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Economy

China's annual comprehensive growth was 2% in boom era: new UN index

Environmental degradation and resource depletion weigh on growth in indicator

Environmental degradation and resource depletion have weighed on China's comprehensive growth, according to a new index.

TOKYO -- A new indicator of national well-being suggests the degree to which China's period of rapid economic growth came at the expense of the environment.

When measured by conventional means, the country's gross domestic product per capita increased by an annual average of nearly 10% between 1990 to 2015. Using the Inclusive Wealth Index, which accounts for environmental and social assets, per capita comprehensive growth measured an average of 2% per year during that period.

The index is the work of a team of experts working with the United Nations and led by Kyushu University professor Shunsuke Managi.

"The IWI consists of three types of assets," Managi said. "Produced capital like infrastructure, natural capital, such as forests, agricultural land and natural resources, and human capital like education levels and longevity."

"GDP grows when more goods are produced by burning oil, which causes environmental degradation," he added. "But this kind of growth isn't sustainable. The IWI quantifies how much capital remains that can be used in the future."

China's "low growth" as measured by the index reflects environmental degradation and other factors that do not show up in GDP but indicate whether development is sustainable, Managi said.

"Environmental problems and the natural resource depletion have acted as drags on the figure," he added.

The index is another example of economic actors paying more attention to the environment and other social issues. Global environmental, social and governance investment totaled $30 trillion in 2018, up 30% from two years earlier. With the increase in socially conscious investing, accurately measuring the value of intangible assets like the environment is becoming more important.

The demand for that data is creating opportunities. Israel's BreezoMeter monitors air quality in 30,000 cities around the world by collecting traffic volume, dispersed pollen and other data from some 50,000 sensors.

The company started the service because CEO Ran Korber, when looking for a house with his pregnant wife who suffered from asthma, wondered if it was possible to visualize the air purity in each dwelling.

Using data from BreezoMeter, L'Oreal of France developed an app to recommend skin-care products to customers based on the air where they live.

The potential demand for clean air is huge, Korber said.

That is true in China. Housing prices there drop 3.97% whenever the air quality index falls 0.1 point, according to Liu Runqiu, a professor at Sichuan University.

Until now air quality and other environmental factors have fallen outside the traditional markets for goods and services because they are difficult to price. But they "can be more readily incorporated into the market because of advances in collecting information," said Toshihide Arimura, a professor at Waseda University

The ability to more accurately price assets like a clean environment and education is leading some to rethink how to address issues like inequality and development.

"In China and elsewhere, we're discussing with local scholars about the idea that to eliminate disparities, improving human capital through investment in education should precede infrastructure," said Kyushu University's Managi.

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