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Why Infrastructure Doesn’t Have to Cost the Earth

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Here’s a statistic: 75 percent of the infrastructure that will be required globally in 2050 has yet to be built. That sounds daunting, but the truth is more encouraging because it presents us with a critical opportunity.

Asia and the Pacific has seen outstanding development and growth over recent decades, but that has come at a cost. Scientists say that some 1 million animal and plant species may become extinct, many within decades. We have also lost nearly half of our coral reefs and mangroves.  

Rapid urbanization, along with agriculture and infrastructure expansion, have severely degraded our land, soil, freshwater, and oceans. This compromises our vital ecosystems, which has significant consequences for the livelihoods and food security of local communities and the stability of our climate. 

And yet, for Asia and the Pacific, where almost 1 billion people still live in poverty, the demand for development—and the economic potential that goes with it—remains. And so we have an opportunity: an opportunity to not only develop investment and infrastructure that lowers poverty and improves living standards, but in a way that also protects, sustains, and regenerates our environment. 

Getting this balance right is now at the heart of what the Asian Development Bank is doing. In 2018, we launched Strategy 2030, a blueprint for eradicating extreme poverty that will, among other things, ensure that eco-sensitive project planning and design is a part of our sustainable infrastructure development. 

ADB has three key principles for ensuring we do so. 

Firstly, to strategically work with nature, infrastructure policies and plans must fully consider any impact on the environment at the early stages of development. This requires incorporating the value of natural ecosystems, as well as the social and environmental costs of losing them, into the planning process. 

ADB is piloting this approach in the planning of New Clark City in the Philippines—a new eco-friendly urban center that will one day accommodate more than 1 million people—and through multisector planning for Pakistan’s Ravi River basin, which is suffering from heavy pollution from urban, industrial, and agricultural waste. This approach involves assessing biodiversity and ecosystem services at an early stage in planning, so that we can integrate the protection and restoration of natural habitats it into the design. This creates a safe space for nature.  

Secondly, ADB is using nature-based solutions to improve climate and disaster resilience. These can be applied to a wide range of infrastructure types and sectors, such as water, urban, transportation, and agriculture. 

For example, nature-based solutions can be applied toward flood-risk management. This includes investing in “green” measures such as watershed protection, bio-retention ponds, improved land use planning, and better building regulations. These measures can be applied in combination with traditional “gray” engineering solutions, such as through the construction of stormwater drainage systems. 

For instance, ADB is supporting a project in Jiangxi province in the People’s Republic of China, which uses what has been referred to as a “sponge city approach” for integrated flood risk management and wastewater treatment. The project integrates the use of forests, wetlands, and river rehabilitation to increase water infiltration and manage the flow of storm water through the city. Acting like a sponge, these measures can soak up excess water, reducing flood risks and minimizing a city’s impact on the water cycle. 

Lastly, to safeguard nature, we must incorporate biodiversity conservation and restoration into the detailed design of infrastructure projects. This is critical given that 25 million kilometers of roads are expected to be built worldwide by 2050—enough to circle the planet 625 times. Ninety percent of the investment is expected to be in developing countries, with an estimated $7.8 trillion in transport infrastructure needed in Asia and the Pacific between 2016 and 2030. These investments could have severe ecological impacts if not planned well, due to the loss and fragmentation of natural habitats, as well as increased access and poaching of endangered species such as tigers and orangutans. 

We can avoid and minimize these types of impacts in several ways, such as by ensuring that landscape-wide biodiversity studies are married with infrastructure planning, and by incorporating wildlife corridors into project design to provide safe passage for animals. 

For example, in the southern region of Bhutan, ADB designed four wildlife underpasses so that migration routes for elephants would not be affected. These allow wildlife to move safely under the road to reduce collision risks and ensure that access to different habitats can be maintained. Such measures take careful planning and design—with engineers and ecologists working together—and a commitment to long-term management and monitoring to ensure that they work effectively. 

The infrastructure needs of the Asia-Pacific region are immense. But with this approach, ADB and others in the development and investment community can ensure that progress doesn’t cost the earth. 

ADB

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Economy

Warning Signs in China’s Economic Outlook as COVID-19 Spreads

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New variables both within and outside of China in 2022 have placed the country’s economy under new pressure. In the first quarter, its economic growth rate was only 4.8%, which was 0.7 percentage points lower than the annual economic growth target of 5.5%, indicating that it will face challenges in stabilizing economic growth this year. Judging from the economic performance of various sectors in the first quarter, there have been some noteworthy risk signals in the country’s domestic economy. Among them, the Yangtze River Delta and the Pearl River Delta, the two largest regional economic pillars in China, have shown signs of slowing down in economic growth.

