U.S. DEPARTMENT OF COMMERCE

International Trade Administration

Washington, D.C.

September 2002
Library of Congress Cataloging-in-Publication Data

China environmental technologies export market plan.

p. cm.

1. Pollution control equipment industry–China. 2. Pollution control equipment

industry–United States. 3. Imports–China. 4. Export marketing–United States.

5. Pollution–China. 6. Market surveys–China. I. United States. International Trade

Administration.

HD9718.C62 C48 2001

382’.4568176--dc21

2001051470

ISBN: 0-16-051189-5

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: http://bookstore.gpo.gov

Telephone: (202) 512-1800

Fax: (202) 512-2250

Mail: Stop SSOP, Washington, DC 20402-0001

Stock number: 003-009-00728-3

Illustration on page viii courtesy of the Central Intelligence Agency.

The full text of this report is available on the International Trade Administration’s

Internet site at www.environment.ita.doc.gov. Reprints on paper or microfiche are

available for purchase from the National Technical Information Service, 5285 Port

Royal Road, Springfield, VA 22161; www.ntis.gov.

Federal Recycling Program

Printed on recycled paper.
China Export Market Plan iii

Acknowledgments

This report was prepared by Sinosphere, Inc., under

contract to the Office of Environmental Technologies

Industries of the U.S. Department of Commerce,

International Trade Administration, with assistance

from the U.S. and Foreign Commercial Service,

Beijing. Conclusions and statements expressed in this

report are those of the contractor and do not necessarily represent the views or policies of the U.S.

Department of Commerce or the U.S. government.

China Export Market Plan v

Contents

Abbreviations and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .vii

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ix

1 The Market for Environmental Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

2 Economic Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

3 Legal and Policy Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

4 The Water Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40

5 The Solid Waste Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48

6 Air Pollution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56

7 The Environmental Services Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .62

8 Resource Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66

9 Finance Programs and Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70

10 Positioning U.S. Exporters in the Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .80

Appendices

Appendix A: Maps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .95

Appendix B: China Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .98

Appendix C: International Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .104

Appendix D: Legal and Market Consultants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .108

Appendix E: Web Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .110

Appendix F: Development Zones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .116

China Export Market Plan vii

ADB Asian Development Bank

BOT build-operate-transfer

CDB China Development Bank

CESTT Center for Environmentally Sound 

Technology Transfer

CFB circulating fluidized bed

CIDA Canadian International 

Development Agency

COD chemical oxygen demand

CRAES Chinese Research Academy of 

Environmental Sciences

CSRC China Securities Regulatory 

Commission

EIA environmental impact assessment

EPB environmental protection bureau 

(provincial and local levels)

EPU Environmental Projects Limit

ETI Environmental Technologies Industries

Ex-Im Export-Import Bank of the 

United States

FAS free alongside ship

FGD flue gas desulfurization

GDP gross domestic product

GEF Global Environment Facility

GTZ Deutsche Gesellschaft für Technische 

Busammenarbeit (German Technical 

Corporation)

HSE health, safety, and environment

HTS Harmonized Tariff Schedule

IFC International Finance Corporation

IPR intellectual property rights

JEXIM Export-Import Bank of Japan

JV joint venture (enterprise)

JBIC Japan Bank for International 

Cooperation

MIGA Multilateral Investment Guarantee 

Agency

MOFTEC Ministry of Foreign Trade and 

Economic Cooperation

NGO non-governmental organization

NPC National People’s Congress

Abbreviations and Acronyms 

OECD Organization for Economic 

Cooperation and Development

OECF Overseas Economic Cooperation

Fund of Japan

PDF project development funds

PM particulate matter

PPP public private partnership

PRC People’s Republic of China

RMB yuan renminbi (Chinese currency)

SDPC State Development and Planning 

Commission

SEPA State Environmental Protection 

Administration

SETC State Economic and Trade 

Commission

SOE state-owned enterprise

TDA Trade and Development Agency

TEC total emissions control

TIPC total investment in pollution control

tpd tons per day

TSP total suspended particulate

TVIE town and village industrial enterprise

UNCHE United Nations Conference on the 

Human Environment

UNDP United Nations Development Program

UNEP United Nations Environment Program

UNIDO United Nations Industrial 

Development Organization

USAEP United States–Asia Environmental 

Partnership

USAID U.S. Agency for International 

Development

WFOE wholly foreign-owned enterprise

WHO World Health Organization

WTO World Trade Organization

Note: Unless otherwise noted, dollar figures given are U.S. dollars.

The exchange rate for the Chinese yuan, or RMB, has been calculated at 8.3 to the U.S. dollar.
viii U.S. Department of Commerce, International Trade Administration
Environmental protection is currently receiving more

attention in Chinese domestic policy than ever before,

and all indications are that this attention is going to continue to increase. Spending on environmental protection

topped 1 percent of China’s gross domestic product

(GDP) for the first time in 1999, and investment rates

are expected to continue rising. Similarly, citizen

awareness and the demand for environmental wellbeing are increasing. The central government, increasingly cognizant of the financial and social costs of a

deteriorating environment, has clearly made its protection a priority.

