China Law Blog - China Warns Foreign Companies On Pollution - Comments

William Lewis

Dan — Fri, 05 Oct 2007 04:24:04 -0800

As foreign companies are enforced against more strictly than domestic ones, do you also see a range of enforcement in between? Say, a spectrum of enforcement with WOFEs at one end, domestic firms at the other, EJVs in the middle with greater foreign equity shares pushing the EJV to the WOFE side of the spectrum and lesser equity towards the domestic side, and a bump towards one end of the spectrum or the other for EJVs and CJVs depending on who your domestic partner is. Or is all foreign investment being targeted heavily? If not, might we see a decline in the popularity of the WOFE, and an upswing in JVs?

nanheyangrouchuan

Dan — Fri, 05 Oct 2007 04:24:04 -0800

And when these foreign companies leave China if they don't like the new regulatory climate, can they take their production lines, money and other hard assets with them? This is an important question to ask. William Lewis also brings up an important point in that perhaps Beijing would like to see foreign companies with advanced technology forced into JVs with Chinese companies.

Here's another; forcing foreign companies to abide by a higher standard forces them to bring more advanced pollution removing and modifying equipment with them from their home country (the West, SK, Japan). Whether or not said company is a WOFE or JV is not important, China getting a good look at advanced environmental technology without having to buy licenses or buy the equipment. And more JVs make getting the look-see even easier.

Charles Liu

Dan — Fri, 05 Oct 2007 04:24:04 -0800

I'm not sure about the claim domestic companies are treated any better when it comes to environmental regulation.

I have personal experiences with local PCB manufacturers in Shenzhen who had to clean up their act after being pressured by the government (non-renewal of lease, rezoning to technology park with waste treatment, relocation process requiring environmental impact statement.)

Never the less, it might be time for China to stop trading enviornment for econmy, and take the logical step the 1st world had taken to slow down growth and start clean up pollution.

Zhang Fei

Dan — Fri, 05 Oct 2007 04:24:04 -0800

I expect that more and more, foreign companies with pollution issues will move their operations outside of China. Or, just as likely, outsource to Chinese subcontractors - if Chinese land and labor continue to be cheaper than in the rest of East Asia.

Another issue with the inspections is this - is it possible that the Chinese companies inspected paid off the officials involved, whereas the foreign companies refused to do so? Between Chinese corruption and xenophobia, it's not surprising to me that the two foreign companies chosen would be flagged. This is what I would call a dog-bites-man situation - an expected outcome.

nanheyangrouchuan

Dan — Fri, 05 Oct 2007 04:24:04 -0800

1. Is the same Zhang Fei as on SP?
2. Beijing inspectors of any kind earn crap salaries and easily bought due to the necessity to survive, so these "crackdowns" are very small baby steps. And it is too late for China anyway.

Glen Wilkins

Dan — Fri, 05 Oct 2007 04:24:04 -0800

The cynic in me still believes that the PRC government's treatment of foreign companies on the pollution issue is rooted in the desire to go, "See? See? It's not just domestic Chinese companies with pollution problems." Sort of a PR diversion tactic, if you will.

Criticizing a foreign company also allows the PRC's environmental agencies to keep up the appearance of vigilance while not threatening the illicit revenue stream that domestic Chinese companies provide.

On the positive side, at least the PRC government is taking an interest at all in environmental protection. This kind of thing used to be a "foreign problem."

Glen Wilkins

Dan — Fri, 05 Oct 2007 04:24:04 -0800

On the positive side, at least the PRC government is taking an interest at all in environmental protection. This kind of thing used to be a "foreign problem."

Duncan

Dan — Fri, 05 Oct 2007 04:24:04 -0800

I actually visited the Hefei Unilever plant in April, and spent a long time discussing pollution issues with the management, so I found the fine quite surprising. I'm not sure when the alleged discharge was meant to have taken place, but given what we discussed it all seems slightly odd. I won't go into the details, but the local management and the company as a whole seemed to be very focused on the issue of environmental standards & emissions. Local officials were reportedly paying more attention to this also, but as of April didn't seem to have moved beyond "visible" emissions like smells and plumes from stacks, although the guy I spoke to said he thought that toughening of regulation was likely to continue. It all smacks of punish the foreigner to make a symbolic point to me...