Can China Grow and Safeguard Its Environment? The Case of Industrial Pollution

China’s remarkable industrial growth during the reform era brought with it severely adverse environmental effects. In particular, industrial air pollution induces high incidences of respiratory diseases in heavily-polluted urban centers. However, China’s own experience during the past decade shows that this damage can be substantially reduced at modest cost. Reform-induced changes in sectoral composition, ownership and scale of production have already reduced the potential polluting effects of rapid industrialization. The paper constructs three scenarios projecting the pollution damage under different assumptions about policy choices. The comparisons based on these scenarios argue for stringent emission regulations that are extremely cost-effective in reducing pollution intensity. Cost-benefit analysis also warrants further industrial air pollution abatement in China’s polluted cities.