In November 2000, the Chinese Research Academy

of Environmental Sciences (CRAES) estimated that

RMB 700 billion ($85 billion) would be needed to

meet the environmental goals of the Tenth Five Year

Plan (2001–2005). Other estimates indicate that as

much as hundreds of billions of U.S. dollars will be

necessary to address all the issues thoroughly. The

World Bank has estimated that 2 percent of GDP will

be needed just to bring air quality standards within

range of those seen in the United States in the 1980s.

Regardless of the estimations observed, the central

government is expected to contribute only 11.4 percent

of the CRAES estimate ($9.7 billion) over the next five

years, while 34 percent of that estimate (nearly $29 billion) is expected to be sourced from provincial and

local governments and 55 percent (over $46 billion)

from business enterprises themselves. 

The financial demands indicate a strong need for

non-public investment, whether it be directly from

Chinese state-owned enterprises (SOEs), from the

small but growing domestic private sector, or from a

variety of foreign investment channels. Under ideal

market-oriented circumstances, such investment might

materialize with relative ease, but as the system currently functions, it remains challenging to operate profitably in China’s environmental sector. This is due in

part to the facts that pricing strata for environmental

services such as waste and water management do not

reflect the actual costs of providing those services,

guarantees and security mechanisms are not well established to mitigate the risks of private investment, and

legal transparency and equitable enforcement of the

law remain lacking in many instances. The government

appears to be aware of these conflicts and the fact that

they must be addressed if the private sector is to play a

considerable role in the environmental protection plan.

The rate and efficacy with which these issues can and

will be addressed is uncertain.

There is already a trend toward the liberalization of

environmental service tariffs. Water prices are rising,

and some investors report cooperation from local

governments in setting water prices at rates that offer

potential for returns on long-term facility investments.

Similar tariff liberalization may carry over to

wastewater treatment and, in due time, to solid waste

management as well. Nonetheless, the common consensus is that, in order to enter the market and eventually

turn a profit, investors must have both ample finances

and patience.

Because most of the government bodies and enterprises (both SOEs and private enterprises) seeking to

invest in environmental protection work under financial

constraints, it is critical that the technologies they invest

in are efficient and affordable. A fundamental underlying indication of this market analysis is the Chinese

demand for innovative technologies that can provide

significant results at relatively low marginal costs, management and clean production schemes that can assist in

the attainment of efficiencies, and innovative recycling

techniques that can turn waste products into moneygenerating commodities. 

Yet, before attempting to enter the Chinese market,

it is important to keep in mind the eccentricities of

doing any sort of business in China. Numerous complications and barriers, many of which are addressed

in detail throughout this document, are encountered

by nearly all exporters and foreign investors that enter

the Chinese marketplace. Perhaps paramount among

those is personal relations, referred to in Chinese and

colloquially among non-Chinese as “guanxi.”

Personal relationships are often at the core of business

dealings in China. For those who lack the time,

money, ability, or interest to establish such relations

and presence in China, an increasing number of service providers with extensive connections and knowhow can, for a fee, provide the necessary connections,

China Export Market Plan ix

Executive Summary
networking, and guidance. Regardless of the facilitation

and assistance sought, entry into the Chinese market

can be a slow and sometimes exasperating process;

those willing to spend the time and effort may find the

payoff worthwhile in the end.

For the purposes of this report, the environmental

sector is divided into the water sector, the solid waste

sector, the air sector, the services sector, and resource

management. All of these sectors present unique opportunities and complications, which are discussed in turn

in the corresponding chapters. Additionally, efforts to

enter markets in any of the sectors are subject to a relatively standard set of conditions that apply across the

environmental sector and in some cases to foreign

investment in China in general; these conditions are

addressed in the remaining chapters.

This market study aims to clarify three things for

U.S. companies looking to invest in China’s environmental protection industry: 

1. The real demands for environmental protection

in China,

2. The current investment climate in the environmental

protection industry and developing trends that may

affect it in the near and medium-term future,

3. Methods to access the market and potential

results that can be reasonably expected from

investment efforts.

This report does not provide comprehensive lists of

industries looking to buy or manufacture equipment,

local governments looking to implement initiatives, or

massive infrastructure development programs that may

offer opportunities to technology providers, as all these

types of information are time dependent and would be

obsolete soon after printing. It does, however, indicate

channels by which investors can find this information

while offering insights into what the market may have to

offer as China pursues its goal of rapid modernization.

x U.S. Department of Commerce, International Trade Administration
China’s domestic environmental technology industry,

according to local government and business leaders,

does not lack the ability to produce standard environmental protection equipment. However, the quality and

innovative character of this equipment is widely known

to be poor, and the country’s demand for reliable, affordable, and effective environmental protection equipment

is not satisfied. Many of the potential consumers of such

equipment lack access to necessary finances. The management skills and know-how needed to use the available technology effectively remain substandard,

severely cutting into the efficient allocation of what little funding is available.

