Chances are, people will blame those with birth defects as "lack of blessing from the Gods" or something superstitious like that... But at least a large portion of the population is killing itself without "external aid", I guess it's good news to the population explosion and its subsequent social problems?
The Pollution problem is known by the politicians many years. They don't intervene and justify China is still a developing nation and it's the same like Europe in the 18th century when the industrialization began. Local politicians won't do anything because of foreign investments in their region. They get some refund hence the economy in their region flourish they don't care about the people suffering the pollution. May these politicians live in a better place without any effect on them by the pollution. Just sitting anywhere with fresh air, earning money by corruption and reputation.