127) China in Copenhagen: sticking to national interests (narrowly defined)

How China Stiffed the World in Copenhagen
John Lee
Foreign Policy, December 21, 2009

Why Beijing insists, "Don't look at our books!"

During the frantic final two days of negotiations at Copenhagen over the weekend, U.S. President Barack Obama and Secretary of State Hillary Clinton set a clever trap for Chinese Premier Wen Jiabao. Having just announced that the United States would establish and contribute to a $100 billion international fund by 2020 to help poor countries cope with the challenge of climate change, Clinton added a nonnegotiable proviso: All other major nations would first be required to commit their emissions reduction to a binding agreement and submit these reductions to "transparent verification." This condition was publicly reaffirmed by Obama, who argued that any agreement without verification would be "empty words on a page."

Everyone in the room knew that "all other major nations" primarily meant China. From the beginning, China has steadfastly refused to place its commitments within a binding framework or accept outside monitoring and verification of its progress toward any promised targets. But the eleventh-hour U.S. proposal immediately isolated China. The onus was now on Beijing to agree to standards of "transparent verification." If it did not, poorer countries standing to benefit from the fund would blame China for breaking the deal. Clinton's proposal had cunningly undermined Beijing's leadership over the developing bloc of countries.

Chinese officials retreated to their well-worn negotiation mantra, namely arguing that such demands were an insult to China and would be a violation of Chinese sovereignty and national interests. Wen had been outflanked and was angry, even leaving the conference center and subsequently snubbing Obama in a couple of previously planned bilateral and multinational meetings involving the U.S. president.

Which raises the question: Why such an extreme response? As Mark Twain reportedly said, there are three kinds of deceptions: lies, damned lies, and statistics. China has long been engaging in a dangerous game of manipulating important economic numbers and concealing domestic commercial realities. Despite all its progress over 30 years, Beijing is afraid to shine too bright a light in dark places, and even more afraid that outsiders might be allowed to do so. In important respects, the government actually embraces opaqueness as a perceived advantage. The thought of "transparent verification" was seen as the thin end of the wedge, allowing outside experts broad authority to peer into the workings of middle China. It would have caused Wen to feel the distinct pang of panic that guilty men feel when they realize the jig might soon be up.

For two decades, NGOs operating within China have struggled not only with wary officials in Beijing but more trenchantly with local officials for access and information. But teams of international economists, scientists, inspectors, and statisticians roaming China to gather information on carbon emissions and reduction initiatives would have been unprecedented. In promoting China, Beijing projects an image of order and competence to the world. In parts of its wealthier coastal cities, China is that. But these international teams would undoubtedly discover exactly how dysfunctional the heart of the country really is. They would see firsthand and report back how China's 45 million local officials remain the most formidable obstacle to improving transparency in China's sprawling economic structure -- protecting their turf, defending their privileges, arbitrarily enforcing the law, and when it comes to economic performance, blatantly cooking the books.

Indeed, China's economic numbers and statistics ought to be viewed as the most unreliable of any major economy in the world. For example, every quarter, China's National Bureau of Statistics (NBS) goes through the same ritual. Statistics come in from all over the country. The provinces take about two weeks to compile them, three times as fast as many smaller, developed economies with much more efficient processes for data collection. The NBS sorts through them, "consults" with senior government officials, applies a mysterious methodology to trim them into shape, and then spits out an annual GDP figure, always in the neighborhood of 8 percent, that is then diplomatically endorsed by organizations such as the World Bank andthe OECD.

Incredibly, provinces rarely fail to hit economic targets set for them by Beijing each quarter despite few changes in policy. Inaccuracy is also perpetuated by the fact that local officials are praised and promoted according to their capacity to meet centrally issued targets, while central officials themselves have limited means with which to verify local figures. Beijing is completely aware that these numbers are wildly inaccurate despite aggressively defending them after release. For the sake of its image and reputation, Beijing still wants to assure outsiders that it remains in charge even though in important respects it is not. It would not want a team of independent experts seeing for themselves the deception, dysfunction, and lawlessness that takes place throughout China under the watch of unaccountable local officials.

This lack of transparency strikes at the heart of China's credibility in any global climate-change agenda. Wen would not want foreign experts reporting to political masters in America and Europe that Beijing's capacity to compel local officials and locally managed, state-controlled enterprises -- some 120,000 companies and countless other subsidiaries -- to implement climate-change initiatives is extremely poor. This would simply strengthen suspicions that decentralized China cannot actually honor future commitments despite promises that it intends to.

Then there is the further problem of cheating in current and future carbon reduction schemes. Developed countries must feel confident that incentives offered to developing countries to cut emissions (in both absolute terms and emissions relative to economic growth) can be verified. Indeed, earlier this month, the U.N. body in charge of the Clean Development Mechanism, a proviso under the Kyoto Protocol allowing developed countries to purchase carbon offsets for funding "clean energy" developments elsewhere, suspended approvals for dozens of Chinese wind farms over suspicions that China had held back the building of planned wind farms and deliberately lowered previously allocated subsidies to make the wind farms eligible for funding -- industrial policies that would disqualify these farms from benefiting under the scheme. China has so far received carbon credits worth more than $1 billion, which is almost half of the total issued under the U.N.-run program.

China's government has vigorously denied that it is attempting to illegitimately manipulate the scheme. But the point is that there is no system for independent and external verification; nor is Beijing proposing to allow one. Meanwhile, China had previously pledged that up to 15 percent of its energy would come from renewable sources by 2020 and special efforts would be made to close dirty power plants, impose world-class vehicle-efficiency standards, and proposed various other measures to cut emissions. Again, developed countries suspect that China will receive plaudits and concessions from any future carbon emissions regime without actually keeping its promises.

Alas, given the desperation to announce a "deal," Obama backed down. The so-called Copenhagen Accord merely compels developing countries to self-report their emissions every two years and allow outside scrutiny of the data. China is off the hook for the moment, but whether this is enough to satisfy the U.S. Congress when deciding whether to approve any future binding agreement is another matter.