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17~~~~o URBANIZATION AND ECONOMIC GROWTH

hina is demonstrating that even the rw _ _ .Iworld's largest and most polluted cities can take action to prevent ' i . .furtherenvironmental deterioration,

- =. vand to reverse some of the damage . *. 1Itsrapid growth and industrialization have led to severe problems of water pollution and atmospheric 1contamination. Under-pricing of coal and water has contributed to much waste, while the sheer size of 's population and the country's natural resource constraints have made the situation especially acute Today, a third of China's 1 2 billion people live in cities

''~5- By 2010, this figure may double

AIR QUALITY N RiE t * i Half of the world's 10 most polluted cities are in China, and many other Chinese cities do not meet the air I -~ 'I quality standards set by the World Health Organization

1rF-"1 1 ¶ | - Two-thirds of the total amount of sulfur dioxide emis- sions in Asia are generated in China Sulfur dioxide is a

~1>.- - precursor to acid rain and urban emissions of this sub- stance are expected to at least double in China over the next two or three decades Already the damage from acid rain can be seen in many areas Since 1995, China has been the world's single largest producer and consumer of ozone depleting substances With its rapid economic growth, the production of CFCs, widely used for refrig- eration, insulation, packaging and aerosol-borne prod- ucts, has increased dramatically Before economic reform in the 1980s, two decades of heavy investment in industry took place with little attention to environmental protection or the provision of basic infrastructure This publication reviews some of the issues, notes some examples of what the Government is doing about them, and shows how the World Bank is contributing

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Vf 0 Ptib~~~~~~4 ~~~~~~~~~~~~~~~~~~~~~~~~~~w-- -Z fwSt Fe- -NSgr ew countries are as dependent on coal for cncrgy as China. More than one billion tons are consumed annually. This is expected to increase to 1.5 billion tons by the end of the century. When this mostly low grade coal is burned it causes serious atmospheric pollution from airborne particulates and sulfur dioxide emissions. Coal is used mainly for industrial production and power generation, but it is also a ! major source for the heating and cooking of individual households. Three major health risks have been associated with the domestic use of - polluting fuels: acute respiratory infection, a major killer of children under the age of five; chronic lung diseases such F as bronchitis, emphysema, asthma and cancer. ik China's rapid eco- nomic growth means that increasingly people are abandoning the bicycle for motor vehicles. Rising consumer demand for motorcycles and cars may be good for the economy, but the outcome of car ownership, continuing to expand as it has in industri- alized countries, will bring unacceptable environmental conditions. Vehicle emissions are already reaching toxic levels in some cities.

Motor Vehicle Growth in China likely Motor Vehicle-Related Air Quality Trends inChina 12 12 ______

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00 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 -,-'- North --a- South -V- WHOGuideline Urban Sulphur Dioxide Levels in Northern and Southern China, 1981-1992 mg/m 3 0.14

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000 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 PROTECTING WATER RESOURCES Water quality is another major concern Throughout the developing world, some 90 percent of sewage is discharged untreated, usually into freshwater bodies China is no exception More than 40 percent of newly-built urban areas have no sewerage systems In many cities, rainwater and sewerage flow through the same pipes into rivers or discharge causing pollution to groundwater resources. As early as the 1980s, more than 300 cities were short of water, and in 100 of them the shortage was critical Drinking supply for a quarter of the population does not meet acceptable standards Today, industrial wastewater is the dominant source of pollution, less than one- third of which is treated Coastal waters and rivers are polluted, and both surface and groundwater are contaminated in many areas Toxic and hazardous wastes are becoming a major environmental problem Hazardous wastes, mainly produced by petrochemical, tanning and chemical industries are collected and disposed of in a largely uncontrolled manner Volumes of waste, already large, are increasing, though some is recycled About 80 percent of solid waste comes from industry, most of it coal-ash Urban residents generate 10 percent more waste each year Due to lack of collection and treatment facilities, much of the urban solid waste and night soil is piled up or improperly buried

*7' Urban Water Consumption, 1990: Selected Cities (population over I million) and Some International (omparisons CITY Harbin Kunming - - (hongqing Jinan _ - Shenyang - Chengdu - - - - - - - - - - Wuhan ------Guangzhou ------CHINA (average) - - -_ Santiago Paris (suburbs) - - - Tokyo - - - (anada (average) _____ 0 100 200 300 400 500 600 700 CONSUMPTION I/c/d

4? ~ ~ ~ ~ sopi t

~1: WHAT IS BEING DONE?

