base using anti-access/area denial (A2/AD) weapons as Yulin is critical for the PLAN’s ability to break through US defences around the First Island Chain. This is because the SCS has favourable conditions for submarines and makes it easier to disguise their movements.

Woody Island is also capable of landing J-11 and FC-1 fighter jets which could be used to gain air superiority and in conducting aerial bombings in the SCS. The same warplanes and even strategic bombers like the H6-K can also be stationed at Fiery Cross Reef which has a 3 km long airstrip and multiple hangers as observed via satellite images. This would allow the PLA to use the island as a force multiplier and an offshore power projection platform, something it had earlier lacked in the SCS. On 5 June the US Air Force conducted a flyby of the Spratly Islands and Scarborough Shoal from Guam using B-52 bombers as part of a routine ‘Continuous Bomber Presence’ mission in a deliberate attempt to project American power. The flyby not only raised tensions but also elicited a response from China who accused the US of sabre-rattling. This is understandable due to the fact that B-52s are nuclear capable and form part of the US strategic bomber fleet at Guam.

A day after the B-52 fly-by, according to ImageSat International, HQ-9B surface-to-air missile (SAM) batteries had been removed from Woody Island which reappeared in the same positions on 8 June. This shows that the PLA is capable of quickly moving and deploying sophisticated military hardware on its offshore facilities. HQ-9Bs have been deployed in the Spratlys as well along with YJ-12B anti-ship cruise missiles. HQ-9Bs are medium to long range SAMs and would be effective in engaging with the US Navy’s fighter jets like F/A-18s but their effectiveness in dealing with stealth aircraft like F-22s and F-35s and cruise missiles remain doubtful. The YJ-12B anti-ship missiles, however, would be dangerous to US aircraft carriers especially if launched in large numbers to overwhelm their short-range defences.

In the current scenario, the PLA could conduct operations in the SCS unilaterally and get an upper hand against all regional actors but not without escalating the stakes involved and risking a direct confrontation with the US. A direct contest with the US, however, would be an uphill task for the PLA due to the experience and superior capability of the US Navy in amphibious warfare and support from its allies. This is one reason why China has still not engaged in a direct show of strength as it knows it still has a long way to go to counter the US fully. For the moment China seems to be abiding by Deng Xiaoping’s ‘bide our time, hide our capabilities’ dictum in its strategic designs. How it all plays out in the long term remains to be seen as neither country seems willing to compromise on their respective stances regarding the dispute.

Book Review: Redefining Empress Dowager Cixi

Ms. Sharanya Menon, Research Intern, Institute of Chinese Studies

JUNG CHANG, Empress Dowager Cixi: The Concubine who Launched Modern China. (London, Random House Group, 2013), pp. 436, ₹ 360/ £ 7.48, ISBN: 9780224087438

Through the Empress Dowager Cixi’s biography, Jung Chang has attempted a reappraisal of a controversial figure in Chinese history – Empress Dowager Cixi (Qing dynasty) –who ruled for over four decades, during some of the most turbulent years in Chinese history (1861-1908). Commonly perceived as ‘tyrannical’, ‘vicious’ and ‘incompetent’ (pp. 373), Empress Dowager Cixi was known as a traditionalist and unfalteringly opposed to modernisation and any engagements with the West. Her adopted son, Emperor Guangxu was known to be a reformer, moderniser and heralded for shaping modern China during its nascent stages. Commonly perceived to be anti-Western and deeply traditional, Cixi is often accused of being the primary reason for China’s humiliating defeat in the Sino-Japanese war in 1895.

Using newly available Chinese records and historical documents, Jung Chang, through this detailed biography of Empress Dowager, constructs a compelling counter narrative. The author throws new light on Cixi’s reign by describing her as an ‘astute’ ruler (pp. 298), and most importantly, a strong woman who stood her ground among the misogynistic male bureaucracy and society. The book narrates the story of a concubine who, with the desire to protect her empire, transforms into an ‘amazing stateswoman’ (pp. 373).

The book is divided into six sections with each section devoted to the various stages and the important events that shaped her life. The first section takes the reader through the initial years of Empress Dowager’s life in the Summer Palace as an imperial concubine of Emperor Xianfeng (1835-56). Initially left as a low-ranking concubine, Cixi was hardly taken notice of by the Emperor. This changed with the birth of her son, Tongzhi (1856), the heir to the throne. She was consequently promoted to a higher position and gained prominence.

