John Schoen  /  msnbc.com
Stockbroker Zai Shasha has mixed feelings about Chengdu's rapid development. Growth has brought prosperity to many, but "the air is becoming terrible," she said.
Image: John Schoen
By John W. Schoen Senior Producer
msnbc.com
updated 10/20/2010 8:44:48 AM ET 2010-10-20T12:44:48

At a small desk tucked in the corner of a Bank of Communications branch office in central Chengdu, a broker for Huaxi Securities is helping her customers navigate the burgeoning Chinese stock market.

Zai Shasha's customers are moving some of their new wealth into companies that are profiting from the rapid growth that has transformed cities such as this one from a sleepy provincial capital into a bustling regional hub. That rapid development and the resulting prosperity have been good for Zai’s customers and her standard of living.

But Zai confessed she had “some sorrows” about Chengdu’s rapid transformation.

“The traffic is bad,” she said. “And the air is becoming terrible.”

John Schoen
Vehicle emissions are now the biggest source of air pollution in China's big cities. The number of cars and trucks on the road is expected to more than double by 2020.

The haze that hangs over this city, and many others in China, is among the most visible of stresses created by breakneck development. Just 1 percent of the country’s 560 million urban residents breathe air considered safe by the European Union, according to a 2007 report by the World Bank.

Explosive economic growth and rapid urbanization have brought other problems, as well, for hundreds of millions of Chinese  moving to the cities looking for a better way of life.

An online survey last year by Xinhua, the official Chinese news agency, found that corruption topped the list of respondents’ concerns. Other key issues included the wealth gap, access to education, democracy and health-care reform.   

Since 1978, the number of cities in China has more than tripled, to 661, and the urban population more than doubled to 43 percent of the nation's 1.3 billion people, according to China Labor Bulletin, a Hong Kong-based organization.

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With much of China’s 800 million workforce still living in sparsely settled rural areas, the Chinese government is hoping that development of cities such as Chengdu will help recreate in the western provinces the rapid industrialization of the east and south that has lifted hundreds of millions of people out of poverty. It’s a process that will likely take decades.

Traffic jams have become a way of life for millions of urban Chinese. Vehicle emissions have bcome a major source of air pollution in big cities. As of the end of 2009, there were 76 million cars and trucks on the road, a figure that’s expected to more than double by 2020.

Cars and trucks aren’t the only source of air pollution. Last year, China burned 3.3 billion tons of coal to generate power, warm its homes and fuel cook stoves in rural villages. That's up from 2.4 billion tons in 2005, according to U.S. Department of Energy estimates, or more than three times the amount of coal burned the United States, the next largest consuming country.

And it's not only the air that is becoming polluted in the rush to maintain breakneck economic growth.

John Schoen
On a recent evening, the Chengdu river walk was crowded with strollers looking for a respite from the late summer heat. Barefoot residents walked in circles over a section of sidewalk embedded with river rock offering a welcome foot massage. On a small dock at the end of a ramp down to the river, three men were fishing in the moonless night, with short glow-lights attached to their lines to better see a strike. But the beauty of this popular public space was marred by a lingering odor wafting up from the water.

Runoff of fertilizers, pesticides, chemicals and untreated wastewater all have taken a toll on China’s rivers and waterways. In December, Wu Xiaoqing, a top official in the Ministry of Environment, said nearly 90 percent of rivers passing through cities are polluted, and some 270 million people in rural areas suffer from unhealthy drinking water.

The Yangtze River is awash in toxic chemicals posing health risks for tens of millions of people, environmental watchdog Greenpeace reported last month. Heavy metals and carcinogens were regularly found in fish caught in four cities along the river, the group said in a report.

After a string of explosions and spills, the environment ministry recently announced it would survey conditions and invest 90 billion yuan ($13.2 billion) on new water pipelines, water reclamation and water pollution controls. The measures are supposed to close down illegal dump sites, drain outlets and factories that don’t meet water quality standards.

“The Chinese government is attaching great importance to the environment,” said Zhu Shouchen, executive secretary of the All China Journalists Association. “Protection of the environment is one of the indicators of Chinese officials’ performance. If they can’t fulfill this goal of protecting the environment, they will be kicked out. It’s that tough.”

But Chinese officials concede they have their work cut out for them. In May, Premier Wen Jiabao told a forum on pollution control that progress had stalled on a four-year plan to boost energy efficiency.

“It is getting more and more difficult to meet the targets due to the resurgence of heavy polluting industries in the past year or so,” Zou Ji, an climate expert at the World Resources Institute, told the South China Morning Post. “The risk of missing those targets is growing.”

Coping with corruption
The surge of wealth in China also has been accompanied by corruption at all levels of government.

Western countries doing business in China have to deal with widespread expectations of "gift giving" to operate in a culture where personal relationships can make the difference between success and failure. The practice can backfire if not handled properly, according to K.C. Kwok, a University of Hong Kong economist.

"You have to be very careful," he said. "You don’t want to make the other guy feel like he’s being bribed. But you want to bribe him. It’s a very technical skill.”

Corruption has become a fact of life for many Chinese people. To help close the wealth gap for the more than 340 million rural workers who haven’t migrated to cities, for example, China rolled out a series of land reforms to help farmers and other rural households.

But land reform also opened up the opportunity for a wave of corruption, as local officials demanded bribes for building permits and contract kickbacks.

In May, the Ministry of Supervision announced that more than 3,000 officials had been punished for various forms of graft and corruption, including bribes and embezzlement related to land sales and government stimulus spending.

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“We will tackle corruption with a heavy fist,” said Fu Kui, head of the ministry’s enforcement department, when the corruption sweep was announced. “With many corruption cases likely to happen, if we don’t take tough measures it will be hard to suppress this.”

