China's Environmental Retreat

"We were supposed to get funding this year, but we are still waiting for government approval to go ahead," said Zhou Xiaorong, an engineer for the contractor that runs the facility. "I am worried the economic situation is having a negative impact. Meanwhile, the city's ability to monitor the environment is not at full capacity."

At the same time, several factories identified by the government as the worst polluters are still operating.

Officials at a steel factory in the central Chinese city of Wuhan that was scheduled for closure in 2007 because of air pollution said they had not been asked to fix the problem or curtail operations. The same is true at the Zhanjiang Plastics Film factory, which was also marked for closure last year.

The Fuan textile company was once one of the stars of Guangdong's economy, producing massive quantities of T-shirts and other clothes for export to the United States and beyond.

But two years ago, area residents began complaining that the Maozhou river had turned a funny color. Inspectors soon discovered that while the factory was producing 47,000 tons of waste a day, it had the technology to process only 20,000 tons. The rest was being dumped into the river. After repeatedly giving the factory opportunities to fix the problem and seeing no improvement, the government finally ordered it shut in February.

By July, the company was breaking ground on a new site in Yancheng on the country's eastern seaboard.

Li Changhao, a director in the business development bureau for Yancheng, said he is sure that the wastewater issue has been addressed and that pollution will not be a problem when the factory begins fully operating early next year.

He said the global financial crisis has been devastating for the city's companies, many of which are exporters, and that their revenue is down 15 percent in the past few months. In this context, he said, Fuan is a valuable asset despite its previous transgressions. "The company has over 4,000 workers and has made $100 million in investment," he said.

Amid sliding environmental standards, there are some who argue that there is still a potential bright side.

U.N. Secretary General Ban Ki-moon has called on world leaders to rethink the global financial system in a way that includes the environmental costs of economic activity. Ban imagines a "green New Deal" that will make environmental technologies the new, hot growth industry to jump-start the ailing world economy. U.S. President-elect Barack Obama has made a similar argument, as have British Prime Minister Gordon Brown and French President Nicolas Sarkozy.

Proponents say lean economic times may be a good occasion to focus on the environment, because with less money available, people will use less energy, shop less and put off big-ticket purchases such as homes and cars. That could mean the consumption of fossil fuels and other natural resources will fall.

Mei Xinyu, an international trade researcher at the Chinese Academy of Social Sciences, said that instead of backing down from environmental priorities, China should focus on clean energy, green construction and other environmentally friendly business ideas to boost its ailing economy. "If you had been investing in a highly polluting factory, now you can invest in a waste-processing facility," Mei said.

Researchers Crissie Ding and Liu Liu contributed to this report.