On January 20, 2016, Washington Post released an article: “Six charts that explain why U.S. companies feel unwelcome in China.”[1] These six charts were published in the China Business Climate Survey Report by the American Chamber of Commerce in China. They explain six major challenges foreign companies face in China: (1) shrinking profit margins, (2) unpredictable legal environment, (3) restricted foreign NGO laws, (4) unfair interpretation of law and regulations against foreign companies, (5) censored internet, and (6) alarming air pollution.  Due to these challenges, one third of U.S. companies are not planning to expand investment in China and a quarter have either moved or plan to move capacity out of China.

Air pollution may not be the only growing environmental concern that makes it harder for American companies to attract top level executives. China is facing intimidating challenges in preventing and controlling soil pollution. Compared to air pollution, soil pollution is more easily hidden and long-lasting. 

In April 2016, brown field pollution received nationwide attention through a public outcry over a case reported by China Central Television (CCTV), where nearly 500 middle school students fell ill allegedly due to toxins from a former pesticide manufacturing site adjacent to their new campus.[2] The broadcast occurred less than two weeks before the State Council, China’s cabinet, presented China’s first annual environmental report to the top legislature.[3] This report includes data on the nationwide environment condition and the implementation status of environmental protection goals in 2015. When the Minister of Environmental Protection, Chen Jining, presented this report, he cautioned that China is facing serious pollution in air, water, and soil and the bearing capacities of its natural resources and environment is “reaching or nearing the upper limits.”

The report stated that a soil condition survey report released in 2014[4] revealed that nearly one-fifth[5] of agricultural land sampled exceed national standard and Yangtze River Delta, Perl River Delta, and the old industrial base in China’s northeast region experience serious soil contamination. In order to address the serious soil pollution, the Ministry of Environmental Protection (MEP) is drafting “Soil Pollution Control Action Plan” (a.k.a “10-point Soil Action Plan”) and expecting to release it in 2016.  The action plan will include: unrolling a nationwide soil pollution survey to investigate soil pollution condition thoroughly and identify hotspots for heavy metal, chemicals, and other toxic pollutants; focusing on agricultural land and construction land; setting up a control mechanism by classification and hierarchy; designating state-controlled soil quality monitoring sites; establishing soil condition primary database; strengthening technical standard and specification; and promoting soil remediation and restoration pilot projects for demonstration. Based on the implementation of “10-point Soil Action Plan,” the legislature will draft China’s first “Soil Pollution Prevention and Control Law,” which is expected to enter into the legislation plan in 2017.

Although the plans sound promising, China faces grim enforcement reality. In 2015, a special fund for the prevention of heavy-metal pollution was only 3.7 billion yuan ($570 million), while water pollution and air pollution received 12 billion yuan and 10.6 billion respectively.[6] Although the central government added a new item of 9 billion yuan in its 2016 budget for soil pollution prevention and control and the MEP set up a special fund of 20 million yuan in its 2016 budget for implementing and managing the soil pollution action plan, government funds are far from sufficient. Soil pollution remediation demands a huge amount of funds from the society. Currently, the revenue from soil remediation industry is only 1% of the total revenue of environmental industry, which is far lower than 30% in developed countries.

Local government is lacking resources in enforcing waste disposal laws. It is not uncommon that a single inspector is responsible for factory inspections and record-keeping for hundreds of local factories.[7] Although anyone convicted of illegally dumping more than 3 tons of hazardous waste can get up to 7 years of prison, experts say courts generally leaned toward light sentences and granted a reprieve. On the other hand, illegal disposal is money-saving for corporations because proper disposing of a ton of hazardous waste can cost up to 6,000 yuan (almost $1,000), while hiring a midnight dumper can cut the cost to 1,200 yuan per ton (almost $200). Moreover, there are not enough licensed waste disposal facilities to meet the demand. Oftentimes, a company has to wait for six months to use a licensed disposal facility for its hazardous waste disposal. Additionally, the quality of companies engaging in soil pollution treatment is worrisome. Many inappropriate soil remediation processes led to secondary pollution.

Furthermore, the action plan to map the hotspots will be political sensitive. Some experts are concerned that it would identify the corporations responsible for the pollution, unleash public demands for compensation, and make it impossible to sell agricultural produce or property near those sites.[8]

[1] https://www.washingtonpost.com/news/worldviews/wp/2016/01/20/six-charts-that-explain-why-u-s-companies-feel-unwelcome-in-china/

[2] http://www.nytimes.com/2016/04/19/world/asia/china-pollution-cancer-changzhou.html?_r=0

[3] http://news.xinhuanet.com/english/2016-04/25/c_135311023.htm; http://www.mep.gov.cn/zhxx/hjyw/201604/t20160426_336736.htm

[4] http://www.mep.gov.cn/gkml/hbb/qt/201404/W020140417558995804588.pdf

[5] The rate indicated here represents the percentage of sampling sites exceeding the standard within the total number of sampling sites.

[6] http://www.mep.gov.cn/zhxx/hjyw/201604/t20160426_336736.htm

[7] http://english.caixin.com/2016-04-26/100936798.html

[8] http://www.ft.com/intl/cms/s/0/76fab472-0b6f-11e6-b0f1-61f222853ff3.html