Analysis & Reviews

China's Economy - Linear to Circular

China’s Economy: Linear to Circular

Circular Economy Close Loop

 

Forget about the linear and resource-heavy “take, make & dispose” economic model and move towards a “reuse, refurbish, recycle & remanufacture” circular economy, according to the Chinese government. The underlying rationale is straightforward; with depleting resources and ever increasing consumption, business as usual is not an option.

As China moves towards a circular economy opportunities are abound for companies willing to take the leap. For those who will fail to do so, the future may not be so bright. Here is why and how China is undertaking this transition towards a circular economy.

No choice but to move towards a circular economy

The need to align economy & environment was highlighted in a preparatory document for the 2014 Central Economic Work Conference, according to which China “is reaching the upper limit of its environment carrying capacity” (more on this here).

Reliance on resource intensive industry is no longer an option

Wastes & pollutants are harming the environment and many resources are being depleted faster than renewed. Clearly, traditional reliance on resource intensive industry and a throw-away economy is no longer an option, especially considering China’s plans to boost domestic consumption.

In addition, a soaring middle class will likely increase demands for new goods and services. Indeed, as shown in the chart there is a strong correlation between economic growth and material consumption. The aggregated consumption of fossil fuels, metal ores, minerals and biomass increases with affluence, as expressed in GDP per capita.

A soaring middle class will increase demands for new goods & services as shown in the chart right

Resource Consumption Economic Growth

 

 

 

 

 

 

Given the inherent limits of many resources (including water), the way economy has been developing so far is unsustainable. The government has realised this, hence its actions to go circular.

China’s steps to a circular economy

In 2009, China was the third country in the world to enact a law on Circular economy promotion, after Germany and Japan (see here - Chinese only). China’s strategy was further detailed in 2013 with the ‘Circular Economy Development Strategies and Action Plan’ that detailed three levels of a circular economy:

  • within a company;
  • within industrial parks; and
  • at the city/region level.

We spoke to this in our article, “8 Game-Changing Policy Paths in February 2015 but given that the more recent ‘Circular Economy Promotion Plan for 2015’ further details actions and targets, we decided to expand on how China intends to use resources more efficiently and to better manage resources & waste in industry, agriculture and cities.

Ten Sectors Circular Economy in ChinaTen industrial sectors invited to ‘close the loop’

Ten industrial sectors have been prioritized by the State Council to initiate circular transitions, these are: Coal, Power, Steel, Nonferrous Metals, Petroleum & Petrochemicals, Chemicals, Building Materials, Paper, Food and Textile (more in “China’s Pursuit of Energy Savings“).

In this transition, industries are invited to ‘close the loop’ through reusing, recycling and remanufacturing products. By reintroducing old products and wastes into the supply chain, resource pressure & pollution are reduced.

Industries can ‘close the loop’ by reusing, recycling & re-manufacturing…

Reduction of material use globally can save up to USD1 trillion p.a.

On top of this, it is economically justified.

For instance, the reduction of material use globally could save up to USD1 trillion per year by 2025. Going circular is also a way for businesses to reduce supply risks and their exposure to price volatility of resources. 

See circular economy plans for the textile sector here and for the Coal, Power and Steel sectors, please see Chapter 5: Battle to Conserve Energy in our report here.

It’s worth highlighting that the loop to be closed can encompass more than a single industrial sector. Indeed, much potential lies in the synergies between different industrial sectors. In this view industrial parks are the most suitable place for tapping such potential.

The key role of industrial parks

Report IISD

The latest report “Development of Eco-Efficient Industrial Parks in China: A review“ published by the International Institute for Sustainable Development (IISD) shows that there were almost 1,600 industrial parks in China by 2014. In 2013, the 215 national Economic and Technological Development Zones and the 114 High-Tech Industrial Zones accounted for 41% of the national Industrial Added Value (IAV)1. Clearly, no transition towards a circular economy could be achieved without industrial parks’ participation and commitment.

As early as the end of the 1990s, China initiated three eco-efficient programmes for industrial parks. The programme led by the National Development and Reform Commission (NDRC) is even called ‘Circular Transformation of Industrial Parks’As shown in the chart below, a growing number of them are joining one of these eco-efficient programmes. However, they remain in the minority.

… a growing number of them [industrial parks] are joining one of these eco-efficient programmes…

…however, they remain in the minority

Eco Efficient Industrial Parks China

 

 

 

 

 

 

 

 

 

In order to receive the eco-efficient certification (and sometimes associated subsidies), industrial zones are required to use and reuse resources more efficiently. The example of the Tianjin Economic Development Area (TEDA) shows us how industrial zones can meet these requirements.

Synergies can be tapped by combining a wide range of practices across industries – TEDA example

TEDA is a compelling example of both severe challenges and innovative solutions. One of the biggest industrial zones in China, it faces both a freshwater resources challenge (water shortages, limited groundwater and sea water intrusion) and an aquatic environment degraded by excessive wastewater discharge.