n recent years, central and local authorities have enacted a comprehensive set of environmental laws, regulations and standards These measures emphasize preven- tion and are based on the principle that the polluter should pay The next step will be to strengthen environmental management, intensify pollution regulation enforcement, and improve tariff collection for all urban environmental services, to ensure sustainability To illustrate how the Government of China and the World Bank are collaborat- ing to overcome these problems, one could look at the cities of Beijing and Shanghai and urban development in the provinces of Liaoning in the north, and , south of Shanghai Liaoning Province has limited water resources Twenty-five million of its people live in or around cities, which have grown rapidly due to migration from rural areas Liaoning has become one of China's major industrial bases due to large reserves of iron ore, coal and oil The pressure on water resources is serious around the capital, Shenyang Here, an area which is less than one fifth of the province supports about 15 million people in the Hun River basin

A .;\ A numberfl 5' of, cities.1= .. in the river basin are major centers of industry, generating a signifi- __| : -cant proportion of national -- n,.*a , ^ 9 i industrial output This degree

-?ps -/ ^ P - of industrial activity, coupled

. with limited treatment of 9 wastewaters, imposes severe ~T h 7 t rs , on the5stress water environ- >- - - j Water1 t^ment supplies are t-' L w ¢sl Lta 1 critically dependent on two

-A 2;i-jt ,r 6 _ rivers, the river water quality fails to comply with national

L_____ - __ t .waterquality standards The situation is particu- larly acute in the case of cities such as Shenyang and Fushun, which are close to - 3~the headwaters of the Hun River The flows are con-

- ,| t _ _ trolled by operating multi- purpose reservoirs upstream

r3>F -!^ 7 1 l 1! 1- The pollution from these cities contaminates the river for considerable distances downstream because of the heavy pollution loads and re- stricted dilution When water resources close to cities are degraded with pollutants, water must be transported from more distant sources at substan- tially higher cost For example, in Fuxin, at the recently completed Bank-financed water supply

- j " svC> ',_#jproject, the intake and treatment plant are situated

iI. 1 ,, > . 1 . 49 . - ! o - w=. around 90 kilometers from the city The future intake will be even farther away

- and that means costs will . . . . be even higher.

PI e D Xn j tS '; , >, tIndustry uses most of the water in each city- typically about 70 percent of total consumption The '~..,. Province and the Bank are working together to solve the water quality problems in Liaoning by combining

- - s wastewater treatment with , _ . = recovery.. and reuse of treated wastewater Industry is being encouraged to &_ _ 4-i-conserve ' ^ 11water and improve - some of its processes

-' \ ^ through modernization.

/O IMPROVING URBAN INFRASTRUCTURE The city of Fushun will soon provide primary treatment to a substantial portion of its wastewater flows, which currently discharge directly into the river system After the project is implemented, 30 percent of the flows will be treated, this will significantly improve the water quality of the Hun River, the major source of agricultural, industrial and drinking water for the community In Benxi, another industrial city, most wastewater will be collected and treated by a new sewerage system At least another 10 percent of wastewater will be eliminated by improving the technology at a large steel mill Both of these measures will provide considerable improvements in water quality and environmental management

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OFV r- I Shanghai is another example of how the Govern- ment and the Bank are working together to protect and improve water quality and protect the environment. Safe wastewater disposal combined with locating Shanghai's main water supply intake in a low-risk location is essen- tial in order to enhance system quality and reliability. In Shanghai more than five million cubic meters of wastewater are produced every day. Ninety percent of it was being discharged into creeks and rivers before the municipal government started its program with Bank support. This situation is familiar throughout the devel- oping world, and in most other Chinese cities. Living standards are rising rapidly; when people move to new apartments, their circumstances change. Before, people had to fetch water from outdoor faucets; and there was the daily ritual of night soil buckets Their new lifestyle provides access to modern conveniences, including flush toilets, running water in the kitchen, and a mod-- ern bathroom-often with a washing machine.

