CONTENTS P10. Searching for Gender Equality in the Workplace. An Environmental Law with Teeth. Urbanization in China

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2 CONTENTS Searching for Gender Equality in the Workplace P4 P7 An Environmental Law with Teeth Urbanization in China P10 Rolling Out the Red Carpet P12 Is Regional Integration the Cure? P14 Achieving Urbanization in an Ageing Society P24 Can China Truly Achieve Eco-friendly Urbanization? P25 Aiding the Urbanization Process P10 Keeping China s Credit in Check P27 A Different Kind of Credit Database P28 P30 A National Challenge P28 Food Safety: Trying to Regain Trust P30 Editor s Message- Urbanization Issue China is currently overseeing the largest migration of people in the history of mankind, and the challenges that such a process presents are astounding. However, issues related to urbanization are not isolated issues; they impact greatly upon other areas of society. Similarly, other challenges that the country is facing, such as its ageing population, food security and food safety and environmental protection all have an impact or are influenced by the country s ongoing urbanization process. This issue of MESSENGER seeks to explore some of the key issues related to China s urbanization drive whilst at the same time highlighting the importance of other societal issues in the context of such huge human migration. How to Feed 1.3 Billion P33 Editor-in-chief: Stuart Wiggin

3 Today, an unprecedented number of women are going to colleges, entering the workforce and taking top corporate positions in the Asia Pacific region. This speaks volumes for the great improvement being made in women's rights within the region. However, it should not be a cause for celebration, since the bigger picture still remains mixed. Female graduates in China, for instance, may still find chances are scarcer than their male counterparts in a job market that is becoming increasingly competitive. For many women that have found a job, they may receive a less-thanample paycheck compared to new male recruits. MESSENGER speaks to Julia Broussard, country program manager at the UN Women China Office in order to assess the issue of gender inequality in employment and asks what can be done, both on the part of the government and companies, to promote gender equality? 7.27 million college graduates will enter the job market this year. Female graduates are facing tougher challenges. Is gender discrimination in the job market unique in China and how has this situation evolved in terms of seriousness? It's not unique to China, it certainly happens in every country in the world and some countries have put very strong laws into effect to try to prevent gender discrimination in their job markets. As for whether it is getting better or intensifying in China, it's hard to tell what the trend is in the past couple of years because we don't have complete statistics. So from the employment percentages of college graduates, based on figures from , for males and females, we saw a drop for both from 2010 to 2013 which probably just indicates a tighter job market overall in China, but the drop for women was worse than for males. For women, it dropped by 7 percentage points and for young male graduates it dropped by less than 4 percentage points from before, but we can't make any conclusive determinations on the basis of that evidence. China has implemented the Employment Promotion Law which targets gender equality in employment. From a legislative perspective, how can China ensure the rights of the female workforce? The Employment Promotion Law was issued in 2007 and took effect in 2008 and it includes some clauses on gender equality and nondiscrimination which was a huge step forward for legislation on the job market in China. Before the law took effect it was very common to see in the job market explicit advertisements for men only for a lot of positions. After the law took effect, you're less likely to see this type of very direct and obvious discrimination. However, some gender experts feel that the law doesn't go far enough; it's very general. It only says that there should be no discrimination; it doesn't define what gender discrimination is, it doesn't define what would happen if a company violates that, what kind of punishment a company would receive, what kind of redress an employee could expect to receive in compensation for discrimination. The law needs to be improved and the government has a role in doing that and also we'd like to see the media play a stronger role in getting people aware that gender discrimination does exist in the job market in China. INTERVIEW One concern for employers in China is that female workers may ask for maternity leave possibly lasting up to 10 months, which could affect their company's performance based on their thinking, is this true? Furthermore, with China loosening its one child policy, is the situation likely to get worse? There is maternity protection in China; women are entitled to three months off. Unfortunately, not all companies are honoring that; some companies are finding ways to get around it. But the basic problem here, and one of the reasons there is gender discrimination in the job market, there's an assumption that the woman is going to stay home and do all the childcare in the child's early years. In the countries that have established the best track record on gender equality, which are mainly the Nordic countries, what's interesting there is they've established paternity leave. Sweden, Norway, Finland and a few others actually require men to take some time off if they have a baby or adopt a baby. This has the effect of evening out the job market, so when an employer hires somebody, it doesn't matter whether they're male or female; if they're going to have children, they're going to take leave. What's particularly interesting in Sweden, the woman can transfer some of her leave entitlement to her partner, but her male partner cannot transfer his required paternity leave to her. Is legislation and regulation the key to ensuring gender equality? I think that evidence from around the world shows that unless governments regulate and take very proactive measures to improve gender equality, either you see no gains at all in gender equality or you see very marginal gains over a long period of time. It's often only when the state steps in and institutes regulations or incentive packages that you start to see real changes take place. I think what we need in China is a little more government promotion of what 4 5

4 Photo: Aming/CFP is actually one of the founding principles of the People's Republic of China. Aside from parental leave that men can take advantage of, there is a need for affordable childcare. Often, in China, there are very limited daycare options. In the past, under the state sponsored danwei system, the so-called iron rice bowl system, every danwei had to provide a childcare center and they were heavily subsidized. That was all done away with in the early 1990s. Now, daycare can be extremely expensive so a family faces a tough choice. Oftentimes, it's just not worth it for a wife to go back to work because her income, all of it or beyond will be used on daycare. Another thing that the Nordic countries have done very well is providing subsidized daycare. All children from age 1 and up are entitled to it. In the Asia-Pac region, female managers are taking an increased number of top positions within companies, especially with regards to real-estate tycoons in China. Does this reflect a trend whereby women in China and within the region as a whole enjoy better status than before, and will this trend continue? I think they certainly enjoy better status than before. One of the big achievements of PRC is getting huge numbers of women into the labor force. So, from 1949 to the 1990s, there were huge, huge gains, particularly in China, also in some other Asian countries, and that was primarily because of the policies of the government. But what we're seeing now is we're seeing a slight drop off. So, the peak of women's labor force participation occurred in Since then, it's gone down a little bit. And even though we see some very notable female tycoons in China, who get a lot of attention, it's important to note that there still is an income gap between men and women in China, and in fact it's growing. So, for the urban population, in 1990, women earned on average 77 percent of what men earned. As of 2010, they're only earning 67 percent of what men are earning. And for rural women the drop is even worse. Although everybody's actual incomes have been going up quite substantially since 1990, the fact is that men's incomes are going up faster than women's. So I don't take these women tycoons as in any way representative of the situation for the average woman in China unfortunately. After the central government declared war on pollution, the legislative process churned out an amendment to the country's Environmental Law in April which determined that polluting enterprises could now face even harsher punishments if they choose to pollute their way to profit. The amendment also gives enforcement personnel the power to shut down heavy polluters if violators fail to comply with environmental regulations. But just because there are laws in place doesn't mean that the desired outcome will be achieved. China is no stranger to problems related to the implementation and enforcement of certain laws, and environmental laws are no different in this regard. Overseeing China's immense industrial sector requires a legion of enforcement personnel, but the number of people available to China's environmental agencies is just a small fraction compared to that of the United States' Environmental Protection Agency. From a governmental standpoint, enhancing environmental protection requires a great deal of political will at the local level; something that has been severely lacking in the past. Meanwhile, the amended law tries to encourage more public participation but lawsuits launched by individuals against polluting industries often lack potency and struggle to overcome the vested interests. MESSENGER asks the experts their opinions on this year's amendment to China's Environmental Law and what the main problems are when it comes to enforcing the law and protecting the environment on the Chinese mainland. Alex Wang is an Assistant Professor of Law at the University of California, Los Angeles, and prior to 2011 he also served as senior attorney for the Natural Resources Defense Council (NRDC) based in Beijing and was the founding director of the NRDC's China Environmental Law and Governance Project. The Amendment The new law has a number of provisions that are significant changes from before. There is a lot of attention paid to fines per day. Previously, if a polluter violated the law they would be fined once and there would be no additional incentive for them to come into compliance more quickly. So now, for each day that a polluter continues to violate they can be fined in additional amounts and the fines increase the longer it takes for them to come into compliance. There are some interesting enforcement provisions, such as the right to detain persistent violators for 15 days, very interesting provisions on open information, public participation and public interest litigation. The big question is how these will be implemented. Punishing Violators One of the fundamental problems in the past in China was that the punishments for environmental violations were just not very significant. So, the new law is good in that it gives stronger authorities for punishment. But the big question is will local regulators use those authorities? In the past, when fines were capped at a relatively low level, often local regulators wouldn't even issue fines up to that very low cap. This has to do with issues of local protectionism; is the local regulator free to enforce strongly when local governments feel a lot of pressure to push very rapid economic development? Those kinds of structural tensions in the past have limited the ability of regulators to enforce strongly, so the law is very good in that it expands on authority and takes away the legal barrier for stronger enforcement, but the question is, politically and as a matter of practice and implementation, can the local regulators use these new authorities? Changes Still Required There are a number of possible further changes that are still needed. Take the issue of local protection. Local governments in China and the US often feel a lot of pressure to prioritize economic development over environmental protection. In the US, a big change came in the 1970s when the federal government took a much stronger hand in monitoring and enforcing. So, Photo: CFP 6 7