Emperor Xianfeng’s lack of foreign policy understanding and deep-seated loathing for the Westerners was seen by Cixi as the primary cause for the empire’s defeat in the hands of the foreign powers during the Second Opium War (1856-1860). Cixi understood that it was in the interests of the empire to engage with the West instead of following a contractionary trade and foreign policy. State-affairs were assigned to a Board of Regents chosen by her husband till her son came of age. Known to share the late Emperor’s views on the West, Cixi was afraid that with themn power the empire would plunge deeper into crisis. Hence, Cixi launched a coup that transferred all authority and powers to her till her son, Tongzhi, came of age.

Section two takes off with Cixi assuming power and ruling from behind the ‘yellow screen’; being a woman, she could not appear in front of the men who served her. Her initial attempts at modernisation and engagement with the West are described along with the resistance that she endured. With the support of her trusted aides, Cixi embarked on the journey of transforming medieval China by introducing foreign policy, diplomacy and engaging in foreign trade at a level that was unprecedented. She introduced reforms to modernise the army and navy; trade and diplomacy boomed during her reign and the empirerom a slump (1861-1873).

Cixi retired as soon as her son came of age and willingly stayed away from state-affairs. Emperor Tongzhi had a short reign (1861-75) and died at a very young age, forcing a heartbroken Cixi to assume power yet again, this time through her adopted son, Emperor Guangxu. Section three and four explore Cixi’s modernisation efforts and her engagement with the West until he came of age. Unlike with her own son, Cixi did not share a warm and close relationship with her adopted son. Often alienated, Emperor Guangxu grew up rooted in Confucian principles and espoused deeply traditional values. Cixi had to retire once again as Emperor Guangxu came of age and was forced to remain silent when he undid all her modernising efforts and reverted to an isolationist foreign policy.

The final two sections highlight the consequences of Emperor Guangxu’s decisions and efforts. China suffered a humiliating defeat in the Sino-Japanese war of 1895 due to Guangxu’s conservative approach. Cixi, unable to hold off any longer, launched yet another coup and assumed the mantle of power. However, at this stage, faced with the combined forces of the imperial powers (British, French, Russian, German, United States, Italy and Austria-Hungary) and Japan. Cixi committed the fatal mistake of aligning with the anti-West and anti-Christian rebel group, the Boxers. The foreign powers overpowered the forces and the empire suffered a setback once again. The period from 1906ere spent in rebuilding her empire and she devoted her time towards transforming China into a constitutional monarchy. Her wish was to allow her subjects to participate in the affairs of the state and hence become citizens.

The nationalists that came to power after the fall of the Qing dynasty (1911-12) were not kind to her legacy though. They yoked together a narrative that presented Cixi in a manner that was highly unfavourable, while all her achievements and successes were credited to Emperor Guangxu or to the men who served her.

The author has attempted to undo the great disservice that has been done to an important historical figure in China. While some may allege that the author is rather explicit in her bias towards the Empress, and the biography at times takes on characteristics of a hagiography, Jung Chang presents the Empress in a manner that disrupts her otherwise demonic characterisation. The book is successful in attempting to produce a fresh and alternative narrative to the dominant one, by successfully presenting Cixi as the astute political ruler and stateswoman, despite all her flaws and handicaps.

QESS What? China’s Advancement in Quantum Communications

Ms. Prarthana Basu, Research Assistant, Institute of Chinese Studies

Next month, that is, August 2018 marks the completion of China’s 600kg ‘Micius’ satellite into the low earth orbit. ‘Micius’, the quantum satellite nicknamed after a famous fifth century BC Chinese philosopher and scientist (墨子 Mozi in Chinese), is a remarkable feat in space deployment achieved by China in the field of quantum communications. The prospects of quantum communications are immense and can be applied to both civilian domains like e-commerce and military aspects by providing a hundred per cent secure link for the transfer of confidential data.

Notably, it is the world’s first “hackproof” satellite and its deployment has opened up an entire new arena in outer space technologies, giving China quite a leeway, ahead of major space powers such as US and Russia. China has further plans to develop technologies that provide for impenetrable communication links, which is why they intend to conduct more tests related to quantum communications. Quantum communication links are clearly an upgrade of the existent communication links where communication works on the principle of quantum key distribution in which cryptographic keys are transmitted in the form of light pulses. The transmission of data remains intact due to a phenomenon known as quantum entanglement where the particles mimic the same quantum state, irrespective of the spatial difference between them. A slight manipulation or disturbance (in the form of a hacking attempt or eavesdropping) would disrupt the quantum state resulting in the loss of the data link.

