Elizabeth Economy just did a Washington Post article on how and why China is blaming foreign companies for China’s own pollution problems. Entitled, A Blame Game China Needs to Stop, it discusses how China is seeking to diffuse international criticism of its environmental record by “launching a political campaign that lays much of the blame for the country’s mounting environmental problems squarely on the shoulders of foreigners.”

We told you so.

Ten months ago, in a post, entitled, Is China Going Green? — Part VII — Doesn’t Matter Because You Should No Matter What, we wrote how “people often get very emotional about the environment and I can see Chinese citizens getting very angry at a foreign company whose units in China are less environmentally sound than their units in the United States or elsewhere.”

That day is now.

The Washington Post article notes “growing international and popular discontent over the country’s environmental crisis,” has led China’s leaders to tap “into anti-foreign and nationalist sentiments to deflect attention from their own failures”:

In late October a top environmental official, Pan Yue, accused the developed countries of “environmental colonialism”: of transferring resource-intensive, polluting industries to China and bearing as little environmental responsibility as possible. At the same time, a leading member of China’s National People’s Congress claimed that foreign companies were not only exporting their waste but also underpaying Chinese workers. When a Chinese nongovernmental organization released a list of 2,700 companies cited for violations of China’s water regulations in late October, the ensuing media frenzy focused exclusively on the 33 multinationals, including 3M, Panasonic, PepsiCo and DuPont, and ignored the more than 2,600 Chinese companies similarly cited. Not surprisingly, Chinese bloggers have taken up the call, discussing the “eco-colonialist” policies of multinationals and calling for “eco-compensation.” Even environmental activists who have worked closely with multinationals have accused these corporations of not practicing what they preach.

As the article notes, “scapegoating foreigners can be an attractive policy option.”

It most certainly is.

As we have written previously, and as those doing business in China well know, forcing foreign businesses to abide by Chinese laws that either do not apply to domestic companies, or which domestic companies ignore, is going on across the board. Foreign companies are to unionize, while domestic companies are not generally required to do so. Foreign companies are to pay their taxes, while domestic companies often do not. Foreign companies must operate fully legally, while domestic companies typically need not.

When Westerners proclaim (as they fairly often do) to our China lawyers that China’s laws are essentially the same for foreign companies doing business in China and Chinese companies doing business in China, we typically respond with something like, “and that means what in real life?”

So what’s a foreign company doing business in China to do? You can get Beijing to change its policies and become even-handed — just kidding.

Or, you can come clean by following all rules. Register your company in China; the crackdown on this is already in full force. Pay your taxes in China. Do not pay bribes. Ever. Follow international environmental standards. In other words, forget about the so-called “Chinese way,” as that never really applied to you anyway, and it certainly does not apply to you now. Complain all you like, but the wise thing to do is to heed the advice of our own Steve Dickinson, and start recognizing there is a “new paradigm” in town and you as a foreign business must abide by it.

For more on the Chinese government’s distinguishing between foreign and domestic businesses, check out, China Policy — Let Mikey (Foreigners) Do It and China’s Corporate Tax System to Become Unified — Someday.

  • davesgonechina

    Elizabeth Economy’s article leaves me wanting. I take issue with her singling out Pan Yue. That guy does not pull punches when it comes to domestic polluters: see Der Spiegel 2005
    http://www.spiegel.de/international/spiegel/0,1518,druck-345694,00.html
    And I’d really like to see Liz’s evidence for China’s eco-bloggers picking up the anti-foreigner line. Most Chinese environmentalists, as far as I know, are going to be more concerned about things like overdrawing Beijing’s water table, the Harbin disaster, massive individual coal burning in winter, and a whole host of other problems that they know all too well have nothing to do with MNCs. MNCs’ will get labeled hypocrites if they don’t match standards in their own countries in China, and that’s more or less what they ought to expect. But I can’t see average Chinese people buying the idea that foreigners are the reason Beijing is domed by smog, the taps don’t work or the river is black. There’s a difference between a campaign designed to convince Chinese people it’s foreigners faults, and a campaign to equip Chinese people with rhetoric to use against lecturing, overbearing foreigners like Ms. Economy. This is a case of the latter.
    The government is going to go after MNCs for another reason: because it’s one of the only things they can do. How, precisely, would the government become even-handed? How would they crack down on the countless Chinese factories running coal furnaces, the countless Chinese homes that survive the winter on coal stoves, the growing water demand in Beijing as migrants flood in and the water tables go dry, the growing legions of car owners pumping out fumes? Those guys with the 30 year old trucks with no grill? The dumpling makers with the pot belly stove?
    They can’t. It’s too big. In a way, the crackdown on foreign companies could be seen as protection. If foreign companies meet rigorous standards and have no violations as China’s environmental problems grow, it’ll be pretty clear who ought to be blamed.

