The China Council (CCICED) Phase III held its 2nd Annual General Meeting (AGM) between October 30 and November 1, 2003 in Beijing. The theme of this AGM was "Establishment of a Well-off Society and a new sustainable industrialization mode". Participants included Council members, task force co-chairs, specially invited guests and observers.

　　The AGM heard work reports from five task forces in the following areas:

　　1) enterprise development and environment, 2) energy strategy and technology, 3) environmental industry development, 4) circular economy, cleaner production strategy and 5) mechanism, investment and financing mechanism in environment protection; and held discussions on the recommendations submitted by these task forces. An issue paper on the theme was prepared by the Lead Experts and presented to the AGM for discussion.

　　During the AGM, Premier Wen Jiabao, former Chairman of the CCICED, met with the Council members and task force co-chairs. He affirmed China's adherence to the principles of sustainable growth during its industrialization and modernization drive and said his government has set guidelines for China's endeavor to build a better-off society, which focuses on an overall, balanced and sustainable development.

　　The AGM heard keynote speeches by Mr. Borge Brende, Chairman of UN Council for Sustainable Development; Deputy Governor of Zhejiang province; Mr. Töpfer, Executive Director of UNEP; Mr. Dietmar Nissen, President of East Asia Regional Headquarters, BASF Ltd; Mr. Tang Fuping, Vice President of An'shan Iron and Steel Croup; and Mr. Ma Xiaowei, Deputy Minister of Public Health.

　　Vice Premier Zeng Peiyan, also Chairman of CCICED, delivered an important speech at the closing ceremony. He said China would discard the traditional development mode that soaks up resources and destroys environment. The sustainable industrialization will be the choice that is characterized by high technology, cost-effectiveness, low pollution and low consumption of resources and good use of labor force. Zeng also urged developed countries to shoulder more responsibility of global environmental protection while developing countries should strive for the quality of their economic growth. Chairman Zeng expressed that the Chinese government would study the CCICED's recommendations and take into consideration in policy-making. "As a big country with strong sense of responsibility, China will pay closer attention to the issue of environment in planning the future development." Zeng stressed.

　　Vice Chairman Xie Zhenhua gave a wrap up speech for this AGM and announced that, based on the Chinese government's policy priorities, "Agriculture, Coordinated Development between Rural Economy and Environment" would be the theme for 2004, and tentatively "Urbanization and Environment" for 2005. The third AGM of the China Council Phase III would be held in Beijing on October 28-31, 2004.

　　Task Force Report at AGM 

　　Task Force on Strategy and Mechanism Study for Promoting Circular Economy and Cleaner Production 

　　Qian Yi, co-chair of the TF delivered a work report at the 2003 CCICED AGM. She explained the concept of circular economy, and pointed out that the TF was established in response to the call of the Chinese government to take circular economy approach for new industrialization and sustainable development. Qian put forward five policy recommendations to the Chinese government: 1) to formulate a master plan for promoting and implementing circular economy under the guidance of the State Committee of Development and Reform; 2) to promote the development of circular economy by enforcement of policy and legislation; 3) to establish an integrated measurement indicators system to monitor the progress of circular economy and sustainable development, and corresponding database and information systems on material and energy flows; 4) to promote green consumption by implementing green procurement at governmental levels; and 5) to promote technological renovation by supporting R&D and policy studies.

　　Task Force on Financial Mechanism for Environmental Protection 

　　Zhang Kun, co-chair of the TF, gave a brief background of this TF in his report. He pointed out that insufficient environmental investment has long been a bottleneck hindering environmental protection in China. As the Decision of the Third Plenary Session of the 16th the Communist Party Committee (CPC) Central Committee calls for the reduction of the restrictions and the expansion of market access and allowing nonpublic-owned investors to invest in the areas of infrastructure, the CCICED approved the establishment of the Task Force of Financial Mechanisms for Environmental Protection in 2002 to identify key problems in the field of environmental investment and financing in China and to make holistic, strategic and operational policy recommendations to the government of China to address these problems.