5 INTERVIEW the equivalent in China would be if the Ministry of Environmental Protection had more resources and a greater ability to take a look at local implementation and define the places where there's very bad local implementation and punish the local governments and local polluters. A critical element in just about any country's environmental protection is the role of the public. Local people who are affected by pollution are the ones that care the most about reducing pollution. If citizens are able to identify problems and have their voices heard, to help put some pressure on polluters to reduce their pollution; that can be an extremely powerful force. The Problem with Public Participation The problem in the past was in terms of priorities, economic development trumped environmental protection. If citizens wrote articles or talked to the media and raised objections, most of the time those objections were not heard; so there was no response to them to improve environmental projects. The result is the public feels that the official channels are not responsive. Potential options are the courts Will courts be able to make difficult decisions against polluting factories? The history has not been good on this. Courts have been very weak and have not been willing to sometimes even accept cases that affect very valuable economic interests. It's an open question as to whether courts can play a greater role in the future, and I hope they do. The other possibility is can the environmental regulators really withstand the pressure from economic interests and other vested interests and actually enforce? In the past few decades, it's been very difficult for the local regulators to do it and the central agency hasn't had enough resources to really enforce. So that's an open question as to whether that will change. In particular, will the central agency get enough resources to really put some pressure on local polluters? What's very promising about the environmental area is that there has been the space for the public to get involved. There are more NGOs probably in the environmental area than in any other topic area. They've been very active in educating the public and also advocating for policy changes for better environmental reinforcement. Citizens are very interested in having a clean environment, so they've been very active even if they're not experts. There are dozens if not hundreds of cases every few months, every year in China where the public gets involved and tries to affect the way the polluters behave. If the public is allowed to continue to do this, and educate themselves to get the information they need to understand what the problems are, and also to mobilize to express their views and create some pressure for better enforcement, I think that will be a really critical element, and will be essential if China wants to turn around its environmental performance. Learning from the US The experience in the US in the early 70s was that a lot of polluters tried to test the law and tried to not comply. So, it required the government and citizens to take these polluters to court and courts to make tough decisions according to the law to get these polluters to change their behavior. And so that's the key, it's all about can we make the polluters change their behavior, can we make them invest the money to reduce pollution? No one is saying that we don't want to have strong economic growth. We just want the factories to be responsible and not put the cost of their pollution onto the public. The experience in the US was that pollution dropped drastically in the 70s, 80s and 90s while economic growth continued to increase substantially. So, it's really the best of both worlds: a stronger economy and a cleaner environment. Lin Feng is acting Dean and Professor of the School of Law at City University Hong Kong and specializes in Chinese law and environmental law. The Amendment One highlight which has been mentioned by many scholars is the public interest litigation. Under the new law, more NGOs have been granted the standing to bring litigation on behalf of public interest. That's definitely a plus. Harsh Punishments They're very essential. If you have an arbitrary ceiling there, that has led to the previous serious pollution in many aspects. In the past, the polluters will judge and evaluate the pros and cons and also the costs and benefits. If the penalty they pay will be less than the benefits they obtain then they're willing to pay the penalty. So, the penalty must be high enough to make sure that not only will polluters not benefit at all but also they will pay a serious price. But that's only one step. In the actual judicial cases, when the cases are brought to the court, you need to make sure that the judiciary will actually implement and enforce it and make sure they pay a big price for polluting the environment. Problems with Enforcing the Law This actually goes to the essence of the whole legal enforcement and the effectiveness of the legal system. You need to have a real consciousness about the rule of law. If all people take the rule of Photography: Cui Chaoqun law seriously, then they will implement the law properly, no matter whether it's the government or the polluters. Take Hong Kong as a comparison, if you ask the law enforcement agency, their position is very clear, we don't have any views ourselves but our role here is to enforce the law. Whatever the law says then we will enforce it, if there's something wrong about the law then you go to the legislature. In Hong Kong, the rule of law concept is taken very seriously by the people. In China, I think that's still a serious problem because the local government and other various vested interest groups, once their interests are in concern they simply may ignore the law or put pressure on the judiciary not to enforce the law properly. If you don't have enough law enforcement officers to enforce the law then no matter how good the law is it won't be able to be enforced. Law enforcement should come from two angles, one is the pro-active approach taken by the environmental protection agencies at various levels. Another is to rely on the public, because nowadays the public's awareness of the importance of environmental problems has increased significantly. If we use (the public) properly, it can compensate to a certain extent the shortage of staff at environmental protection agencies. The Need for Political Will If you look at incidents that have happened in Guangdong and other places, you will see that the public's interest in participating in the environmental impact assessment is high if their personal interests are affected. One issue there with genuine public participation is the effectiveness of their participation and what will happen if their views have not been taken seriously, whether there's a legal remedy for them to move further; that is an issue in the current public participation in China. A more fundamental issue here is actually related to the political will of the government at various levels. It will only be effective if you have a total amount of control. In the American system they have what is called the bubble. The bubble is fixed, so if you want to increase more, create or establish a new polluting enterprise, it has to purchase from someone else. They can't increase the total amount. The total amount must be fixed and gradually reduced; but that (relies on) the political will of the government. Political Unwillingness I think the root cause behind (the lack of political will) is the political careers of the leaders. Take the local government for example, or even the central government, the possibility is if you have a very clear and strict rule, have a bubble there saying this is the total amount of water pollution for example; you cannot exceed, anybody who exceeds this then we will not approve. The consequence is that local GDP may not increase as much as you want and if you don't get that increase maybe you wouldn't get promoted. So that sort of consideration will affect the political will. 8 9

6 As China presses ahead with its massive and ambitious urbanization plan, policy makers will soon be forced to confront the task of making Chinese cities friendlier to the large migrating population. However, big cities aren't exactly rolling out the red carpet for every one of the newcomers as the influx of migrants has put huge pressure on public resources. As a result, many migrants are left without access to important and vital public services. And yet job prospects within the country's largest cities, such as Shanghai, Beijing and Shenzhen, continue to lure migrant workers and college graduates. While China's small and medium sized cities will be the major destinations for China's future migrant population, more must be done to accommodate the arrival of farmers-turned city dwellers as they abandon their land and head to the city in the hope for a better life. But the big question facing the country's leaders is how to make Chinese cities friendlier to migrants in the context of such rapid urbanization. Arguably, the most critical issue for the hundreds of thousands of migrants flowing into the country's cities is access to government services, specifically healthcare for themselves and their family and education for their children. Increasing the amount of access that migrants have to public services is a priority for the central government going forward but the country's established household registration system, otherwise known as the hukou, is something of an obstacle in terms of achieving this goal. According to Shanghai-based financial magazine Value Line, Shanghai is the most popular city for migrants in China with the total net inflow population reaching 9.54 million; suggesting that the city has somehow found the answer to the question of how to make cities more migrant friendly. However, John Bacon-Shone, Associate Dean of Social Sciences and Director of the Social Sciences Research Center at the University of Hong Kong believes Shenzhen provides a better example for creating a friendlier city. The hukou system itself has created a culture of unfairness within cities, effectively creating second-class citizens who are poor and have inadequate access to public services despite the fact that they are adding to the country's wealth and development. "I suspect (Shanghai) is not particularly migrant friendly at this point," notes Bacon-Shone, adding that the influx of migrant workers is "overwhelmingly to do with jobs." But just because job opportunities are the main factor in Shanghai's popularity amongst migrants, public services still play a part in the decision-making process when people decide to relocate from rural areas to the city; as is evident in the case of Shenzhen. Bacon-Shone explains, "The extent to which you can also access government services is important. Shenzhen has a more flexible approach to that so I think even though Shenzhen probably doesn't have as good job opportunities as Shanghai, it can still compete to some extent by its greater flexibility in terms of allowing people to FEATURE have registration in that area." Two key debates arising from the conversation on urbanization center on the topics of regional integration (see page 12) and hukou reform. With regards to the second debate, the hukou system itself has created a culture of unfairness within cities, effectively creating second-class citizens who are poor and have inadequate access to public services despite the fact that they are adding to the country's wealth and development. As Bacon-Shone asserts, "The hukou system is a source of inefficiency and corruption, so in general, getting rid of it is a good idea in the long run; the question is how you get from here to there." The widespread reliance on the hukou system means it is hard to abolish immediately, though a points-based scheme represents a step in the direction towards slowly phasing out the system, with the idea being that you gradually decrease the point score needed to gain residency in the cities. At the very least, as Bacon-Shone notes, a points-based system represents a "process" which is attempting to make it more feasible for people to be allowed to live and work in different places. There is often talk about concerns amongst local residents as a result of the pressure put on local resources due to inflows of people. As for whether a points-based system would be effective in addressing such concerns at the same time as increasing access amongst the migrant population, Professor Lu Ming, Director of the China Center for Economic Development at Shanghai Jiaotong University believes that focusing on the topic of a points-based system leads people to avoid the actual issue at hand. "People always think that there is a conflict between the floating population and the benefits 10 11

