Bing Zhu discusses the development of China's Circular Economy Indicator System

Dr. Bing Zhu is Director and Professor of the Institute for Circular Economy at Tsinghua University, China as well as a Guest Research Scholar at Energy Program of International Institute for Applied Systems Analysis (IIASA), Austria. Now a Member of the Inter-Ministerial Panel of P. R. China on Circular Economy, he works with his team to actively provide scientific support for China's circular economy and resource efficiency. Prof. Zhu is also the Member of UN Environment Programme's International Resource Panel (IRP), the Member of Advisory Panel of National Natural Sciences Foundation of China (NSFC) on Cooperation with International Organizations, and Vice Chairman of Circular Economy Committee of Chinese Ecological Economics Society.

Why is monitoring national progress towards a circular economy important to China?

Circular economy is very important for China, the Chinese Government views it as a strategy for economic and social development, as well as a pathway towards ecological civilization and green development. China’s 13th Five-Year Program for National Economic and Social Development states that great efforts should be devoted to circular economy; and for that objective, the National Development and Reform Commission (NDRC) and 13 other central government departments have jointly promulgated the Guiding Action Plan for Circular Development. Due to such high-level attention to circular economy, it is essential to develop a robust system for evaluating the progress towards a circular economy.

Beyond this general reason, there are three specific reasons for the Chinese Government to evaluate progress towards a circular economy. First, it is required clearly by the 2008 Law on the Promotion of Circular Economy that an indicator system should be established to evaluate circular economy using a robust approach. Second, it is out of a need to further promote circular economy practices. Since 2008, the Chinese Government has implemented regulations and invested in initiatives to promote circular economy. For example, during the 12th Five-Year period (2011-2015), ten major demonstration programs were implemented, covering hundreds of cities with more than 1,000 participating enterprises and industrial parks. Robust evaluation of these initiatives provides lessons and benchmarks for the future. Third, it is out of the government’s internal need for performance consolidation and self-improvement. In China, the performance of lower-level governments is evaluated regularly according to relevant laws and regulations - this is an important means for the higher-level government to make sure that its policies are implemented at the local level.

What major changes do you anticipate for China’s economy in the future?

China’s economy is undergoing major changes, and is shifting from an era of high growth to one of high-quality development. In order to realize this, China is committed to carrying out supply-side structural reform by phasing out backward production capacity and by developing and expanding the real economy. The government has realized that China’s current economic growth is imbalanced and inefficient. An important challenge regarding China’s economic growth will be the mitigation of systematic risks, the elimination of poverty, and the prevention and control of pollution. Now, environmental protection and improvement are listed among the highest priorities on China’s development agenda – this is unprecedented in history. It may be said that the era of relying on large amounts of resource consumption to drive economic growth has ended.

How were you involved in the development of China’s Circular Economy Indicator System?

In China, the NDRC is the leading department for circular economy, and has been responsible for organizing and coordinating the academia, central government departments, industrial associations and local governments during the study and design of the Chinese circular economy indicator system. As early as 2008, the Institute for Circular Economy of Tsinghua University (TH-ICE) led by myself, with the support of the NDRC and two other governmental bodies, started to conduct theoretical study on the indicator “resource productivity” and carried out piloting and demonstration on its accounting.

In 2015, with concrete guidance and support from the NDRC, our team from the TH-ICE started to carry out preliminary surveys and studies regarding a circular economy evaluation indicator system. We evaluated the old indicator system, analyzed relevant indicator systems of other countries, and on that basis proposed preliminary recommendations to the NDRC regarding a new indicator system. Over the course of 2016, the NRDC consulted major stakeholders and experts in order to develop a new draft of the indicator system. My research team was involved in this process, for example developing a new indicator for “recycling rates of main wastes”, as well as assessing trends for some of the existing indicators. Coordinated by the NDRC, an initial draft of the new framework was shared with a range of authorities for feedback. Based on the feedback, the NDRC revised the draft. At the end of 2016, the NDRC, the Ministry of Finance, the Ministry of Environmental Protection, and the National Bureau of Statistics formally promulgated the indicator system.

Can you shortly describe the structure of the Chinese Circular Economy Indicator System, and explain the main elements of a circular economy to be captured by the current indicators?

The Chinese Evaluation Indicator System of Circular Economy Development (2017 Edition) contains three types of indicators: Comprehensive Indicators, Work Indicators, and Reference Indicators. In total, there are 17 specific indicators.

The Comprehensive Indicators are similar to the “lead indicator” in the EU Resource Efficiency Scoreboard, and reflect the core concept that circular economy emphasizes efficient use of resources and their recycling and reuse.

