“The single biggest obstacle to China’s growth is the physical environment,” said University of Michigan’s’s Dr. Lieberthal in Q&A time this morning.  Environmental pollution can be reversed but it takes time, investment and the willingness to change.  Compare Pittsburgh’s air quality today with Pittsburgh 40 years ago.

For China the greatest constraint is the lack of usable water.  In China the water table has dropped three feet every year since 1960.  In Northern China - where 40% of the population love and 40% of the manufacturing takes place - the water table has dropped 12 feet in the past year alone. 

What water is left is seriously compromised.  In China 40% of the water cannot be used - it is beyond salvage given the high levels of pollution.  Water is critical to civilisation.  It cannot be imported. 

Major infrastructure has been developed - but they are not being used because the treatment plants cost money. 

This leads to serious questions: Can North China maintain manufacturing and population beyond five years? There needs to be fundamental changes in the water culture which is not occurring - there are no NGOs able to push for change, and not an adequate legal system.  The incentive is purely for short-term gain. 

The lack of potable water will lead to serious social unrest in China - and we need to factor in the water equation into China’s growth potential.