7 of local residents. Actually, this is a problem of a shortage of provisions rather than over-demand. The influx of migrants to the big cities is a natural process during urbanization and development. The right policy for the government to make is increase the supply rather than control population growth," Lu explained. Rather than championing policies designed to phase out the hukou system, Lu highlights the flaws in the provision and supply of public services, which are variables determined based on the estimation of future population growth, and the inability of cities to control population growth after making such determinations. As Lu explains, "In big cities like Beijing and Shanghai, the problem is the estimation of future population growth is always underestimated because they don't want the big cities to grow bigger. But actually, they don't have very effective measures to control the population growth. So, finally, after maybe ten years you'll find that there is a great gap between the supply of public services and the demand." "So what is wrong? You cannot say the influx of population is wrong; that is the result of economic development because you need them to come in to be the labor supply for your manufacturing and services. What's wrong is the provision of public services. Now, the right policy is to invest more in schools and hospitals and of course also infrastructure, rather than control population growth." Ultimately, increased investment in things like healthcare, infrastructure and education is vital but the inefficiency and corruption of the hukou system cited above could hamper the progress of such investment and therefore needs to be addressed in order to finally roll out the red carpet to China's floating population. Is Regional Integration the Cure? China is apparently experiencing a spate of so-called "urban blights," including increased congestion, air pollution and rocketing real estate prices, brought about as a result of the country's rapid process of industrialization, population growth and migration flows. China's capital, Beijing, is now in the midst of a development dilemma because of these urban blights. Chinese President Xi Jinping has asked Beijing and neighboring Tianjin and Hebei to coordinate their development for the purpose of regional integration. According to President Xi, Beijing, neighboring Tianjin municipality and Hebei Province should coordinate in city planning, environmental protection, and industrial and market integration to build a functioning urban agglomeration. President Xi says local governments need to adopt a more sharing and cooperative approach with ecological cooperation being highlighted by planting shelter forests, preserving water and tapping clean energy, given that the three regions are often engulfed by heavy smog. The policy, which has been redrafted a number of times since its conception in 2004, is designed to explore new urbanization models, given that Beijing is struggling to cope with issues caused by excessive migration into the city. Lack of industrial and infrastructure support has left many regions around Beijing as so-called "sleeping cities," with commuters shuttling to Beijing for work and play, returning to their homes only in the evening to rest. But regional integration is also being interpreted as a way for policy makers to guide migrants into medium and small sized cities, and drive people out of overcrowded mega cities. Ultimately, this results in Beijing trying to move low value added industries into neighboring provinces and regions. Wen Kui, former president of the Capital University of Economics and Business and senior researcher in the fields of economics and economic reform in China, suggests that Beijing seek integrated development with neighboring Hebei Province and Tianjin municipality, in order to get out of the trouble that the city has found itself in. "Part of Beijing's city function should be diverted," claims Wen. "However, this doesn't mean a simple transfer of (the city's) local heavy polluting enterprises, which Beijing's neighbors would also find to be an unwelcome addition. A precondition to achieving regional integration and coordinated development between Beijing, Tianjin and Hebei province is for each party to gain a good understanding of each other's needs, rather than considering chiefly its own interests." Beijing's gridlocked roadways and smog have impacted the lives of around 100-million people living in the 216,000 square kilometers that comprise the three areas mentioned above. But the plan to integrate two major municipalities directly under the central government's control along with a sizeable province such as Hebei is intended not only to ease congestion and pollution in the nation's capital, it also intends to upgrade the industrial structure among all three areas. Furthermore, integration is expected to lead to positive developments in the treatment of pollution in Hebei and will further develop the region into a new economic hub. In a bid to upgrade Beijing's industrial structure, Wang Lianfeng, deputy director of the city's Urban Management Law Enforcement Bureau, believes that moving lowend enterprises out of Beijing is a necessary step in order to achieve this goal. "Low-end businesses in Beijing should be relocated. However, low-end businesses do not simply refer to heavily polluting enterprises. For instance, (it also refers to places like) the Dahongmen clothing wholesale market in Fengtai district, the massive wholesale market group which is located around Beijing Zoo in Xicheng district, and the Automobile Spare Parts Factory in Chaoyang district. We've consulted with different cities in Hebei and have basically reached deals on the relocation of these projects." Wang Lianfeng points out, however, that although the integration initiative is a crucial approach to treating city blights affecting Beijing, its effect is unlikely to be immediately noticeable. Aside from the issue of "fixing" the capital's problems, people and officials in neighboring provinces and regions likely to be part of any regional integration process will also no doubt be concerned with the issue of even development. In addressing the concept of even development, one starts to see possible problems related to the process of regional integration as a policy tool for improving Beijing or guiding migrants to second and third tier cities. Professor Lu Ming, Director of the China Center for Economic Development at Shanghai Jiaotong University points out that if local governments are purely seeking to evenly distribute economic activities and populations, policy goals will not be achieved. According to Lu, the ideal goal should be equalizing per capita resources, or per capita income. "In the development process in developed countries, like the US or European countries like France, you will find an inverse U-shape between the economic development level and inter-regional income difference. During the early stages, the income disparity between different regions and cities could be widening. But after a turning point, the inter-regional income disparity will be narrowed." "When you make economic resources or populations more unevenly distributed, actually per capita income difference will be narrowed. During this process, the only thing we need to do is improve life quality and economic development by developing (key) industries in regions like Hebei. It doesn't mean that you have to move those activities that enjoy agglomeration effects in big cities out from Beijing to Hebei." Lu claims that the result of moving such activities out of the city purely as the result of a regional planning policy could reduce the efficiency of those industries that rely on agglomeration effects and scale economy, thus causing them to lose their competitiveness. Furthermore, Lu highlights the plight of the large groups of people affected when industries are transferred from city to city. According to Lu, the government first needs to define what integration actually means before implementing plans which could have negative effects. "Real integration in the market economy means that the price of production factors is determined by market factors. And the flow of production factors including labor should be free across regions. (We need to) develop the right (kind of) industries in (places like Hebei) like tourism, or largescale farms. At the same time, we need to subsidize those population losing regions by providing them with better public services, education and medical care. This is the real and ideal meaning of integration. It doesn't mean that you plan the regional development as a whole and then you just use your government policies to move out some industries to Hebei; it's not a planned economy." Pursuing a planned approach to integration is likely to be troublesome considering the vast scale of the three regions involved. As Huo Deming, Professor at the China Center for Economic Research of Peking University explains, regional integration in this case is a very difficult task if you want to go through a government directed planning (approach). Professor Huo adds that integration must be the result of a market-oriented approach rather than being forced as a result of environmental concerns. I would like to postpone this grand scale of integration and I d say let s think about how to resolve the smog problems in this part of the country Why don t we just look at the problems and try to solve them. If central planning is necessary, just deal with that problem without resorting to other kinds of bureaucracies. Regional Integration should not be seen as a panacea to the problems faced by each respective region. If implemented correctly integration would certainly benefit many areas of society and business but a much broader approach to implementing policy is required. For instance, pollution control has to be tackled across areas rather than tackling it at a city level; a huge task considering the vast areas involved. Meanwhile, a regional approach to household registration poses serious challenges in the context of urbanization, especially when one considers how difficult it is for people to gain household registration, and all the benefits that go along with that, within the capital (see page 25). Ultimately, if regional integration is tackled lightly, it may lead to more layers of bureaucracy at a time when huge inflows of people require access to social benefits

