China's new addiction

Activism undermines Beijing's investment-led model

China’s activists are putting Beijing’s investment-led growth model at risk. Violent protests in Ningbo forced Sinopec to cancel plans to expand a petrochemical plant. The latest in a string of demonstrations could further embolden resistance to new projects. It’s another reason why China needs to find new ways to develop.

The u-turn by authorities in Ningbo, which came after 3,000 angry protesters demanded the mayor’s resignation, is the latest in a series of local government climb-downs. In July, Qidong dropped plans for a waste water pipeline by a Japanese paper maker, after mobs stripped the local party chief’s clothes and forced him to wear a T-shirt bearing anti-pollution slogans. The same month, authorities in Sichuan Province ordered a local company to shelve plans for a metallurgical plant.

The demonstrations are a sign of China’s growing affluence and concern about health. In Ningbo, two female protesters featured in a Reuters photo appeared to be clutching Louis Vuitton handbags. The government has also made little progress in reducing pollution. Despite the official target of reducing disposal of heavy metals by as much as 15 per cent between 2007 and 2015, discharges of the pollutants actually rose by eight per cent between 2007 and 2011, the Environmental Protection Ministry said. Frequent accidents have also undermined the authorities’ credibility with locals. For example, official data on the air quality in China’s smog-ridden capital is widely distrusted.

The surge in environmental awareness is healthy, but also undermines China’s current position as the world’s workshop. The country is the world’s second-biggest consumer of chemicals after the United States. Being forced to import them rather than manufacture locally undermines factories’ competitiveness. The chemical industry, the country’s largest recipient of foreign direct investment in 2011, is also important for growth and jobs.

Foreign officials and executives often marvel at China’s ability to force through development projects that would face fierce resistance in the West. The latest protests suggest the picture may be changing. Over time, Beijing’s efforts to rebalance its economy towards services and consumption should allow it to slow the pace of large-scale construction. Growing citizen activism could force it to make that shift faster.