switzerlanden
Beautiful China: the war on pollution

Beautiful China: the war on pollution

23-08-2018 | Insight

China’s unparalleled growth over the past decades has come at a price: pollution. The government has made fighting it one of its prime objectives. Its aim of a Beautiful China ties in with other strategic goals, including global leadership in electric vehicles and technological innovation.

  • Jie Lu
    Jie
    Lu
    Head of Investments China

Speed read

  • Environmental reform is a key objective for China
  • The government has taken large-scale measures, which appear to be effective
  • China’s clean energy investments present opportunities for (sustainable) investors

At the latest National People’s Congress in March 2018, China’s leaders announced a 19% increase in spending to curb pollution, to an amount of RMB 40.5 billion (USD 6.4 billion). One of the aims is to cut sulfur dioxide and nitrogen oxide emissions by 3% in 2018.

Serious measures

As of 1 January 2015, the New Environmental Protection Law has significantly increased corporates’ pollution cost because of the high penalties that are being enforced. As of May 2017, the Central Environmental Inspections team had imposed 15,586 penalties to a total amount of RMB 775 million. Corporates’ environmental investments have increased to up to 13% of total investments.

Last winter, factories were required to cut their output capacity by 50% on heavy pollution days, and millions of households and industrial shops were ordered to switch their heating systems from coal to electricity in an effort to reduce toxic emissions. In 2018, the country aims to convert another 4 million homes to natural gas or electricity. The government has closed polluting factories and has set up a special police force. This year, it has expanded environmental inspections to more cities and regions in a new round of checks that will be executed until April 2019, as part of a three-year anti-pollution plan.

The environment reform isn’t limited to improving air quality. China has stopped accepting other countries’ plastic and paper trash as well, in response to public concern over pollution and a decreased need for scrap materials.

A match with other strategic goals

The war on pollution tallies with many other Chinese objectives. Its focus on environmental reform and technological innovation has made it the global leader in electric vehicles, to name but one result. Robeco Chinese Equities holds several stocks with direct exposure to the electric vehicles theme, i.e. car manufacturers, or indirect exposure, such as battery producers.

China also takes up an important role in clean energy. Throughout the world, solar panel prices are falling, as China is investing huge amounts in clean energy. China invests more than double the amount of the US and two-thirds of solar panels are produced in China1. This offers interesting investment opportunities to (sustainable) investors. In addition to wind and solar energy, China is looking into new clean energy technologies such as hydrogen. Finally, China’s supply-side reforms, aimed at cutting excess industrial capacity, also help clean up the environment.

Source: U.S. Department of State Air Quality Monitoring Program, China Customs

As the biggest polluters are state-owned, government efforts to reduce concentrations of the smallest polluting particles have been effective. The Chinese government states that heavy air pollution days in key cities are down 50% over the past five years. Last year, Beijing’s average daily concentration of PM2.5 particles – tiny particles in the air which, in large concentrations, pose a risk to people’s health – was almost a third lower than in 2015, compared with declines of around a tenth for some other major cities. As growth accelerated to 6.9% over 2017, there’s no sign so far that the war on pollution comes at the expense of economic growth.

1 Source: Bloomberg New Energy Finance

Subjects related to this article are:
Logo

Disclaimer Robeco Switzerland Ltd.

The information contained on these pages is for marketing purposes and solely intended for Qualified Investors in accordance with the Swiss Collective Investment Schemes Act of 23 June 2006 (“CISA”) domiciled in Switzerland, Professional Clients in accordance with Annex II of the Markets in Financial Instruments Directive II (“MiFID II”) domiciled in the European Union und European Economic Area with a license to distribute / promote financial instruments in such capacity or herewith requesting respective information on products and services in their capacity as Professional Clients. 

The Funds are domiciled in Luxembourg and The Netherlands. ACOLIN Fund Services AG, postal address: Affolternstrasse 56, 8050 Zürich, acts as the Swiss representative of the Fund(s). UBS Switzerland AG, Bahnhofstrasse 45, 8001 Zurich, postal address: Europastrasse 2, P.O. Box, CH-8152 Opfikon, acts as the Swiss paying agent. The prospectus, the Key Investor Information Documents (KIIDs), the articles of association, the annual and semi-annual reports of the Fund(s) may be obtained, on simple request and free of charge, at the office of the Swiss representative ACOLIN Fund Services AG. The prospectuses are also available via the website www.robeco.ch. Some funds about which information is shown on these pages may fall outside the scope of the Swiss Collective Investment Schemes Act of 26 June 2006 (“CISA”) and therefore do not (need to) have a license from or registration with the Swiss Financial Market Supervisory Authority (FINMA). 

Some funds about which information is shown on this website may not be available in your domicile country. Please check the registration status in your respective domicile country. To view the RobecoSwitzerland Ltd. products that are registered/available in your country, please go to the respective Fund Selector, which can be found on this website and select your country of domicile. 

Neither information nor any opinion expressed on this website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco Switzerland Ltd. product should only be made after reading the related legal documents such as management regulations, prospectuses, annual and semi-annual reports. 

By clicking “I agree” you confirm that you/the company you represent falls under one of the above-mentioned categories of addressees and that you have read, understood and accept the terms of use for this website.

I Disagree