Background: The goods and services provided by biodiversity are worth hundreds of billions of yuan to the Chinese economy each year. One global estimate is that nature's services are worth US$ 33 trillion per year, of which China's share could be as much as $ 6 trillion per year. These benefits include direct provision of food, medicine, timber, and other products as well as watershed protection, nutrient cycling, carbon sequestration, and the numerous other processes of life upon which the productivity of the Chinese economy is based. Thus conserving these biodiversity goods and services is of interest to all CCICED working groups.

Despite the role of biodiversity in improving air quality, conserving water, reducing the incidence and impact of floods, providing food, enhancing the longevity of dams (thereby contributing to energy supplies), and increasing agricultural yields, insufficient investments are being made to enable biodiversity to continue providing these benefits. Instead, many sectors of the economy - both public and private - are gaining substantial economic benefits without paying a fair price for them.

CCICED studies have demonstrated that even areas managed primarily for biodiversity conservation can be highly profitable, with the proper policy support. Wolong Panda Reserve in Sichuan, for example, would generate revenues of between $ 1.68 -$ 2.17 million per year if the admission fee were raised from $ 7 to $ 25 (an increasing number of tourists would be willing to pay). This compares very favourably with the current operation costs of $ 250,000 per year, but far greater earnings are possible with greater investments in improving the management of the reserve.

Substantial investments are required to enable biodiversity to be well managed for the benefit of China's economy. Experience elsewhere has demonstrated that these investments will earn very high rates of return, in both the short term and the long term. However, many of these benefits are in the form of "public goods" - distributed freely to all citizens - rather than "private goods" that provide immediate financial returns.

Measures proposed: Establish a research programme to better understand the economics of biodiversity, including its economic benefits and how various economic instruments can be used to both capture the benefits of biodiversity and return profits to improving biodiversity management. As an example, some crops may be extremely wasteful of water and/ or land in providing a certain amount of human nutrition. Since these crops are effectively being subsidized by natural ecosystems they should be subjected to an 'ecological taxation', to return profits to the source.

On the basis of the research, develop policies that will enable significantly increased funds to be returned to biodiversity management. For example, a "Panda Stamp" on tourist visas could earn many tens of millions of dollars per year, if the funds were used for biodiversity management; and many protected areas could at least cover their operating costs if they were enabled to retain the admission fees paid to them and if they were compensated for the watershed protection values they provide. Policies should also be developed to charge private users for the biodiversity benefits they are provided by nature (for example, water fees, green taxes, royalties, resource user fees).

Establish, on the basis of the research programme, a special fund in the State budget to invest in biodiversity activities. This Biodiversity Fund is required to make the necessary investments in infrastructure, research, and administration that will provide returns to the general public over the longer term.