We hope this week’s report shows a side of China often neglected in the mainstream media.

We owe a great debt of gratitude to two individuals whose research went a long way in the development of this report. First, we would like to thank Elizabeth C. Economy, author of the essay “The Great Leap Backward? The Costs of China’s Environmental Crisis.” We would also like to thank James Kynge, former China Bureau Chief for the Financial Times and author of the book China Shakes the World.

You can find a copy of Ms. Economy’s essay in the latest issue of Foreign Affairs. Many other scholars, editors, and interested parties contributed to this essay without their direct knowledge. We believe the proper attention to their research on this particular subject is long overdue. We thank them for their support.

The Costs…

Air

• The percentage of China’s energy needs supplied by coal: 70
• China must construct a new coal-fired power plant every week just to keep pace with demand.
• The average life expectancy of a Chinese city traffic police officer: 43 years
• The chief culprit for his abridged life: air pollution
• The number of reported premature deaths in China caused by respiratory diseases related to air pollution on an annual basis: 400,000
• The actual number: 750,000 (According to the World Bank… Beijing didn’t want to release the actual figure due to fears of inciting social unrest.)
• The combined number of individuals who died at Hiroshima and Nagasaki as a result of atomic bomb related causes: 410,000
• The number of pollution related protests that took place in communist China in 2005: 51,000
• The number of doctors your editor visited for an unidentified lung ailment he developed after living in Hong Kong for less than two years: 3
• Total amount spent to cure his “cough”: $1,000-plus
• The number of people China will re-locate to newly developed urban centers between 2000 and 2030: 400 million
• The population of the United States: 302,730,255
• The number of the world’s 20 most polluted cities that call China home: 16
• The year China will emit twice as much carbon dioxide as all of the OECD countries combined: 2032
• The number of new nuclear reactors needed to be built each month from now until 2070 to make any difference to global carbon emissions: 4
• The most optimistic forecast regarding the time it takes to build one nuclear reactor: 36 months

Land

• The percentage of China’s landmass that remains uninhabited: 50
• The percentage of humanity crowded onto just 7% of the world’s cultivatable land: 20
• The distance China’s Gobi Desert continues spreading annually: 1,900 square miles
• The percentage of the entire country that is now desert: 25
• The percentage of China’s agricultural land that receives ample amounts of acid rain: 33
• The amount of annual Chinese grain production contaminated with heavy metals: 12 million tons
• The number of Chinese citizens who died as a result of the famine that immediately followed Mao’s Great Leap Forward: 30 million
• The total number of Chinese who died as a result of Mao’s policies: 80 million (Chen Yizi: July 17, 1994, Washington Post (“Great Leap Forward, 1959-61”)
• The total number of deaths attributed to both World Wars: 70 million
• The number of tropical logs shipped worldwide that the International Tropical Timber Organization estimates are bound for China: 1 in 2
• The total area of rainforests, the “lungs of the planet,” destroyed each year: 24,000–30,000 square miles
• The total area of West Virginia: 24,231 square miles

Water

• The ratio of China’s 660 cities that have less water than they need: 2 in 3
• The number of years before cities in the Northeast China could completely run out of water: 5-7
• The amount Beijing commissioned to divert river water to address the problem: $60 billion
• This represents the largest civil engineering project since the Great Wall.
• The percentage of China’s city aquifers deemed polluted: 90
• The Yangtze River received 40% of the country’s sewage, 80% of it untreated.
• The number of Chinese who drink water contaminated with animal or human waste: 700 million
• The number of doctors your editor visited after drinking one glass of Hong Kong tap water: 2
• The number of days that the single glass of water confined him to his bed: 10
• The ratio of fish species native to the Yellow River now extinct thanks to pollution: 1 in 3
• The percentage of the East China Sea, one of the world’s largest fisheries, now rated unsuitable for fishing: 80-plus
• The percentage rated unsuitable for fishing as of 2000: 53
• The largest exporter of fish to the United States: China
• Melting glaciers in Tibet threaten to flood both the Yangtze and Yellow Rivers.
• The year scientists now warn rising sea levels could submerge Shanghai: 2050

The Affects Here at Home

• The number of Chinese made toys Mattel decided to recall: roughly 1 million
• Thus far, the number of deaths directly attributed to this incident: 1 (Zhang Shuhong, owner of Lee Der Industrial, a company that made toys for Mattel, hanged himself in a company warehouse shortly thereafter.)
• The U.S. Environmental Protection Agency estimates that on some days, 25% of the particulates in the Los Angeles atmosphere originated in China.
• The U.S. Environmental Protection Agency recently reported that one-third of the nation’s lakes and nearly one-quarter of its rivers are now so polluted with mercury that children and pregnant women are advised to limit or avoid eating fish caught there.
• Scientists estimate that roughly one-third of that mercury settling in the United States comes from other countries, China in particular.
• China spews around 600 tons of mercury into the air each year.

According to Elizabeth Economy, “The environmental degradation and pollution cost the Chinese economy between 8 percent and 12 percent of GDP annually…water pollution costs of $35.8 billion one year, air pollution costs of $27.5 billion another, and on and on with weather disasters ($26.5 billion), acid rain ($13.3 billion), desertification ($6 billion), or crop damage from soil pollution ($2.5 billion).”

Meaning, there seems to be great economic incentive to aggressively address this catastrophic problem. And as James Kynge points out…it’s not that the world lacks the resources to support China’s growth, it’s simply that the world does not have enough resources to cater to 1.3 billion Chinese behaving like Americans.

Sincerely,
Christopher Hancock
August 31, 2007

P.S.: China’s growth has certainly caused major problems for everyone, but as you probably already know, it has created some phenomenal investment opportunities. There is one in particular that I’ve been stressing to my Free Market Investor readers. It’s been referred to as the “World’s Greatest Growth Stock,” and the best part is it’s traded on a U.S. exchange.

The Cons of Investing in China was originally featured in the Penny Sleuth.