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Projects and Priorities in China
China’s EPA Head Cites Projects & Priorities

From getting rid of trash more efficiently, to cleaning up the air, water, and soil pollution, China’s environmental needs are getting top priority. According to State Environmental Protection Administration (SEPA) head Xie Zhenhua, China requires more than USD $10 billion in annual environmental investments, of which roughly half will come from overseas. In an interview late in September, Xie stated that 20 years of eight percent economic growth created numerous environmental problems in China. The government’s challenging goal is to maintain economic growth of 7 percent while keeping pollution at 1995 levels. Currently, fewer than half of all industrial enterprises in China meet SEPA’s national pollution emission standards. SEPA recently announced that enterprises must meet standards by the end of next year or be shut down.

Major cities and tourist areas are to meet air quality standards by the same date. Under an anti-air pollution law amendment submitted to the National People’s Congress (NPC) in late August, 1999, China will spend between $14.5 billion and $18.1 billion to combat air pollution in 34 major cities. The estimates to clean up Beijing’s air pollution alone are about $723 million; Shanghai needs $3.6 billion. Since most air pollution is energy-related, Xie said China must shift its energy structure away from coal toward oil and gas. According to a November 13, 1999 article in the English language newspaper China Daily, coal plays a leading role in energy consumption and low grade coal is used for 75 percent of the people’s energy needs. Xie wants coal burned more efficiently and cleanly, and believes coal desulfurization is cost-effective. The NPC committed $21.7 billion to targeted areas seriously suffering from acid rain and SO2.

Xie said that Beijing is converting part of its bus and taxi fleets to run on compressed natural gas (CNG) or liquified petroleum gas (LPG) to reduce emissions, but that construction of fueling stations for them is proceeding slowly. US Embassy sources report that Beijing expects to have 14,000 CNG/LPG-powered taxis and 3,000 buses on the road by the end of this year.

Reducing total energy use through conservation is also essential. Specifically, Xie said, more energy-efficient building materials could have a major impact. China’s priority technological needs include energy-efficient building materials and other energy-conserving technologies; fueling infrastructure for natural-gas-powered vehicles; coal-desulfurization technology; and technologies to control agricultural runoff and organic waste. Xie cites the following as China’s most important priorities requiring urgent attention:
• Water pollution, particularly in the so-called "three rivers"–the Huai, the Hai, and Liao, and three lakes, the Taihu, the Chaohu, and Dianchi;
• Marine pollution in Bohai Bay;
• Urban Air pollution and acid rain, mostly from power plants and home furnaces;
• Municipal waste water and organic waste from paper mills, breweries, tanneries, and electronic manufacturing plants;
• Run-off of agricultural chemicals into rivers and lakes;
• Growing pollution from automobiles.

There’s Will, But is There a Way?

Xie concedes that, while the necessary legislation may be in place, enforcement is another matter altogether. The two greatest obstacles are funding and technology. However, in a September 23 article in the English language China Daily, unnamed SEPA officials conceded that reform of state-owned enterprises (SOEs) was a third major obstacle. Large, financially weak SOEs are among China’s worst polluters. Their equipment is outdated and they lack resources to modernize or implement pollution controls. The SEPA officials said some local officials do not adequately support SEPA’s work, fearing that cracking down on SOE polluters will hamper economic growth and affect social stability. Not surprisingly, Shenzhen–a free market special economic zone (SEZ) that borders Hong Kong and has few, if any SOEs--is the only Chinese city to meet air quality standards to date. Shenzhen is one of 11 "model" cities that will try to meet the standards a year ahead of schedule (i.e., by the end of this year). Others include Xiamen in Fujian Province and Zhuhai in Guangdong Province–also SEZs.

Nonetheless, Xie claims that all levels of the Chinese government recognize the imperative for sustainable development. Total environmental spending by enterprises and all levels of government surpassed 1 percent of GDP, reaching RMB 100 billion (USD$12 billion). That’s one half of the amount the World Bank estimates China needs to spend annually just to achieve US air quality standards of the early 1980's by 2020.