According to the data released by the Shanghai Municipal Bureau of Statistics, the GDP of Shanghai in the first quarter was RMB 1 trillion, a year-on-year increase of 3.1%. From January to February, the city’s economic operation began rather smoothly, yet in March due to the obvious impact of the COVID-19 pandemic, the growth rate of some economic indicators slowed down. In the first quarter, the added value of Shanghai’s industrial enterprises above the designated size increased by 3.9% year-on-year, 8.0 percentage points lower than the growth rate from January to February. The total sales of goods increased by 2.0%, and the growth rate dropped by 4.1 percentage points. The total investment in fixed assets increased by 3.3%, and the growth rate dropped by 9.3 percentage points. Meanwhile, the total retail sales of consumer goods changed from an increase of 3.7% in January to February to a decline of 3.8% in the first quarter. The total import and export of goods increased by 14.6%, and the growth rate was 7.4 percentage points lower than that in January-February.

On the other hand, according to data from the Guangdong Provincial Bureau of Statistics, the GDP of Guangdong in the first quarter was RMB 2.85 trillion, a year-on-year increase of 3.3%. The added value of industries above the designated size was about RMB 0.98 trillion, a year-on-year increase of 5.8%. Fixed asset investment increased by 6.2% year-on-year; total retail sales of consumer goods up 1.7% year-on-year; and total import and export of goods rose by 0.6% year-on-year. In terms of finance, in the first quarter, Guangdong’s local general public budget revenue was about RMB 0.35 trillion, a year-on-year increase of 1.4%. Local general public budget expenditure has increased by 8.7%.

In the Chinese economy, the two provinces of Shanghai and Guangdong have a unique and important position.

Shanghai is not only highly crucial in China’s urban economy, but also leading the Yangtze River Delta region as well. In 2021, its GDP was RMB 4.3 trillion while the GDP of the whole of China was RMB 114.4 trillion. The total GDP of the 41 cities in the Yangtze River Delta region was RMB 27.7 trillion, accounting for 24.2% of the national GDP. There are 24 cities in the country with a GDP exceeding RMB 1 trillion, and there are 8 cities in the Yangtze River Delta (Shanghai, Suzhou, Hangzhou, Nanjing, Ningbo, Wuxi, Hefei, Nantong) accounting for one third. Shanghai is also one of the most internationalized cities in China, which also functions as the country’s center of international economy, finance, shipping, and trade. In addition, the city also proposes to build a global science and technology innovation center.

Guangdong is China’s largest province in terms of economic scale. Its GDP in 2021 was RMB 12.43 trillion, an increase of 8.0% over the previous year. In terms of sub-regions, the GDP of the core area of the Pearl River Delta accounted for 80.9% of the province, while the eastern and western parts, as well as the northern ecological development area accounted for 6.2%, 7.0%, and 5.9% respectively. The Pearl River Delta region is also the main body of the Guangdong-Hong Kong-Macao Greater Bay Area. In 2021, the total economic volume of the Greater Bay Area was about RMB 12.6 trillion. There are 25 of the world’s top 500 companies in the region, and it has over 60,000 high-tech enterprises, most of which are located in the Greater Bay Area. As of the end of 2021, there are 5 cities with a GDP of trillions in the Guangdong-Hong Kong-Macao Greater Bay Area, with a combined GDP of RMB 10.56 trillion.

It is precisely because of the important position of Shanghai and Guangdong in the country’s economy that their signs of a downturn in the first quarter this year are worthy of attention. These two provinces represent the development of the Yangtze River Delta and the Pearl River Delta respectively to a considerable extent. If there are issues in their economy, it would signify that China’s twin pillars in the most economically developed coastal areas will not be able to support the whole nation’s economy. If this happens, there will undoubtedly be a huge negative impact.

Looking back at the economic development of Shanghai and Guangdong in the first quarter of this year, the impact of the pandemic is clearly seen. In Guangdong, this is mainly due to the COVID-19 outbreak in Shenzhen in March. As Shenzhen acted quickly, and after locking down for a week, the outbreak has been brought under control and the city reopens subsequently. The situation in Shanghai is much dire. It has been a month since different urban areas are under lockdown and the city has been completely closed off in April. Based on the economic scale of Shanghai in 2021, the average daily GDP of Shanghai is about RMB 11.8 billion, and the average monthly GDP is about RMB 360 billion. If the lockdown of Shanghai continues, its economy will be enormously affected.