　　The TF found that insufficient investment and low efficiency are the two key problems in environmental investment and finance in China. Insufficient investment is particularly prominent in the fields of urban environmental infrastructure (UEI) and small and medium sized enterprises (SMEs). The TF put forward three policy recommendations: 1) to multiple financing mechanisms for UEI; 2) to promote marketing of construction and operation of UEI; 3) to provide supportive mechanisms for financing SMEs. Prof. Zhang particularly recommended that the Government of China consider the introduction of municipal bonds, which will serve as a new and important channel for financing UEI.

　　Hidefumi Imura, co-chair of the TF, spoke and stressed the urgency to establish and implement effective environmental financing mechanisms in China as a critical element of its fiscal reform and the financial sector reform and the necessity to build risk mitigation and protection mechanism for investors based on international experiences and lessons.

　　Task Force on Development of Environmental Protection Industry 

　　Wang Yangzu, Cco-chair of the TF, reported on the TF's main work since its establishment in 2002. Rudi Kurz, co-chair of the TF, presented suggestions on promoting the development of environmental protection industry (EPI). The TF believed that a fast-growing domestic demand is the single most important driver for the development of Chinese EPI. The demand for EPI products and services has four sources: enterprises, private households, government and foreign markets. For enterprises, tighter environmental regulations would increase the demand for EPI products and services; ambitious regulations without strong enforcement measures are useless; the 'polluter pays principle' should be reinforced; all government subsidies should be re-evaluated and reduced if they support activities causing negative environmental impacts. For private households, the government can regulate prices by taxing highly polluting products. Only if private households have to pay the full costs can reduced energy and water consumption and waste reduction etc., be achieved.

　　Task Force on Energy Strategies and Technologies 

　　Ni Weidou, co-chair of the TF, pointed out that China's current energy system is unsustainable; it causes severe environment damages by direct coal combustion. He emphasized that the modernization of coal utilization is an important part of the energy system for sustainable development. International Co-Chair Prof. Thomas Johansson presented the TF's recommendations for implementation of polygeneration system: 1) to fully recognize the strategic importance of the modernization of coal utilization in achieving sustainable energy in China; 2) to immediately conduct a feasibility study of demo-plants in two selective areas; 3) on the basis of demo-plants, to have the government define the capacity and portion of modernization of coal utilization in the total amount of coal consumption in the next 20~30 years, during which period, preferential tax, low interest loan and funding, should be considered; 4) to implement and deploy polygeneration in close cooperation with power sectors, for instance, joint investment, joint operation, joint sharing of the profits; 5) in the short term, to extend the utilization of 15% methanol blended gasoline to motor vehicles, and to use DME (dimethyl ether) as alternative liquefied petroleum gas (LPG); and 6) to summon the best research teams to conduct R&D of polygeneration system, and to include research projects concerning the modernization of coal utilization into national intermediate/long term science and technology program.

　　Task Force on Enterprise Development and Environment 

　　Bjorn Stigson, co-chair of the TF, reported that, through their study and comparison of enterprises during the TF study tour overseas, the TF believes that environmental protection and society responsibility are the key factors for the success of enterprises; it is very important for enterprises to cooperate with the government in environmental protection. Business sale, capacity building need, strengthening governance framework, and sustainable development strategy for small and medium enterprises (SMEs), and key performance indicators are five topics in the report. The TF put forward six major recommendations: 1) to increase manufacturing facility size via industrial sectoral restructuring which can support sound business, environmental, and quality practices; 2) to speed up capacity building in business and management practices, and legal and social institutions; 3) to strengthen governance frameworks; 4) to develop specific strategies and tactics for improving performance of SMEs; 5) to develop and make widely available a set of key performance indicators for both specific industries and for China's key social, environmental and economics goals; and 6) to make industry structural changes which encourage and promote stronger environmental performance.

