Within the past few decades, China's economy has changed drastically.  Beginning as a closed authoritative economy to a now globally significant open-market economic player, China has transformed itself into an economic powerhouse.

China has exceeded many of their goals for their proposed 10th Five Year Plan 2001-2005.  However they failed their environmental protection goal because of their uncontrollable economic growth.  China’s consumption levels have been at a constant high and the government is quickly trying to solve these problems which will help reduce the environmental damage.

Together with the major advantages of China's rapid economic growth, came great challenges the nation must face as well.  China's State Environmental Protection Agency (SEPA) and the Asian Development Bank (ADB) have pinpointed the concerns to four distinct areas:

1. Pollution of water, air, and land
2. Water shortages and land degradation
3. Environmental accidents
4. Energy inefficiency and greenhouse gas emissions

Water

Currently China's five rivers are polluted to the point that they are hazardous to direct human contact.  Most of China's water sources are polluted such as nearly fifty percent of China's lakes.  Of growing concern is the 8% increase of wastewater each year.  One of the main factors for this high number is the fact that more than 278 cities do not have any wastewater treatment facilities at all.  In addition to these cities are rural farm areas that also possess little to no waste management or wastewater treatment systems.  Farmers often resort to agricultural and animal waste dumping into local rivers, lakes, and other water sources.  To counteract this environmental degradation, China has decided to deploy a comprehensive tariff reform for water and wastewater treatment.  This tariff is a good sign for investors creating a huge opportunity potential for private market investment.  The government has decided to issue corporate bonds to help fund the development of water treatment facilities throughout China.

Accidents

The construction of more water treatment facilities is one way to help clean the water however accidents are a common habit in China, and this is another reason why water damage is so high.  China had made so many environmentally detrimental accidents in 2006 that on average they had a water pollutant accident every other day.  It is not only the quantity of incidents but the magnitude of many of the incidents, which is why China has made this one of their four distinct areas they must watch over, control, and reduce.

Air

As a major result of China's rapid urbanization, air quality has suffered tremendously.  Many of China's cities are ranked as having the worst air quality in the world.  Currently roughly 70% of the urban population is living in hazardous, polluted air.  For most large overpopulated cities, the root source of pollution stems from motor vehicle pollutants instead of industrial structures.  This poor air quality has become a growing concern for athletes of the 2008 Olympics making China revaluate their air quality control regulations.  The main objective for China's plan to curb greenhouse gas emissions is a 20 percent improvement in energy efficiency between 2006 and 2010.  New energy efficiency and environmental protection laws have been put in action and factories are given clean industry rewards or high pollutant punishments.  With China's new plan, industrial power plants are able to either pay or trade for the right to emit pollutants.  Industries have begun using less coal to reduce carbon dioxide and sulfur dioxide emissions, the biggest threats toward global warming.

Land

Removal of solid waste has become China's biggest urban pollutant.  China has recently passed the United States as the world's largest producer of municipal solid waste.  Insufficient methods of waste removal have been to blame and a threat to China’s land environment.  China's safe waste disposal rate is at 20 percent demonstrating that many cities do not have a safe waste disposal provision at all.  Farmers with no provision have often resorted to dumping wastes in water sources simply exacerbating the pollutant damage to the water sources.  Of growing concern is China's land degradation.  This issue has taken several forms in China, soil erosion, wind erosion, salinization, desertification, and deforestation.  The government of China has set the Western Development Strategy to help protect, improve, and maintain the crisis of land degradation.  Currently they are making strides in ecological conservation by improving nature reserves, returning cultivated land, and providing irrigation to forests and agriculture.

Energy Efficiency

As a consequence to China's rapid urbanization of cities, industries, and transportation, energy consumption, most of which is inefficient, and the release of greenhouse gases is at an all time high.  China's industrial sector has grown so quickly that regulations, enforcement of regulations, and pollution controlling technologies have not been able to manage the pollution production capacities of the facilities.  In the transportation sector, energy inefficiency accounts for more than 30 percent of China's oil consumption.  Vehicle energy efficiency is already far below world standards and vehicle usage and ownership is at an upward increase.  As a result, unregulated vehicle emissions will also continue to grow and release into the atmosphere.  China is currently the second largest emitter of energy-related carbon dioxide emissions mainly because it is the world largest coal consumer.  China has intended in their 10th five year plan to make better use of their coal resources, primarily expending it on generating electricity.  They also instituted that all power plants using coal install desulphurization equipment by the year 2010 in able to utilize their sulfur while reducing the amount of pollution produced.