Chinese-produced equipment that is of lesser quality

than similar foreign-produced equipment is often

favored by Chinese end users, as it makes up for its

shortfalls in quality by being less expensive and domestically produced. In some instances, purchasers are

beginning to favor more expensive, higher-quality

exports as maintaining mediocre domestically-produced equipment proves to be inefficient. Nonetheless,

it is difficult for foreign technology producers exporting

to China to enter the market competitively with products that are similar in design or function to anything

already produced in the country. The exceptions to this

rule are exporters that are able to provide equipment at

significantly reduced prices and those that offer attractive support packages. Such exporters remain few,

given such factors as high import tariffs, reduced production costs in China, and various other market barriers. Changes associated with the accession of China to

the World Trade Organization (WTO) are having a beneficial impact. 

Vendors looking to export equipment to China need

either to provide exceptional products brokered through

a reliable local representative or to enter the market indirectly through multilateral projects, through other foreign-funded investment schemes, or by targeting the

demands of foreign-invested companies operating in

China. Another option is to forgo the notion of exporting

and establish a local presence in-country via a joint venture (JV) or wholly foreign-owned enterprise (WFOE).

Such in-country operations can reasonably expect a

share of the market demand if they offer competitively

priced goods and services. Trends indicate that Chinese

end users prefer to buy equipment and parts produced by

Western-invested JVs and WFOEs due to inherent quality differences. JVs and WFOEs can also maintain competitiveness by avoiding customs tariffs and taking

advantage of reduced production and labor costs that

exporters cannot. Changes associated with WTO accession are influencing these realities and should be considered when developing a market strategy. (See further

discussion of the WTO later in this chapter.)

Despite the broad range of environmental legislation that has been promulgated over the past decade

and will likely be promulgated in the decades to come,

regulation remains weak or non-existent. Chinese

environmental protection is not regulation driven but

rather economically driven; the economy and its

forces, meanwhile, can be described as somewhat market oriented although controlled by seemingly monopolistic behavior. Once this is understood and a

marketing strategy is developed that provides an economic and profit-driven explanation for the use of a

product, then market entry may be possible. Such a

market strategy would require indications not only that

a proven technology is technically appropriate for a

task but, more important, that savings can be realized,

that the payback period for an investment would be

favorable, and ultimately that profitability could be

enhanced. More sophisticated and costly technologies

might require creative financing, in which the vendor

would initially carry some of the cost, thus shouldering some risk in proving that the technology is viable,

and would later be paid back from the accrued savings

or profits according to a pre-arranged formula.

China’s Real Demands

The domestic production of basic environmental

technology is not impossible for China. The following

is an assessment of the country’s more complex and

advanced needs, which can be roughly divided into four

categories: inexpensive solutions, innovations and efficiency, management skills and best practice, and maintenance and equipment servicing.

China Export Market Plan 1

Chapter 1

The Market for Environmental Technologies
According to State Environmental Protection

Administration (SEPA) statistics, over 70 percent of

China’s pollution problems stem from industrial pollution, which is primarily generated by seven industrial

subsectors: non-metal mineral production; chemical

production; pulp and paper production; textiles; ferrous

smelting and processing; mining; and electricity production. Nonetheless, other sources such as municipal

waste and agricultural pollution factor heavily into the

equation, and the needs discussed below are generally

applicable across the board.

Inexpensive Solutions

Available finances for environmental protection fall

far short of what is needed to address China’s serious

environmental degradation. One consistent response

from local government leaders and enterprises during

the research for this market plan was that needs are

tremendous but money is scarce.

Foreign enterprises looking to provide marketable

solutions to China’s environmental problems need to

find innovative solutions and to develop affordable and

cost-effective methodologies backed by creative financing. Technology providers who can offer means to make

significant environmental improvements at affordable

prices find themselves warmly welcomed in China. 

The potential market size, economies of scale, and

the reduced costs of producing in China—through

either a JV or WFOE—are keys to commercial viability for inexpensive solutions. A solid market analysis,

effective and widespread marketing, and adept use of

the advantages of in-country production are all

required. Enterprises composed, at least in part, by foreign technology providers are regarded as superior by

many consumers in China.

Innovations and Efficiency

SEPA Minister Xie Zhenhua has indicated that

RMB 700 billion ($85 billion) will be needed to meet

the environmental goals of the Tenth Five Year Plan

and, according to CRAES, about 55 percent of that is

expected to be covered by enterprises themselves.

However, many business enterprises already view

environmental protection as a costly burden, and new

goals are met with increased disfavor. Therefore, a

market demand is developing for innovations and effi2 U.S. Department of Commerce, International Trade Administration

Box 1. Industries Find Efficiency Through Green Business

Sinopec Corporation and the Shanghai Baosteel Group (Baosteel), although not the only Chinese industries to do so, are

finding that smart business simultaneously generates revenues and protects the environment. Both companies have

strong internal health, safety, and environment (HSE) departments that establish and enforce standards that often exceed

those of the state. Ultimately, their efforts pay off in revenues and offer positive public relations as they enter the

international market.

● Since 1983, Sinopec has tripled its revenues while simultaneously reducing pollution. Between 1998 and 1999 industrial output increased 12 percent while major contaminants continued to decrease.

● In 1997, Sinopec spent RMB 90 million ($10.8 million) transforming 22 production units into “clean production units.”