　　Task Force Updates 

　　Task Force on WTO and Environment 

　　The Task Force convened its first meeting on October 27-28, 2003 in Beijing. Zhu Guangyao, Secretary-general of CCICED, stressed in his message to the meeting that as a new member of the WTO, China will meet the new challenges brought about by trade liberalization and environmental protection, and other multi-facet conflicts between developing and developed countries under the framework of the WTO. He pointed out that it is important for the TF to discuss future possible issues in the Doha Round, and the environmental implications of China's entry into WTO. The TF has two priorities: 1) environmental impacts assessment of WTO accession in several selected sectors; and 2) technical support to participation in Doha negotiations on trade and environment. Cancun ended without any result, which may imply that the task for future work of the TF would be more important.

　　A Roundtable Discussion took place before the TF meeting, which aimed to assess the results of the Fifth WTO Cancun Ministerial Conference and the future of the Doha Round. The TF reviewed its current work, including environmental impact assessment in six sectors that have most environmental and sustainable development implications, namely forest, energy, agriculture, automobile, textile and aquaculture. Some work has been done in the six studies, and further substantial work, mainly quantitative analysis and policy analysis, will follow after the meeting. The TF also examined its work supporting China's participation in the Doha negotiations. Five research projects focusing on the Doha negotiating issues and non-negotiating issues have been launched. These include the relationship between WTO rules, reduction and elimination of tariff and non-tariff barrier to environmental goods and services, the effects of environmental measures on market access, the relationship between TRIPs and CBD, eco-labeling for environmental purposes.

　　Task Force on Non-Point Agriculture Pollution Prevention 

　　A working meeting of the TF was held in Jiangsu Province on October 27 -28, 2003. The topics covered at this meeting included: bio-physical mechanisms of the agricultural fertilizer, the influence of the agricultural technological promotion system to the amount of fertilizer used, farmers' refusal to use the recommended fertilizing techniques, grain security and appropriate fertilizer usage, and policy on the organic fertilizer etc.

　　The task force will conduct a socio-economic investigation, including: fertilizer usage, production, selling, marketing, packaging, user instructions, farmers' fertilizing habit and the amount of fertilizer used, etc. The TF's research report to be submitted in May 2005 should focus on the assessment of non-point source pollution, control technologies and socio-economic analysis for eastern China. In addition, the influence of fertilizer usage to fishery and urban water supply should also be discussed and demonstrated for major/typical river basins.

　　A policy consultation workshop will be held before the end of June 2004. Topics for the workshop will include: analysis of negative impacts of the non-point source pollution, the local governments' challenges, economic methodologies and their constraints during the policy implementation. Some international experts and policy makers from relevant government departments will be invited to attend the workshop.

　　Following the meeting, some members of the TF paid a visit to Yixing, Anzheng and Changshu to investigated area source pollution and control technologies in the Tai Lake basin.

　　Task Force on Agricultural and Rural Development 

　　The Task Force held its first meeting in Beijing on November 4 - 5, 2003. Jikun Huang, co-chair of the TF, initiated a discussion on the main objective and the tasks for the TF and emphasized that the TF should pay special attention to food security and farming income. He disclosed that the present government's focus is the issue on agriculture and farmer. Discussion on the tasks of the TF began with the agricultural R&D system reform. Whether or not the private sector should be encouraged or facilitated to join agricultural R&D is also discussed. Topics discussed during the meeting included: rural development, grain market reform, land tenure, food security and trade liberalization and scientific research on agriculture, etc. The TF reached a consensus after a brain-storming on the 8 tasks and designed a matrix to implement the project. A number of well-known experts will be invited to comment on working papers to ensure the effectiveness of the final recommendations. The format of the report next year was also discussed. The organization and coordination mechanisms for conducting sub-projects have been worked out.