All these facilities i increase the flow of domestic wastewater and pollutants. Watercourses A_ where sewage is discharged are interconnected with . . the , which supplies Shanghai's drinking water. The wastewater causes major environmental and ecological damage. Fish cannot live in much of the Huangpu River, and down- stream, shellfish have dangerously high pathogen levels which can cause serious illness when eaten. River tides drive pollutants upstream as far as the present intake for the city water supply. The Bank-supported program has focused on intercepting wastewater previously discharging into Creek (which flows through the city center) and financing the construction of a new water intake farther away from the city The objective is to raise the water quality in the river and canal system crossing the city and provide safe drinking water to residents The first phase of the program is already operat- ing A large diameter wastewater conveyor system intercepts effluent that otherwise would have gone into the canals and rivers and carries the wastewater to the River Driving the effluent is the Peng Yue Pu pump station-the largest in Asia-with eight pumps handling 40 cubic meters a second against a pumping head of 22 meters More pump stations and a pretreat- ment plant are located on the 33 kilometer journey to the outfall in the Yangtze River A second outfall is currently under construction It is an impressive sight with a one-and-a-half kilometer tunnel being constructed under the Yangtze River It has a diameter of more than five meters and will join up with the river 17 meters below the surface At this depth, the h discharged wastewater will be rapidly diluted and dispersed, making minimum impact on the environment The present water supply intake for Shanghai is located on the Huangpu River, just upstream of the city . center It is polluted and must be moved Under one of the projects, a new intake is being constructed some 30 kilometers farther upstream, at Da Qiao This intake will have a capacity of almost five-and-a-half million cubic meters per day It is designed to handle Shanghai s peak demand up to the year 2008 The design provides for a 50 percent expansion of the system Massive reinforced concrete culverts will convey the water to the underground intake pump house Most construction sites in China feature an astonishing combination of new and old technologies Work progresses at great speed An . e extensive below-ground raw water conveyor system

distributes the water to various treatment plants, from r , -i where it is finally distributed through metered connec- - -. tions to the 12 million consumers in Shanghai To ensure a better water supply for Shanghai, -- - .. one of the projects will clean and protect the upper catchment area Presently, cities, agriculture and indus- tries discharge wastes into many small creeks and rivers t :X ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~J

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4~~~~~~~~~~~~ It' ;*' an a i ~ K , fl r r,' j ^ this polluted water ultimately finds its way into the Huangpu River, upstream from the city's water intake. These wastes will now be intercepted and treated, a water quality laboratory has been set up to monitor water continuously at the river intake area and in the entire catchment area The water supply system under construction for Hangzhou City in Zhejiang province is another example of collaboration between the Government and the Bank The main components of this project include an intake and treatment plant on the An eight-kilometer transmission main leads to the city where it will supply metered water to the consumers

AIR POLLUTION REDUCTION There are serious air pollution problems in the city of Fushun In common with many cities in China, there are large concentrations of airborne particulates and sulfur dioxide, particularly in winter These problems develop when poor quality coal with high sulfur content is used to generate heat and electricity, and the problems are compounded by inefficient use of energy, lack of emission controls, and the discharge of pollutants close to ground level, particularly caused by the domestic use of coal When temperature inversions occur, atmospheric pollutants become trapped close to the earth's surface and create smog Air pollution is even worse in the city of Benxi in Liaoning Province, northern China, an important center for iron, steel and cement production The pollution is partly due to Benxi's location in a river valley surrounded by hills This topography produces temperature inversions that dramatically restrict the dispersion of the substan- tial quantities of air pollutants discharged by the local industries About seven million tons of poor quality coal are burned each year in Benxi, frequently causing it to be covered in a heavy gray smog The city disappeared from the satellite maps many years ago, and is only now starting to be visible The air quality problems here and in other cities of Liaoning Province are too severe to be solved soon, or at reasonable cost, by emission controls alone Reducing air pollution will require action at all stages-beginning with finding different sources of fuel The World Bank-supported Government program in Benxi has two main air- quality management components The first will virtually eliminate fugitive emissions from Benxi's four coke ovens and most pollution from two blast furnaces The second component of the Benxi project established a district heating company to deliver hot water to radiators in the homes of a quarter of Benxi's popula- tion Introducing district-supplied heating reduces pollution by enabling residents to replace their old and inefficient boilers and coal briquette stoves As urban renewal progresses, old neighborhoods with substandard heating, cooking and sanitation facilities will be upgraded Home owners will be given a modern apartment in ex- change for their former dwellings Replacing inefficient boilers and stoves in the old residences with district heating units will contribute to improving air quality The program will also eliminate 39,000 tons of highly polluted wastewater a day Similar activities are being undertaken in many other parts of China In Beijing, more than 20 million tons of coal are burned each year by domestic boilers and small stoves To reduce pollution, the Bank has assisted in financing a major part of Beijing's modernized district heating system One of the large power plants has been re-engineered to co-generate space heating and supply hot water, and a new plant has been constructed to supply heat during peak demand periods Together, these plants serve about 800,000 people in the western part of the city The long-term plan is to have district heating systems supply nearly all heating City-distributed or bottled gas will serve for cooking This gradual elimination of coal-burning devices has already substantially reduced pollution

