TNAG-2752-FCO40-3967-Organisation-for-Economic-Co-operation-and-Development-(OECD-1994 — Page 137

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tions the ability of the existing structures to meet energy targets without substantial investment [2759].

Insufficient water supplies could prove to be a major problem too, unless the collection, purification, and distribution networks are significantly improved. Chi- nese experts estimate that 450 out of 600 largest cities will be short of water by 2000, while quantities allocated to agri- culture will have to increase by a quarter in the 1990s [2712].

ENVIRONMENTAL POLLUTION

Investment in environmental protection is also needed. While worsening water pollution and soil degradation will mainly affect China itself, air pollution could affect relations with neighbours. China was already the world's third largest source of carbon emissions in the mid-1980s, and projections agree that emissions will in- crease considerably (perhaps even dou- bling) as energy consumption grows.

According to the IEA, primary energy supply will increase almost two-fold to 1.1 billion tons oil equivalent in 2005 versus 649 million in 1989. Coal will continue to represent three-quarters of energy produc- tion, and neighbouring countries may make investments conditional on a reduction in air pollution.

SOCIAL STRAINS

There are also signs that social strains within China are increasing. Satoshi Amako reports Chinese public security agency estimates that there are already problems of political and social stability in 14 out of 30 provinces, municipalities, and autonomous regions, accounting for 60% of the country's land area and 43% of the population [0355]. If political liberalisation

does not keep pace with economic estruc- turing, instability could grow.

Widely differing conditions for develop- ment are contributing to growing econom- ic, social, and political differences among regions, and clashes are increasingly of a horizontal nature, i.e. region against region, rather than against central government. Amako suggests that there may be a prob- lem of maintaining national cohesion as regional disparities increase and prosperous areas come to resent paying for less well- off neighbours. Rapid industrialisation is likely to cause massive internal migration. This may lead to clashes with migrants from the poorest areas, (seen as a threat to wage levels) for some of whom the main hope of avoiding poverty, according to the World Bank [0390] will be to seek em- ployment among richer neighbours.

TRANSITION

It is increasingly apparent that China's economy needs a coherent long-term policy strategy to sustain growth and to success- fully manage the transition from a largely command economy to a more liberal, mar- ket-based regime. As less and less activity comes under the remit of govemment planners, three interrelated issues will have to be tackled.

Institutional reform will be vital if the full potential of the domestic base is to be realised. Economic management will have to adapt and improve, starting with mea- sures to streamline the state sector, to contain inflation and to guard against falling once again into the trap of a boom and bust cycle. And if China is to gain the expanded access to markets and technology it will need, it must move beyond a policy that consists mainly of attracting foreign direct investment in its export-oriented industries to one in which it opens up its own markets to a much greater extent.