With proper coordination among the different bureaus, the zone succeeded to initiate remedial measures: quotas and progressive tariffs for freshwater resources, preferential price for reclaimed water, obligation to install and operate reclaiming water systems for new large-scale businesses, shared infrastructures such as wastewater reclamation and treatment facilities, cogeneration plant, steam and water pipes’ network, ISO 14001 certification, information disclosure, capacity building, experience sharing and so on. The chart below (click to enlarge) illustrates the water distribution/reusing/recycling network that has been developed in the zone:

Water Network TEDA

The achievements are substantial

e.g. industrial water reuse rate has stabilised above 87%

The achievements are substantial: the water reclamation network now covers the whole area and the reuse rate of industrial water has been stabilised above 87%. Freshwater consumption and wastewater discharge per unit of Industrial Added Value were reduced by 21% and 33% respectively within three years (2009-2013). In addition, COD discharge levels are three to four times lower than required.

But TEDA’s circularity goes beyond water – waste is also reused: flour scraps from instant noodle production are sold to nearby pig farms, starch scrap is used in the production of coal briquettes, aluminium scrap from automotive industry is transferred to an aluminium melting factory and lead waste is recycled to mention but a few.

Other zones such as those in Suzhou, Rizhao, Linyi, and Zhangjiagang are also achieving similar improvements. All these actions pave the way for better integration of industrial processes and better use of China’s scarce water resources.

However, innovation shouldn’t be confined to technology.

Breakthroughs beyond technological improvements required for true circular transition

The required innovations in transitioning to a circular economy go beyond new and more efficient technologies; practices need to radically change as well. Examples of new practices include:

  • Extending the producer responsibility to the entire life-cycle of a product, including its recycling: if properly set up, this so called ‘Extended Producer Responsibility’ creates strong incentives for more eco-responsible design;
  • Selling services rather than products, thereby creating incentives for long-lasting products and refurbishing; and
  • Develop the sharing economy in order to get more service from fewer products.

Opportunities clearly lie ahead but radical change needed in the way corporates do business and also in the way consumers consume

 

Clearly opportunities lie ahead for China to move circular and take the lead in such innovations. But can the circular economy solve China’s pollution and resources depletion? Is it the long sought-after solution to reconcile the economy & the environment?

For this to be true, circular transition needs to be more than a catchy slogan; it needs to go beyond mere process efficiency improvements. Real breakthroughs are required – not just in the way corporates do business but also in the way consumers consume. We all play a part; our attitude towards consumption also needs to go circular. Thanks to Redress’ work, this could start by the way we dress ourselves.


Disclosure: Prior to joining China Water Risk, Hubert Thieriot collaborated with the International Institute for Sustainable Development (IISD). He is the leading author of the aforementioned IISD report: Development of Eco-Efficient Industrial Parks in China: A review, 2015.


1 CWR estimations, considering only secondary industry and excluding construction

Further Reading

  • Made in China 2025: Are You On The List? - How does the new Made in China 2025 Action Plan fit with other ‘Future China’ plans? Are the ten industries in Made in China 2025 the same as the Circular Economy Ten? Find out why which list matters
  • 8 Game-Changing Policy Paths - There has been a fundamental shift in planning China’s future growth with changes in regulatory landscape due to multiple polices set & changes in law. Many come into full effect in 2015. Get on top of these
  • China’s Pursuit of Energy Savings - Our report “Towards A Water & Energy Secure China” shows that billions of cubic metres of water can be saved via energy savings. See why China has no choice but to pursue this strategy
  • Water Ten: Comply Or Else - China’s new Water Ten Plan sets tough action on pollution prevention & control. While this is good for the water sector, less obvious is who or which sectors will be impacted. China Water Risk’s Tan on why China is serious about its fast & furious pollution reforms to propel China to a new norm

Textiles going circular

  • Water Ten & Fashion: 8 Reasons to Leap or Fall -China Water Risks’ Hu shares 8 reasons why China’s Water Ten is actually an ultimatum for textiles to leap or fall. They need to decide which soon, as there is only two to three years before the paradigm shift
  • Putting Waste Back Into Fashion - China is clamping down on textiles due to the heavy pollution & waste from the industry. With potential new revenues streams in recycling, hear from Redress CEO Christina Dean on how the EcoChic Design Award’s army of sustainable designers is closing the loop on textile waste
  • Clean by Design: Gaining Traction - Many factories look to MNCs to help address environmental issues that have arisen from textile production but there is scant on ground corporate engagement by brands. See how NRDC’s ‘Clean By Design’ textile mill programme in China has achieved stellar results despite this. NRDC’s Linda Greer expands
  • On Being Water Conscious in Textiles - Zhao Lin from Solidaridad expands on the Better Mill Initiative (BMI) and provides solid business cases in water savings for the textile sector. See how water & energy savings can result in sustainable & financially viable gains with short payback periods
Hubert Thieriot

About Hubert Thieriot

Hubert’s focus at China Water Risk is the water-energy nexus. Realising China’s pivotal role in global resource management and climate change mitigation, Hubert moved to Beijing in 2012. During his two years in the capital, he conducted research for the International Institute for Sustainable Development as well as the Chinese Institute of Engineering Development Strategies (CIEDS) on international energy efficiency policies, low-carbon policies and China’s future trends including the circular economy. At the same time, Hubert also pursued a Master of Public Administration at Tsinghua University’s School of Public Policy & Management. Prior to Beijing, Hubert spent several years researching & lecturing on clean & renewable energy and industrial energy efficiency at institutions such as Mines ParisTech, the Swiss Federal Institute of Technology of Lausanne (EPFL) and Huazhong University of Science & Technology. Hubert has multiple publications on design optimization in industrial energy efficiency and hails from an engineering background with a MSc in Mechanical Engineering.

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