The investment was recouped through reduced waste management and pollution treatment costs within one year of

operation. Phase two, comprising another 20 units, is currently under evaluation, and phase three is already in progress.

● Investment in proactive safety measures by Sinopec and its subsidiary enterprises reached RMB 1.3 billion ($157

million) over the past three years. In 1998 and 1999, they collectively suffered RMB 4 million ($483,000) and RMB 8

million ($967,000), respectively, in asset damages due to accidents. Between 1984 and 1997, before HSE was initiated, that number averaged 20 to 30 million RMB ($2.4 to 3.6 million) per year.

● Baosteel has been experimenting with recycling methodologies that use steel production waste products as a raw

material in the construction of concrete roads. In 1998, the steel producer manufactured 10.16 million tons of steel

and generated 5.5 million tons of waste. Some 4.7 million tons of that waste was re-used for road construction, generating RMB 187 million ($22.5 million), and eliminating the need to manage that waste through other means.

● By standards in developed countries, Baosteel’s achievement may be considered commonplace. But in the developing

world, where waste management industries are far less developed, this type of waste is often simply dumped directly

into the environment.

● Both Sinopec and Baosteel have indicated that their HSE programs were originally instigated by high-level government

and enterprise leadership decrees. In time, the decrees have led to a sincere commitment on the part of both companies.
cient management techniques that allow an enterprise

to simultaneously protect the environment and save or

generate money, either through increasing efficiency

or reusing and recycling by-products. 

Some of China’s major industries are already putting

such innovations to use and are finding that waste products previously seen as useless and troublesome to dispose of can be reused or recycled, and can generate

further income. Other industries are developing more

efficient and cleaner production methods and are reducing pollution levies and cleanup costs so much that

expenditures formerly used to cover those costs can

cover upgrade investment costs over a surprisingly short

period of time (see Box 1). As enterprises are increasingly burdened with the responsibility of funding

China’s environmental protection—and internalizing

their own environmental liabilities—they increasingly

seek out means to make that responsibility affordable

and profitable.

Management Skills and Best Practices

Although China is capable of manufacturing a great

deal of the basic equipment for environmental protection, there remains a considerable gap in terms of management and know-how when putting that technology

to use. There is a demand for consulting and management training that improves equipment performance

and overall environmental performance. Many industrialists and officials contacted during the research for this

document expressed a need for training on sound management practices and operations.

Additionally, there is a widespread lack of understanding regarding best practices. In some cases, this is

due simply to the fact that enterprises are not aware of

or do not seek out information regarding such practices.

In other cases, a perception perists that environmental

protection is necessarily costly and that therefore enterprises must become financially sound before they can

become environmentally sound. In either case, it is

apparent that information on best practice needs to be

widely disseminated, with simultaneous consideration

of the innovations and efficiencies discussed above. 

Based on these findings, it appears that any initiatives

in this area require coordination between individual vendors, industry associations, and the U.S. government.

Maintenance and Equipment Servicing

Another breakdown in the industry—one that heavily influences the efficiency of environmental protection

expenditures and equipment—is poor operation and

maintenance. This may be due to perceptions that

equipment maintenance and servicing is merely another

burdensome cost, or it may be due simply to a lack of

awareness. Regardless, potentially strong market

demand awaits investors who can successfully illustrate

to enterprises that relatively small expenditures on

maintenance can result in long-term efficiencies and

revenues. Furthermore, technologies that require little

maintenance or are self-maintaining (which are heavily

marketed by Israeli industries in China) undoubtedly

have additional competitive advantages.

The Issues

The three primary environmental priorities in China

are water quality, air quality, and waste management.

They will be the primary focus of environmental protection during the Tenth Five Year Plan and will therefore be the primary focus of this market survey.

However, issues such as land degradation, ecological

and biodiversity preservation, and other standard environmental concerns are getting attention and offer market potential.

Each of these issues is introduced below. For market

analysis and discussion of market potential by sector,

see the appropriate corresponding chapters.

Water

Statistics from 1991 to 1998 indicate improvements

in river water quality in some limited areas but illustrate

an overall trend suggesting significant deterioration as a

whole. Forty percent of the country’s river water is

ranked as poor by domestic standards. Additionally, an

estimated 25 percent of all Chinese lakes are affected by

eutrophication, almost all of the coastal seas are moderately to highly polluted, and it is now being said that little or no groundwater in the country remains

unpolluted.

Water sources in 50 percent of the major cities and

towns cannot meet drinking water standards. Ten percent of urban and 80 percent of industrial wastewater

receives some treatment, but most of that treatment is

inadequate. Most Chinese cities and towns lack municipal wastewater treatment facilities, and many towns do

not even have proper drainage systems.

Additionally, parts of the country are dramatically

short of water. In some areas, water availability is as

low as 355 cubic meters per head (the international definition of water scarcity is 1,000 cubic meters per head).

China Export Market Plan 3
In 2000, Beijing endured what many called its worst

drought in decades.

The vast majority of water in China is biologically

and chemically unsound, primarily as a result of

● industrial wastewater discharge,

● municipal wastewater discharge, and

● non-point pollution (generated by agricultural

practices, livestock production, and so forth).

