China's unequal ecological exchange

Abstract

Since the economic reform started in 1978, China has experienced unprecedented economic growth and rates of urbanization and associated changes in lifestyles. As a result, China has become one of the world's greatest consumers of natural resources. In a tele-connected world, China's demand for goods and services is increasingly met by global supply chains involving countries that are situated in far geographical distances, and where processes at each stage in the production chain create environmental impacts. On the other hand, China is the world's largest exporter producing goods for the consumption in developed countries. Based on the hypothesis of ecologically unequal exchange that low and middle income countries export natural resources and high impact commodities thus allowing richer countries to reduce ecologically harmful industries domestically, we assess the unequal exchange between China and the rest of world (186 countries) using value added, and four environmental indicators: SO<inf>2</inf> emissions, GHG emissions, water, and land, associated with China's trade relations with the outside world. By using a global multi-region input-output model, we found that developed regions, such as North America, the EU and East Asia including Japan, South Korea externalize environmental impacts through importing goods produced in China. By contrast, less developed regions, such as Southeast Asia, South Asia and Africa, export large quantities of goods and associated SO<inf>2</inf> and CO<inf>2</inf> emissions, land and water to China, but only gain relatively small shares of economic values in exchange. Less developed countries may recognize the value of resources and the cost of pollution and launch stricter environmental policies to prevent further ecologically unequal exchange with developed countries.