A landmark quantum encrypted video-conference, which lasted for about 75 minutes, was held in September last year between China and Austria, covering a distance of roughly 1200 kilometres. Anton Zeilinger, a pioneer in the field of quantum communications has termed the video-conference as ‘very important and impressive’. European researcher Ronald Henson from the Technical University of Delft, Netherlands has also applauded China’s successes and commented that ‘This is the first demonstration of intercontinental quantum key distribution of any kind, and it will stand as a milestone towards future quantum networks’. This indeed has been proven to be an important milestone for China as a country and its scientific community who have been working on it, including various other projects, in order to be at par with other global powers such as the US and Europe. For Pan Jianwei, the lead scientist of QESS said, ‘The satellite marks a transition in China’s role from a follower in classic information technology (IT) development to one of the leaders guiding future IT achievements’.

Quantum Experiment at Space Scale (QESS) is an international research project, which China has been working on, since 2011. The White Paper released by China titled ‘China’s Space Activities’ in 2016 discusses China’s breakthrough in Space Science and highlights ‘quantum experiments in space’ as one of the major thrust areas. It also mentions about ‘quantum communications and computing’ under the science and technology programme that were to be carried out as a part the programme for Sci-Tech Innovation 2030. The Sci-Tech Innovation 2030 is an integral part of the science and technology programme and has been one of the major areas of focus for China as it continues its aspirations to become a space faring nation; this has also been repeatedly emphasized by China’s President Xi Jinping. QESS largely works under the ambit of Quantum Physics and aims to test the principles of quantum entanglement and quantum key distribution. Albert Einstein, one of the prominent scientists who produced works on quantum physics quoted the quantum entanglement phenomenon as a “spooky action at a distance”. However unwelcome in the earlier part of the 20th century, the idea has now gained currency in the 21st century in the experiments conducted by countries such as China and Austria.

There were certain scientific objectives enumerated by the National Space Science Centre of the Chinese Academy of Sciences (CAS) guiding the QESS plan: implementation of long-distance quantum communication network to provide transmission of data in a secure manner, based on the application of quantum cryptography, which has established a high-speed quantum key distribution between the satellite and the ground stations. The second objective that has been enumerated is to test quantum entanglement distribution and quantum teleportation on space scale. It is too soon to comment on the full proven successes of the QESS as it is still in its engineering qualification model phase.

In order to further advance the development in quantum experiments, Antonia Zeilinger emphasized the importance of constructing more ground stations in Europe and also creating a ground network of optic fibres (something which China is already progressing in). Xinhua commented that the country hopes to ‘achieve Asia-Europe intercontinental quantum key distribution in 2020 and build a global communication network in 2030’. Reportedly, China intends to create more quantum satellites in order to facilitate long distance quantum communications with a larger area coverage. Tests are also scheduled to take place between China and Canary Islands (West Coast of Africa), thereby expanding the area coverage over half of Asia and some parts of the African continent. China has also established a 2000 km long quantum fibre link connecting Beijing to Shanghai in the month of September 2017. Sources suggest that the successful tests on quantum communications would provide a secure communication backbone network, which would aid in the creation of strategic spaces in Beijing-Tianjin-Heibei and the Yangtze River economic zone. According to the National Interest, China’s scientists have plans to conduct a follow-up experiment with a quantum satellite placed at a higher orbit (probably GEO) within the next five years, which would provide larger geographical coverage. The future plans also include upgradation of the Chang’e Programme (China’s Moon Programme) by sending a quantum satellite to one of the gravitationally stable points between the Earth-Moon system, which would provide more scope to research on the structure and gravity of the spacetime.


Trump Administration’s Decision to Quit UNHRC: An Opportunity for China?

Ms. Fatima German, Research Intern, Institute of Chinese Studies

On 18 June 2018, the United States Ambassador to the UN Nikki Haley along with Secretary of State Mike Pompeo announced the administration’s decision to pull out from the United Nations Human Rights Council (UNHRC). In the press briefing, Haley gave two main reasons for the pullout: first, the poor framework of the Council and its inefficiency in meeting its objectives. Second, she cited the Council’s bias against Israel and attempts to isolate it via agenda item 7. Secretary of State Mike Pompeo who joined Haley during the withdrawal announcement took issue with the Council’s image – that it has come across as a poor defender of human rights.