8 FEATURE Achieving Urbanization in an Ageing Society Photography: Bejan Siavoshy Demographic issues will in many ways define the country's future. Tackling the issues related to an ageing population whilst working to achieve nationwide urbanization represents a huge challenge for China's authorities. For years, the government in China has been aware that its population is ageing rapidly and they have accepted the stark fact that the proportion of older people will inexorably increase in the future. The challenge of addressing an ageing society, however, converges with the country's other major challenge, accommodating the hundreds of millions of people who are moving, or have moved, from rural to urban areas in search of the opportunities that China's development affords. The country's one-child policy, which was established in the 1970's as a means to boost development and curb overpopulation, ultimately brought about a dramatic decline in the nation's birthrate. The onechild policy has since been loosened, but many experts argue that China's economic development will now keep the country's birthrate low, with or without a one-child policy. When those who were born in large families get old, there will be comparatively fewer young people to support them. Experts have predicted that by 2050, 34 percent of the Chinese population will be over the age of 60. The problem will no doubt become more apparent in rural China as the country continues to pursue its urbanization drive. Mass migration from farms to cities has been driven by China's economic development, which has largely been furthered by industrialization in large coastal cities along eastern and southern China. The country's urbanization rate was around 16 percent in 1978, surpassed 50 percent in 2011, and is expected to reach 60 percent by In an effort to gain more insight into China's future demographic trends, alongside exploring how an ageing population and urbanization will affect China's future, MESSENGER presents the views of two experts, covering both the economic perspective and the environmental perspective. The Economic Perspective provided by Zhao Yaohui, professor of economics at Peking University and Principal Investigator of The Chinese Health and Retirement Longitudinal Study (CHARLS) As a result of CHARLS, a national survey of people aged 45 and over conducted by the China Center for Economic Research at Peking University, Zhao and her colleagues found that, "if we use (the age of) 50 as the threshold definition for the elderly population, the health situation is quite worrisome. The percentage of people suffering from difficulties in daily activities is about 38 percent; the percentage of people needing help in daily activities is 24 percent. And a lot of them suffer from pain; 39 percent of women getting older suffer from pain (compared to) 27 percent of men. So we found that there is a large gender difference; women tend to have worse health than men." The elderly require increased levels of care and palliative services in their old age and the findings from The China Health and Retirement Longitudinal Study paint a bleak picture for the future as a greater number of elderly Chinese will require more attention, which ultimately costs money. The study also measured the cognitive and mental health of its participants, and the findings revealed that a large number of people aged 60 and over suffer from elevated depressive symptoms, with statistics indicating that this phenomenon is much worse amongst Chinese women than it is among Chinese men. However, according to Zhao, in order to address issues related to pain and mobility or cognitive and mental issues over the long term, the authorities must first be certain what elements within a person's life causes the problems highlighted within the report mentioned above. "Health is determined by a lot of factors including childhood factors. A lot of Chinese people are not poor now due to the rapid economic growth of the past 30 years. But when (today's elderly) were children, their economic situation was very bad so this might have contributed to the poor health situation now." Zhao adds, "The current social economic 14 15

9 situation may also have an impact on health status. The first thing (that authorities should do) is analyze or determine the health situation. If we know, for example, that childhood conditions are very important, then the policy recommendations would be (things such as) improving child nutrition or maybe pregnant women's nutrition status. But if the adult situation matters more, then we can do things right away; so the implications are different according to what researchers find." In something of a controversial stance, Zhao believes that economic growth is not necessarily harmed by an ageing population because the parameters for the working age can be shifted, thus extending the age of retirement. "If the older people are healthy then it is technically possible for them to continue to contribute to the society. We define a labor force by the traditional standard of (60 years of age), but that standard was set a long time ago when the life expectancy was pretty low. Now that life expectancy has extended to the late 70s and will (extend) further into the 80s, then the definition of labor may also be extended." Zhao believes that, "If we can extend working life then the extra years that people live can be taken out of retirement and contribute to productive activities." While Zhao's assertion may indeed be '"technically" possible, she does neglect the fact that Chinese industry is moving up the value-added scale, meaning that older workers may be unemployable as their skills become obsolete at an accelerated pace. If the labor force remains unchanged in terms of its age parameters, economic growth becomes even more vital in terms of covering the costs of an ageing society. "If we use the current definition of the labor force," Zhao points out, "you will need many more people to support the population and you will need to take out a bigger share of their income to support the older population. Economic growth can add to what they can produce so that even after you take out this share of their income to support old people, they will still be left with significant income to support themselves. Regardless of whether the definition of the labor force changes and elderly people end up working further into their old age, the simple fact at present is that China's ageing situation is getting worse in rural areas due to the country's urbanization drive, as Zhao explains: "Rural young people are migrating, working in cities, to support the elderly population in the urban sector. So, their parents are left (behind) in rural areas. But over time, these young migrant workers will be retiring in urban areas. So, this "pension system dividend" will disappear over time. Right now, they're adding to the people who contribute money, but their parents do not add to those who receive money." South Korea and Japan are experiencing similar problems in terms of facing up to an ageing society. In fact, many experts believe that the situation in these two countries is far worse than that of China at present. However, instead of trying to look for lessons from one's neighbors, Zhao thinks that people should look at the bigger picture in order to understand and identify demographic trends in the context of economic growth, and thus pinpoint the more important issues at hand. "In Korea and Japan, the fertility rate has become too low. These countries are really worried and are encouraging people to have more children. Improving fertility can lessen the burden of population ageing. China should understand that the decline in fertility rates is a worldwide phenomenon; it goes with economic growth, with higher opportunity costs for women. A lot of people are still worried about (China's fertility rate) being too high, but that will not (always) be the case. China will follow other East Asian countries and regions in that decline. We are already at a very low fertility rate. It's not low fertility that we should be worried about, it's (the speed) of decline in fertility that we should be more concerned about. The Environmental Perspective provided by Qi Ye, professor of environmental policy at Tsinghua University and director of the Brookings-Tsinghua Center for Public Policy China's urbanization is predicted to hit 60 percent by This process is related to many areas of environmental issues and many are wondering whether getting urbanization right will be the most important factor in improving environmental conditions in the future. With the prediction that China's urbanization rate will hit 60 percent by The journey towards this 60 percent rate has been an unprecedented one which has taken a toll on the country's environment. As Qi Ye explains, getting the process right is a matter of extreme importance with regards to China's environmental wellbeing going into the future. "When you look at the end of the 1970s, the urbanization rate back then was less than 18 percent. So, over the last 30 years or so, almost every year we gain 1 percentage point in terms of urbanization rate. When you (extrapolate) that into the future, it is right that we'll hit the 60 percent rate pretty soon in just a couple of years possibly. In the last 3 and a half decades, this very high speed of economic development and growth rate of the economy and also growth rate of urbanization has had a major impact on natural resources and the environment. Therefore, it is crucial to get it right (in terms of) industrialization and urbanization." person from the rural area moves to the urban area, energy consumption could increase by 3 to 5 times; so that has major implications for energy use (and our) carbon footprint. So, getting it right, (implementing) the right kind of urbanization is really important for the environment and the natural resources. The so-called new type of urbanization proposed by the Chinese government will focus on urbanization that is smart, compact, green and low carbon. I think there is a very high awareness about how to get urbanization right." Often, environmental issues are attributed solely to the country's breakneck speed of economic growth. But as Qi explains, it is hard to separate the environmental issues caused purely by the urbanization process from those of economic growth, as urbanization itself is unequivocally linked to the country's economic success. "These factors are all connected very closely. Urbanization is driven by people pursuing a better (and) higher standard of livelihood; better prospects for their income. (With regards to) industry they need people to come into the cities which in general will have higher productivity. All these economic factors coming together, industrialization with people pursuing a better life, they're related to urbanization. When more people move into the cities and are very close to each other, you have to deal with all sorts of problems environmentally and also in terms of natural resources." Qi points out that society has to deal with an increased number of so-called "negative externalities" that are generated when people live in close proximity to one another; citing garbage disposal and processing as an example that many might overlook when thinking about the impacts of urbanization. "Factors including resource utilization, environmental protection and economic growth, they tend to come together as urbanization goes up. However, even as more people move to cities, one of the unexpected outcomes from China's urbanization process revolves around the issue of population density. "In general, when the urbanization rate goes up and you expect the population density in urban areas to go up as well. Ironically, here in China in the last three decades, as urbanization goes up, the population density in the urban area has actually gone down; so that is a major problem," claims Qi. Qi explains that a lower population density in the context of an increasing rate of urbanization "means the utilization of (urban) land is relatively inefficient. We're unnecessarily utilizing more land than necessary. I think the most important thing is to increase the population density of the urban area. In other words, we need to have a higher efficiency in utilizing the land, not only utilizing land in rural areas but also better utilization of land in urban areas as well." Though Qi calls for more attention towards urban land utilization, he also alludes to the fact that discussion has taken place regarding the use of rural land amid huge flows of people to the cities. The Chinese government wants China to be self-sufficient in terms of its food supply but there are obviously implications of pursuing such a policy when considering the migration of people from farming areas to the cities. Qi points out that urbanization is vital in creating the demand needed to spur domestic consumption. A move away from the country's heavy reliance on export driven economic growth "will inevitably mean that (China) will put greater emphasis on domestic consumption. With the urbanization process, more people moving into the city will consume more; so that will drive economic growth. And that will increase domestic consumption and the domestic demand for goods and services." And Qi believes that the current global economic climate provides China with the perfect conditions to pursue urbanization and alter its economic model. "It's not a matter of choice (as to) whether or not you have a heavier reliance on exports at the moment. With the global economic slowdown, it is a must. You have to move away from greater reliance on exports; you have to move towards a greater reliance on domestic consumption. This, in a way, provides a good opportunity to transform the economic development model and urbanization is providing a great opportunity because it provides more forces for elevating domestic consumption." And as the country tries to shift its economic model towards one of domestic consumption at the same time as trying to achieve widespread urbanization, many are asking whether there will be something of an agrarian revolution in farming methods, so as to boost efficiency as people move away. Qi warns that focusing too much on the urban aspect of urbanization would damage the process in the long run. "On the one hand (we need) greater efficiency in urban areas; the cities. On the other hand (we need) to increase the efficiency and improve the quality of living in rural areas. So we have to be very careful. Urbanization is important for economic development and social development; there is no question about that. But that does not mean we're trying to get rid of the rural areas and the rural population." "There has to be the right balance between the population in rural areas and urban areas. By no means (does this suggest) that the greater the rate of urbanization the better. Therefore, improving the efficiency of resource utilization in rural areas, to improve the quality of living (there) is just as important as urbanization if not more." "Take energy for example, when a 16 17

