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Green dreams, brown reality for
China
By James Rose
It's been a big year for Chinese
environmentalists. They've seen the hitherto
somnambulant government environmental watchdog,
under the stewardship of a feisty vice-director,
score some rare victories and begin to wake up.
The triumphs include taking on the powerful Big
Dam industry over shoddy environmental auditing
standards, and winning. There's been the back down
from a legal claim made by multinational paper
company APP over a local boycott of its products
following a damning Greenpeace report on its
logging practices in Yunnan. And then, the launch
of a major government-sponsored environment group.
All in all, it looks like Red China is turning
shades of green, and some environmental advocates
are not surprisingly looking a little perkier over
China.
But in China, laws on paper are one
thing, and laws in reality are something else
again, especially when local businesses are under
pressure from all angles to make a quick buck. So
observers of the environmental practices of
Chinese businesses are seeing a less than verdant
landscape.
The Chinese government is a
past master at deflecting pressing issues outward,
protecting its own interests while obliging others
to pick up the slack; acknowledging the concern,
but ducking the responsibility - and the pattern
has repeated itself with regard to environmental
regulation of business. This may be about
political expediency; on the other hand, it may
represent an example of the government's increased
willingness to let the market breathe, not stifle
it with regulation. Richard Welford, Deputy
Director of the Corporate Environmental Governance
Program at Hong Kong University, acknowledges
recent government pronouncements in support of the
environment, but questions their credibility: "It
doesn't really matter how many statements Beijing
makes about the environment - the fact is that the
environmental situation is so serious there that
drastic action will have to be taken."
Such arguments are backed by evidence.
China is clearly in the midst of an environmental
crisis. A recent news report quoting China's State
Environmental Protection Administration says
breathing the air in China's polluted cities is
like smoking two packets of cigarettes a day. By
some counts, six of the ten most polluted cities
in the world are in China. Meanwhile, the
country's waterways are being laid to waste. In
her book on China's environmental emergency The
River Runs Black, US researcher Elizabeth
Economy says water in five of China's biggest
river systems cannot even be touched, let alone
drunk, because of toxic chemical waste and other
industrial pollutants.
So, it's apparent
that for all the apparently stern government
rhetoric on environmental issues, something is
still going horribly wrong. The problem looks to
have two heads: local autonomy and lax monitoring
of existing laws. Both can be seen feeding off the
other. This hydra has a personality problem.
The local autonomy issue has its roots in
China's system of provincial autonomy in such
matters as raising certain taxes. By allowing
local party kingpins to lord it over private
businesses in their bailiwick, Beijing has
effectively devolved much of its ability to
control the activities of smaller private
operators. As a result, even when the central
authority has had specific environmental laws in
place, in some cases for more than a decade, few
need to heed them. Small enterprises, which are
unlikely to do business outside a given political
zone, are therefore more beholden to their local
authorities than to Beijing on certain matters.
Few local cadres have the same environmental zeal
as the Beijing nomenklatura, which are,
among other things, desperate to ensure that the
2008 Beijing Olympics are as "green" as they've
promised.
That being said, there have been
scuffles and the national government has clipped
many businesses' wings. Since 1985, Beijing
administrators have shifted more than 200
companies from Beijing into less populated
regions, because their contribution to the city's
pollution levels was just too much to take.
Indeed, even some of the provinces have heeded the
central party call and cracked down on local
environmental recidivists. Following a series of
complaints from locals, the local government in
Jiangxi province warned 358 heavily polluting
companies in September. The same month, the
Guangdong Environmental Protection Bureau adopted
a "name-and-shame" approach, outing 33 local
polluters, which were obliged to clean up their
act. Many local governments have also introduced
environmental regulation and have increased the
publication of "blacklists" of environmental
laggards.
The situation has indeed
improved, but such moves are more the exception
rather than the rule, or, at best, comparatively
easy to overcome for private operators. While the
government's tactic of heavy language and little
action might work relatively well with foreign
multinationals keen to kowtow to Beijing in return
for commercial opportunities, local businesses are
less concerned about how Beijing sees them and
their environmental recalcitrance. According to a
recent report by Guo Peiyuan of Tsinghua
University, only 34% of Chinese companies disclose
any information on their environmental profile.
The worst performers in this regard are among the
most environmentally damaging: construction,
transport and heavy industry firms. Worse,
widepread corruption at the local government level
tends to marginalize business leaders with
scruples, who, while they may not be leaders in
environmental management, might at least recognize
its importance. It's difficult to find the
justification to spend on environmental clean-ups
when your competitors are in cahoots with local
officials and get all the breaks.
The
second reason for China's failure to rein in
environmental vandals in the private sector is
more about bald economic mismanagement. In short,
private businesses based in China are being
squeezed in the crush between China's dual
socialist-market system.
One important
area where this is noticeable is in the banking
sector. Private companies struggle to gain credit
from the mainstream banking system because China's
commercial banks, mainly state-owned, are
genetically predisposed to support the country's
state-owned enterprises, many of which are
struggling to stay solvent. Some are even
considered technically insolvent, but continue
trading - and borrowing. Depending on whose
figures you believe, the current amount of bad
loans on the books of China's creditor banks is
somewhere between US$200 billion and $400 billion.
Government measures, such as the introduction of
private asset management companies (AMCs) to buy
irretrievable debts in debt-for-equity swaps, thus
improving the banks' balance sheets, have thus far
failed to improve governance and may even be
prompting more "risk free" lending, by giving the
banks another lifeline. This calcified credit
system denies financial life-blood to smaller
private players.
A related problem is the
wafer-thin profit margins of many Chinese firms.
The overinvestment in many sectors has forced big
state-owned enterprises to sell their products at
close to cost, just to get some cash flow and keep
the political bosses off their backs. This leaves
smaller private companies at a distinct
disadvantage, having to trim already tight
margins, especially to keep up with China's export
boom. Indeed, it may get even more severe for
exporters as the country's currency re-pegging
bites and the state sector rakes in the
transitional support likely to flow from Beijing's
deep pockets.
As Guo noted in his
environmental reporting study, China is now in the
phase of pulling back from mandatory environmental
regulations, to market-driven or voluntary
policies. This gives the companies final say on
the extent of their environmental approach.
Welford of Hong Kong University says this is the
only way: "What works best in those situations
seems to be incentives, praise, reward schemes and
tax advantages, rather than increased regulation."
The problem is the gaps left by this approach
between expectation and delivery. The ultimate
challenge for environmental progress in China
remains how to make the gains made thus far stick
- how to make the green dream a reality. Leaving
it totally to the market doesn't seem to be
working, despite the occasional green victory.
James Rose is an Australia-based
freelance writer and the
Asia-Pacific editor
of Ethical Corporation
magazine.
(Copyright 2005 Asia Times
Online Ltd. All rights reserved. Please contact us
for information on sales, syndication and republishing.) |
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