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Greater China

Apr 7, 2005

China to address e-waste problem

BEIJING - China will soon have its first regulations dealing with the mounting problem of electronic waste. As China emerges as a major global manufacturing and consumer powerhouse, discarded electronics products and household appliances, many filled with toxic chemicals, are piling up, posing a severe threat to the environment and sustainable economic growth.

Ministry of Information Industry (MII) official Huang Jianzhong said the regulation would be published before the end of the year. The Management Regulation on the Recycling and Treatment of Disposed Appliances and Electronics Products has been jointly drafted by six ministries including the MII, the Ministry of Commerce and the State Environment Protection Administration (SEPA). Huang, director of the MII's Economic Reform and Operation Department, revealed that four of the ministries have so far approved the regulation. The new rule will cover all electrical and electronics equipment on the market, regardless of whether it has been produced in, or imported to, China, said Huang.

In a nutshell it means that manufacturers of personal computers, TV sets, mobile phones, DVD players, refrigerators and air-conditioners will be required to select environmentally-friendly raw materials for their products and recycle the discarded ones. Manufacturers will be severely punished if they do not obey the new rules. They could either be fined and/or have their business licence revoked, according to Huang. Commenting on the detailed rules, Huang said China has referred to the relevant requirements of the European Union (EU) to guarantee that "Chinese companies will not be squeezed out of the [EU] market" once the EU adopts two related laws.

The EU promulgated two waste electrical appliance directives in February 2003. One is the Directive on Waste Electrical and Electronics Equipment (WEEE). This stipulates that producers, importers and vendors provide deposits for the expenses incurred in the collection, treatment, recycling and environmentally-friendly disposal of waste electrical and electronics products on the EU market. It is scheduled to take effect on August 13, 2005. The other is the Directive on the Restriction of Using Certain Hazardous Substances in Electrical and Electronics Equipment (RoHS). This will ban the use of lead, mercury, cadmium, and chromium (VI) in electrical and electronics products on the EU market as of July 1, 2006.

Almost no electrical equipment escapes from the directives, which cover household appliances, IT and telecommunications equipment, TVs, video cameras, electronic toys and sports equipment. China's exports to Europe are expected to be hit by the new EU laws, since many companies in China, especially local firms, fail to meet the new requirements.

Statistics released by the China Electronics Import & Export Corp indicate that products falling under these two categories accounted for about 70% of the country's exports to the EU market, worth more than US$100 million. The export volume of these products is expected to fall by 30 to 50% as a result of these two new directives, which has caused serious concern in government circles.

The National Development and Reform Commission has drafted a regulation on the recycling of WEEE, which is awaiting the final nod from the State Council, China's cabinet. The commission forecasts that about 4 million refrigerators, 5 million washing machines and as many TV sets will be discarded in the next few years. The State Environment Protection Administration is also on the verge of releasing policies related to electrical and electronics products made in China.

"We are trying our best to catch up with the EU in drawing up rules related to electronic waste, by adopting the same, or at least similar, standards," said Huang.

As a result of the WEEE rules, a levy ranging from 1 to 20 euros (US$1.3-26) will be slapped on every colour TV set or mobile phone exported to the EU. These new costs will place a heavy burden on many Chinese firms, and could force them out of the EU market, said Li Huiying, a researcher from the Sino-European Research Department of the Chinese Academy of International Trade and Economic Cooperation, a think-tank of the Ministry of Commerce.

Fierce competition and technological innovation have eaten into the profit margins of many of China's electronics products and household electrical appliances. Li said that the profit margins of PCs are particularly narrow for vendors, as users now upgrade their computers more frequently than ever for better performance and faster speed. According to Li, China's mobile phone makers, already engaged in a protracted price war, will also feel the heat from these additional costs. But most companies, especially local players, remain woefully unaware and unprepared for this major challenge, she warned.

Ningbo Bird, the country's largest producer and exporter of mobile phones, as well as multinationals including GE and Fuji Xerox, declined to comment on their moves made or to be made in dealing with electronic waste.

Possible exemptions?
According to a recent report by the 21st Century Economic Herald, one of China's major economic newspapers, the Ministry of Commerce is discussing exemptions with the EU for certain products listed in the two directives, in a bid to mitigate the impact on Chinese firms. Governments can resort to the exemption provisions in the EU's two directives on certain products, if the requirements are proved to be economically or technologically unfeasible, according to Li. But she did not confirm whether the Ministry of Commerce is making such efforts with the EU.

Huang explained that EU's exemption provisions are not country-specific. "In other words, once the EU rules that a certain product can be exempted from the directives, the exemption can apply to all members of the World Trade Organization. But China still can present its proposals to the EU, and the EU is likely to approve the exemption if a large number of members make such requests based on actual difficulties."

However, China was silent when the EU sought the opinions of WTO members about its two directives on two occasions last year, she added. "The government should take a more active approach to seek exemptions - every WTO member has this right," she stressed.

But she said the Ministry of Information Industry and the State Environment Protection Administration will help domestic companies with the research and development of alternative materials to meet the EU's new standards, probably by establishing a fund. Earlier media reports said the National Development and Reform Commission and the Ministry of Finance plan to establish a special fund to offset some electronics manufacturers' increased costs.

Cao Jianhua, director of MII's Science and Technology Department Technology Department, said: "We are researching possible substitutes for the toxic chemicals." But he hinted there will be some technological difficulties.

Apart from the efforts to help Chinese exporters adapt to the higher threshold in the EU market, the government should ensure that its WEEE rules are rolled out before the EU implements its two laws, suggested one expert, who wished to remain anonymous.

China is likely to be the next destination for foreign products that cannot be sold in the EU market due to the new requirements, but China has no such safeguards of its own. The expert pointed out that the pressure of higher costs will drive a great number of exporters to markets without these requirements.

"China should at least keep in pace with the EU in implementing such rules," he said.

According to Huang, the regulation being drafted will probably be released later than the date the EU's WEEE directive takes effect. He argued that, based on the market demand, China's imports will only be slightly affected in the short-term. But the absence, or delayed implementation, of electronic waste rules will leave the country at a disadvantage.

But Li added that "the impact would be minimal." As one of the world's major manufacturers of electronics products and electrical household appliances, China itself is dominated by local goods. Meanwhile, the country is an exporter to many regional markets including the EU and United States, noted Li. "Chinese products in these categories are quite competitive worldwide, therefore it makes no sense to worry about the domestic market."

Many experts believe that the EU will postpone implementation of its WEEE directive, giving China a golden opportunity to fill its legal vacuum in this regard. These two directives act as principle and guidelines for EU member states in making their national laws. And EU members are supposed to complete the legislative process for the WEEE directive before August 13, 2004, which, however, no single member has fulfilled. "The delay... is likely," said Huang.

EU officials in China were unavailable for comment.

(Asia Pulse/XIC)

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