China announces plans to shift investment focus to 'green' projects

The country needs about 3.4 trillion yuan ($536 billion) in environmental investment before the end of 2015, the State Council said in a blueprint on pollution reduction.

Business news service Bloomberg has calculated that Chinese environmental protection spending amounted to 2.08 trillion yuan in the period from 2006 to 2010.

According to the blueprint the Chinese Government plans to reduce sulphur dioxide emissions by 8%, increase the proportion of the country's total energy use which comes from sources other than fossil fuels and add 42 million tonnes of daily sewage treatment capacity.

However the State Council did not say whether this emissions reduction target was a "binding indicator". This wording appeared in its spending plan over the previous period, Bloomberg said.

China will also "significantly" improve nuclear energy production safety measures and speed up the phasing out of "old automobiles and motorcycles" registered before 2005, the State Council said.

The country will also deepen its focus on preventing water and air pollution, including protecting sources against illegal construction projects and strengthening regulations against toxic and hazardous substances, it said. Existing controls against industrial smoke dust will also be introduced, while coal-fired power plants and construction sites will also face stricter controls.

Companies and local authorities will be mainly responsible for investments with support coming from central government as needed "depending on different circumstances", it said.

Infrastructure law expert John Yeap of Pinsent Masons, the law firm behind Out-Law.com, welcomed the effect that this shift in focus would have on companies working out of China.

"The significant investment needed to meet the policy objective of a cleaner environment will create meaningful business opportunities for technology providers and clean tech funds and companies," he said.

Wang Jun, a researcher with the government-backed China Centre for International Economic Exchanges, told Bloomberg that the country's increased spending commitment for environmental projects was part of a campaign to move it away from an export and infrastructure-based economic growth model.

"Boosting environmental protection is an important step in China's move to shift its growth model. Excessive infrastructure investment over the past years has been a key factor in fuelling China's high inflation and also added to financial risks. The government will continue to build roads, bridges and airports, but the investment won't match the four trillion yuan the country spent after the 2008 crisis," he said.

Recent investment in Chinese infrastructure has come through "historic" levels of bank lending, much of which was made to companies set up by local Chinese governments set up to avoid rules barring them from borrowing directly, Bloomberg said.

Local government debt in China in June of this year came to 10.7 trillion yuan, according to the country's National Audit Office.

In remarks reported by the China Daily website from a conference earlier this week, Chinese Vice Premier Li Keqiang said that the government would strive to provide people with a "more liveable environment" with "clean water and blue skies". However, he stressed that the government had to maintain the balance between economic development and environmental preservation.