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-~~~~~~~~E~ , Beijing has introduced a range of environmental management systems for reducing industrial pollution, including the "polluter-pays" principles of environmental management. Administrative sanctions and economic incentives are being used to encourage a change of practices and behavior The aim is to introduce clean .^ >technologies, practices and reduce the consumption of raw materials, promote energy efficiency, and minimize waste and the necessity for treatment In adopting these incentives at three of the most-polluting chemical plants, .__ a five percent increase in output resulted in a five I frpercent decrease in COD discharges The rehabilitation 5 of a major vinyl acetate plant, one of the major polluters in Beijing, was financed in part by a World Bank loan The Bank is also an implementing agency under the Montreal Protocol to help China phase out ozone depleting substances by year 2010. The Government is starting to implement new policies including the regula- tion of supply, and controls or bans on certain ozone depleting substances

Per Capita GDP and Energy Consumption, Low and Middle Income Countries, 1990 and China Baseline Energy Demand Scenario

6000-

* Romania 0 S000- * Poland * Hungary Venezuala 4000 -- South Africa 3000 - - 3000- China -2020 * Argentina * Korea

=2000 - -2000~ ~ (hina -2010 * Mexico China - 2000 oob Bai * Colombia * _ rai 1000- OhinaC -1990 Thiln * ~~~~Thailand * U. a 0- l 0 1000 2000 3000 4000 5000 6000 '.7 g 1 ; 1 ~~~~~-o - P& [ t-:

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,k >1.,,s, SOLID WASTE MANAGEMENT w.. -' {i tMunicipal and district governments and neighborhoods share responsibility for domestic solid waste collection ttz9 11 1 W t ~~and disposal services. People carry waste from their homes to neighborhood pickup points where it is collected between three and seven times a week While &*s+^ ii _ I - collection services generally are good, the sanitary disposal of municipal solid waste in urban China is i!_ - s . , S generally unsatisfactory Most is disposed of in

- _. .^ l _ unmanaged dumps on the fringes of urban areas where --- ?|sit contaminates aquifers and surface water Much indus-

-5 -- a trial waste is simply left in place Beijing is one of the municipalities that has .4~tl~ developed a solid waste management plan The World Bank is supporting the implementation 75 percent of solid waste will go to properly managed landfills, seven percent will be burned and the remainder will be dis- persed by other methods such as composting Containers

tNit*\j c ;,g, ^, <4sm 2 are loaded at a local collection point and then trans- . }= = ported to one of several major transfer stations Here the

-- X ^ _ -0 waste is dumped into storage bins, then loaded into special trucks and hauled to managed sanitary landfill sites These sites control leachate and methane gas emissions The total area of the landfill site is 72 hectares and Is able to receive 2,000 tons of refuse a day over a II1 I ~decadle - 4 1.- 4/ *'4k

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11,1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~P PROVIDING FOR PEOPLE'S NEEDS

inally, let's examine examples of support to urban development and important aspects in financing the sustained provision of urban services A number of Bank-supported projects also focus on improving the general living and working environment for urban residents Old neighborhoods are being upgraded with wider streets and improved services All projects take care to conserve and restore to use historic buildings and cultural heritage sites of importance City, in Zhejiang Province, is a good example of such conservation Ningbo's history goes back some 7,000 years, and in the old city, around Moon Lake, there are build- ings and temples of great historic significance A temple that was located in a right of way was moved to a new location by the lake In another case the alignment of the road was changed to preserve an ancient Buddhist temple Another aspect of urban renewal is resettling families from substandard and crowded housing lacking most facilities, to apartments in newly developed residential areas with all essential services In Ningbo, about 10,000 families were resettled into modern apartments during the transformation of the inner city In , another attractive and historic city close to Ningbo, additional features were added A com- plete satellite city for 30,000 people is being developed with Bank assistance in an area where farms and rice paddies previously existed Farmers are compensated for land used and have moved to modern apartments with all conveniences. Besides housing, the project includes an industrial park, office buildings, commercial estates and a sports arena Many joint venture manufacturers have already moved into these facili- ties, creating employment and economic growth Japan, Singapore and Taiwan are among the major investors here

World Bank Lending to China - Amount by Sector 9% 7% Education 1% Education 1% 16% 10% and Heolth TA 28% and Health TA Agriculture Urban and Agriculture 17% Environment Urban and Environment 12% Industry 24% Energy

Industry

18% Tr2nsportation Energy 25% Transportation Fiscal Years 1981-95 Fiscal Year 1995-96 K I

a- _ 1

$ entral to China's provision of urban environmental services and the World Bank's involvement in the sector, has been the support through these programs and projects for recovering the cost of service provision. Tariffs are charged and increased as appropriate and consistent with national policy, aiming to meet affordability criteria, while encouraging the sustained financial viability of the services. These important practices are being implemented nationwide.

