Do China’s polluting firms deserve better treatment?

Yang Zhaofei, deputy chair of the China Society for Environmental Sciences, argues that local authorities need to engage with polluting companies more constructively

When Guangxi’s He River was polluted by thalium and cadmium the downstream province of Guangdong became concerned about its water supply. According to China.com.cn the source of the pollution is most likely smelting and ore dressing plants upstream. The local government has shut down 112 illegal mining firms along the river and is taking samples for testing. Hezhou deputy mayor Bi Haidong pointed out that the firms had been punished previously, but to no effect.

Local governments often shut down polluters in response to public complaints or emergency situations, a practice that is increasing.

In 2012 Beijing shut down 200 polluting or energy inefficient firms, with a similar number to be closed this year. In Taiyuan 118 firms were shut down in the first half of the year. The companies closed were mostly producing construction materials, chemicals, or were foundries and electroplating plants. These sectors are often responsible for pollution and carbon emissions; shutting them down will certainly have a positive environmental impact in the short-term.

But Yang Zhaofei, deputy chair of the China Society for Environmental Sciences and formerly chief engineer at the Ministry of Environmental Protection, believes that simply ordering polluting firms to shut down will fail to resolve environmental problems. The real question is how to responsibly help the companies cease operations or change sector.

Yang told chinadialogue that “when faced with public anger the government often shuts down the firm without even thinking about its circumstances – i.e. is it a legal business, what investments have been made, etc.”

Whilst it’s hard to argue that a firm breaking environmental laws should be allowed to continue operating, many companies are caught between the prongs of incoherent and contradictory policies. Industries may be offered incentives to locate in an area, and then receive little environmental oversight until they are closed down. Last year’s attack on the deputy head of a Shandong environmental bureau was an example of how businesses can be backed into a corner. The operator of an illegal iron foundry, closed down a year earlier by the deputy head, burst into her office and badly wounded her. In court the attacker said, “If she won’t let me live, I won’t let her.”

According to Yang the environment does require protection – but the rights of investors must not be ignored. The government should take responsibility for the management of all polluters, illegal or otherwise. “Local governments can’t encourage firms to start up to boost GDP and then later just shut them down because of environmental problems.”

He suggests the government draws up a plan for the elimination of polluting firms, looks at the background of the companies, and talks with the owners to come up with solutions. Those that can be upgraded or shifted to a different sector should be provided with technological support and other assistance.

Yang also argued that if a firm must close, the owner should be informed well in advance. Companies should be given compensation in line with the number of employees, amount of land, and value of equipment involved. Even illegal firms should be given time to prepare.

Though it’s debatable whether polluting firms warrant such extensive compensation, it’s important to consider constructive forms of engagement with local industries. A plan to relocate stone processing plants from Dalian’s Donggang district, due for completion this year, is a good example. These firms tend to be small and polluting, and in Donggang present a particular threat to water supplies as they are close to the city’s Rizhao reservoir. The government met with company bosses and persuaded 190 of them to change sector or quit. The government will provide 28 million yuan in subsidies for those that cannot afford to move.

Fong On Kei is an intern at chinadialogue’s Beijing office.