The United States questioned the UN Human Rights Council’s competence by approving countries like China, Venezuela, Iran, and the Republic of Congo for membership, who are believed to be the worst human rights violators. She further alleged that countries like Russia, China, Cuba, and Egypt came out as ‘woodwork to oppose the council reform’.

Earlier, on 6 June 2017, Haley in her speech in Geneva suggested two required reforms to the Council. First, she suggested a change in its election procedure in order to make it more competitive and transparent. Second, she called for the elimination of agenda item 7. In her view, singling out of a country such as Israel with a good human rights record is a mockery of the Council. She mentioned that many other Council member countries agreed with the United States regarding the poor framework and need for reform; however, it was all behind closed doors.

Asia Advocacy Director at Human Rights Watch John Sifton criticized Nikki Haley for the decision to pull out from the council and suggested that she ‘could have worked with missions in Geneva on agenda consolidations and member pledges, as we and others repeatedly advised’. He expressed concern about how such a decision would work in the interest of countries like Russia and China. Radio Free Asia also mentioned in its report that this decision has let down the Chinese rights activists and dissidents who on had their hopes pinned on the United States. Human Rights Watch in a statement said ‘The United States withdrawal risks emboldening countries like China, and other actors that regularly seek to undermine UN human rights mechanisms’.

The notion that China will benefit from the absence of the United States in the Council is largely driven by the understanding that the US withdrawal creates a void that is opportune for China. As the US moves towards isolation by pulling out of multilateral forums, it creates space for China to gradually increase its presence. For example, Chinese personnel are filling senior posts in the World Bank, Interpol, the United Nations Industrial Development Organization, UNESCO, and so on. Also, China is deploying a majority of troops to UN peacekeeping missions. In October 2017 the president of the Better World Campaign, a UN advocacy group, Peter Yeo noted that China is the second biggest funder of the UN. In the same year Human Rights Watch’s UN director, Louis Charbonneau mentioned that ‘With China’s international influence growing and growing, there is a worry that what it’s doing could undermine the UN Human Rights system overall’.

Two days after the American withdrawal from UNHRC, China’s foreign ministry spokesperson Geng Shuang expressed regret regarding the United States decision to quit. However, as discussed earlier, it is widely perceived that China will benefit the most from it. Amnesty International researcher in Hong Kong, William Nee, pointed out that without the United States in the Council it will become easier for China to promote its views, as ‘The United States had been one of the few countries willing to stand up to China’.

China’s influence in the Council is increasing gradually and in 2017 China successfully passed a resolution which prioritized development over human rights. This resolution basically considers the right to economic development at par with the right to freedom of speech. In March 2018, China proposed a resolution suggesting ‘mutually beneficial cooperation in the field of human rights’. The US was the only country to cast a negative vote with Britain, Australia, Japan, and Switzerland abstaining. The US spokesperson Jason Mack reasoned that ‘the “feel good” language about “mutually beneficial” cooperation is intended to benefit autocratic states at the expense of people whose human rights and fundamental freedoms we are all obligated, as states, to respect’. The US also argued that this resolution glorifies Xi Jinping and is an attempt to forward his thoughts in the international human rights glossary.

China has often criticised the United States for imposing their notion of human rights and experts have observed that now China is aiming to ‘smash the West’s monopoly on human rights’ and promote human rights with Chinese characteristics. Amidst this, the decision of US to pull out from the Council is no less than an opportunity for China. Frances Eve, the researcher at the Chinese Human Rights Defenders, noted that ‘withdrawing will not make the UNHRC disappear, rather provides open space for China to dominate the council unchallenged’.

Nevertheless, Israeli Prime Minister’s office released a statement appreciating the Trump administration for voicing against the hypocrisy of the Council, ‘Instead of dealing with the regimes that systematically violate human rights, the UNHRC obsessively focuses on Israel, the genuine democracy in the Middle East’. While the debate on US withdrawal from the Council continues, Ambassador Haley has assured that the US would continue to work on human rights from outside the Council and rejoin it when desired reforms are undertaken. Until then, how human rights with Chinese characteristics play out at the Council would be an important issue to watch out for.

National Carbon Market: China’s Response to Climate change

Ms. Shristi Singh, Research Intern, Institute of Chinese Studies

For a very long time, China believed that climate change is a myth propagated by western countries to contain the growth of developing countries, especially of China. With time, China has realised that climate change is a reality and has decided to stop adhering to the concept of ‘common but differentiated responsibility’. In the past few decades, the economic growth of China had been impressive. It is the world’s second largest economy and most likely to supersede the United States (US) in coming years. The pace of China’s economic growth has put its environment under increasing stresses. Historically, it has been reluctant in cutting its emissions off, fearing that it could hinder its economic growth. At present, China is the world’s largest energy consumer and carbon emitter, but there are positive signs that it is shifting its position.

