From Indigo Development 2005
The Service or Functional Economy
China’s leadership, inspired by Japanese and German Recycling Economy Laws, has formed a Circular Economy (CE) initiative that has major strategic importance for the whole world, not just China. China’s rapid economic growth demands major supplies of all basic industrialcommodities, in competition with other nations. (Massive reconstruction following December’s tsunami disaster in Southeast and South Asia and Africa will add to overall competition for resources and undoubtedly to costs of materials.) China’s emissions cross boundaries and oceans, impacting Korea, Japan, and North America. Its contribution to greenhouse gases is rising rapidly, even as its energy crisisbecomes more acute.
If China achieves its goal of increasing efficiency of resource utilization by a factor of 10, this will have global impacts. One critical factor will be the success or failure of Chinese leadership in convincing their citizens to follow a Chinese model of quality of life before a US style consumerist lifestyle fully emerges.
A US level of consumption would quickly overwhelmgains in productivity through the rebound effect. (The rebound effect occurs when higher rates of efficiency and lower pollution are overcome by overall increases in industrial output. The total resource depletion and pollution continue to increase.)
For foreign producers, China’s success in the Circular Economy effort would set a new level for competitiveness in the world economy. The issue ofcompetitiveness gained through resource optimization is synergistic with rapid development of regional trade alliances and networks of joint ventures.
China is buying mineral and oil processing facilities in Southeast Asian countries, contracting for major energy and mineral purchases, and creating supply chain joint ventures. Long term commodity contracts extend China’s reach to Brazil andLatin America. China’s regional supply and production chains assemble more sophisticated components from South Korea, Taiwan, Japan and Singapore with low-cost labor in China and Southeast Asia. To reinforce the trade alliances, China is now supplying bi-lateral development aid to neighbors such as Burma and Sri Lanka.
The laws of both thermodynamics and economics make a completely “Circular”Economy or closed-loop system impossible. At some point in any system it becomes too costly to get the last gains in efficiency of resource use. Many substances we use, such as paint, metal plating, and lubricants are inherently dissipated through their use. However, it is possible to move toward a more circular economy. In China it is vitally important that this rapidly growing country succeed inachieving more efficient use of resources and less pollution.
The awareness motivating the Circular Economy
China’s rapid industrialization in the last decades has engendered serious problems of depletion of natural resources, degradation of major ecosystems, and pollution extending far beyond its borders. (Economy 2004, Pan Yue 2004) Projections by the country’s top leadership have persuaded keyofficials that continuing this unsustainable model of development is simply not possible. The resources are not available to provide a growing population with higher standards in a Western lifestyle of consumption. The challenge for the Chinese government and people is to create an alternative to Western economic development models. This alternative must enable social and political stability in atime of economic dislocation and growing expectations.
The State Environmental Protection Administration of China (SEPA), and the China Council for International Co-operation for Environment and Development (CCICED), have directed the attention of the top leaders of China, at both national and local levels, to a hard reality: the development target set by the government will not be achieved...