Air

Of the three ambient air quality parameters consistently monitored in China—sulfur dioxide (SO2), nitrogen oxides, and total suspended particulates—only

nitrogen oxides have increased concentration in medium and large Chinese cities in the past few years.

However, all three pollutants remain formidable concerns for China’s environment, and numerous other pollutants remain unmonitored. 

Ambient air quality in many large urban areas has

shown optimistic trends, but air quality in more than

500 major Chinese cities remains below World Health

Organization (WHO) standards. Small cities have seen

little or no improvement. Every Chinese city, large or

small, faces serious total suspended particulate problems that pose significant threats to public health. The

impact of acid rain has stabilized since the mid-1990s,

but its influence is still widespread and destructive,

affecting approximately 40 percent of China’s landmass. Indoor air pollution resulting from fuel combustion is on the decline as briquettes and gaseous fuels

replace raw coal for cooking and space heating.

Nonetheless, it still poses a severe health risk, particularly for poorer, rural populations.

In keeping with the Montréal Protocol, China was

able to freeze increases in the production and consumption of ozone-depleting substances in 1999.

However, the country still faces the task of completely

phasing out such substances by 2010, a goal that may

be difficult to achieve.

● Coal consumption is far and away the most dominant source of air pollution in China, spanning the

gamut from large- and small-scale industrial and

commercial sources to residential space- and waterheating operations.

● Motor vehicle emissions, in line with the increase

of automobiles in most larger cities, are expected to

continue rising over at least the next 10 years.

● Non-combustion-related airborne particles resulting

from construction and land degradation (e.g., desertification) are on the rise.

Waste

Over 200 of more than 650 cities surveyed in China

are surrounded by hills of waste. As of August 1999,

more than 6 billion tons of municipal refuse had accumulated and claimed 5.4 billion square feet of land in China.

Between 600 million and 750 million tons of industrial

solid waste was generated in 1999, and statistics on the

generation of hazardous waste vary from 5 to 30 million

tons annually. Hazardous wastes are often incinerated and

disposed of improperly and are frequently mixed with

non-hazardous waste in landfills and dumps. 

There is much discussion now of sustainable development through an integrated approach to waste management, including minimization of the production of

waste materials and maximization of waste recycling

and reuse. Composting, incineration, and landfilling all

have roles in the management apparatus, each with its

own host of pros and cons. Nonetheless, waste management remains a subpriority for Chinese planners, as air

and water concerns take center stage.

● Only 5 percent of household waste and 17 percent

of industrial waste receive any treatment.

● An adequate hazardous waste management system

does not yet exist.

● Market-based tools that would allow profitability

and thereby generate private investment have not

been successfully established.

Resource Management

About 20 percent of China’s agricultural land has

been lost to soil erosion and economic development

over the last decade. Desertification in northern China

is estimated at 70,000 square kilometers and is increasing by about 2,100 square kilometers per year.

Salinization, reduction of pastureland, and loss of arable

land are considerable, and the effects of widespread

deforestation are having a strong impact. Land degradation is arguably the most critical rural environmental

problem in China today.

Financing and Expenditures

China spent just under $10 billion on environmental

protection in 1999, reaching 1 percent of GDP for the

first time and accounting for an increase of 15 percent

over expenditures in 1998. Certain localities, such as

Beijing, Shanghai, Xiamen, and Dalian, are claiming

expenditures in the range of 3 percent of local GDP.

There has been considerable discussion about raising

4 U.S. Department of Commerce, International Trade Administration
national expenditures over the next few years to the

neighborhood of 1.3 percent to 1.5 percent of GDP; however, it is uncertain how soon that goal can be reached,

what it will include, and to what extent it would be

reflected in opportunities for various types of vendors.

In a year 2000 report, CRAES indicated that 11.4

percent of the $84 billion that will be spent during the

Tenth Five Year Plan is expected to come from the central government, 34 percent is expected to come from

provincial and local governments, and 55 percent from

business enterprises themselves. A smaller amount ($4

billion) will be sought from foreign governments and

international finance institutions. Whether or not business enterprises will be able to cover their 55 percent of

the bill remains to be seen and is dependent upon location. In fact, the goals of the Ninth Five Year Plan

placed a similar burden on enterprises, which was not

fulfilled in most parts of the country. 

Nonetheless, enterprises in and around cities like

Beijing, Shanghai, Shenzhen, and other relatively affluent coastal areas are quite up to the task. Last year in

Beijing, over 55 percent of the spending on pollution

control came from enterprises. However, increasing

numbers of enterprises in much of China’s antiquated

rust bowl are in dire straits simply to pay out wages and

keep operations running, making the possibility of

upgrading pollution control a long-term goal for many

of them.

Chapter 9 of this document provides further indepth discussion of environmental protection financing in China.

Visualizing the Market

The Role of Policy and Enforcement

Although demand in China’s environmental industry

remains predominantly driven by financing through

official assistance programs or through enterprise interests in efficiency, policy pressures are becoming

increasingly influential. As China’s environmental policies become more comprehensive and detailed, market

niches will become more defined. Investors looking for

key market-entry points need to keep a close watch on

the development of policy and, of equal importance, on

policy enforcement trends. 