　　News Briefs from China 

　　Beijing prepares for 'Green' Olympic 

　　The Beijing Organizing Committee for the Games of the XXIX Olympiad is requiring all proprietors of Olympic venues to follow "green" environmental guidelines in the construction of Olympic venues. A so-called "green Olympics" is one of the three main concepts of the 2008 games, along with themes that include high-tech and people's Olympics. Enhancing the concept of environmental protection at the Olympic venue construction sites is an important way to realizing a Green Olympics, said Liu Jingmin, executive vice-president of Beijing Organizing Committee when speaking to potential Olympic contractors at a Sustainable Development Seminar for Olympic Venues in late February. Liu listed several main tasks for sustainable development, including controlling air pollution, especially reducing the coal and industrial pollution and vehicle emission, effective disposal of municipal sewage and municipal refuse and increasing the green land acreage to 50 percent.

　　In addition to the four Olympic venues upon which workers broke ground last year, there will be 11 new venue projects starting this year. (Source: China Daily, 2004/03/01)

　　China aims to check quality of afforestation 

　　The State Administration of Forestry has worked out rules for the examination of the quality, instead of quantity, of afforestation. The rules have defined the content, standards, legal bases of such quality checks and ways for punishment or encouragement. They have set up new systems for the checks in the quantity, quality and management of man-made forests, air-sown forests, natural forests as a result of sealing off mountains and sapling nurseries. According to the rules, the targets for quantity and areas of those forests must be fulfilled by 100%. For man-made forests, the fine tree strain percentage and the percentage of trees for ecological purposes in the man-made forests must attain well over 30% and over 95% of saplings planted must be up to the state-prescribed standards. For forests grown in sealed-off mountains, over 95% of certified forested areas and nursery saplings must be up to the state-prescribed standards. (Source: China Environment News, 2003/12/08)

　　China Wins UNEP Prize 

　　China as a country that fulfils its commitments to the Montreal Protocol won the 2003 prize of UNEP for its outstanding contributions to the protection of the ozone layer at the 15th meeting of the signatories of the Montreal Protocol in Nairobi. Wang Jirong, head of the Chinese delegation and Vice Minister of the State Environmental Protection Administration of China, received the medal and certificate from Vice President of Kenya, at the headquarters of the UNEP on November 14.

　　China as the world's biggest producer and consumer of the ozone layer depleting substances has made tremendous efforts in implementing the Vienna Convention for the Protection of the Ozone layer and the Montreal Protocol and has made fine progress. Thanks to the efforts of the Chinese government and people of all walks of life, the Montreal Protocol has become one of the international environmental agreements that are being implemented with the best results. The international community agrees that China has set a good example in honoring its commitments to environmental agreements and is entirely entitled to winning this prize. (Source: China Environment News, 2004/01/24)

　　Beijing to Set New Water Prices 

　　To address water shortages in Beijing, municipal authorities have decided to set quotas on residents' water use and adopt a progressive water pricing system. Under a progressive fee system, residents pay one price for water until a certain amount is consumed. After that, the price goes up. Water price hikes may be the most effective alternative to encourage people to save water. Experts say the demand for water will drop by 20 percent when the price is doubled. Several big cities in China have moved towards progressive fees for water. Dalian, a coastal city in northeast China's Liaoning Province, charges 2.3 yuan (US$0.28 ) for every cubic meter of water if a household's monthly water consumption is under eight tons. But the price soars to 10 yuan (US$1.2) per ton after that. However, the implementation of progressive pricing in Beijing would be more complicated, due to the city's huge population and varied conditions of different social strata. If progressive charges are based on households, the same basic amount of water would be quite tight for a six-member household compared with a two-member family," The municipality plans to hold public consultation on the draft of water price hike measures. Beijing has been facing a severe water shortage. The situation has deteriorated after five consecutive years of drought since 1999. 40 percent of the water used in Beijing goes to the personal needs of residents. People in the city use more water than industry.

　　Beijing Starts Sand-storm Monitoring System 

　　A system dedicated to monitoring sand storms has been put into trial use at the Beijing Meteorological Station, in hope of providing more accurate sand storm forecasting for the capital area. The computer will sound an alarm and flash bright brown signals to notify system monitors of an encroaching sand storm. The system contains a historical database that uses all available information on storms in the area since 1951, and is also linked to meteorological defence system with Hebei province and Inner Mongolia. (SEPA, 2004/02/17)