As I sit down to write this blog, the US Embassy in Beijing is reporting a reading of 52 on its PM 2.5 Air Quality Index. This translates as ‘Moderate’ and looking eastwards out of our office window, the sky is blue and all looks well in the Chinese Capital. Today, however, is the exception rather than the rule. Air quality readings have gone off the scale on more than one occasion in 2013 and Beijing has come under the media spotlight like never before. I will focus on Beijing in this blog but the city is just one of many across China currently dealing with air quality issues.
It was recently reported that China will spend RMB 100 billion (US $16 billion) on tackling pollution over the next three years in Beijing and sustainability was discussed at the recent National Party Congress in March. Significant improvements, however, will not happen overnight and for now, air pollution remains a fact of life for those of us living here.
When the US economist Charles Tiebout first coined the phrase voting with your feet more than half a century ago, he was referring to an individual’s ability to choose a location based on, amongst other things, taxes and public goods. I don’t suppose Tiebout ever factored air quality into his calculations but it doesn’t take a great leap of the imagination to apply the concept to the situation we currently face in Beijing. Anecdotal evidence in recent media reports suggests that expats and locals alike may be considering leaving Beijing and recent conversations with friends and acquaintances, particularly those with young families, back this up.
If individuals vote with their feet, then the same must go for organisations. Quality of life factors are a important criteria in choosing a location for many service sector operations, and those quality of life issues inherently include environmental factors. Recent media reports suggest that some firms are experiencing difficulties in persuading senior executives to relocate to the Chinese capital. All other things being equal, it is not difficult to envisage a situation whereby some firms would opt to locate in a less polluted city or country in order to more easily attract top talent.
All other things, however, are not equal. China is central to the growth strategies of many international firms and the Beijing office market, to an extent, benefits from relatively inelastic demand due to the perceived need to be close to the domestic power base. Huge net absorption and massive rental growth in recent years, 1Q13 notwithstanding, are testament to this. From a personal perspective, air pollution (and overcrowding) aside, Beijing remains a great place to live and work and the drawbacks are more than offset by all of the other things that the city has to offer.
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