China's Environmental Retreat
In Tough Economic Times, Promises Fall by Wayside

By Ariana Eunjung Cha
Washington Post Foreign Service
Wednesday, November 19, 2008

SHANGHAI -- In February, the Fuan textile factory became one of the first major casualties of China's anti-pollution campaign when the multimillion-dollar company was shut down for dumping waste from dyes into a neighboring river and turning it red.

But as the country's economy began to cool this fall and job losses mounted, the company was resurrected. Encouraged by the government, Fuan changed its name, moved to a new location and quietly reopened.

With the global economy at the edge of recession, China appears to be turning away from previous pledges to improve its record on environmental protection. In this, China is hardly alone: A climate-change proposal in Europe that a few months ago seemed like a sure thing has now divided the continent because of its anticipated expense, and worldwide, money for the development of renewable energy sources has been drying up.

But the impact of China's pullback from environmental protection efforts could be the most far-reaching. Home to some of the planet's most polluted cities, China last year hit a dubious milestone: It surpassed the United States to become the world's largest emitter of greenhouse gases. Its factories release so much toxic waste that they have created black clouds thousands of miles away. Its waterways are no better off -- poisoned with industrial runoff ranging from arsenic to acid.

Premier Wen Jiabao had vowed to move China's economy away from its dependence on environmentally harmful manufacturing industries such as paper, chemicals and textiles. Instead, he said, he hoped to build an innovation economy that would make breakthroughs in computing, biotech and other sciences. His effort to spur the development of cleaner businesses while cracking down on polluters appeared to gain momentum in the run-up to the 2008 Olympic Games in Beijing.

While Wen's initiative has been applauded by environmentalists, it now seems ill-timed from an economic standpoint. With unemployed workers taking to the streets in protest, it also poses a political challenge for the Communist Party.

"With the poor economic situation, officials are thinking twice about whether to close polluting factories, whether the benefits to the environment really outweigh the dangers to social stability," said Peng Peng, research director of the Guangzhou Academy of Social Sciences, a government-affiliated think tank.

During China's environmental push, thousands of companies that could not meet pollution standards were shuttered, leaving millions of workers jobless. Those companies able to remain open -- already under pressure from a new labor law, the falling dollar, increased costs for raw materials and a scarcity of loans -- had to bear the additional cost of mandatory environmental upgrades, or face fines.

For the past two years, Guangdong province, the country's richest and the cradle for China's export manufacturing industry, was among the most enthusiastic supporters of China's anti-pollution campaign. Now academics, company representatives and industry associations say that it may be pulling back.

Eddie Leung, president of the Hong Kong Chamber of Commerce in China and owner of a watch factory on the mainland, said Guangdong officials as recently as several months ago strictly enforced environmental regulations. Now it is not uncommon for them to look the other way. "They relaxed the enforcement this year," he said.

Budget priorities also appear to be changing. Money is increasingly needed to pay the salaries of workers whose companies have gone bankrupt and to provide social services to the rural poor, who are having trouble selling their crops. There has been less money left over for environmental initiatives.

As a result, plans to build a state-of-the-art, automatic wastewater and air-testing system for factories in Guangdong's provincial capital are now on hold.

"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.

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