China launched its much awaited ‘National Carbon Market’ on 19 December 2017 as its biggest initiative to combat climate change. The foundation of carbon market was laid down in 2013 when local markets were launched in five cities (Beijing, Tianjin, Shanghai, Shenzhen, Chongqing) and two provinces (Hubei and Guangdong) to reduce carbon emission. It included sectors like power, cement, metals, textiles and others. These markets were also included in 12th Five-Year Plan (2011-15) and current 13th Five-Year Plan (2016-20). The motive was to experiment the pilot projects in these polluting cities and provinces before commencing the mechanism nationwide. The countdown began when President Xi Jinping visited his US counterpart President Barack Obama in 2015 and promised to launch national carbon market in 2017. This commitment was then included in China’s pledge to Paris Climate Agreement and is also known as ‘Nationally Determined Contribution’ or NDC to reduce global greenhouse gas emissions.

Carbon Market in China

Carbon market can be defined as a marketplace where carbon emissions can be traded. The government sets limit on carbon emissions to ensure that industries cannot pass the environmental costs to the public. There are many ways of implementing the carbon market and the most popular approach is ‘cap-and-trade’ system where the government sets the cap on the emissions based on factors like ‘type’ of the industry and the ‘ease’ with which companies could feasibly reduce their emissions. If the company successfully beats the government’s target it can sell additional ‘saved’ carbon emissions in the market and earn profit whereas other companies that fails, will buy those saved emissions to reach their target.

Carbon market can be seen as China’s response to pressure at home and abroad to clean up its act and achieve target of clean environment. The domestic public is highly concerned about China’s increasingly deteriorating environmental conditions like rising sea level, soil pollution, deteriorating water quality, urban smog and poor air quality and others. The government has responded to these challenges by introducing ‘green technologies’ such as electric cars, solar panels, wind turbines and other eco-friendly technologies.

It was expected that China will upgrade existing local markets into national emission trading system covering eight high-energy intensive sectors such as power generation, iron and steel, paper-making, chemicals, non-ferrous metals, construction materials, aviation and petrochemicals. Instead, the government chose to cover the emission from power sector only, which emits one-third of China’s total greenhouse gases and makes China’s carbon market – the world’s largest carbon market or Emission Trading System (ETS). China has been the world’s leading investor in renewable energy sources for years but its power sector still depends upon high-carbon sources such as coal. Thus, carbon market starting with the power sector will be helpful in reducing coal burning and thereby boost the growth of clean energy industry.

Under the mechanism, the government will set a limit on total carbon emission and within that limit, polluting power generating industries that fails to reach the target will have to buy ‘carbon credits’ from less-polluting industries. This will impose financial burden on the polluters and will grant rewards to the cleaner entities. This way the renewable energy sector would be able to earn extra revenue from selling carbon credits to those that emit more than their allowed quota. For the first time power plants will undergo a rigorous verification process and there will be a continuous check by the government on accurate measure of emissions coming from them.

Environmental or Political Strategy?

China has vied for the role of a global leader on climate action after the withdrawal of the United States from Paris Climate Agreement in June 2017 under the Trump administration. However, carbon market as an idea is not new to the world, but coming from the world’s largest emitter is startling. China has promised that its carbon dioxide emission will peak by 2030 and the market may not produce a reduction in emissions immediately but in a way has been successful in sending signal to the world about China’s seriousness in dealing with the catastrophic climate change.

China has respected the timeline for announcing its carbon market but is being criticised for drifting from its original plan of covering all the eight broad industries to confining it to the power generation sector. At present, there is no hard cap emission on power sector, which can be pointed as China’s conservative approach to cushion the power sector and economy from sudden carbon shock. It can also be seen as ‘image-building’ process initiated by China to improve its image internationally from biggest emitter to one championing the carbon markets and also among its own people to restore their faith in new project as government’s action in dealing with broad environmental issue.

China’s carbon market would dwarf all the existing markets in the world. No official date has been announced for the actual start of the ETS but if successful, it could incentivize other nations to adopt emission-trading system and take a firmer stand on climate change and if it fails, it will dent China’s image and might impact many climate policies in different parts of the world.