China’s Green Push is Here to Stay
President Xi Jinping is placing anti-pollution high up on his agenda as he enters his second five-year term in office, echoing the intensity of his sweeping crackdown on corruption.
An environmental inspection round carried out by China’s central government up until September this year has had hard-felt effects across industries. Non-complying factories involved in highly polluting processes such as die-casting, metal-coating, polishing, printing, and dyeing, had to halt production, sending ripple effects all the way down the supply chain.
After decades of unburdened economic growth taking its toll on China’s environment, the government stepped up its fight against pollution in 2015 when the revised Environmental Protection Law came into force. Since then, industrial companies have faced stricter environmental standards and closer monitoring by authorities. The law granted environmental officials a broad set of punishment powers including uncapped fines, factory shutdowns, and judicial prosecution.
Inspection Round No.4
Last month’s inspection drive is the fourth and final round of an effort launched by the central government in July 2016 to investigate the anti-pollution efforts of different provinces. Since round one, more than 18,000 companies have been punished. International businesses have been affected in three major ways:
- Shipment delays due to suppliers/sub-suppliers being shut down for non-compliance or voluntarily suspended production to avoid a risky inspection
- Price increases due to a fall in the supply of highly-polluting raw materials and processes
- Time invested in liaising with suppliers to prevent order interruptions
What comes next?
Although the fourth inspection round is officially the last one, its force has confirmed just how much of a priority anti-pollution has become for China’s central leadership. Local officials turning a blind eye on environmental problems have faced unprecedented public criticism and demotion. International businesses can expect:
- An ongoing and increasingly strict enforcement of environmental regulations
- The relocation of highly polluting activities to less-populated locations
- Industry consolidation, as smaller players who don’t have access to required permits, are pushed out
- Growing demand for energy saving and environmentally sustainable industrial products and systems
How to cope:
These measures can help you foresee and prevent setbacks in your China sourcing and production operations:
- Monitor developments in government policy and enforcement to evaluate current and potential impact
- Establish communication channels with on-site vendors and encourage them to report on developments proactively
- Discuss solutions with high-risk suppliers and search for alternative sources as necessary
- Communicate with clients to manage expectations regarding price and delivery times
Contact us to discuss how your China business might be affected by these regulations and how you can minimise delays, interruptions and losses along your supply chain.