10 A study by the China Ageing Development Foundation predicts that by 2050, 31 percent of the total Chinese population will be aged 60 or over. The last national Census, conducted in 2010, revealed an annual population growth of 0.57 percent in the previous decade ( ) on the Chinese mainland; a sizeable decrease in the growth rate from , which stood at 1.07 percent. Census data revealed that the growth rate of the ageing population on the mainland had increased with people aged 60 or above accounting for percent; 2.93 percentage points higher than that in the 2000 Census. Photography: Bejan Siavoshy 18 19

11 Photography: Bejan Siavoshy 20 21

12 Photography: Bejan Siavoshy 22 23

13 Can China Truly Achieve Eco-friendly Urbanization? Urbanization is expected to be a driver of economic growth, and with regards to social development, it can be a huge blessing for new immigrants vying for a higher standard of living. However, according to conventional wisdom, the process of urbanization leads to environmental degradation. The Chinese government is keen to avoid such degradation and has encouraged the use of city management forums in an effort to gain the advice and opinions of experts and scholars in order to ensure a green urbanization path. According to national statistics, about a fifth of all urban Chinese city-dwellers breathe heavily polluted air. Statistics provided by the Institute for Urban Development and Environmental Studies of the Chinese Academy of Social Sciences revealed that China s carbon dioxide emissions accounted for 23.6 percent of the world s total output back in Complaints about certain areas smelling of highsulfur coal or leaded gasoline have become commonplace over the past year or so. Speaking at a city management forum during the 16th China International High-Tech Expo in Beijing earlier in the year, Li Yizhong, vice chairman of the Economic Committee of China s top advisory body says China s progress in pollution reduction is almost invisible compared with its growth in terms of urbanization as well as industrialization. China is top of the list in terms of emissions intensity for carbon dioxide and sulfur dioxide worldwide, Li pointed out. Despite that, China has made some achievements in reducing its emissions. But our environment and resources cannot sustain such rapid development if the current model of development remains unchanged. Therefore, pursuing a different model of development for the purposes of reducing environmental degradation is one of the main goals of the government at present. MeeKam Ng, Director of the Urban Studies Programme and Associate Director of the Institute for Future Cities at Chinese University of Hong Kong warns that authorities cannot afford to look at cities as isolated places when implementing new models, as many cities are often nestled in rural areas. She says, We need to improve our understanding of rural areas before we develop cities. At the same time, Ng advocates more compact urban development in order to reduce the environmental footprint of big cities. Compact development encourages the use of non-motorized transport modes, improves public transport usage as people no longer have to rely as much on cars, thus benefitting air quality. Furthermore, Ng believes that denser urban development could lead to a closer community, promoting social sustainability. However, according to Zhao Jinhua, Assistant Professor at the Department of Urban Studies and Planning of the Massachusetts Institute of Technology, compact development will not necessarily lead to better air quality. Zhao points out that in most western countries, city size and car ownership are inversely related, i.e. people in big cities have less cars and use less cars relative to people living in small cities. According to Zhao, in China the opposite is true, evidenced by the huge number of car owners in Beijing, one of the largest cities in the country. Zhao explains that there is a more pressing need to normalize this pattern by guiding preferences rather than looking towards technological solutions or urban planning methods. As social influence plays a huge role when it comes to buying a car in China, despite the fact that roads are already saturated, Zhao somberly explains, If every Chinese aims to have a car as part of his or her successful life, honestly there s no technological solution to satisfy this city desire. Zhao paints a bleak picture for the nation with regards to the impact of the previous model of development pursued as a result of a desire to increase the country s gross domestic product. Economic growth and the ecological system are both part of an intertwined system. A common mistake is actually to think of urban activities as (being) unconstrained by natural resources and hoping that technology and innovation can always solve the problem. But actually, to the contrary, the rapid urbanization and economic growth in China has already pushed many cities to the boundary of the natural limit. The water, the land, the forests, the public space are all at the edge of an ecological crisis. We are already paying a huge price for it. Wang Yi, Professor of Environmental and Energy Policy at the Chinese Academy of Social Sciences, believes that China s environmental protection efforts will encounter serious challenges in the decade ahead. We estimate that the coming 10 years will be the most difficult period of time for China s environmental protection efforts; especially in regards to two factors. One, China will continue to emphasize industrial development for at least 10 years. And two, a new round of urbanization efforts will be sped up; whether this new urbanization will be environmentally friendly or not is still being questioned. But major consumption of resources and pollutants will reach their peak around that time. The traditional model for China s urbanization and development pattern has so far been treatment after pollution. Experts, however, point out that minimizing pollution should be the first priority in the government s new modernization endeavors. Wang Yi suggests that China s existing law on the Prevention and Control of Atmospheric Pollution be largely amended since it is out of date and fails to stipulate specific limits on factors related to China s new round of urbanization. Wang notes, If China wants to achieve green urbanization, its primary task should be an amendment overhaul of its law on the Prevention and Control of Atmospheric Pollution in which it clarifies the individual responsibilities of the central government departments and regional or local governments. The length of China s existing law on the Prevention and Control of Atmospheric Pollution is only one seventieth of that of the relevant American laws. Moreover in terms of content, China s law lacks compulsory and rigid clauses. In this way, how can China hope to control air pollution? There have also been calls for added provisions to the law s third amendment, which went into effect in 1987, including measures on air pollution emergency incidents, regional joint prevention initiatives, control mechanisms and fuel quality control. So while policy and technology will certainly play a role going forward, the people of China are still left with the stark reality that the country is already suffering from the effects of rapid industrialization. And as the process of urbanization marches forward, the environmental challenges that the government is likely to face will surely proliferate if they fail to pursue the right path of urban and rural development. Aiding the Urbanization Process A number of senior Chinese officials have pointed to the household-registration system, or the hukou system, as a key area in need of reform as the country shifts to a new urbanization strategy. Xu Xianping, vice chairman of the National Development and Reform Commission, says China's urbanization process has seen achievements in the past decades, but has also created obstacles that hinder healthy development moving forward. His comments came after the government released a new plan aiming to achieve a better quality of urbanization at the start of the year. According to Xu, one of the highlights of the plan is the aim to reform China's hukou system. "The reformed system should involve different residential statuses, so those who have a rural Hukou but have been long working in the cities, as long as they are capable and willing, can apply for the urban hukou. And for those who are also working in the cities but cannot apply for the urban hukou, they can apply for a residential certification which grants them equal social services, as urban residents enjoy." Official statistics show that by the end of last year, the FEATURE