Xie said 20 percent of this year’s special economic stimulus package is devoted to environmental projects. The September 16 China Environment News (Huanjing Bao) quoted State Development Planning Commission Vice Chairman Li Rongrong as saying RMB 6.7 billion (USD $810 million) or 11 per cent of the RMB 60 billion special bond issue was being spent on environmental projects. Li adds, however, that 93 percent of a remaining RMB 34.3 billion (USD $4.15 billion ) bond issue for basic infrastructure construction will be devoted to completing already-initiated urban transit, water supply, gas supply, waste-water treatment, solid waste management, and other such projects that could be considered environment-related. Li adds that RMB 2 billion (USD $242 million) would be spent this year on 123 projects to treat water going into the three key rivers and three key lakes, raising the total water treatment capacity to 11.4 million tons per day.

Show Us the (Soft) Money

Xie noted China’s extensive environmental cooperation with Canada, Europe, and Japan, totals about USD $3.3 billion. US cooperation is much smaller in scale, which Xie attributes to the lack of USG grants and subsidized loans to support exports of US environmental technology to China. Xie notes an Idaho delegation that visited in September was an exception because it included both business and government representatives. Typically, he says, when US environmental delegations visit China, they are either all government officials, or all business people. In contrast, when the Swedish environment minister recently visited China, 30 Swedish CEOs came along.

The complaint about lack of concessional financing for US environmental exports to China is a familiar one. So far, the US $100 million ExIm Environment Facility has found no takers because ExIm’s interest rate is not competitive with those offered by Japanese and European governments.

Bilateral JCCT Environment Subgroup Signs 1999-2000 Work Plan

During a visit to China in early September, Alan Bowser, Deputy Assistant Secretary (DAS) for USDOC Basic Industries, on behalf of ETE’s Acting DAS Carlos Montoulieu, and Wang Zhijia, Director General for International Cooperation for the State Environmental Protection Administration (SEPA), signed the JCCT Environment Subgroup’s 1999-2000 Work Plan. Among the Work Plan projects proposed by SEPA and listed as conditional subject to identification of funding is a Comprehensive Environmental Demonstration program. SEPA officials clarified they seek more capacity-building programs and exchanges to promote the enforcement of and voluntary compliance with environmental regulation, including market-based incentives and Superfund-type mechanisms.

Another of the Work Plan’s conditional technical projects that received subsequent funding from ETE is a Water Resources Management Training Workshop for 10-15 senior Chinese Environmental managers. The Workshop will take place in Seattle/Tacoma in late March, immediately after Globe 2000. Session topics will include waste water treatment systems, market-based incentives for pollution prevention and control, environmental quality monitoring and enforcement strategies, waste water and sludge treatment technology options, recycle/recovery alternatives; finances strategies, and site visits to industrial and municipal facilities. Prior to the training workshop, ETE, in conjunction with trade and environmental associations in the Pacific Northwest, will conduct a one-day seminar to highlight opportunities in China for U.S. environmental technology companies.

The Water Resources Training Workshop dovetails with Vice President Gore’s and Vice Premier Zhu’s US-China Environment and Development Forum’s Commercial Cooperation Working Group objectives, and with those of the newly implemented initiative of the State Department’s Office of Science and Technology Policy, the Water Resources Management Initiative. The initiative seeks to involve the private sector in joint efforts to solve environmental problems and promote commercial opportunities.

Water, Air, and Solid Waste Projects in Guangzhou

On November 4, 1999, nearly 200 guests attended the signing ceremony for the service contract for the design, construction, and operation of Guangzhou’s Xi Lang Wastewater Collection and Treatment Project. The public/private Sino-American joint venture project between the Guangzhou Lemna Xi Lang Wastewater Treatment Company, Ltd., and the Municipality of Guangzhou is the first of its kind. The agreement marked a major milestone after nearly six years developing the project’s structure, and launched the project’s implementation phase. The Xi Lang Wastewater treatment plant will provide direct environmental protection of the raw water supply for the major manufacturing and trade center of southern China, and partial remediation of the surface water of the Pearl River estuary and upper Victoria Bay, Hong Kong.

