China

Project title Sector SCP practice
ACMFN Cross cutting issues Cleaner Production
CAPACITY - Food Supply Chain Food and beverage Creating Demand for Better Products, Eco-labels
China Motor Challenge Fabricated metals industry, Machinery industry Eco-labels, Product design for sustainability
Eco-Friendly Bamboo Wood-based industry Business and products for the poor, Product design for sustainability, Sustainable Supply Chain Management
Edible Bamboo Shoot Food and beverage Corporate Social Responsibility (CSR) Management, Creating Demand for Better Products
EMAS Global China Electrical equipment industry Environmental Management Systems
ESEEC Electrical equipment industry, Machinery industry Corporate Social Responsibility (CSR) Management, Environmental Management Systems
FEES Cross cutting issues Cleaner Production
Heat Pump Water Heater Challenge Machinery industry, Utilities sector Cleaner Production, Creating Demand for Better Products
Higher Efficiency of Transformers Fabricated metals industry, Machinery industry Product design for sustainability, Sustainable Supply Chain Management
Industrial Symbiosis Chemical sector, Cross cutting issues Industrial symbiosis
Lead Elimination Project Chemical sector Cleaner Production
Low Energy Housing Building materials industry Cleaner Production, Environmental Management Systems
Printing and Dyeing Textile and leather industry Cleaner Production
REWIN Utilities sector Cleaner Production
SC in Urban China Cross cutting issues Creating Demand for Better Products
SUPP-Urb China Wood-based industry, Machinery industry Creating Demand for Better Products, Eco-labels
SUS BIRD Building materials industry Creating Demand for Better Products
Train the Trainers Building materials industry, Wood-based industry Cleaner Production, Creating Demand for Better Products
VA3 Cross cutting issues Cleaner Production
Western China SusBuild Building materials industry Product design for sustainability
Wood Processing and Trade Wood-based industry Eco-labels, Sustainable Supply Chain Management

Focal point

Mr. Xia Cheng Deputy Adviser 

Environmental Management and Sustainable Development Division

Department of Regional Economy

National Development and Reform Commission (NDRC)

SWITCH-Asia RPSC

Under SWITCH-Asia’s regional Policy Support Component, UNEP is implementing a range of coordinated SCP activities in China. For this policy support, UNEP’s main partner in China is the Chinese National Development and Reform Commission. 

Activities being implemented also include collaborations with non-governmental institutions coordinated with the UNEP China Office. These non-governmental partners for advancing SCP in China include, China Environmental United Certification Center (CEC), Chinese Academy of Sciences (CAS), and the All China Environment Foundation (ACEF). 

With the CEC SWITCH-Asia policy support has focused on capacity-building in the business sector, with small and medium enterprises (SMEs) to increase energy efficiency and ensure the development of a low-carbon certification system for businesses in China. Various trainings and events have been conducted with the private sector in this regard. 

With the CAS, SWITCH-Asia Policy Support has focused on developing a national SCP indicators system for China, the first of its kind for a country, which can assess progress on SCP across national and local governments, even assessing progress among household consumers. The system has been fed into UNEP’s work on the Sustainable Development Goals, where goal 12 on SCP will also involve the development of national indicators to assess progress on SCP.

With ACEF, SWITCH-Asia policy support is focusing on research to advance sustainable consumption at the local level, among urban and rural town centres, conducting surveys to develop a benchmark on sustainable consumption trends in key areas of China.

Status of SCP policy framework

Environmental objectives are integrated into several national policies and regulations, including the Circular Economy Promotion Law and the Cleaner Production Promotion Law. SCP principles are also integrated into China’s Five-Year Plans for Social and Economic Development.

China's 11th and 12th Five-Year Plan

The Five-Year Plans for Social and Economic Development (FYPs) form the basis for coordinating Chinese national public policy priorities. They are developed by the National Development and Reform Commission (NDRC) and approved by the National People’s Congress. SCP principles are integrated through quantified pollution emission targets as well as quantified resource efficiency targets.

The 11th FYP (2006-2010) marked a major shift from previous plans in terms of the objectives of economic policy. It had an increased focus on more balanced and sustainable growth, greater resource efficiency, better living standards and balanced rural- urban development.