  • I fully agree with your opinion. While Chinese people cannot complain to their own government, they need to find a scapegoat. MNCs are the primary targets. It also shows that if the chinese people that foreign expats say they have a good impression about foreigners (except probably about Japanese), this impression is only superficial. Things can change very fast in China. History has proved it!

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  • davesgonechina —
    Thanks for checking in. As always, you raise some good points. I too am a fan of Pan Yue, who I believe does very much want to clean up China’s environment and is unafraid of being clear on this, even to domestic polluters. But that does not mean he is immune from pawning off too much of the problem on foreigners.
    I completely agree with you that it is easier to go after the foreign companies, and why not? I am not aware of any country that isn’t going to be tougher in enforcing its environmental laws against foreign companies.
    I also completely agree with you that the smart foreign company avoids this by meeting the highest standards, not just Chinese standards, and certainly not the standards the domestic companies typically attain.
    The article is a bit weak on evidence, but it completely jibes with what we have been seeing in all sorts of legal arenas.

  • Monsieur Guerel —
    My attitude on these things is maybe yes, maybe no, but since these things are so difficult to predict, the only thing a business can do is to toe the line and that means obeying the law and doing the utmost not to pollute. Of course, I fully realize businesses have countervailing considerations, including, first and foremost, making a profit. So really all I am saying is that they must be mindful of the fact that, as a foreign company, they are the easy target and it is not good for profits to get shut down or heavily fined.

  • Hui Mao

    You bring up some good points, but I strongly disagree with the article’s contention that there is a delibrate government orchestrated campaign to blame foreign MNCs for China’s environmental problems. From what I see in the Chinese media and internet forums, the overwhelming majority of the discussion on environmental problems in China are focused on purely domestic issues and incidences. Yes, I’m sure there are xenophobic types in China that would like to blame China’s environmental problems on foreigners, but their voices are very much insignificant right now. Pretty much all Chinese have intimate first hand experience with how pollution and environmental degradation is affecting their lives. They see how the waste water from the local factories are poisoning their local river and how the local power plant is blacking out the sky with their dirty burning coal. They are certainly not blaming the MNCs in Shanghai or Shenzhen for these things. As far as I see, this is very much reflected in Chinese media coverage and internet discussions of environmental issues.
    With that said, I do agree with your points on the need for foreign companies to strictly follow Chinese laws and regulations even when it seems all the local Chinese companies are blatantly violating them. Chinese companies can consistently get away with these violations because they have built “special” relationships with powerful patrons. It’s very difficult and expensive (in terms of money as well as time and effort) to build these “special” relationships even for the Chinese. For a foreign company, it is downright near impossible. Even if it is possible, would you really want to have the long term success of your China venture to be critically dependent on the “special” relationships that you have built with a few local officials who in a few years time will be transferred, retired, or otherwise replaced with new people with whom that you have no such “special” relations?
    In a related note, a while ago I read a “where are they now” sort of story on the top Chinese entrepreneurs of the 80’s and early 90’s. In turned out that of these entrepreneurs, the overwhelming majority of them (something like 90%) are either in jail or have completely lost their fortunes through run-ins with the law. So even if you are Chinese, it’s not a good idea to flaunt the law. You may be able to get away with it for a while, maybe even long enough for you to be really successful, but chances are eventually you’ll stumble.

  • nanheyangrouchuan

    What cannot be denied is that besides the pipe dream of “1 billion customers”, MNCs DID and DO come to China for the vast pool of cheap labor, no labor laws aaaaaaaaaaaand the chance to let it all go and not have to install expensive air and water treatment gear.
    I’m afraid I must take some credit for the spread of MNC bashing, I do have contact with local chinese and have urged them to find books like “Silent Spring” and read up on the US Clean Water Act, US Clean Air Act and NEPA. Companies haven’t changed their behavior since the days of the robber barons in the US and “David Copperfield” in Europe.
    Now, why did western Europe and the US act to reform labor and environmental laws? And what did companies do in response?

  • Hui Mao —
    Thanks for checking in. I completely agree and you have said it better than I ever could have.