Xi Lang is one of 6 waste water treatment plants that Guangzhou has planned to build between 1998 and 2008. In the area of solid waste treatment and handling, Guangzhou needs to build three more waste-to-energy facilities and three more landfills; and to improve 10 old-style landfills that do not meet standards. Guangzhou municipal authorities want to hear from US companies that can help recycle 100 million tons of tires per year. , Guangzhou’s dozens of large scale hospitals, some using incineration, need pre-treatment technologies prior to municipal treatment to handle growing amounts of medical waste.

Chinese interest in US technology to solve these problems is evidenced by the fact that two delegations totaling more than 48 environmental specialists and representatives from Guangdong Province were among the four from China that attended last summer’s Waste Expo and the October WEFTEC ‘99 trade exhibits. To obtain lists of delegates and their priorities, contact Christine Huang in Guangzhou (Phone: 86-20-8667-5430; Fax: 86-20-8666-6409) or ETE’s Susan Simon, 202-482-0713.

Recent Reports

The following recent reports on various aspects of China’s Environmental technology market are available on www.stat-usa.gov:
Hard Currency Environmental Projects (135 pp)
Water Treatment and Supply Concession Projects in China (43 pp)
Solid Wastes Management Technologies (19 pp)
China Legalizes Scrap Plastics Imports Under Strict Standards (6 pp)
Trip Report of International Buyer Program (IBP) to WEFTEC’99 (includes list of the 17 Chinese environmental specialists from Sichuan and Yunnan provinces who attended)
Coal Washing Equipment Market (3 pp)
No Clean Environ Without Clean Government (9 pp)

Updated Web Sites

The Embassy Beijing EST section updated the China specific and some of the generic links on the Embassy’s web site: www.usembassy-china.gov/english/sandt/index.html. You’ll find links to provincial and local environmental regulatory agencies at: www.usembassy-china.gov/english/chenvlnk.html, including SEPA’s English language reports on the state of the environment in China; the Woodrow Wilson Center’ s web site with scholarly papers on environment and sustainable development, the China Energy Page; Pace’s www.chinaenvironment.net; EPA’s Infoterra: www.epa.gov/epahome/intl.html; and the US-China Business Council: www.uschina.org.

Hong Kong

Headlines in Hong Kong’s newspapers illustrate the growing awareness of the danger from rising levels of pollution. On October 6, Hong Kong’s Chief Executive, C.H. Tung delivered his annual policy address. Unlike his 1998 address that included numerous big-ticket infrastructure projects, this year’s speech addressed Hong Kong’s environmental challenges, and how the government plans to correct these problems. He outlined plans to spend approximately HK $30 billion over the next ten years on the environment. Tung set aggressive targets to reduce levels of particulates and nitrogen oxides equal to London’s and New York’s. Tung’s measures to reduce diesel emissions, convert taxis and light buses to LPG, retrofit cars with catalytic converters, and purchase electric trolley buses, all offer opportunities for US companies. The Hong Kong government is continuing construction of its multi-billion dollar Strategic Sewage Disposal Scheme. In addition to this major sewage project for the main urban areas, the government is investing heavily in sewage infrastructure in new towns and small villages in the New Territories. The government is pushing a series of initiatives to reduce the amount of waste produced by introducing waste disposal charges and providing land for facilities. These programs will enable recycling operations to become economically more viable and should increase opportunities for related US businesses. The government will also seek funds to construct new waste separation facilities and waste-to-energy incinerators at a cost of HK $10 billion over the next ten years. For a summary of these and other recent trends, initiatives, and newly formed organizations in Hong Kong, contact Keith Gilges of the US-AEP at Phone: 852-2522-6078; Fax: 852-2801-6036.

Wastewater Treatment Equipment Needed

A Hong Kong engineering company is looking for wastewater treatment equipment and technical support for a new sewage treatment project in Hong Kong. The required system needs an aeration unit, a screening unit, a chemical dosing system, sedimentation and disinfection systems, and a sludge dewatering system; Contact Albert Leung at Phone: 852-2522-6078; Fax: 852-2801-6036; email: alusaep@navigator.com.

For a full report of recent developments in China’s environmental marketplace (including Honk Kong), see ETE’s website at http://infoserv2.ita.doc.gov/ete, and visit the “Market Plans” section. To speak with ETE’s China trade specialist, contact Susan Simon at 202-482-0713.

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