However, unlike some countries in which policy is

consistently and efficiently upheld through transparent

and equitable enforcement, Chinese environmental policy can vary in its influence on market demand due to

lapses in enforcement. Enforcement of policies is being

stepped up, particularly in some of the more developed

regions, and environmental policies are beginning to

carry more weight.

China Export Market Plan 5
There are currently several barriers to enforcement,

which include conflicts of interest between environmental and development goals, a breakdown in the rule

of law, lack of capacity on the part of local enforcement

agencies, and weaknesses in monitoring systems. The

prevalence of these and other barriers varies tremendously from region to region and should be considered

in determining where to locate an operation or where to

market products.

At the same time, however, it is not unheard of for

local governments or other entities to respond to mandates and deadlines by paying cash to import required

equipment such as compressed natural gas bus engines or

air monitoring equipment. Such circumstances provide

lucrative, albeit inconsistent, market opportunities, and,

much like the market demand created by multilateral and

untied bilateral assistance programs, these circumstances

create a market environment quite unlike that in the U.S.

It is also advisable to monitor government policies

pertaining to priority projects and goals and to consider

incentives and preferential policies to encourage investment in that regard. However, before taking advantage

of such policies, investors should critically review the

circumstances. In some instances, whether the incentives and preferential treatment will make up for the difficulties and costs that could be faced is questionable

(see Box 2).

In sum, it is not so much the regulatory pressures as

the economic efficiencies and the availability of assistance funding that currently create market opportunities

for foreign vendors. For now, most exporters will likely

find market demand by offering efficiency solutions that

either save money or generate revenues, or by exploiting

the opportunities generated by multilateral and untied

bilateral assistance programs. (See Chapter 10 for further

discussion of positioning U.S. exporters in the market.)

Market-Based Incentives

Market-based incentives, or the setting of resource

and service tariffs (such as those for water and waste

management) at a level that legitimately represents the

cost or value of those resources and services, is an idea

that is only just beginning to gain a foothold in China.

The Chinese government is reluctant to institute drastic

tariff changes for fear that rapidly increasing the costs

of resources and services, which have thus far been covered by the state, could stir social unrest. Yet the government appears well aware of the need to begin a

process of instituting these tools, and potential investors

would do well to watch closely, as changes could be

instituted rather quickly.

Water is the first natural resource to have been affected by market-based incentives, with tariffs rising several times in 2000 alone. In December 2000, the Yellow

River Water Commission raised irrigation water prices

by 100 percent, hoping to encourage water conservation. Household water tariffs, although still quite low,

are on the rise in some parts of the country, thereby

introducing the idea that consumers will have to begin

paying for the resources and services they use. As tariffs

increase, consumers (particularly industries with high

water consumption rates) will likely start looking for

ways to reduce their costs.

Tariff liberalization trends are not altogether clear,

but wastewater management is already being brought

into the fold, and solid waste management will probably

be affected in the near future. Additionally, there has

been some experimentation with emissions trading as a

market tool to influence air pollution management, an

idea that the government is examining, and that may

instigate increasing demand for monitoring devices and

air pollution control technology. However, progress

here is currently limited by the small number of participating enterprises and the lack of a free market for

services such as electricity, in which individual enterprises are directly concerned with their own financial

bottom lines.

The WTO and the Environmental Industry 

The U.S.-China bilateral trade agreement that led up

to China’s accession to the World Trade Organization

directly addressed the environmental sector only briefly

and vaguely. In particular, it addressed China’s commitments to environmental services, which include sewage

services, solid waste disposal services, cleaning services for exhaust gases, noise abatement services, nature

and landscape protection services, and other environmental protection services. However, environmental

monitoring and pollution source inspection were not

included. Additionally, foreign service suppliers could

provide environmental consultation services via crossborder delivery, without establishing a presence in

China; other service suppliers could operate in China

through joint venture operations. Because the exact

effects of the WTO’s General Agreement on Trade in

Services (GATS) on the sector are in fact quite vague,

service providers are advised to consult a WTO specialist when considering the possibilities. 

In addition to its effects on trade in services, WTO

accession is resulting in significant tariff reductions on

machinery and other imports. Overall, average tariffs

6 U.S. Department of Commerce, International Trade Administration
will be reduced to 10 percent within five to seven

years of accession. For specific details on the agreement and tariff schedules or to inquire about tariff

rates for a particular item, contact the U.S. Department

of Commerce for a copy of the agreement, or obtain a

copy of the Regulations on Import and Export Tariffs

of the People’s Republic of China, available for RMB

240 from the Publishing House of the General

Customs Administration, No. 6 Jianguomennei

Avenue, Beijing 100730, China, +86 (10) 6519-5616,

6519-5615.

Although the agreement contains very little that is

directly associated with the environmental sector,

WTO accession is generating significant, indirect

impacts on the industry. Many of the changes that

benefit industries across the board, such as the dismantling of non-tariff barriers, the discouraging of import

substitution policies, and (ideally) increased transparency, benefit the environmental industry. 