The Comprehensive Indicators and the Work Indicators are used to evaluate the performance of local governments, whereas the end-of-pipe waste discharge and disposal indicators are used as Reference Indicators only, but not used for evaluation. The reason is that China’s economy is still at a stage of rapid growth, and both the overall stock of materials and the amount of waste disposal will continue to grow, so it is unrealistic to expect the amount of end-of-pipe waste disposal to decrease in the short run.

Table 1 –Chinese Circular Economy Development Evaluation Indicator System

Promulgated by the National Development and Reform Commission, Ministry of Finance, Ministry of Environmental Protection, and National Bureau of Statistics

How are the most recent Chinese circular economy indicators, presented in 2017, different from the first system implemented in 2007?

In 2007, the NDRC, the predecessor of the Ministry of Environmental Protection, and the National Bureau of Statistics promulgated China’s first indicator system for circular economy evaluation. The system included resource productivity indicators, resource consumption indicators, resource comprehensive utilization indicators, and waste discharge indicators. It has two versions – one for the macro level and one for industrial parks respectively.

In the past decade, China’s economy has grown rapidly, and the social environment and people’s living standard have improved continuously, raising new requirements for the development of circular economy. The Chinese Government has carried out a variety of circular economy policies and actions, and the coverage of circular economy has been expanding. As a result, the Chinese Government have revised and improved the indicator system.

In the new system, the productivity indicators resources are more comprehensive and systematic, covering raw materials, energy, water, and developable land. It is worth noting that the Chinese Government pays very high attention to the “resource productivity”, and this indicator is adopted as a Comprehensive Indicator in the new system. In terms of resource recycling and reuse, the new system has adopted the “recycling rate of main wastes” as a Comprehensive Indicator, and has added the “utilization rate of kitchen waste” and the “utilization rate of building material waste” as Work Indicators – these are areas of high concern for circular economy practices in recent years. It is also notable that the new system does not have a separate version for industrial parks. The reason is that the main approach of industrial parks in promoting circular economy has been to implement “Circular Transformation of Industrial Parks”, which is a major national program starting from 2011, and an independent indicator system has already been developed for this purpose. Moreover, the 2017 system emphasizes the application of the indicators at the provincial level. The national government will carry out independent third-party evaluation on the performance of provincial-level jurisdictions. This reflects the determination of the Chinese Government to promote circular economy more deeply.

What are the challenges in developing metrics for measuring progress towards a circular economy?

A first important challenge is whether the indicator system is fully capable of helping achieve circular economy targets for at least some time in the future. During the 13th Five-Year period, China’s main circular economy targets are to establish a basic green, circular, low-carbon industrial system, a basic urban circular development system, a preliminary new strategic guarantee system for resources, and a basic system for green lifestyle. It is a big challenge to design a set of indicators that are capable of reflecting all these requirements whilst being practicable. For example, China’s current indicator system does not provide sufficient support for the establishment of a basic strategic guarantee system for resources. I have noted that the EU framework includes the indicator “EU self-sufficiency for raw materials” – I think this is a very good attempt by the EU.

A second big challenge is the calculations of each indicator for provincial jurisdictions. All the indicators in the Evaluation Indicator System of Circular Economy Development need to be applied at both the national and the provincial level. However, due to data limitations, it is difficult to calculate certain indicators at the provincial level, such as the “resource productivity” and the “recycling rate of main wastes”. I have noted that some indicators in the EU framework are applicable to the EU as a whole, but not to all individual member states - maybe for the same reason as ours. My research team is currently carrying out study on the calculation of certain indicators at the provincial level.

In what way can circular economy indicators contribute to the debate on Beyond GDP? I.e. how can resource use and re-use be related to concepts such as progress, development or wellbeing?

GDP is a very good measure of economic growth. For a long time, GDP was the most important indicator in China for the evaluation of local growth and the performance of local governments. My understanding is that Beyond GDP does not mean that GDP will be abandoned, but that GDP is no longer the only important measure. For a large developing country like China, GDP is still an important measure of the level of economic development. However, China is also aware that GDP alone is insufficient to measure social development, because it does not reflect very well social progress, human wellbeing, resource use and environmental protection. Last year, China published a green development index, whose purpose is to discard the “GDP only” approach for measuring development and achievement, and to improve the evaluation system for economic and social development.

A very important element of Beyond GDP is to integrate social and environmental considerations into the evaluation of development. The Chinese circular economy indicator system is a very good approach to measure environmentally friendly economic development. Reflecting, for example, how the extraction of virgin resources and pollution can be reduced. Of course, China is still a developing country, and both its economy and society are still at a stage of rapid development. The circular economy indicator system reflects a new development mind-set. These indicators are not entirely separate from the GDP, and the GDP is still incorporated into the calculations of many indicators, but they reflect higher quality of development with more efficient use of resources. My understanding is that if we can achieve higher economic output with less resource consumption and enable people to live higher-quality life at less environmental cost, we should be eligible to say that this is a reflection of technological progress, higher-quality social development and increased wellbeing.