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Ownership on China’s
Environment
By Candace Williams
China in the News
Central Goal: Clean-up
Transportation
Boom:
14,000 new
cars each day
Water Pollution: Costs
More than 75% of water
that flows through faucets
is deemed unsuitable for
drinking or fishing
household sewage
remain untreated.
Causes
China’s industries
use 10 – 20% more
water than similar
industries in
developed nations
Political Costs
51,000 environment-related
protests in 2005
International Issues
externalities
SOEs
-Bargaining power
-Local bargaining power
Privately-Owned Foreign Firms (FDIs)
Enterprises (POEs)
-Over 70% share today -41,485 new contracts in
(5.5 million) 2006 alone ($70 billion)
-No incentive to -Wholly-owned foreign
internalize externalities enterprises: 75%
-Strive for efficiency -Rest are joint ventures
-Least bargaining power -Race to the bottom vs. new
Why does ownership
matter?
Wang and Jin
Why does ownership
(2002)
-Determinants:
ownership, factor
costs, pollution
matter?
abatement costs,
technology,
location, policy
variables,
community
variables, type of
industry
- Best to worst
performance:
FDIs, COEs, POEs,
Why does ownership
matter?
Is “race to the bottom”
Black
20% Blue
Hohhot Yellow
Red
1999 65%
Black
Hohhot Blue
Red
2000 Yellow
Wang et al (2002)
Lesson Learned: Power of the
Public
Lesson Learned: Efficiency
Barriers to
Efficiency:
- Subsidies
- Factor Prices
- Some
enterprises do
not have the
goal of
efficiency
- Phase out subsidies
- Change prices
- Increase awareness
New Policies