The 12th FYP (2011-2015) is continuing the broad policy direction of the previous plan. Major themes in the current plan are sustainable growth, economic restructuring, social equality and environmental protection. The Chinese government seeks to move the economy up the value chain to more service and high-tech oriented business. For the first time in a FYP, China has set a carbon-intensity reduction target of 17 per cent and intends to reduce energy intensity by a further 16 per cent by 2015.

(Source: Resource Efficiency: Economics and Outlooks for China, 2013)

China’s Circular Economy Promotion Law

China is one of the first countries to embrace the circular economy (CE) approach as a new paradigm for economic and industrial development. The CE concept seeks to change the economic growth model by radically increasing material use efficiency and sharply reducing pollution discharges. The ultimate objective of the CE approach is to achieve decoupling of economic growth from natural resource depletion and environmental degradation (World Bank, 2009).

The Circular Economy Promotion Law came into force in 2009. It is a comprehensive framework law which aims to improve resource efficiency, protect the environment and achieve sustainable development. The Chinese government is currently in the process of drafting the CE Development Plan, which will outline the major tasks and measures necessary for achieving more effective implementation.

(Source: Resource Efficiency: Economics and Outlooks for China, 2013)

Cleaner Production Promotion Law

China began to implement cleaner production (CP) in the early 1990s as a way of confronting the country’s serious environmental problems. A network of national and local CP policies incorporated CP activities such as demonstration projects, training and promotion centres and the creation of the National Cleaner Production Centre (CNCPC) (Hicks and Dietmar, 2007). Today, the Cleaner Production Promotion Law (2003) governs the implementation of all CP activities in the country. It seeks to promote cleaner production, increase resource efficiency, and reduce and avoid the generation of pollutants. 

(Source: Resource Efficiency: Economics and Outlooks for China, 2013) 

These are broad policies supporting SCP in China, from national to local government. However, China has recently also enacted specific policies focusing on advancing SCP through consumer information (e.g. Eco-labelling), support for green public procurement through the government procurement law and more. 

In 2013, the China Council for International Cooperation on Environment and Development (CCICED), a policy advisory body in China, launched a task force for Sustainable Consumption and Green Development. This task force published an assessment of SCP policies in China as well, by sector, the report of which can be found online here

Sectoral Policies (from SWITCH-Asia SCP Policy Needs Assessment)

The Land Administration Law was implemented in 1999 to protect environmentally sensitive and agricultural land, and to coordinate the planning and development of urban land. The law reinforces farmland preservation efforts by stipulating that the total amount of cultivated land within each administrative area needs to remain unreduced. 

In recent years, China has adopted Building codes and standards for residential and public buildings, focusing on heating, ventilation and air conditioning, as well as lighting, hot water and power use. National energy design standards for residential and public buildings were developed in 2005. The Ministry of Housing, Urban and Rural Development (MOHURD) regulates the building industry in China and coordinates the country’s building energy codes. The various standards and codes developed are active, but enforcement of these is a key challenge. 

The Chinese government has adopted a number of regulations to reduce the negative environmental and health impacts of motor vehicles. The revised Energy Conservation Law (2007) promotes the use of clean, alternative fuels and provides incentives for the development and use of high-efficiency vehicles, including alcohol-fuelled, hybrid, electrical and compressed natural gas vehicles. Mandatory fuel economy standards have been instituted to achieve emission reductions in private vehicle use.

Minimum energy performance standards now exist for 30 types of appliances and equipment, mandating an average ten per cent reduction of energy consumption over previous levels. A mandatory energy information label, known as China Energy Label (CEL) was established for 13 types of appliances to promote consumer awareness and facilitate market transformation.

The Chinese government has issued a series of favourable policies to strengthen waste management. These incentives include tax refunds, prioritized bank loans, subsidized loan interest, and subsidized prices for purchase of electricity. Several policies have been implemented to address the serious waste problems in China. These include among many others (i) the Law on the Prevention and Control of Environmental Pollution Caused by Solid Waste (1995), (ii) the Measures for the Management of Municipal Domestic Waste; and (iii) the recently adopted China WEEE Regulation (2011).