Agreements on distribution services are also benefiting environmental industry players, and agreements on

commission agent services, wholesaling, retailing, and

franchising may all be central to the plans of exporters

developing a presence in the country. Foreign service

suppliers are now allowed to provide all “subordinate

services,” including after-sales services. Once again,

China Export Market Plan 7

Box 2. Investing in the West: Hype Versus Reality

The 10 western provinces of Shaanxi, Sichuan, Guizhou, Yunnan, Gansu, Ningxia, Inner Mongolia, Qinghai, Xinjiang, and

Tibet are the focus of China’s western development plan. The region covers 57 percent of the country’s landmass, is home to

23 percent of the population, and claims over half of all the country’s verified natural resources. Yet 90 percent of the country’s

poorest people live in the region, registering a per capita GDP of only 60 percent of the national average. Much of the region

is mountainous, and agricultural land is of poor quality. Infrastructure and transportation capacities are lacking, as are education and a supply of qualified industrial managers and administrators. Direct investment is scant, the region is disconnected from

international and even domestic markets, the environment is deteriorating, and the poverty-stricken population, without the

proper resources and know-how, continues to stress the local ecosystem. Additionally, the potential for social unrest resulting

from inequitable development across the country is something the government can no longer ignore.

The development plan’s intended focuses are infrastructure development; the fostering of industries that maximize local

comparative advantage; capacity building for science, technology, and education; a vastly improved investment climate; and

environmental protection. Official support for the initiative has been overwhelming, with many emphasizing that development

in the region is long overdue. Promises of increased direct investment, preferential tax rates, eased restrictions on foreign investment, simple solutions to complicated foreign exchange issues, and other incentives to draw both foreign and domestic investment to the region have been made. 

However, beneath the rhetoric run concerns that foreign investors must consider:

● The plan is extremely long-term, with an anticipated timeline of 20 to 30 years or more. 

● The majority of proposed projects are large-scale, long-term infrastructure development projects, which are notorious in

China. A Ministry of Finance survey of recently completed large-scale infrastructure projects found that, on average, such

projects went 85 percent over budget and were 23 months behind schedule.

● The region lacks a secure legal climate and high-quality human resources. Local officials blindly gather and promote projects with little regard for long-term, efficient planning. Such circumstances traditionally breed corruption and shortcuts in

China, resulting in misallocated funds and final products of poor quality. 

● Official media reports indicate that total investment in the region increased 17.9 percent in 2000, constituting billions of

renminbi. However, only a percentage of this money has actually been transferred or invested; the remainder is accounted

for as signed proposals or contracts. Whether these funds will materialize as actual investment remains to be seen.

● Many projects are billed as environmental or ecological projects, in keeping with the plan’s environmental focus.

However, prospects for environmental protection are not guaranteed. Although a proclaimed propensity toward environmental protection may offer opportunities for related industries, the phrase environmental protection is not well understood. Barriers and resistance to true environmental protection measures still exist.

● In some estimations, the development plan is more a political campaign for social stability than an economically viable

campaign for growth, as central planners continue to realize the need to narrow China’s development gap. 

Many foreign investors have investigated business prospects in China’s western regions, but as a result of some or all of the

above factors, most have left empty handed. The prognosis is not that China’s west will never yield quality opportunities, but

investors should consider how much progressive change is required before venturing in.
details in regard to these agreements are complex, and a

WTO specialist should be consulted by service

providers that are considering the possibilities. 

In consideration of the role state-owned enterprises

play in China’s economy, governmental influence on

the decisions of SOEs regarding the purchase and sale

of goods and services has been addressed by the bilateral agreement as well. Under the agreement, decisions

by state-owned and state-invested enterprises are based

on commercial considerations, and the enterprises of

other WTO members have equal opportunity to compete for contracts with such enterprises. Although China

has chosen not to sign the Government Procurement

Agreement, all procurements for commercial and nongovernmental purposes by state-owned and stateinvested enterprises are considered non-governmental

procurement. Additionally, the receipt of benefits,

investment approvals, and so forth, are no longer contingent upon technology transfers encouraged or

imposed by the government. Under the bilateral agreement, technology transfers and similar issues are decided upon solely by the involved parties, without

interference by the state.

Yet another significant and influential aspect of WTO

entry is the effect it is having on other Chinese industries, which in turn affects market opportunities for

environmental technology providers. According to the

World Bank, as WTO accession slowly opens Chinese

markets, China is shifting its industrial base to industries in which it benefits from comparative advantages

(labor-intensive sectors as opposed to land-intensive

sectors). Following are some of the industries that

the World Bank expects to be affected by WTO accession, and the opportunities they may offer to environmental exporters:

● Textiles. China’s production of processed cotton

products, including the dyeing of such products, is

rising, resulting in increased industrial water consumption and wastewater generation. Water conservation, recycling and reuse methodologies, and

wastewater treatment are important.

● Livestock Production. As China’s agricultural

product markets (particularly non-rice grain product

markets) open to less expensive international competitors, many farmers are switching production

focus. Livestock production is increasing, which is

causing, among other things, an increase in livestock wastes. If improperly handled, such wastes

will pose serious water pollution threats. Water

pollution control and efficient waste management

techniques with potential for reusing such wastes

are important.

