The Circular Economy: Does China set an example for the West?

Xavier Pavie, Professor at ESSEC Business School, author, Academic Director of the ESSEC Grande Ecole programme in Singapore and the iMagination Center, explores the question of China’s environmental footprint and its push for a circular economy which just might prove a model for others to follow.  

It is simplistic to consider innovation as the simple launch of a new product or service on the market to increase the profits of an organisation. The essence of innovation is to resolve problems – it means taking action to survive. As such, the emergence of the circular economy can be considered as an innovation of processes with a clear objective to keep our ecosystem alive.

The planet: running out of resources

Since the beginnings of the Industrial Revolution, our models of production and consumption have been aligned along the pattern of a linear economy based on the tryptic of produce, consume, dispose. Even if this model has enabled the living conditions of millions of people to improve in a spectacular way, its large-scale impact on the environment means that today it has reached its limits. Each year it leads to an ever-hasty, ever-closer “Earth overshoot day” – a date from which mankind begins to live on credit, the blue planet having exhausted the natural resources it is capable of renewing in a year. In 2017, this stage of no return was reached on August 2nd. In December of the same year, humanity’s consumption ended up overstepping the 70% mark of available resources.

The advent of the circular economy

Conscious of the ecological impact of their growth, an increasing number of countries choose to act by opting for a new model: the circular economy. This is a system of production exchange which, at every stage of the product life-cycle, aims at increasing the efficiency in how we use resources, lower the impact of the consumer on the environment, and develop the well-being of individuals. Appearing in the 1970s, this economic concept is founded on several green and innovative approaches to production and consumption such as the sustainable supply chain, ecodesign, industrial and area ecology, the product-service system, responsible consumption, extending the duration of product use and also recycling.

Germany and the Netherlands were among the first in the world to enforce policies aimed at encouraging its implementation, rapidly followed by Japan. It was from its 12th 5-year Plan, from 2011 to 2015, that China itself became aware of the impact of its rapid development on the environment and the costs generated by the latter. In response to this observation, the country succeeded in re-thinking its strategy by giving great emphasis to the development of a sustainable economy. As such, large investments have been allocated to environmental conservation since 2011 through projects aiming to reduce greenhouse gases, increase forest cover or then again create eco-towns and eco-parks.

The circular economy is not a choice, it is a decision

Today, China counts among the rare countries to have adopted a specific law targeting the promotion of the circular economy – “the law for the promotion of the circular economy” – which is applied on a large scale and already concerns millions of inhabitants. Concretely, this 2013 circular proposes towns and localities to work on the re-introduction, after use, of natural resources (solids, liquids, gazes, organics) in their cycles of production and consumption. Moreover, China will go even further than the other nations committed to the cause by demanding its local authorities to revise its regional planning. Thus, if Germany or the Netherlands have made industrial ecology and eco-technological research a priority, no other country had yet ordered its contracting authorities to make the circular economy a central issue in their work. Finally, the country has also earmarked a specific budget for this new form of economy: in 2013, of 52,000 billion yuan in financial credit granted by the major Chinese banks, 360 billion were dedicated to energy-efficient and environmental protection projects, with 63 million yuan specifically destined for the circular economy*.

The government directives in terms of regional planning are far from being the only specificities of the country regarding the circular economy. China is also the first state to have established circular economy indicators on a macro-economic scale, as much on a national as provincial scale. These indicators take the form of a battery of more than 80 measurement indicators which thereby enable the Middle Kingdom to make a clear assessment of its circular strategy and to set new objectives accordingly. The first results have turned out to be convincing: in 2010, 78 % of municipal waste produced was sent to the tip against 65% in 2014.

It is only just a beginning…

With emissions that reach 10.357 megatons of CO2 per year, it is important to remind ourselves that China remains the biggest polluter on the planet, in front of the United States whose emissions reach 5.414 megatons. China is the nation which has the greatest quantity of greenhouse gases – hence the importance of its initiatives regarding the circular economy.

The country’s numerous projects for a more sustainable and ecological growth are to be praised and are inspiring but also to be taken with moderation as there is still a long way to go before being able to consider China as a truly eco-responsible country. As such, adopting the circular economy to a bigger scale, and durably, will allow the country to become a true agent of change in the years to come.

Asia is without doubt the economy of the 21st century with China, but also Korea, India, Japan along with all the emerging economies which are Malaysia, Indonesia or even Thailand. At the same time, this continent is the one that will be the first in line to feel the impact of global warming, notably with the rise in the sea level. These countries have understood this and are on the lookout for quick and effective models which will enable them to survive. Western economies cannot remain on the sidelines of this necessary movement, the United States at their head, and Europe for as much. Because if globalization enables us to see the planet as a market, it must also enable us to see it as a place we must take exceptional care of.


*Aurez, Vincent, and Laurent Georgeault. Les indicateurs de l’économie circulaire en chinethe OFCE review, vol. 145, no. 1, 2016, pp. 127-160.

Xavier Pavie is a Professor at ESSEC Business School, Academic Director of the Grande Ecole programme in Singapore and the iMagination Center. He has recently published Lnnovation à l’épreuve de la philosophie, (PUF 2018) and is notably co-author of the book Responsible Innovation: From Concept to Practice (WorldScientific 2014) and Innovation, creativity and imagination (WorldScientific 2018). To browse or buy the book, please click HERE

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