Economy

150,000 angry folk

Can Linyi survive a pollution crackdown?

Linyi w

In his efforts to tackle one of China’s most difficult conundrums, the mayor of Linyi city in Shandong province might be advised to emulate the strategic ingenuity of its most famous resident. The coastal city claims Zhuge Liang was born there. According to the novel the Romance of the Three Kingdoms Zhuge was so in touch with nature, he could use it to ensure victory (famously in the Battle of Red Cliff he used a change in wind direction to destroy a rival fleet with boats he’d set on fire).

Modern day Linyi is one of the most polluted Chinese cities and its government faces the almost impossible task of trying to reduce emissions drastically while maintaining economic growth. But according to his critics, mayor Zhang Shuping paid little heed to the consequences of his actions when he obeyed the wishes of the newly empowered Ministry of Environmental Protection.

In late February a delegation from the ministry visited Linyi. In an interview the investigators urged Zhang to take tougher action on polluters. Three days later he simply shut down 57 factories and ordered a further 412 to cut production. Why such resolute action? Zhang’s dressing-down was broadcast by state broadcaster CCTV in a popular show, making Linyi a bad example in front of a nationwide audience.

In a recent feature ThePaper.cn examines how Linyi has fared over the subsequent four months. One manager at a glass company tells the website his electricity was suddenly cut off when there was still 2,000 tonnes of molten glass and tin running through the furnaces. “If and when we resume production it will take us about four to five months to blast the cooled glass off,” he complains.

Another mill owner claims his furnace has been permanently damaged to the tune of Rmb10 million ($1.6 million). ThePaper.cn says about 60,000 jobs have been lost as a result of the closures, and if dependents are also taken into account, the anti-pollutution drive has affected 150,000 citizens in a city of just over 10 million.

Zhang’s actions have exposed him to immense pressure. Local police have reported the joblessness has increased robberies, while Linyi-based firms complain they have no idea if they will ever be able to resume production. Why? In their earlier haste to meet GDP targets former government officials had rushed through approvals. As a result many of the firms set up never underwent any environmental reviews. That means they do not have the necessary paperwork to reopen.

Southern Weekly says the pollution crackdown could also trigger a regional financial crisis since the 57 firms under ‘enforced closure’ account for about a third of Linyi’s Rmb300 billion of outstanding loans. The city’s largest private sector firm has already needed a Rmb70 million capital injection from the local government’s investment arm in order to continue servicing its loans.

On the plus side, the government has scored a notable success meeting environmental targets, with Linyi’s PM2.5 reading dropping by a quarter over the past few months. But there is a long way to go before it reaches the World Health Organisation maximum recommended limit of 25. More recently the reading has swung between 122 and 304.

The Ministry of Environmental Protection remains unrepentant. In a WeChat post it responded to ThePaper.cn with the following message, “Linyi is a microcosm of all the cities that sacrificed the environment in the process of economic transition and now it has to pay its historical debts to the environment.”

The central government has also been taking public feedback on a new environmental protection tax, which proposes to set minimum tax thresholds for polluters on a national scale. All companies will have to install pollution-monitoring devices to measure their emissions.

Will it be as effective as Zhuge Liang’s tricks for dealing with his enemies?

At Red Cliff he was said to have “borrowed the East Wind” to win the battle. Today summoning the East Wind is viewed as a metaphor for doing what is necessary to fulfill a critical undertaking.

In its current quandary, the Linyi government must wish it had the power to invoke a wind – if only to blow its pollution out into the East China Sea.


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.