China’s continued investment in development will present ongoing opportunities for corruption. Beijing has promised to spend heavily to clean up the air and water, build new schools, roads, hospitals, airports, and fund other projects aimed at moving its development plan to the next phase.

Now, they have to find the money to pay for it.

NEXT: Hong Kong thrives as gateway to China trade.

Reporting for this series was done as part of the first China-United States Journalists Exchange, a field-study trip sponsored jointly by the East West Center, the Better Hong Kong Foundation and the All China Journalists Association.  The two-week trip included dozens of meetings with government, business and academic leaders in Hong Kong, Beijing, Chengdu and  areas damaged by the 2008 Sichuan earthquake.

Photos: China 2.0 - Economic transformation

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  1. China 2.0

    A guard stands sentry overlooking Tiananmen Square in Beijing. Three decades after the failed policies of Mao Zedong's Cultural Revolution brought economic collapse, China has caught up with Japan to become the world's second-largest economy. But as it enters a new phase of growth, the Chinese government faces a new set of challenges. (John Schoen / msnbc.com) Back to slideshow navigation
  2. The way West

    The Great Wall, one of the greatest engineering projects ever built, stretches west. China has embarked on a massive new infrastructure program designed to spread the breakneck economic growth of its coastal cities to inland and western regions. (John Schoen / msnbc.com) Back to slideshow navigation
  3. Panda power

    A growing panda consumes between 15 to 30 kilograms of bamboo every day in the Wolong National Nature Reserve in western Sichuan, a popular tourist attraction. The government is encouraging newly wealthy Chinese to travel more as part of a plan to boost domestic spending. (John Schoen / msnbc.com) Back to slideshow navigation
  4. Wealth gap

    Shoppers search for low prices at a Wal-Mart store in the New World Shopping Center in Beijing. China's red-hot economy has raised the living standards of urban households. But hundreds of millions of rural workers earn roughly $2 a day. (John Schoen / msnbc.com) Back to slideshow navigation
  5. Building the New China

    A laborer in Chengdu works on a new sewer system, part of a multibillion-dollar investment in new roads, railways, power and water lines. China's rapid industrialization has created a long list of environmental hazards that will be costly to clean up. (John Schoen / msnbc.com) Back to slideshow navigation
  6. Property wealth

    A farmer in rural Sichuan province tends to the fall harvest. Rural households recently were granted long-term leases on their property. But land reform has been plagued by corruption. (John Schoen / msnbc.com) Back to slideshow navigation
  7. The next generation

    Like many aspiring young Chinese, Gong Da Dian, 25, who goes by the English name "Dickens," moved to the city of Chengdu looking for a better life. But it hasn't been easy. He wants to go back to school and start a computer company "if I can get enough money.” (John Schoen / msnbc.com) Back to slideshow navigation
  8. Learning to innovate

    At Deyang Primary School No. 1, students assemble in light, airy rooms surrounding a quiet courtyard. Classes can include as many as 70 students. To create new technology and high-wage jobs, China is spending heavily on education. (John Schoen / msnbc.com) Back to slideshow navigation
  9. Designing their future

    A worker at an art company in western Sichuan province creates traditional Chinese paintings. The government is working to create jobs in rural areas, where employment opportunities are scarce. (John Schoen / msnbc.com) Back to slideshow navigation
  10. On the move

    Three years ago, He Yue moved to Chengdu in Sichuan province to find "a better opportunity." She now works as a travel agent and business is brisk. "Chinese people used to travel once a year," she said. "Now they travel two or three times a year." (John Schoen / msnbc.com) Back to slideshow navigation
  11. Recovery and rebuilding

    A photo is left as a memorial to victims of the Sichaun earthquake of 2008, which killed nearly 70,000 people and left millions homeless. The government committed more than $400 million to the relief and rebuilding effort. (John Schoen / msnbc.com) Back to slideshow navigation
  12. Road to Somewhere

    Though China's coastal cities are choked with traffic, some new highways like this one in Sichuan province are virtually empty. China's leaders are hoping an expanded network of roads, high-speed railways, airports and data links will spur growth in western and inland regions, where economic gains have lagged coastal cities. (John Schoen / msnbc.com) Back to slideshow navigation
  13. Slow, steady recovery

    You Zhoubao was at home when the Sichuan earthquake struck in 2008, collapsing his home and severing his left leg above the knee. Two years after the disaster, victims are still being treated at a local clinic sponsored by the Hong Kong Red Cross. (John Schoen / msnbc.com) Back to slideshow navigation
  14. Growth takes a toll

    Stockbroker Zai Shasha helps her customers navigate the burgeoning Chinese stock market. Rapid urban development has helped boost investment returns for her customers. But growth also has created "some sorrows," she said. "The traffic is bad, and the air is terrible." (John Schoen / msnbc.com) Back to slideshow navigation
  15. Relaxing by the river

    Visitors to Chengdu's riverwalk enjoy a little relief from a hot September day. People in this provincial capital proudly say they enjoy a "more relaxed" lifestyle than friends and family in China's bustling coastal cities. (John Schoen / msnbc.com) Back to slideshow navigation
  16. Hazy outlook

    Air pollution is a serious problem for Chinese cities, including western provincial capitals like Chengdu. Only 1 percent of the country’s 560 million urban resident breathe air considered safe by the European Union, according to the World Bank. (John Schoen / msnbc.com) Back to slideshow navigation
  17. Hong Kong: the capitol of capital

    Shoppers flock to Hong Kong from mainland China to spend some of their new wealth. The city also draws investors hoping to profit from heavy investment in the next phase of China's economic development. (John Schoen / msnbc.com) Back to slideshow navigation
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