It should also be pointed out that with the current measures and policies against COVID-19, various areas have also seen the systematic suspension of many economic activities, especially the shutdown and interruption of logistics systems. This, in turn, has resulted in the obstruction of the flow of economic elements. This situation is still quite severe, where localized shocks in the economy are spreading or spilling over to other regions through obstruction of transportation and logistics.

As COVID-19 continues to hit Shanghai, the authority’s goal of “dynamic clearing” still faces major challenges. However, judging from the pressures China’s economy is facing this year and the development tasks it is currently undertaking, the country needs to pay more attention to economic growth in its balancing of pandemic control and the economic goal. As emphasized by China’s Central Economic Work Conference at the end of last year, “stabilizing the macroeconomy is not only an economic issue but also a political one”.

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G7’s potential should be utilized positively

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UK Government / flickr (CC-BY-ND 2.0)

The G7 Foreign Ministers of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States of America, and the High Representative of the European Union, have met in a fundamentally changed strategic and security environment. The Russian-Ukraine issue was dominating in their deliberations. As this issue has a direct regional and global impact, it was expected to remain a core issue during the G7 discussions.

G7’s share in global wealth, resources, and political influence is domination. They have been contributing to geopolitics a lot and possess the capability to transform the whole world into a better place to live.

G7 understands its potential and global responsibilities. So during the meeting, almost all burning issues were discussed:-

The climate crisis is accelerating and threatening the very existence of humanity. Together with the international community, G7 must act decisively and urgently. It reaffirmed the belief in international solidarity and the need to mitigate and overcome this existential, human-made threat.

The fight against COVID-19 and its global consequences is far from over. It is paramount to reaffirm our commitment to increased efforts to respond to the pandemic and to prevent a similar threat from emerging again. Equitable access to and provision of vaccines, therapeutics, and diagnostics must go hand in hand with immediate support, especially in critical ’last mile’ contexts, and with a focus on humanitarian efforts as well as opportunities for green, inclusive and sustainable recovery from COVID-19.

The present and the future of this planet are at stake. Based on a strong sense of unity, the G7 is determined to uphold our values and defend our interests. It commits to preserving strong, vibrant, and innovative societies and upholding the rules-based international order to protect the rights of all, including the most vulnerable. It commits to engage with partners and multilaterally for a peaceful, prosperous, and sustainable world, and to increase coordination on economic security.

Iran, North Korea, Palestine-Israel, Sudan etc., most of global issues were also discussed. China remains important during their discussions. Regarding China, the G7 declared its strong statement. In response to it, the Chinese authorities have expressed deep concerns;

China on Monday urged the Group of Seven (G7) to stop smearing China and interfering in China’s internal affairs. Foreign ministry spokesperson Zhao Lijian made the remarks at a daily news briefing when asked to comment on the communique issued by a G7 meeting of foreign ministers, which contains various items relating to China including Hong Kong, Xinjiang, human rights, maritime issues, the situation in Ukraine, peace, and stability across the Taiwan Strait, among others.

“China’s positions on issues relating to Hong Kong, Xinjiang, and Taiwan, as well as maritime issues, are consistent and clear,” Zhao said, adding that China has expressed its firm opposition to the G7 presidency.

“The lengthy G7 communique is filled with preposterous allegations not even worth refuting. In total disregard of China’s solemn position and objective facts, it grossly interferes in China’s internal affairs, maliciously slanders and smears China, and once again exerts pressure on China using such pretexts as the Russia-Ukraine conflict,” Zhao said.

China urges the G7 to uphold the international system with the United Nations at its core, international order based on international law, and the basic norms of international relations based on the purposes and principles of the UN Charter, Zhao said. He called on the G7 to respect China’s sovereignty and to cease slandering China and interfering in China’s internal affairs in any form.

“We urge the G7 to act in the interest of world peace and development, stop applying double or multiple standards, stop sending military aircraft and warships to other countries’ doorsteps to flex muscles at every turn, stop wantonly instigating color revolutions in other countries, stop arbitrarily resorting to illegal sanctions or long-arm jurisdiction, and stop fabricating and spreading lies and rumors about China,” the spokesperson said.

He also urged the G7 to assume its responsibility, fulfill its due international obligation, safeguard true multilateralism, focus on global governance, strengthen cooperation with the UN, G20, and other multilateral mechanisms, and play a positive role in addressing global challenges and promoting world economic recovery, instead of clinging to the Cold War mentality and ideological bias, pursuing “small clique” group politics, creating confrontation and division, and bringing chaos to the world.

As a matter of fact, G7 controls the major portion of resources, economy, and trade. It possesses the potential to transform the whole world into a better place to live for everyone. It has the capacity to resolve any outstanding issue being faced for as long as several decades, like Palestine, Kashmir, etc. G7 may utilize its capabilities to save humankind and the total welfare of human beings. Bashing, threatening, and coercion, will complicate the situation further and may harm humanity. G7’s potential should be used positively.

