> How can China allow this level of pollution?
The tradeoff between economic growth driven by energy use (for production) and pollution.
"The environmental Kuznets curve is a hypothesised relationship between environmental quality and economic development: various indicators of environmental degradation tend to get worse as modern economic growth occurs until average income reaches a certain point over the course of development.[12] Although the subject of continuing debate, some evidence supports the claim that environmental health indicators, such as water and air pollution, show the inverted U-shaped curve.[1]
It has been argued that this trend occurs in the level of many of the environmental pollutants, such as sulfur dioxide, nitrogen oxide, lead, DDT, chlorofluorocarbons, sewage, and other chemicals previously released directly into the air or water."
http://en.wikipedia.org/wiki/Kuznets_curve