  • nanheyangrouchuan —
    I know a lot more about U.S. environmental laws and their history than I do about labor laws, so I will answer half of half of your question. The U.S. and Europe (and Korea and Japan, for that matter) started tightening up their environmental laws when their people became wealthy enough to be willing to sacrifice some jobs and cost savings in favor of a cleaner environment. I think to a large extent Shanghai is already at this point and I think the rest of China will eventually follow (assuming continuing wealth increases).
    Many U.S. companies have begun to realize it is good public relations to be green and, in many instances, they also have come to realize reducing pollution, conservation, re-use, and recycling can save money.
    There will always be companies that just don’t care and for them, rigorous enforcement is necessary. My old law firm did a lot of environmental work and you would be surprised how many of their clients favored stringent environmental enforcement. They felt they were following the law and they did not want to see their competitors securing an unfair advantage by not doing so, like for instance, engaging in illegal dumping. I also have had clients tell me that they initially balked at various new regulations, but after spending the time and money for new equipment, they are now realizing cost savings. Again though, this is not always going to be true, and it is in those circumstances, in particular, where strong and definite enforcement is key.
    I do think that will happen eventually in China –I cannot believe how much more this is happening in Korea from when I first started going there around 15 years ago.

  • Hui Mao

    One thing that I neglected to address in my previous comment is that there is indeed some appeal to nationalism by some parts of the environmental movement in China. Nationalism is a powerful force in China and on many controversial issues people try to identify their stand as patriotic and identify their opponents’ stand as traitorous. However, this is not the same as blaming foreigners for China’s environmental problems as the linked article claims, but rather it is the use of nationalism by some environmentalists to rally people to the cause of protecting the environment by associating the development at all costs policies of the last couple of decades with the negative imaginery of selling out China’s interests and “environmental colonialism”. I think this is the context that one needs to keep in mind when looking at Pan Yue’s and the NPC member’s comments. Even though China is not a democracy, there is still policy debate inside the Chinese government and the influence of popular opinion on these debates has been steadily increasing. Both Pan Yue and the NPC member’s comments are made as part of this debate on environmental protection and are meant to be criticisms for the proponents of the development-at-all-costs policy inside the Chinese government and not as an effort to deflect criticism from the government onto foreigners. Indeed, as both Dave and Dan have both pointed out already, Pan Yue has a proven track record of being a vocal critic of the impact on the environment by Chinese government’s economic policies. To hold him up as an example of this supposed government campaign to scapegoat foreigners for the environmental problems in China is just unbelievably irresponsible journalism by the Washington Post.

  • Very interesting thread. I agree with the post above. In the Pan Yue interview which I believe Economy is referring to ( read here: http://www.chinadialogue.net/article/show/single/en/493–The-rich-consume-and-the-poor-suffer-the-pollution-), Pan Yue makes a fairly explicit link betweeen the eco-colonialism that leads western countries to export waste and polluting technologies to developing countries, and the development strategy which leads China to “export” its pollution from east to west. This is something Economy omits from her analysis.
    “In China, pollution has been moved from east to west and from the city to the rural areas. The rich consume and the poor suffer the pollution.”
    Pan Yue is not only criticising western countries, therefore, but allying this with an internal criticism of Chinese domestic policy:
    “The economic and environmental inequalities caused by a flawed understanding of growth and political achievement, held by some officials, have gone against the basic aims of socialism and abandoned the achievements of Chinese socialism… Domestically, [China] should establish systems to prevent unbalanced development from causing environmental risks.”
    Sam

  • nanheyangrouchuan

    “I also have had clients tell me that they initially balked at various new regulations, but after spending the time and money for new equipment, they are now realizing cost savings”
    And would those clients be the same ones who did the same thing in the US and Europe 20-30 years ago? Those companies balked because they (still) consider “green” legislation to be anti-business.
    “when their people became wealthy enough to be willing to sacrifice some jobs and cost savings in favor of a cleaner environment.”
    I don’t know about SK and Japan, and that is probably true about Europe, but there was still alot of resistance to the CAA, CWA and NEPA when they came out, even though people were shocked and horrified by the Cuyahoga River fire and Love Canal to mention a few memorable events. Even now US car makers and “big oil” are helping Bush in the US Supreme Court to keep the EPA from more effectively fighting air pollution in the US, so the game never ends.
    People in Shanghai complain about the pollution, but they will complain more about higher prices for cars with actual catalytic converters among other costs associated with “green” laws being enforced, heck, people in China just like to complain in general. Pan Yue’s goals are admirable and he’ll probably be a national hero someday, but there are more forces against him in today’s China than the forces against Nixon in 1960s US.