14 26 registered urban population accounted for only 35.7 percent of China's total population. The new central plan has vowed to increase that number to 60 percent by Huang Ming, vice public security minister, says that under the plan the greatest increase in urban residents will be recorded in small cities. That goal is to be achieved by controlling the measures for applying for urban hukou in major centers. According to Huang, "We should strictly control the population in the biggest cities. The measures for applying (for urban household registration) should be based on an open, fair and ordered principle, probably with a points-based system. And for people who are eager to apply for the urban hukou, it would be easier for them to apply in small cities rather than in huge ones." Huang adds that such measures are also aimed at relieving pressure on big city residents, who are now facing "urban diseases" such as traffic jams, low capacity in dealing with sewage and garbage, and pollution in air, water and soil. According to the newlyreleased plan, the country should further relocate the distribution of resources among developed and developing regions (see page 12). The main idea of the government's new-type urbanization approach is to guarantee equal services for all residents, no matter where they are living. Qi Ji, vice minister of Housing and Urban-Rural Development, outlined the necessary steps required going forward. "For rural residents who move into cities, they should be guaranteed affordable housing, so they should all be covered by our housing security system. And then we need to gradually make basic social services available to all permanent residents." Qi has also stated that the new type of urbanization should be ecologically-minded as well. Chen Gang, Vice Mayor of Beijing, has previously stated that every year more than 500,000 people come to Beijing. Chen says the population in Beijing has reached more than 21 million, with 8 million being from the migrant population. Alongside the household registration issue, the city is finding it increasingly hard to deal with the rapid growth in its population due to limited energy, land and water. According to Chinese Premier Li Keqiang, urbanization is the certain route to modernization and an important basis for integrating the urban and rural structures. Household registration reform is a prerequisite for achieving such integration. Wang Lu, a senior government adviser of Hainan Province, says the government should make efforts in human-focused urbanization, stating, "Currently the rate of urbanization in China is 53.7 percent. However, less than 40 percent of migrants have city household registration. Therefore, there is still over 10 percent of the population without (access to) equalized city services." Many within the press and academia have pointed towards successful instances of western urbanization and urban management as a blueprint for China's process. In reference to judging whether a city is urbanizing positively, Daniel Doctoroff, CEO of Bloomberg and also the former deputy Mayor of New York City explains, "The way we judge, certainly in America, the success or failure of a city is actually about its ability to grow. And we have an attitude that growth, at least smart growth, is good and it's the best evidence that what you're offering as a city is successful; that the free market of people moving in and out, of jobs moving in and out, of visitors moving in and out, is the best evidence of success." Transportation is also considered an important part in urbanization. Doctoroff says making the city more walkable could also be helpful. "One of the pieces of advice that I would probably give to Beijing is continue to focus on ways of making it more walkable, creating much more activity on the street level, and that obviously is a difficult thing to do." According to this year's government work report, China will carry out a new type of people-centered urbanization that will grant rural people who live in cities more social welfare currently enjoyed by the city dwellers. The report says China will grant urban residency to around 100 million rural people who have moved to cities, rebuild rundown city areas and villages inside cities where around 100 million people live, and guide the urbanization of around 100 million rural residents of the central and western regions in cities there; all of which are goals that are easier said than done. Photography: Bejan Siavoshy Keeping China s Credit in Check China has submitted a plan on establishing the nation's first personal credit database to the State Council, China's cabinet, for review. The country's banking sector has built up a similar database that allows users to check their personal information and financial records online. The newly proposed database will absorb a broader range of information, including financial records, tax and social security history and even traffic violations. The database, which is expected to be completed by 2017, involves several stages, including the issuance of a credit code for both individuals and companies, based on the identification card numbers or organization codes. In mature economies, national credit databases are useful tools for equalizing competition across different financial institutions at the same time as protecting consumers and providing them with more options with regards to seeking sources of credit. Without a national database, large banks essentially have a monopoly control on customer information, making it difficult, if not impossible, for other banks to enter the market. Furthermore, if information is not shared amongst financial institutions, customers will often be forced to carry out their banking with one financial institution while other banks will find it hard to lend money to people without the ability to conduct credit checks. While a national credit database would be beneficial to the banking sector as a whole, it would also have implications on the ability of consumers and small businesses to get credit; an important aspect considering the amount of small businesses that have had to seek loans outside of the banking system just to keep functioning. Ultimately, the creation of a national credit database will not only encourage fair lending, it will also allow the government to regulate the lending process. With regards to consumer protection, under a national credit database, consumers should have the right to challenge the data if it is wrong. Therefore, once such a database is established, consumers should be able to gain access to the information at a reasonable price. But there is some debate as to what kind of information should and should not be included within such a database. Negative credit history data, such as the inability to meet credit card payments or loan defaults, should of course be included as part of a credit database. However, the possible inclusion of positive credit history, such as mortgage repayments, has thrown up another issue in China; that of wanting to remain hidden. Restrictions on owning property mean that those people who own more than one apartment will be keen for their information to remain out of sight. As a result, the inclusion of such data could provide people with an incentive to seek out less than transparent methods for conducting their personal business, such as taking loans out under other family member's names. Along the same lines of wanting to hide data that would reveal multiple properties, according to Dr. Hu Naijun with the School of Public Policy and Management at Tsinghua University in Beijing, a number of government officials may also resist revealing personal information for fear that their personal wealth and possibly greed may be exposed. But according to Hu, the motives of some government officials or departments is not the main obstacle for the creation of such a database, instead it is the technological capability of the government. As Hu points out, society is in need of FEATURE a credit system and the individual power of those who want to resist "is relatively very small compared with the demand of the whole society." As mentioned above, the country's banking sector has already built up its own database but it remains fragmented. Legislation is vital in order to integrate data across various databases, which are currently managed by different ministries in various regions. In order to be successful, Hu suggests that the Chinese government look to the US example of creating an overarching body responsible for the management of the national credit database and embrace the role of the private sector in creating a comprehensive database. "China should learn from the experience of the US. In the US there is a central bureau (managing) this kind of credit collection and credit management. Right now we do have several kinds of database that are totally different and independent of each other. If we want to build a comprehensive and independent central database we must have a strong central bureau to (carry out) every step of this (process). In my opinion I think there should a central bureau to be responsible for this. But at the same time, I think there is still a need for cooperation between the government and the private sector. This kind of cooperation also needs some kind of integration from an authoritative bureau." But one of the key factors to ensuring the success of a national credit database is combatting social mistrust. Historically, people in China have not really cherished their credit record and according to Hu, the government needs to work hard in order to make the general public realize the importance of their credit history, whether via educational methods or hard fines for those who have abysmal creditworthiness. 27