MANAGING THE ENVIRONMENT. SUSTAINING THE ECONOMY China has embarked on an ambitious but urgently needed program with World Bank support to save its cities from the environmental problems associated with rapid economic growth. The way in which China responds to the tremendous challenges it faces will significantly affect the well-being and long-term prosperity of its people. C

Amr,77- - CHINA AT A GLANCE

POVERTY and SOCIAL East Low- China Asia Income Development dbamond Popubtion mid-1995 (mnllions) 1,211.2 1,709 3.188 GNP per capita 1995 (USS) 620 830 460 Ufe expectancy GNP 199 (billions USS) 751.0 1,418 1.466 Average annual growth, 1990-6I Popultion (9) 1.2 1.3 1.8 Labor Worce%) 1.1 1.4 1.8 GNP Gross Most recent estimate (Ialest year available since 1989) capita enrollment Poverty headcount index (%ofpopulatbon) 11 Urban popubtion (%of lotal population) 30 31 29 Life expectancy at birth (years) 69 68 63 Infant mortality (per 1t000 the bIrihs) 29 36 58 Child malnutrition (%of chlkren under 5) 17 17 38 Access to safe waler Access to safe water (%ofpopulaton) 83 77 75 Illiteracy (%opopulatIon age 15+) 19 17 34 Gross pimary enrollmenlt (%dschool-age popula"on) 118 117 105 Matle 120 120 112 Cia -Lwrm iu Female 116 116 98

KEY ECONOMIC RATIOS mindLONG-TERM TRENDS 1976 1986 19S4 1996 Economic rmsow GDP (billions USS) 160.3 304.9 540.9 697.6 Gross domestic investment/GDP 30.3 37.8 39.9 40.5 Exports of goods and non-factor serviceslGDP 5.2 9.9 22.0 21.0 Openness of economy Gross domestic sangsiGDP 30.6 33.7 41.2 42.0 Gross national savingslGDP 30.6 34.0 41.2 40.5 Current account balancelGOP -0.2 -3.9 1.3 0.2 tnterest paymentlrGDP o 0.2 0.7 7 Savings Investment Total debt/GDP 5.5 18.6 16S.9 Total debt servicelexports 8.3 8.9 9.9 Present value of debUGDP 15.8 Present value of debt/exports 68.5 Indebtednesss 197644 1986-95 1994 1996 199644 (average annaud growth) GDP 7.7 9.6 12.6 10.5 8.5 China - Low-ncomnegroup GNPpercapita 7.1 8.0 11.3 7.9 7.8 Exports of goods and nfs 17.9 13.3 28.1 9.6 8.5

STRUCTURE of the ECONOMY 1976 1986 1994 1996 Growthrs of output and Investhn (%) (%of GDP) Agriculmure 32.0 28.4 20.3 20.6 2A Industry 42.8 43.1 48.0 48.4 20 . Manufacturing 31.6 35.4 37.6 37.6 1_ Services 25.2 28.5 31.7 31.1

Pdvateconsumption 61.9 53.1 45.9 45.7 90 91 92 93 94 95 Genera government consumption 7.6 13.2 12.8 12.2 GD1 GDP Imports of goods and non4actor serices 5.0 14.0 20.6 19.4

(average annual growl/i) 1976-4 1986-6 188 1996 Orowth rats of exports and ImportB (%)

Agriculure 5.1 4.2 4.0 5.0 40 Industry 10.0 12.8 18.4 14.1 30 Manufacturing 13.1 12.3 18.4 13.3 20 Services 8.8 9.4 9.3 7.9 10

Private consumption 7.3 8.3 9.7 6.3 D General govemment consumption 8.5 9.5 7.8 -1095 Gross domestic investment 8.9 9.7 10.5 19.1 -20 Imports of goods and non-factor services 21.1 9.0 9.3 5.0 Expat - tnpo Gross national product 8.5 9.5 12.6 9.0

Note: 1995 data are preliminary estimates. The dIamonds show four key Indicators in the country (in bold) compared with its income-group average. n data are missing, the diamond will be Incomplete.