  • Sam G (China Dialogue)
    Thanks for checking in and thanks for your link, which goes a long way towards reconciling the favorable views I and those who have commented hold of Pan Yue with the reality as to what he actually said. Putting his quote in context, as you have done, really does change its intent and impact. I think most reasonable people can agree that the wealthy consume more than the poor and the poor usually suffer more from pollution than the wealthy.
    Not sure it changes the WP article all that much, but it does influence what we should be saying about Pan Yue.
    In fact, reading what you have written about what Pan Yue said corresponds exactly with what I would have expected him to say.

  • nanheyangrouchuan —
    Thanks for checking back in. Humans are inherently conservative animals. Businesses more so. Change is to be feared and resisted. Of course, there are many times where change is bad, including environmental changes.
    The problem with environmental change is that most everyone can approve of cleaning up the area where they live and work, but at the same time, nobody wants increased regulation for their own business. I am an opponent of big government, but the environment is one of those areas where government assistance is critical.

  • Hui Mao II —
    Thanks for checking back in. I agree with you that “even though China is not a democracy, there is still policy debate inside the Chinese government and the influence of popular opinion on these debates has been steadily increasing.” Your explanation that Pan Yue’s comments are “part of this debate on environmental protection and are meant to be criticisms for the proponents of the development-at-all-costs policy inside the Chinese government and not as an effort to deflect criticism from the government onto foreigners” also makes sense, particularly in light of the comment made by Sam G of China Dialogue, below.
    The WP is usually very good on China, Maureen Fan, in particular. I am not familiar with the writer of this story, Elizabeth Economy (maybe that was why I listed her name, which I normally do not do) and I too am having my doubts.

  • nanheyangrouchuan

    “Humans are inherently conservative animals. Businesses more so”
    I would say when it comes to labor rights and environmental laws, businesses typically far beyond conservative and dally in the “abusive” territory. While Pan Yue and Chinese in general are wrong to say that western gov’ts encourage exporting waste to China (and Africa), businesses saw an opportunity to avoid nasty enviro laws by basically bribing local officials to accept some of the most horrible waste they produce.

  • John G

    I saw the article in the NYT 3 weeks ago and hoped it would attract more attention. The US economy is 26% of the total Global economy while China is 5.8% of the total Global economy. The US is 4x larger than China, yet China’s pollution will be equal to the US’s? Also of note, it is usually stated that the US has 5% of the total population, but accounts for 25% of total pollution. Spin it around, the US is 26% of the total Global economy, but only 25% of the total pollution.
    Bush / Republican Congress was right not to sign the Kyoto protocol – if the Kyoto was approved China would have less incentive to improve its environmental policies.
    Recently France stated that it might try to implement a tariff on Countries that do not meet the Kyoto protocol – thus the US would face the tariff but China would not. Maybe the UN / WTO should consider a global tariff on all countries based on pollution generated vs. total of global economy.

  • nanheyangrouchuan —
    I have no doubt that many foreign and domestic businesses did exactly as you say, but I also no for a fact, that many foreign businesses view it as being in their own best interests to maintain high level environmental standards in China.

  • John G —
    Thanks for checking in.
    I have always been a fan of linking taxes/fees directly to pollution, but I am not sure if it would be all that fair to tie it to a country. Tell me more.
    I will never forget when I was a young (and it should go without saying, naive) sophomore getting my haircut in Grinnell, Iowa. Bill Stowe, who hailed from Storey, Iowa (I think it was) was there getting his haircut at the same time. Bill asked me what I thought about raising the gasoline tax and I told him it made complete sense. I let there with my hair so short that it took months before I looked quasi-normal again. Stowe, the native Iowan, had obviosly set me up, but it was a lesson learned.

  • gluelicker

    John G sez:
    The US economy is 26% of the total global economy while China is 5.8% of the total global economy.
    Gluelicker edits:
    The US population is 5% of the total global population while China is 20% of the total global population.
    John G sez:
    The US is 4x larger than China, yet China’s pollution will be equal to the US’s?
    Gluelicker edits:
    The US has 1/5 the people of China, yet produces as much pollution as China?
    The implication:
    So, it is somehow just that the average Chinese person gets to foul the commons only as one-fifth as much as the average USer? Or do you think that per capita GDP is so much higher in the US because of the instrinic ingenuity and moral superiority of USers, and thus they should be allowed to hog five times more per person of the planet’s capacity to absorb waste?

  • nanheyangrouchuan

    Hey Gluelicker,
    Even Pan Yue admits things are bad when China uses 7 times more energy than europe and Japan, 6 times more energy than the US and 3 times more than India to generate the same dollar in GDP. Technology won’t save anything, proper and even law enforcement will.

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