Resource consumption and production

Main Resource Consumption and Resource Efficiency Indicators (2010)

Population (millions) 1,390.551
GDP (billion USD) 3,890.890
GDP is in USD exchange rate based on year 2005 and deflated.
Source: UNSD database.
Subject Area Total Per person Per USD$ of GDP
Domestic Material Consumption, DMC
(tonnes, tonnes per capita, kgr per 1USD$)
23,590,996,267 16.97 6.06
GHG emissions
(kilotonnes,tonnes per capita, kgr per 1USD$) )
11,183,810 8.04 2.87
Total Primary Energy Supply, TPES
(Petajoules, Gigajoules per capita, Megajoules per 1USD$)
106,368 79.52 27.34
Water Use
(Trillion litres, Kilolitres per capita, Litres per 1USD$)
554 398.48 142.41
Subject Area Indicator
Population density 2015 (UNESA 2012 revision), population per sq.km 146
GDP per capita (USD), 2013 WB 6,807.40
HDI Rank (2013) UNDP 0.719
Arable land (hectares per person) WB 2012 0.08
Forest cover in % (2010), UNSTATS 22
Material intensity (2010)UNEP 6.06
Per-capita energy use (kg of oil equivalent per capita) 2011, WB 2,029
Energy intensity (total primary energy consumption per USD of GDP) 2011, EIA 24,708.07
GHG intensity (2010) UNEP 2.87
CO2 emissions (metric tone per capita), 2010, WB 6.2
Number of Middle Class consumers % (2010), ADB 62
Number of people with income < 2USD/day (PPP, USD, %), 2010, ADB 37

Trends in Resource Consumption and Resource Efficiency Indicators (1970-2010)

DE: Domestic Extraction;
MI: Material Intensity of the economy;
MF: Material Footprint.
All other abbreviations explained in the table above

In panel a) we can see that growth in China’s GDP has far outpaced growth in the other four overview indicators, so we would expect rapidly decreasing material and energy intensity, with relative decoupling of growth from DMC, although the rapid growth in both total DMC and TPES make clear that there is no sign of absolute decoupling at all. The trajectory of DE in panel b) makes clear the extent to which China’s local extraction of materials has escalated to meet the requirements of its rapidly growing economy. While we know China to be a major importer of raw materials, panel c) shows that its total material footprint is less than DE by itself, although the relative shares of different material categories changes somewhat. Panels d), e) and f) confirm the trends for material, energy, and GHG intensities, and per capita, that we would expect from panel a) i.e. all intensities are decreased rapidly while consumption per capita nonetheless continued to increase for all. An aspect that was not clear from panel a) is the degree to which early, rapid improvements in intensities have plateaued since the year 2000, indicating that even relative decoupling is no longer occurring, while per capita consumption continues apace. The footprint based measures in panels d), e), and f) also agree well with the more conventional indicators, but are consistently lower, indicating that the traditional measures tend to overstate Chinese consumption of resources.

(Source: UNEP CSIRO Indicators for a Resource Efficient and Green Asia and the Pacific, 2015). 

Key references relevant to SCP

  • SWITCH-Asia RPSC SCP Policy Needs Assessment, 2011
  • Environmental Policies in China over the Past 10 Years: Progress, Problems and Prospects, Procedia Environmental Sciences, 2, 1701-1712, Chunmei, W and Zhaolan, L., 2010.
  • China’s ongoing energy efficiency drive: Origins, progress, and prospects, Energy Policy, 37, 1331-1344.
  • Circular economy policy of China: Role of policy research towards a shift from institution building to implementation, Presentation, Chinese Academy of Sciences, UNEP, Geng, Y., 2009.
  • Toward Sustainable Growth in the People’s Republic of China: the 12th Five-Year Plan, ADB Brief No,7, Manila, the Philippines. Lommen, Y.F, 2011.
  • China and a sustainable Future: Towards a Low Carbon Economy and Society, UNDP, Beijing, China. 2010
  • Mid-term Evaluation of China’s 11th Five Year Plan, Poverty Reduction and Economic Management Unit, World Bank. 2008.
  • UNDAF 2011-2015, United Nations Development Assistance Framework for the People’s Republic of China, Office of the United Nations Resident Coordinator in China, 2010.

UNEP's relevant activities

The information in the country profiles herein have been obtained through research with firsthand and secondhand sources. The information presented herein cannot be considered as official policy of governments or other official bodies. The SWITCH-Asia Programme cannot be held responsible for the content of the sites to which it provides links or for the availability of servers or links. Information is being continuously updated in order to maintain an up to date country profile. If you would like to contribute information for this profile or have any further comments, please send an email to: SWITCH-PSC@unep.org

Status

In China, the need to improve access to finance for small and medium-sized enterprises (SMEs) and to increase sustainable consumption and production (SCP) practices as well as green growth has been recognised by the government and, to some extent, by financial institutions.

