Environmental protection inspectors have led to economic fluctuations in China's economy? Should environmentalists not take this pot?

In August 2017, the fourth batch of Central Environmental Protection Inspectors stationed in place to achieve full coverage of environmental protection inspectors, which indicates that the environmental protection and pollution control accountability “storm” has been fully rolled out, but the market has seen two distinct voices: The inspection team should come early; environmental supervision injure the economy. Whether it is the Central Environmental Protection Inspector or the "2+26" city strengthening supervision is to strengthen the ecological environment to improve the people's sense of gain, what is the root of different voices in the society? This issue is worth pondering!

A seemingly "reasonable" logic

The so-called logic of the capital market, which is widely circulated, is that the limited production of environmental protection will support the price of some cyclical products in the short term, but the decline in supply brought about by the medium-term environmental restriction will have a negative impact on the economic fundamentals. Under this so-called logic, “2+26” urban heating deadline production and environmental protection inspections are strictly implemented, and some product supply will show a significant decline (accounting for electrolytic aluminum, crude steel, cement, etc. will account for more than 8.4%, 11.1% And 16.3%), the price of the corresponding product will rise significantly in the short term. In the medium term, the upstream is directly shut down, and the mid-to-downstream narrows profits due to rising raw material costs. Downstream demand decreases to offset rising prices, which in turn leads to slower production and lower investment. At the same time, environmental tolerance increases to reduce export competitiveness and brings about a reduction in unemployment and spending power. In the long run, environmental protection and production restriction cannot increase environmental protection equipment, lack market-based measures to endogenous environmental costs, and even prevent high-efficiency production capacity from being shut down. Ultimately, it is difficult for industrial upgrading to play a role.

The "reasonable" logic of the environmental protection inspectors' impact on the economy

In fact, the plausible transmission mechanism

The above-mentioned impact logic implies several transmission mechanisms. We have divided it to include the following components: First, environmental inspectors have brought about a significant decline in the supply of upstream products. The transmission chain does not seem to be established. As of August 2017, the year-on-year growth in production of crude steel, non-ferrous metals, coke, glass, cardboard, etc. is still relatively fast, and the output of major industrial products has risen steadily. It does not seem that environmental protection inspectors have seen upstream. The adverse effect of product supply.

Taking the steel industry as an example, the target for capacity reduction in 2017 is 50 million tons, which has now been exceeded. However, from the effect point of view, the statistics of the crude steel output from January to August increased by 30.09 million tons year-on-year, a reasonable explanation is that after the obsolete production capacity is eliminated, the production capacity of compliance production is increasing, and the compliance production capacity will be driven by high profits in 2017. The output is higher than the 2016 level. That is, environmental protection inspectors have indeed brought down the supply of backward production capacity products, but the production capacity structure has been continuously optimized, the production capacity of compliance capacity has increased, and the steady increase in the output of industrial products has occurred.

Second, due to the increase in raw material costs, the mid-to-downstream narrowed profits, which in turn led to a decline in production investment. In August 2017, industrial production was slowed down due to the impact of comprehensive factors, and main business income also decreased slightly. However, corporate profitability increased significantly. From January to August, the total profit of industrial enterprises above designated size increased by 21.6% year-on-year, and that of industrial enterprises increased by 24.0% in August, which is the best level since 2012. From the perspective of the industry, the profitability of the upper, middle and lower reaches has improved to varying degrees. In August, upstream industry profits increased by 76.8% year-on-year, and midstream and downstream profits increased by 8.4% and 10.8% respectively.

Third, China’s export competitiveness is determined by environmental tolerance. With the appreciation of the real effective exchange rate of the Renminbi and rising labor costs, China’s share of the world’s total exports has stagnated, and the G3 market has indeed lost some of its labor-intensive product market share. However, the market share of machinery products and other industries With steady increase, this shows that China's export competitiveness has not weakened. On the contrary, due to the strengthening of structural optimization, competitiveness is still the undoubted big producer and exporter in the global market.

