[William Pesek] China is choking on its success

Walking through Beijing’s Tiananmen Square last week, a German family of five surrounded me, all wearing large face masks and sunglasses. They weren’t robbing me, just asking me to take their photo. When I yelled the customary “Say ‘cheese,’” the dad joked: “We are smiling under here.”

Only China’s pollution bubble is no laughing matter, and tourists tell the story. Thanks to extreme air pollution, foreign arrivals plunged by roughly 50 percent in the first three-quarters of the year. Beijing could see even fewer visitors to the Forbidden City, the Great Wall and the famous square dominated by a painting of Mao Zedong thanks to images of acrid smog that have been beaming around the globe.

The timing doesn’t help. Jokes about renaming the city “Grayjing” or “Beige-jing” coincide with the Communist Party’s much-anticipated Third Plenum meeting Nov. 9-12. In a more democratic system, that might increase the urgency to act boldly to address a bad-air crisis that’s literally impossible not to see. But early signals aren’t encouraging. News media leaks have the more than 200 members of the party’s Central Committee crafting a vague blueprint for readjusting China’s economic structure. Nowhere are there hints the plan will do what China really needs to do: Ban coal.

The conventional wisdom is that China will eventually get serious about the environment, and when it does, the skies will turn blue before we know it. This view finds comfort in the experiences of the U.K. and the U.S. and concludes that Beijing’s toxic-air challenge pales in comparison with London’s back in the days of Charles Dickens. But what if the comparison is a false one? What if China’s crisis is different and harder to reverse?

Neither London in the 1850s or 1950s nor Pennsylvania in the 1940s was at the mercy of a paranoid authoritarian government whose legitimacy relies on 8 percent growth. Case studies of the past weren’t as linearly reliant on manufacturing. They weren’t dealing with urbanization anywhere near the scale of modern-day China. They didn’t rely on huge overseas investment predicated partly on the ability to pollute freely. Large numbers of their politicians weren’t becoming multimillionaires from the existing system.

China is entering completely uncharted territory ― navigating the demands of a newly vocal middle class without the democratic and civil institutions that helped Japan and the U.S. clean up environmental damage in the 1970s. It’s also doing so with higher levels of corruption.

The party is playing with fire. Anger over pollution has replaced land grabs as the primary cause of social unrest. The last 12 months have seen a sharp increase in protests against chemical plants and oil refineries. Fewer than 1 percent of China’s 500 largest cities meet the World Health Organization’s air-quality standards, while seven are ranked among the 10 most polluted in the world. Walking the streets of Beijing, it’s hard not to feel like you are trapped in an airport smoking lounge.

As China chokes on its success, the solution is obvious: Phase out the use of coal immediately. Flush with $3.7 trillion of currency reserves, China could finance a transition to natural gas. Doing so requires political will of the kind that neither President Xi Jinping nor Premier Li Keqiang has displayed. When China does make the transition away from coal, the economy will slow significantly in ways that would damage the state-owned enterprises that dominate the economy and enrich the Communist Party and its cronies.

China’s new leaders are acting in other ways. A series of embarrassments this year ― not least of them thousands of dead pigs floating in the Huangpu River near Shanghai and myriad food-contamination scandals ― and the increased frequency of protests leave them little choice. In August, China promised to spend the equivalent of the gross domestic product of Singapore, or about $275 billion, to improve air quality.

“Of course, the country continues to be an investment destination and expats will come here in numbers, but it is definitely harder to sell Beijing as a posting,” says Kobus van der Wath, founder of the Beijing Axis, an international advisory firm. “Also, the level of dissatisfaction among Chinese was/is very high at the times when pollution was/is at its worst.”

But there’s little sign China understands the extent to which bad air is imperiling investment. Many of the government’s ideas about cleaning up first-tier cities such as Beijing involve moving coal-burning plants toward Shanxi province and inner Mongolia ― in other words, redistributing pollution to less populated areas. Better emissions standards are vital, too. In 2012 alone, China added more cars than the total number that plied its roads in 1999.

Once the U.K. and U.S. got serious about reducing carbon emissions, the transition away from coal took a few decades. But China doesn’t have decades. So Beijing can rail against the foreign media for exaggerating its gray air. It can pretend wind turbines, solar farms and other renewables alone will do the trick. But China should do the inevitable and curb coal use today. Otherwise, the only tourists heading to Beijing in the years ahead will be adventure seekers donning gas masks.

By William Pesek 

William Pesek is a Bloomberg View columnist. ― Ed.