The Costs of China’s Modernization

In a rare disclosure of the enormous hidden cost of China’s rapid economic development, the Chinese government acknowledged last week that “sudden public incidents” such as industrial accidents, social safety accidents, and natural disasters are responsible for over one million casualties and the loss of six percent of GDP every year. Shocked by the recent explosion of a major petrochemical plant in Northeast China that caused large-scale pollution to the Songhua River and cut off water to over 10 million people for a week, and a series of large coalmine accidents, China is now debating not only how the system can better respond to disasters but also if the current development paradigm can be sustained.

Costs Too Dear to Bear

According to a recently People’s Daily online special, over 5 million “public accidents” occurred in 2004 alone, causing the death of 210,000 people, injuring another 1.75 million, and resulting in the immediate economic loss of over USD $57 billion (455 billion Chinese yuan). It is estimated that the direct annual cost of such disasters for China is more than USD $81 billion (650 billion yuan) on average, equal to six percent of the country’s annual GDP. To state the obvious: most of China’s economic growth each year is simply cancelled out by the immediate sacrifice of human lives and long-term damage to the environment.

China is no doubt one of the countries in the world that is seriously affected by natural disasters, which are large in volume, high in frequency, and severe in losses. The lives of more than 200 million people, or one-seventh of the Chinese population, are routinely disrupted by natural disturbances. Seventy percent of China’s major cities—more than one-half of the Chinese population and more than 75 percent of China’s GDP—are spread across the eastern part of the country where climate, water, and earthquake disasters cause considerable damage.

Yet, losses due to natural disasters seem to be a small portion of the total, with government figures showing just over USD $12.5 billion (100 billion yuan) per year. That means financial losses of some USD $69 billion (550 billion yuan) every year are caused not by natural events but by human-generated accidents. Take the coalmine sector for example: China has the worst safety record in the world. From 2001 to 2004, according to the official Xinhuanet, accidents in China’s coalmines claimed 6,282 lives every year on average—that is more than 17 people dead every day from accidents alone. More than 50 incidents occurred each year, with each accident resulting in more than 10 deaths; in the past three years, five major coalmine accidents have each claimed more than 100 miners’ lives. Moreover, a BBC report (July 17) estimates that the real death toll per year may be close to 20,000 because many mine operators intentionally cover up the death numbers to evade responsibility.

Worse yet, China’s work safety authorities predict that for the foreseeable future China faces a severe challenge as more catastrophic accidents occur because the country’s industrialization process has entered a high-growth and high-accident phase.

Responsibilities Nobody Dares to Bear

China’s economic development is based on an industrial structure that demands heavy resource and energy consumption, with coal comprising close to 70 percent of China’s total energy needs. With China’s shortage of energy and increasing oil prices, the price of coal in the domestic market is also on the rise, which has resulted in a new boom for the coal mining industry. While large-scale industrial efforts are bound to bring a higher number of industrial accidents, the old, heavy industrial infrastructure, built in the early decades of China’s industrialization, has begun to age, and with little repair or renewal has become ripe for further accidents.

Yet tracking down who is responsible for taking precautions to prevent accidents—and for taking measures to deal with disasters once they occur—is a frustrating process. This is fully illustrated by the toxic contamination of the Songhua River last month. The Jilin provincial authorities, overwhelmed by the initial chemical plant explosion on November 13, which released large quantities of chemicals into the air and benzene into the nearby Songhua River, were slow in making initial assessments of the scale of the pollution. They then had to file their findings all the way up to the State Environmental Protection Agency (SEPA) because local authorities are not permitted to take any action or to make any public announcement without central approval on accidents of such scale. Jilin province was at the outset instructed to cover up the pollution, and not to inform tens-of-thousands of people along the river of what had happened, including the neighboring province of Heilongjiang and Russia, both downstream from the plant.

When it was clear that the scale of the pollution was too extensive to hide, Heilongjiang was informed that an 80-kilometer long slick of polluted river was on its way to Harbin, a city of 9 million residents. Then it was Heilongjiang’s turn to report up the chain to SEPA for instructions. The Harbin government was told to find an excuse to shut down the city’s water supply. Only when Premier Wen Jiabao personally intervened, according to those who are familiar with the government response to the event, did the Harbin authorities tell the truth to the public. Although Harbin narrowly escaped a poisonous disaster, every other city downstream on both the Chinese and Russian sides of the border struggled to cope with the approaching pollutants. After defending its role as the leading agency that handled the initial cover-up, the head of SEPA resigned (Xinhua, December 2). Some have given credit to the effective mobilization that the government launched to save the urban residents. Yet the failure of the first-stage warning system has serious consequences: rural residents who were not informed on time may have drunk from the river, and the long-term ecological impact is yet to be fully estimated.

To blame the system is not enough. Evidence has shown that many of the “public accidents” were in fact human errors that could have been avoided. Last week, just after the water supply had been restored to Harbin residents, a large explosion in a nearby coal mine killed 169 workers. The investigation into this accident reveals that the leadership of the state-operated mining group simply failed to follow basic work safety procedures. In the pursuit of higher production volumes and profits, the managers ignored the increased levels of danger indicated by the detection system, and carried on with operations. When the explosion happened, no one could tell exactly how many miners were trapped underground because the work-shift record was so confusing that there was a 30-person discrepancy between the names on the record and the actual people who went down the mine for their shift. Nor did the leaders of the mine have any knowledge of the recent government documents that call for nationwide coalmine safety upgrades. Rather than put people first and follow the necessary safety procedures, many of China’s industrial enterprises appear only focused on increasing their cash earnings.

Burden of Reforms that China Must Bear

It is uncertain if the recent crises will produce the necessary impetus for reform. There are indications, however, of a changing public mood in China. Citizens who suspect that the government lied to them are demanding transparency and accountability from the government in the latest ecological and mine tragedies. Encouraged by Premier Wen’s intervention in the Songhua pollution case, the Chinese press, which has been on a tight leash in recent months, has taken the opportunity to launch an aggressive campaign of its own to report and investigate the truth behind the growing number of accidents and disasters. Many have now given serious consideration to the thought that, given the enormous costs, China’s obsession with high GDP numbers in the past 25 years cannot be sustained in the future.

Yet China’s infrastructure for disaster response is very weak. First, a lack of legislation that deals with different kinds of accidents and disasters has led to an unclear division of labor among different levels of government and different regions. Second, the flow of crisis information management has fatal flaws. The current system of reporting through vertical ministry/agency chains is too small to handle large volumes of information, slow to transmit information and decisions, and ineffective in meeting rapid response requirements.

Third, in recent years, China’s social welfare system is collapsing while a primitive form of capitalism is taking over in the market place. According to China’s labor and welfare protection authorities, among the more than 700 million employees nationwide, only 124 million people have medical insurance; 45 percent of the urban population and 80 percent of the rural population do not have any form of medical coverage and must pay from their own pockets for any medical treatment. The government has not invested in the education system for disaster prevention and related education. China is far behind other advanced industrialized countries in societal readiness to deal with large-scale disasters.

President Hu Jintao and Premier Wen have repeatedly told the world that being “close to the people” is a top priority in their administration. If a human-centered approach for constructing a “harmonious society” is to take root in Beijing’s overall modernization strategy, China must reconsider the human and ecological costs of its drive for great power status. Yet, if the Chinese leadership fails to translate the latest setbacks into much-needed political reforms that include more press freedom to monitor government activities, future disasters and their fallouts may come at a scale in which the regime is unable to cope.