China is looking for ways to maintain stable economic growth while at the same time reducing energy consumption and the pressure on the environment. For achieving this goal, the development of the SME sector and the promotion of green investments are strategic goals of the Chinese Government. Access to finance is an important success factor for reaching these targets.

At the moment, a large share of SMEs uses internal resources for financing their day-to-day business operations. This is due to the fact that many SMEs do not have access to formal sources of funding - challenges are greatest for micro- and small-sized enterprises (MSEs). A major hurdle is posed by banks' high collateral requirements that result from the riskiness of SME (green) business. A lack of implementation and monitoring capacity leads to the effect that SME and green lending guidelines for financial institutions are not strictly followed. Overall, investors prefer large state-owned enterprises working with more established technologies.

Within the formal banking sector, most important providers of working capital and investment finance for SMEs have been small- and medium-sized city commercial banks. Recent efforts by the Chinese Government to improve SMEs' access to finance have led to large state-owned commercial banks, policy banks and joint-stock commercial banks increasing their SME lending activities.

The definition of SMEs in China is relatively wide - compared to international standards, Chinese SMEs are rather large. As a result, a considerable share of the funding for SMEs actually goes to large enterprises while smaller enterprises still remain unserved. This situation is not expected to change significantly in the coming years, as policymakers and banks hope to achieve their green (credit) targets primarily through the transformation of large polluting enterprises and the implementation of large-scale renewable energy projects. Particularly joint stock commercial banks have become known for being pioneers in green lending in China. Through the introduction of innovative finance products, such as energy performance contracts and carbon quota pledge-based loans, several joint-stock commercial banks have created opportunities for SMEs to obtain funding for their green projects. Even though state commercial and policy banks invest great sums in green sectors and pollution abatement, these financial resources are mostly earmarked for large enterprises and infrastructure projects.

The capital market is slowly developing as a source of funding for SMEs. Yet, the share of SME financing remains very small compared to overall financial transactions taking place at capital markets.

If SMEs cannot access funding from conventional financing banks, for example due to a lack of collaterals, they turn to non-deposit taking lenders and informal sources of finance. In this sector particularly microcredit companies and pawn shops have seen strong growth in recent years. Additionally, new sources of financing have been developed and are on the rise. These include P2P (peer-to-peer) lending and crowdfunding platforms.

The financing of green projects in the SME sector is not yet a priority for financial institutions in China. Generally, funding for SMEs will be more easily available if they operate in one of the seven priority strategic emerging industries as these receive most funding. Within the various green sectors, energyrelated topics are currently of highest priority to the government and financial institutions. Compared to energy efficiency and renewable energies, other fields such as water, air, and waste remain underrepresented.

Key challenges for Green Financing in China Demand-side barriers:

- SMEs have low awareness and knowledge of opportunities for funding

- SMEs lack financial literacy and financial track-records

- Energy Service Companies face high financial burdens and risk

Supply-side barriers:

- Financial institutions have high collateral requirements

- Financial institutions lack tools to assess SMEs' credit default risk

- Financial institutions charge high interest rates for lending

- Small lending institutions that are important sources of funding for (green) SMEs suffer from low financial capacity

- Many investors and banks are biased towards energy-related projects

- Guidelines for SME lending and green lending are not fully complied with

These barriers make clear that there is still a lot to be done for enabling a better access of SMEs to financing in general and, specifically, green finance. Pushing for more SCP in its economy is almost inevitable, if the country wants to reduce pollution from its industrial activities. SMEs as an important pillar of the Chines economy must contribute their share to the efforts of making production more sustainable. Providing financing is a crucial prerequisite to accomplish this goal.

Main institutions providing Green Finance

- Ministry of Science and Technology (MoST)

- Torch High Technology Industry Development Center (under MoST)

- National Development and Reform Commission (NDRC)

- National Clean Development Mechanism (CDM) Fund

- International Finance Corporation (IFC)

- Ministry of Industry and Information (MII)

- General Administration of Taxation

- Huaxia Bank

- China Exim Bank

- Minsheng Bank

- Bank of Beijing

- World Bank

- China Industrial Bank