China's acute environmental problems stem from a deteriorating natural resource base, dense population, heavy reliance on soft coal, outdated technology, underpriced water and energy, and breakneck industrial growth. The World Bank estimates that air and water pollution cost the Chinese economy up to eight percent of GDP. In response, the government has unleashed a burst of environmental legislation, shut down thousands of small, dirty factories, and decreed by 2005 the country will reduce its total pollution discharge by 10% from the 2000 level.
China is expected to spend RMB 84 billion (1.2% of GDP) on environmental protection to meet the goals of the 10th five-year plan (2001-2005). Yet, according to World Bank estimates, two percent of the GDP is needed just to bring air quality standards to levels near those seen in the U.S. during the 1980s. During this 5-year period, the central government is expected to make 11.4% (RMB 9.7 billion) of the investment, while 34% will come from provincial and local governments and the remaining 55% from business enterprises. Meanwhile, some booming coastal cities such as Shanghai, Xiamen, and Dalian claim to be spending 2-3% of their local GDP on environmental protection.
Still, local enforcement of environmental laws is spotty, investment in pollution control infrastructure inadequate, and competition from domestic firms increasingly strong. Products enjoying the best sales prospects include low-cost flue gas
desulfurization systems, air and water monitoring instruments, drinking water purification products, vehicle emissions control and inspection devices, industrial wastewater treatment equipment, and resource recovery technologies.