15 A Different Kind of Credit Database Since the establishment of a personal credit-rating system in Jiangsu Province's Suining County by the local government in 2010, residents there have questioned its validity and effectiveness when it comes to bettering society. The personal credit-rating system rates people based on a set of social guidelines stipulated by the county government, which can help or hinder residents in enjoying public amenities. Under the rating system, each resident is given a "credit label" featuring grades ranging from A to D, with A being the best rating available. Each credit label is dictated by how many "points" a resident has, with the maximum amount of points available being 1,000. So-called misbehavior or incidents of delinquency comes with a penalty of between 10 and 50 points, depending on the act in question. Using social media to lodge false accusations against others; violating traffic laws; and intentionally defaulting on utility bills or loans constitute misbehavior and carry point penalties. However, a resident can gain points if he or she receives any kind of award or has carried out good deeds, such as volunteer work. Those who maintain an A- grade credit label rating will gain priority treatment in terms of gaining employment, school entrance and social security applications. Wang Tianqi, the party secretary of Suining County said, "We want to create a system that reminds people that being honest and credible will benefit your life in the long run; and vice versa, cheating and dishonesty will do you harm." While there has been some praise for the rating system among Suining County residents, many netizens find the ratings system to be unfair, pointing out that most of the people who receive bonus points for their actions are government officials. Likewise, many question how the standards for the ratings system are set and whether the local government has the right to rate its citizens in the first place. Food Safety - A National Challenge by Bejan Siavoshy Urbanization has become a cornerstone of China s economic future. By 2050, the government said that it plans for 70 percent of all Chinese to be living in urban areas the average for a relatively developed country. But the rapidly shifting migration and urbanization landscape in China has had a big impact on food in the country; particularly on food safety. One of the most significant threats to food safety in China has gone hand in hand with the country s rapid urbanization and development soil and water contamination. A survey by China s Ministry of Environmental Protection (MEP) shows that 87 percent of Chinese participants said that they are worried about food safety and drinking water. The lifelines of food security, arable land and potable water are integral to keeping a country s population fed, especially one as large as China s. However, unchecked development and industrialization coupled with loose environmental oversight in the past has rendered much of China s farmland and water sources harmful to crops and, thus, harmful to humans. Food demand in China has increased due to urbanization. China s steady development since reform and opening up in 1978 has seen the country s agriculture sector grow in kind. A study by the United Nations Food and Agricultural Organization (FAO) shows that China s agriculture sector grew by 4.5 times between 1980 and An HSBC report from 2014 says that China s agriculture industry is as large as the entire economy of Australia. This booming sector has caused many suppliers to take any means necessary to ensure production increases in agricultural output, even at the cost of the environment upon which it is reliant. Wen Tiejun, head of the School of Agricultural Economics and Rural Development at Renmin University, told Reuters in 2010 that the agriculture sector is the largest polluter in China. Using over 40 percent more fertilizer than necessary for crops, the run-off is equal to about 10 million tons of fertilizer making its way into China s water, according to a Greenpeace research report citing official figures on fertilizer usage in the country. The other major contributors of water pollution in China come from the industrial sector and municipal waste, both of which have been active due to increased urbanization. China Central Television (CCTV) ran a report about the country s mounting garbage problem in the face of rapid urbanization. According to the story, roughly two-thirds of China s 668 cities are surrounded by landfills. The biggest risk these growing refuse sites pose to food safety is their potential to leak into ground-water sources. Likewise, China Daily ran a report quoting Zhong Bin, the head of the solid-waste sector at the pollution emission control department of the MEP, as saying that, by 2015, China will be generating over 60 million tons of hazardous waste. As of 2009, about 42.7 percent of China s rivers and more than three-quarters of its lakes and reservoirs contained water unsuitable for drinking or fishing, according to the MEP. This water is, however, used for irrigation, which ultimately contaminates the soil of the country s arable farmland. Heavy contamination has left roughly 20 percent of China s farmland unusable, according to partial findings in a research report from 2009 that the MEP revealed earlier this year. Soil contamination has resulted in much of China s grain production having high amounts of contaminants hazardous for human consumption most notably, cadmium, which is a metal element that can cause kidney and skeletal damage if ingested. An estimate by the Ministry of Land and Resources says that heavy metal pollution contaminates about 12 million metric tons of Chinese grain annually. With the country s middle and upper classes gaining numbers each year, these sub-populations can more easily afford meat products like beef and pork, which must be fed substantial amounts of grains, contaminated or not. At the same time, scientists at Nanjing Agricultural University say that as much as 10 percent of rice, a staple food in China, may contain cadmium. While the contamination of lifelines to China s food staples like soil and water threaten food safety, so too does the disparity of suppliers in the country s food production markets, leading to a lack of proper oversight over the years and a prevalence of foodborne illnesses. Medical journal The Lancet ran a story in 2013 citing that the widening gap between China s growing urban developments and its rural areas has created an equally differing supply chain in food production. As the publication put it: Food production in China is dominated by elephants and mice : sprawling, monopolistic enterprises and tiny household producers. Both the diversity and sheer number of producers (there are thought to be more than 500,000) pose a challenge for supervision. The Lancet continues, saying that oversight of food safety is spread across at least 13 different government bodies, making collaborative supervision of food safety difficult. From baby formula tainted with melamine to the recent discovery of Shanghai Husi Food Co. a subsidiary of U.S.-based OSI Group repackaging expired meat to be sold to fast food chains, China has seen a string of highprofile food safety scandals. While government action has been swift following each instance that grabs headlines, the more widespread problem of common food poisoning has seen little sweeping action at the hands of authorities. The Lancet cites a survey from late 2010 that found Chinese consider food safety as the secondlargest threat they face in daily life, just under earthquakes. An online poll cited in the publication s report showed that 92 percent of Chinese respondents expected to soon be a victim of food poisoning. But the government hasn t been sitting on its hands as food safety deteriorates in the country. In June, a revision of China s Food FEATURE Safety Law was unveiled, pledging tougher sanctions for offenders and a stricter food-safety supervision system (See page 31). The new bill allows consumers to demand reparations worth three times losses incurred from substandard food. The previous law only called for ten times the price of the tainted food to be paid as reparations. Likewise, suppliers of contaminated food can face up to 30 times the value of their respective products, an increase from 10 times the same amount stipulated in the previous law. If said tainted food is less than 10,000 yuan (or $1,600 U.S.), those involved can be fined as much as 150,000 yuan, up from 50,000 yuan according to the previous law. The bill also punishes landlords or owners of production sites pumping out tainted food or treating food with contaminants for profits. The income from these ventures will be seized and offenders can be fined an additional 200,000 yuan. Officials aiding in these illegal activities will also have their positions revoked, according to the law. Premier Li Keqiang also announced a war on pollution, in a bid to address the growing concerns over air, water and soil contamination throughout the country. The most promising sign, however, of the government addressing food safety issues is the statement from Zhang Yong, head of China s Food Safety Commission, quoted in the newspaper, Southern Weekly: To manage food safety issues, we absolutely cannot have an ostrich mentality no dodging or concealing. Problems can really only be addressed by uncovering them and resolving them as much as possible

16 Food Safety: Trying to Regain Trust (Source: National Bureau of Statistics) FEATURE Law, noted that the position of the China Food and Drug Administration needed to be clarified as part of any amendment that the National People's Congress planned to introduce. With the government seemingly aware of the need for such a clarification, the latest amendment singles out the Food and Drug Administration as the sole supervisory body for food production, transportation, and catering. Aside from specifying the Food and Drug Administration as the sole supervisory body, the revision also makes food manufacturers the primary sector responsible for food safety when it comes to establishing liability for a problem. Zhu Yi, an associate professor from China Agricultural University, believes that the change will provide a legal basis for more effective supervision. Shanghai based Husi Food Co. reportedly sold expired beef and chicken to a number of high profile companies including Mcdonalds, KFC and Starbucks. (Photos: CFP) At the end of June, China's top legislature revised the country's Food Safety Law in light of a crisis of confidence in the country's food industry. The revision to the law follows a series of incidents over the past 8 years. Pork injected with clenbuterol, the recycling of oil poured down drains, the production of medicine capsules with toxic gelatin and the use of illegal additives in growing bean sprouts are just a few of the scandals that have angered the general public and brought the issue of food safety into stark focus for the government. Last year, the State Council published an institutional reform plan which meant that food companies, manufacturers and operators, shouldered more responsibility when it came to guaranteeing food safety. The reform led to the implementation of a traceability system, which would provide accountability in the case of future scandals, and also attempted to regulate online shopping of food with regards to B2B or B2C websites. Severe penalties were also put in place so as to discourage illegal activities or deliberate manipulation of China's food safety laws. "Previously, if a tomato was sold at a vegetable market, it fell under the jurisdiction of the Agricultural Department. When it was sold in the supermarket, it was under the Industry and Commerce Department. When the tomato was processed into tomato sauce, it fell under the Supervision of the Quality Inspection Department. If it was served in a restaurant, the Food and Drug Administration would be responsible for supervision. Now, with this amendment, the Food and Drug Administration will be responsible for all processes. It will help plug the loopholes in the supervision system." With the public so incensed by food safety issues, companies have been attempting their own damage control in an effort to get customers back on side and avoid further incidents which damage their brands both domestically and also internationally. The best example of this is Walmart, which has vowed to increase its spending on food safety in China to 300 million yuan in the next 3 years, up from the previously announced figure of 100 million yuan. The company has also suggested it will increase DNA testing on meat products and in-house supplier inspections. According to the State Council's institutional reform plan published last year, supervision responsibilities in the area of food safety were transferred from the State Administration of Industry and Commerce to the China Food and Drug Administration. However, despite helping to improve food safety in general, the existing system is not effective and the fines in place do not deter offenders according to Zhang Yong, director of the administration. Prior to the latest revision of the law, Wu Jingming, professor at the China University of Political Science and Director of the Food and Drug Administration Zhang Yong has stated that the country will impose the harshest penalties on offenders and supervisors going forward. "The law will set up the strictest legal liability system. For offenders who add poisonous and deleterious substances in the food, the authorities can remove their licenses and impose fines up to 30 times the value of their products. For officials who are dismissed for issuing fake evaluation reports, they could be banned from food safety supervision posts for life." 30 31