Fourth, high-pollution companies prefer to shut down under environmental protection supervision and are not willing to upgrade environmental protection equipment. The companies shut down by environmental protection inspectors are mainly “scrambling” companies. These enterprises generally have such features as: First, there is no industrial and commercial registration, no environmental protection procedures; Second, backward technology, not in line with industrial policies; Third, there is no governance facilities, The pollution is heavier; the fourth is not in line with the local planning and layout. Pollution companies such as "scattered pollution" may have little contribution to local development, and their "contribution" to environmental pollution and ecological damage is actually not small. The environmental protection investment of these enterprises is close to zero, and the price of the products is cheaper than the normal operating companies of environmental protection facilities, which undermines market equity and hinders the optimization and upgrading of industrial structure. The environmental protection inspectors will shut down and help accelerate the optimization and upgrading of the industry and promote the green development of the industry.

In general, the “reasonable” logic transmission channels that environmental protection inspectors have negatively affected the economy cannot be established. In fact, the overall impact of limited environmental protection on the economy is relatively limited, but it needs to pay attention to the extent to which different types of enterprises are affected by environmental protection policies.

At present, large-scale enterprises and state-owned enterprises perform better, while small companies and private enterprises suffer more. Affected by environmental protection equipment renewal costs and other issues, environmental protection has tightened the impact on the production and operation behavior of small and private enterprises. Since last year, the prosperity of large-scale enterprises has continued to be higher than that of small enterprises, and the performance of SOEs has also been significantly better than that of private companies. When the government implements policies, it needs to make a proper screening of small and private enterprises, and strictly shut down pollution companies such as “scattered pollution”, but it also needs to support private enterprises with good development prospects.

Who will carry out the economic downturn and the “public grievances”?

With the continuous escalation of real estate regulation and control, the first and second-tier property markets are cooling down, and real estate investment growth will gradually return to the normal track, with low-speed growth, zero growth, or even negative growth. The investment in superimposed infrastructure construction gradually withdraws, and the downward pressure on China's economy continues. However, in the next 1-2 years, the Chinese economy may gradually approach the status of “clearing out”, and the economy will take a formal step when the new round of production cycle and inventory cycle are opened. Into the new platform.

Another important issue is that the people's position on the issue of environmental protection seems to be undergoing a subtle shift from one-sided criticism of the deterioration of environmental quality and the failure of government departments to gradually turning to questioning and failure to understand the governance measures involving itself.

There are three main reasons for this problem. First, the closure and rectification of “scattered” companies and some small and micro enterprises caused short-term unemployment and income declines for the people; second, some industries made “promotional” policies such as speculation. The cost of the people’s lives has risen. Thirdly, some local governments have been overweight and overkill, and fine management has not been implemented. There is a “one size fits all” type of extensive management. Everyone needs a clear understanding that the current problems are phased and will gradually return to normal.

Can environmental protection inspectors be able to benefit the country and the people?

Many people will say that the historical experience of the industrialization process in developed countries shows that pollution emissions have an inverted U-shaped relationship with economic growth. It should be noted that the appearance of the "Environment Kuznets Curve" is only a representation, and the essence behind this is the transformation of a country's economic development mode. However, the spontaneous adjustment of economic development methods takes a long time, and the transformation of environmental protection policies is a good impetus and catalyst. Limiting production by environmental protection is an inevitable choice for transforming the mode of economic development, an important starting point for structural reform on the supply side, and an objective requirement for practicing the concept of green development.

From the perspective of macroeconomics, the restriction of environmental protection will, in the short term, reduce the output of restricted production industries in restricted production areas. However, in the long run, environmental protection and production restriction will strengthen the hard constraints of the environment, help eliminate the backward production capacity of thermal power, steel, coking, and chemical industries, and force companies to increase environmental protection investment, actively reduce the level of environmental pollution emissions, and make up for environmental protection. Short board to increase product added value. Therefore, the environmental protection inspector can not only achieve the supply-side structural reform aim of removing backward production capacity, but also promote industrial upgrading and economic restructuring, enhance the endogenous driving force of China's economic growth, and ensure the long-term healthy and sustainable development of China's economy.

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