China has been heralded as the fastest growing economy in the world. However, this growth has been achieved significantly at the expense of its environment. Conventional measures of economic performance such as Gross Domestic Product (GDP) do not take into account environmental damages, and thus may be biased towards an unsustainable development path. In this paper, we compare China's economic performance as measured by GDP against a measure of sustainable GDP, estimated by adjusting GDP for the depreciation of air, soil and water resources. Our results indicate that China's performance may not be as remarkable as commonly perceived, and that its quest for sustainable development may be challenged by political and social considerations. The challenge includes the resolution of conflicts between the goals of employment and sustainability.
Keywords: China, economic growth, environmental cost, green accounting, natural capital depreciation, sustainable development, sustainability, environmental damage, sustainable GDP, employment