17 How to Feed 1.3 Billion Examining how the country manages to remain self-sufficient in agriculture, and the challenges that it faces regarding food security. China relies on 7 percent of the world s arable land to feed 22 percent of the world s population, and its track record in carrying out such a feat has so far proven successful. The country has long resorted to what many refer to as a self-sufficiency strategy by growing most of the crops it needs and importing relatively little in terms of food grains from overseas. In 2013, China s grain production reached 600 million tons and food imports increased. In the same year, China s grain self-sufficiency rate stood above 97 percent and cereal imports reached 40 million tons, accounting for less than 2.6 percent of the country s total cereal output. But as the Chinese population grows more affluent, with people demanding more and higher quality foodstuffs, and as urbanization puts a dent in the farming population, China may now need to adjust its strategy in order to ensure its future food security. In its first policy document of 2014, the Chinese government stated that it will continue to make good use of international markets for agricultural products in order to complement domestic supply. With regards to using international markets Ren Zhengxiao, Administrator of the State Administration of Grain, has noted that, China is a country with a population of over 1.3 billion. We will continue to do this and take responsibility for our role in the world. The issue of whether China can feed itself is probably not one that many ordinary people concern themselves with. But at the higher levels of government, efforts are being made to increase China s food supply and improve food safety, and in doing so ensure the nation s food security status for the coming decades. According to Laura Kam and Alex Pevzner of Kam Global Strategies and Pevzner Greater China Communications respectively, China faces particular challenges when it comes to ensuring food security as a result of issues like water scarcity (about half of China s land area is considered water scarce under UN guidelines with just 1,000 cubic meters per head each year), arable land scarcity, and water and soil pollution resulting from rapid industrialization. Furthermore, over the past decade, the incredible wealth that certain sections of society have accumulated has put China s current strategy under pressure. An approach devoted to improving production yields per hectare for food grains has allowed the country to maintain its self-sufficiency strategy. But increased prosperity has led to an increased demand for income elastic livestock products and as Jenifer Huang McBeath and Jerry McBeath point out in a report on Environmental Change and Food Security in China, As Chinese economic development proceeds, and more Chinese are able to purchase high quality foods, we can expect that grain sufficiency alone will be even less good a measure of food security. Richer Chinese people are eating and therefore importing more meat, far more feed grains than before and more vegetable oils. Professor Michiel Keyzer, Director of the Center for World Food Studies at Amsterdam s Vrije University in the Netherlands, notes that, In the future, if Chinese (people) were not eating animal livestock products, there would be no problem, (China) could quite easily be self-sufficient. Keyzer adds, In food grains and vegetables (China) has been self-sufficient and it will remain so if it wants. But to remain so it will have to impose a serious environmental policy to counter pollution. However, Keyzer is confident that China is not facing a fundamental threat in terms of failing to feed its people citing a combination of demographic factors that are usually considered to be negatives for the country. Keyzer notes that due to China s one-child policy and its rapidly ageing society, China s shrinking population will alleviate the pressure to produce huge amounts of food domestically. Meanwhile, Keyzer believes that China will not become a bigger consumer than it already is because its ageing population will eat less as they grow older. As China s society ages, and elderly people eat less, and particularly less meat, the longterm demand for meat will not be that big, claims Keyzer. Clearly, falling back on its ageing population as a safety net for maintaining food security is not an ideal or viable scenario. Despite its ability 33

18 to remain self-sufficient in terms of grain production, China will continue to be import-dependent for meat, animal feed and vegetable oils for the coming decades. According to Jenifer Huang McBeath and Jerry McBeath, China s self-sufficiency in corn is expected to decline from 97.4 percent in 2000 to 74 percent in 2020 and for soybeans, the ratio is expected to decrease from 46.1 percent in 2000 to 20.6 percent by For the market year , imports of soybeans rose dramatically as domestic output decreased and demand for animal feed increased. Heavy rains in Heilongjiang Province, China s largest soybean producer, severely undercut Heilongjiang s soybean production this (market) year and will force China to import more foreign soybeans to meet its domestic demand, Hu Zengmin, analyst at the China National Grain and Oils Information Center in Harbin was quoted as saying last year. It has been forecast that soybean imports this year would rise 15 percent from the previous market year, while domestic output continues to decline for a third year running; outlining the general situation that China finds itself in despite many referring to it as being self-sufficient in grain seeds. There has been a certain amount of discussion as to whether China should increase meat imports at the expense of animal feed. However, the advantage of importing animal feed is that it provides a very important source of income and employment in rural areas. Reducing animal feed imports in favor of increasing meat imports could lead to an increase in the rural-urban income divide. Keyzer believes that this aspect will force the government to continue importing animal feed despite the fact that importing meat is cheaper economically and transport-wise. Away from the topic of food imports, in the private sphere, foreign food companies have increasingly been on the shopping list of Chinese investors. Bright Food Group, China s second largest food vendor, recently announced that it had acquired a 56 percent stake in Israel s largest food company Tnuva and also purchased a 60 percent stake in Weetabix in It is debatable, however, as to whether these acquisitions will contribute towards food security. In 2013, Shanghai International acquired Smithfield Foods, the largest pork producer in the US. At the time, the deal led to much discussion about its impact on Chinese meat imports and exports. In reality, the deal only served to provide the country with the technology needed to boost food safety as opposed to a rich source of pork imports. According to Professor Zheng Fengtian, Associate Dean of the School of Agricultural Economics and Rural Development at Renmin University, domestic company behavior is in no way linked to China s national food security policy. Chinese food security has to be realized by the country itself. The companies can learn about a lot of technology and (gain) some brand experience; that s better for them when they provide agricultural food to the domestic market, however, increased food safety ultimately does not contribute towards the country s food security strategy. Nonetheless, food safety is linked to food security despite the fact that ensuring one does not guarantee the other. Song Hongyuan, Director of the Research Center for Rural Economy at China s Ministry of Agriculture says ensuring food quality and safety requires sustainable development. We can ensure food supply for now, but not at the cost of natural resources. We will also need to look to the future and maintain sustainable agriculture. But in attempting to implement sustainable agricultural processes, the government faces another urgent question with regards to a dwindling labor supply in rural areas. Amidst the wave of urbanization, and partly due to an ageing society which is more pronounced in rural areas, millions of people have left their hometowns and moved to cities for work leaving behind far fewer people to work in agriculture. Meanwhile, those who are left behind in rural areas often do not meet the demand for qualified labor. For this reason, China is seeking to establish a new agricultural management system. Li Guoxiang, Research Fellow at the Rural Development Institute of the Chinese Academy of Social Sciences, believes that a new system will be of great help to China s food security cause. The new management system must consider labor-pool declines in rural areas as the urbanization process moves forward. As farmers move to cities, who will work in grain production? Photography: William Wang The new system will help develop modern agricultural practices and ensure the food supply with less labor, while protecting farmers. What form such an agricultural management system will take will only become apparent over the coming years; however, it is likely that such a system will see an increase in the number of large-scale farms. But as Keyzer points out, large-scale farming is not the ultimate solution for dealing with a declining labor pool and meeting the requirements of feeding China s growing number of urban dwellers. The countryside cannot flourish on large-scale farming alone. Yes, it will need to consolidate some farms because there are very small farms that don t work, and this is already in process. But the countryside should remain livable also. Not all Chinese can live in cities and there are also many older people who have to live in arable areas and earn incomes. Largescale farming will be important but it shouldn t be allowed to dominate the landscape in any province. It should be one part of the whole system. If you get these purely largescale farm areas, the local people suffer and nobody checks (on) the environment, so it s better to have a mixed system. China can continue feeding itself into the future and, if needed, would be able to slaughter enough animals in a given year to meet the requirements of feeding its population. Furthermore, over the next decade China will move towards becoming self-sufficient with regards to dairy items. Despite having a sufficient number of herds to achieve self-sufficiency already in dairy production, current yields are wholly inadequate. Nonetheless, China s ability to feed its population is good news for the rest of the world. However, the pressure that the government faces is being able to meet the needs of an increasingly affluent society in which dietary requirements are continuously changing

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