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China stops subsidizing polluting industries

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Kai Ryssdal: China’s economy had a rough quarter. Beijing announced today GDP slowed 1.6 percentage points. ‘Course, that kind of drop is a lot easier to take when you’re starting with an economic growth rate of 11.9 percent. Now it hovers just above 10.

Also today, and in a related vein, the Chinese government yanked some key subsidied for hundreds of exported products — everything from steel to corn starch and fertilizers. What do all those have in common? Pollution. They make up the most energy-intensive parts of China’s economy.

From Shanghai, Marketplace’s Rob Schmitz reports.

Rob Schmitz: Consider them China’s bad boys: Dirty, energy-wasting industries that help keep China dependent on foreign oil and gas. Their pollution has left a trail of damaged lungs across this country.

Economist Andy Rothman says by removing a tax rebate for them, Beijing is sending a couple of signals: One, we need to stop paying polluters. And two, our economy’s strong enough to do just that.

Andy Rothman: The Chinese government is saying our economy is back to normal, it’s back to the pre-crisis level, and we can resume the policy adjustments we were making in ’05, ’06, ’07 and in the first part of ’08 before the global crisis hit.

With GDP growth hovering around 11 percent, China’s economy seems like it’s back to it’s normal phenomenal growth. And that’s good, because some of these polluting companies will soon need all the help they can get.

Ship horn

This is where it’s gonna hurt. Three million tons of steel leave the port of Shanghai each month, making China the world’s largest steel exporter. Not for long.

Helen Lau: The door to exports is closed.

Steel exporters here thought it was bad enough when the government allowed its currency to appreciate. Hong Kong-based industry analyst Helen Lau says removing this subsidy will slash China’s steel exports in half.

Lau: Either they have to cut their production, or they have to sell for lower prices. And either way, they make less money.

The winners in all of this, Lau says, will be Japanese and Korean steel makers and if all goes as planned, China’s environment.

In Shanghai, I’m Rob Schmitz, for Marketplace.

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