Industrial chemical analysts are sensing a sea change in Chinese Politburo policy. While the past two decades have been full of the ocean waves of industrial expansion crashing onto the shores of the global economy, there are signs that the tide is turning.
For while Beijing continues to encourage industrial growth, higher employment, and a rising standard of living, there are signs that the ‘Growth at All Costs’ policy is over. Instead the waves of a more ‘Eco-friendly’ approach to industrial policy are being heard.
Those waves began with a splash in January 2013, when a blanket of smog fell over much of the Chinese population. As the NY Times reported, “During that episode, Beijing and dozens of other cities in northern China were shrouded in toxic haze for days. Despite emergency measures to cut emissions, the concentration of PM2.5, particles of a size that can penetrate the bloodstream, remained dangerously high.”
The so-called airpocalypse impacted everyday life in Chinese cities, convincing everyone of the need to focus on environmental care. But despite some initial efforts to lower air pollution, the problem still remains. For example, a 2017 study by the Health Effects Institute, a Boston-based non-profit organization , found that, “… air pollution has caused over 4.2 million early deaths across the globe in 2015, out of which China alone accounted for 26.1%.”
However, the death rate in China is not the only impact of poor air quality. For public perception in China on the need for cleaner air is based on daily factors; sales in air purifiers, the popularity of wearing masks, headaches, dirty windows and cars, sore throat complaints, respiratory diseases, breathing difficulties, and a lack of blue sky.
As a result, the Chinese government has introduced numerous policies to improve air quality. But what is new is that these policies are being enforced even if they impact industrial output, including chemical production. As the regional industry journal Japan Chemical Daily noted in Sept 2017, “Chemical companies in China this year have been subject to a series of new operation regulations as part of government-led environmental measures. Government-sponsored survey teams have begun inspecting chemical factories, as air pollution is being seen as a serious problem.”
Some chemical plants are even being shut down as local officials try to curb emissions. Reporting on those efforts, the state-controlled China Daily announced in Sept 2017, that, “A total of 599 companies, mainly construction materials, furniture, chemicals, packaging and printing, were relocated out of the capital, said the Beijing municipal commission of development and reform. Beijing also closed 2,543 firms and ordered 2,315 firms to make changes. About 73% had pollution issues.”
Significantly, the focus is not just on factories or chemical plants, but on government officials charged with implementing Beijing policy. Whereas five years ago, the Politburo was aiming at curbing corruption, today, emission reduction is increasingly prioritised.
As the Chinese newspaper, Caixin Global, reported, “In a document jointly released by the Ministry of Environmental Protection and nine other ministry-level bodies, if a city does not achieve 60% of the emission reduction target, the city’s vice mayor will be held responsible; if the city achieves less than 30% of its target, the mayor will be held responsible; and if the PM2.5 level ends up increasing instead of falling over the winter, the party secretary of the city will be held responsible.” Adding that, “Possible punishment includes party disciplinary or administrative punishments, the document says, without elaborating.”
While lowering the amount of industrial pollutants from the air is a long-term project, the positive effects are already being measured.
As the NY Times notes that, “The government’s pledge to go more aggressively after polluters and to cut excess production in heavy industry, is already showing some progress, with particulate pollution falling nearly 10% in the Beijing area over the past three winters, according to government statistics.”
These are statistics which are supported by business periodical, Fortune magazine, which recently published data on China’s ‘greener’ industrial policy. It notes that, “China has had substantial successes in reducing pollution emissions since 2011, even as its economy has grown more than 7% per year and coal use has stabilized. On average, national pollution levels have been stable or falling as a result. In Beijing, the annual average PM2.5 level was 73 micrograms per cubic meter in 2016, down 9.9% from 2015 and 18% from 2013.”
But any changes that are made will have to balance a clean air policy, alongside economic growth. Protecting the environment costs money and jobs. During the weeklong 2014 Asia-Pacific Economic Cooperation summit held in Beijing, as the chemical industry journal Chemical and Engineering News reports, this resulted in losses totalling 3.5billion Yuan ($500 million).
Furthermore, efforts to reduce pollution are hampered by local politics. As Xinmin Zhang of the Chinese Research Academy of Environmental Sciences informed Chemical and Engineering News, “… to permanently improve air quality in Beijing, more chemical plants in Hebei province have to be closed. But, she admitted, this would entail huge costs and the loss of many jobs. ‘Local governments in Hebei province cannot afford the cost, yet the much richer Beijing municipal government refused to offer enough compensation to Hebei,’ she said.”
To sacrifice industrial chemical production for lower pollution emissions requires both money and politics. A point that is highlighted by Paul Hodges, Chairman of chemical consultancy, International eChem. In his BeyondBrics blog on the Financial Times website, he has outlined the new direction that China is taking, writing, “[China’s] new policy is [President] Xi’s decision to move away from the ‘growth at any price’ policies of his predecessors. He knows that reducing pollution, rather than maintaining economic growth, has become key to continued Communist Party rule.” Adding that the policy, “represents a paradigm shift from those put in place 40 years ago by Deng Xiaoping after Mao’s death in 1976. This shift has critically important implications, as it means growth is no longer the main priority of China’s leadership. In turn, this means that stimulus programmes of the type unleashed in 2012, and on a more limited basis by Premier Li last year, are a thing of the past.”
How a lack of economic stimulus programmes in favour of environmental protection will impact the Chinese chemical industry is unclear. But it is likely that the policy change will, slowly but surely, begin affecting chemical markets soon. As Hodges notes in his ICIS report on Chinese Chemicals and the Economy, “Large economies are like super-tankers, they take a long time to change course.”
But once set on its way, a cleaner, greener, Chinese chemical industry will be almost impossible to stop.
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Photo credit: ChemInfo, DailyMail/Shutterstock, Reuters, & Phys.org