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China’s Policy Logic and Economic Rationale

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Authors: He Jun and Wei Hongxu

Recently, Morgan Stanley mentioned that “we are standing at an important turning point in China’s economy and capital market. The resetting of the underlying logic of the economy brought about by the new goals is marked by the supervision of Internet giants. China is changing the underlying logic of economic development: shifting from priority growth to fairness”. In their view, this policy orientation, coupled with Chinese economic rationale, will have a long-term and far-reaching impact on China’s future development, business, and investment.

Since economic rationale is a part of social phenomenon, the fundamental basis of economy logic also lies in changes in demographic factors. Although human factors are crucial in economic activity, they are often overlooked due to the long-term and individual nature of changes in population quality and scale. On the contrary, industrial development and policy choices pay more attention to changes in external factors such as cost, technology, and capital. However, the underlying logic changes caused by demographic shifts are often decisive and could serve as the basis for corporate decision-making and macro-policy.

China’s transition from a high-growth era to high-quality diffusion shows that the underlying foundation of the country’s economic development has changed fundamentally. From the demand side, the past trend of counting on exports and investment as economic drivers will soon become obsolete. At the same time, driven by continuous investment on the supply side in the past, the steady growth of production capacity not only conforms to domestic demand, but also the subsequent expansion of exports has also turned China into the world’s factory, resulting in excess production capacity. After its rapid development, internal contradictions continue to accumulate, resulting in a widening gap between the rich and the poor, excessive collection of environmental resources, declining investment returns, and rising labor costs in the country. These factors have deprived China’s economy of its potential for scale expansion. On this basis, China’s economy began to turn inward. Upgrading value content and output efficiency have become the key to improving its industrial productivity and competitiveness.

From the underlying logic, China’s population structure is undergoing a trend adjustment. The declining share of labor force driven by continuous urbanization and the rural population transfer has alternated labor supply. The low-end labor force has now become relatively insufficient, while the industrial labor costs continue to rise. This makes cost-push expansion increasingly onerous. On the other hand, with the development of urbanization to a certain stage, rising land prices, housing, and education costs begin to erode the spending power of households, causing an increasingly inadequate domestic demand. These two aspects are eroding the long-term growth potential of the Chinese economy. The recent drop in China’s economic growth rate is not only caused by cyclical factors driven by demand, but also by structural factors at the supply side.

In terms of policy trends, whether it is the “13th Five-Year Plan” poverty alleviation, or the current policies on common prosperity and unification of the large market, the fairness of these supply-side structural reform policies is being strengthened. The purpose is to enhance the contribution of science and technology and human capital to the economy. By increasing household income and spending power, China’s economy can achieve endogenous economic growth. Despite increased macroeconomic pressures and the need for countercyclical policies, macro foundation has yet to change significantly. The focus remains on decisive regulation and quality improvement, which is the logic of the policy change.

While implementing the supply-side reform, the Chinese economy still needs to improve the structure of supply through incremental expansion to achieve a balance between efficiency and fairness. Morgan Stanley revealed that, on the one hand, the efficiency improvement brought about by digital industrialization is the main area for China’s future market expansion. On the other hand, further urbanization still has great significance in the market space. These two aspects will be the main essence of China’s economic growth in the future, and therefore the focus of policy support and catalyst. Overall, under the new underlying logic, increasing households’ income, reducing class gaps, and increasing the output of capital and labor would be the main lines of sustainable development in the future. This pattern suggests that economic expansion has become relatively less important in policymaking. As noted by Morgan Stanley, China “is shifting its regulatory priorities to a balance between growth, sustainability, improving social imbalances, and maintaining security. This will shift the division of economic benefits to workers and reduce corporate profits”.

Yet, the policy-oriented changes under this underlying logic could be precarious. Due to the dominant role of government policies in market supervision, education, transformation of scientific and technological achievements, as well as the allocation of public resources, the impact of policies on economic and market development is getting more pronounced. For the industry and market players, future development must consider even more policy influences. At present, education and the consolidation of internet platform companies have had a significant impact on related fields and investors. Concernedly, as policy influence continues to expand, so do the risks posed by policy excesses. Although the current policy does not emphasize “one-size-fits-all” but rather “precise regulation”, it is often strenuous to achieve “moderate” and “balance” in the current policy implementation capacity. Meanwhile, the risk of excessive supervision continues to cause harm to economic activities. Therefore, under the expanding policy influences, policy decision-making should be more cautious to prevent harm or excessive intervention in the market and economic activities.

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