● Increased Production of Leather and Fur

Products. Increased livestock production is benefiting livestock producers by increasing income, but it

is also causing increased water consumption and

water pollution.

Foreign technology providers have reported difficulties in managing the wastes of some leather

treatment facilities in China, as leather treatment

processes have a great deal of impact and some

Chinese facilities are primitive. Foreign technology

providers have indicated that they lack the technology or know-how to manage pollution in such facili8 U.S. Department of Commerce, International Trade Administration

Box 3. Town and Village Industrial Enterprise: The Little Big Polluters 

Town and village industrial enterprises (TVIEs), which are economically significant small private and collectively owned enterprises, are slipping through the enforcement web of China’s environmental protection. Very few, if any, of these facilities are

up to state standards.

Unlike SOEs, TVIEs are weakly linked to the government, and pressures upon them to meet environmental standards are

quite low. This may be a result of practical and logistical problems associated with enforcement of protection policies, or it may

reflect the significant economic performance of the sector, which some are reluctant to restrain.

Pollution statistics relevant to TVIEs are far from complete. Nevertheless, there are strong indications that TVIE pollution

is a significant contributor to total pollution discharges and that emissions target rates for the sector are in fact increasing. Year

2000 chemical oxygen demand targets for TVIEs increased 36 percent over 1995, while those targets remained generally

unchanged for SOEs. The Ninth Five Year Plan target levels for TVIE SO2 emissions were nearly 50 percent higher than the

actual 1995 levels, while the target levels for SOEs were reduced.

The United Nations Industrial Development Organization (UNIDO), with funding from the Global Environmental Facility,

has initiated a program to bring energy-efficient technologies to TVIEs by strengthening capacity to govern the clean development of TVIEs and by stimulating demand for clean technologies through regulatory and market reforms, as well as the development of financing mechanisms. Exporters that offer goods potentially of benefit to TVIEs, but that have avoided the market

due to TVIE financial constraints or market instability resulting from sporadic government cleanup campaigns, may find the

UNIDO program instrumental in facilitating market entry.
ties because these types of facilities were

transferred out of their countries before control

technology was developed.

Water conservation methodologies and water pollution control are important, as are cleaner leather production techniques.

● Increased Fruit and Vegetable Production and

Processing. As a result of decreased grain production, there is an increase in the production of fruits

and vegetables, causing an aggregate increase in the

use of water and pesticides. Water conservation

methodologies and irrigation techniques particular

to fruit and vegetable production, improved pesticides, and the dissemination of sustainable agriculture and non-point pollution control methodologies

are important.

● Restructuring of Forestry and of Pulp and Paper

Production. Massive restructuring in the forestry

sector is phasing out small-scale pulp and paper

production facilities. The development of new and

more efficient production facilities offers opportunities for investment in cleaner production, water

conservation, and water pollution control. Furthermore, researchers at the World Bank have indicated

that the paper industry, with its relatively high

chemical-oxygen-demand (COD) discharges and

low abatement costs, may be the most cost-effective

target for reducing organic water pollution.

Generally speaking, WTO accession is increasing

competition, spurring local industries to improve technology, management, and general know-how.

Efficiencies that both affect and are affected by environmental performance are increasingly important, particularly as awareness of eco-efficiency principles

becomes more widespread. Additionally, increased

scrutiny by international communities with an eye on

environmental protection is strengthening Chinese

industries’ commitment to environmental protection

and increasing their demand for environmental technologies as they seek to become competitive players in

international markets.

A number of WTO-associated Web sites are listed

among the resources for further reading at the end of

this chapter.

Structural Trends of Pollution Control Investment

The structure of total investment in pollution control

(TIPC) has changed over time in regard to the three

main categories receiving that investment: urban infrastructure construction, renovation and redevelopment of

existing enterprises, and new projects (see Figure 1.2).

Investment in urban infrastructure has seen both the

most overall growth and the largest increase in percentage of total investment. Investment in this sector was

$1.8 billion during the Seventh Five Year Plan and

reached $15.6 billion in the first four years of the Ninth

Five Year Plan. In 1999, investment in this sector

accounted for 58 percent of TIPC, while it accounted

for only about one-third of TIPC during the seventh

Five Year Plan.

Investment in renovation and redevelopment of

existing enterprises has remained relatively constant

since the seventh Five Year Plan but has declined as an

overall percentage of TIPC. Investment in this sector as

a proportion of TIPC fell from 41.2 percent during the

seventh Five Year Plan to 16.9 percent and 18.5 percent,

respectively, in 1998 and 1999.

Investment in new projects has increased consistently from year to year but has fluctuated in terms of TIPC

percentage. It accounted for 26.6 percent of TIPC during the seventh Five Year Plan, rose by less than 1.5 percent in the eighth Five Year Plan, dipped to 19.7 percent

in 1998, and rose to 23.3 percent in 1999. Overall, the

share of investment in new projects has declined slightly since the seventh Five Year Plan.

Understanding China

Definitions of environmental protection vary from

place to place, and China is no exception. In fact,

because it lists initiatives such as urban beautification

(i.e., fixing sidewalks and painting buildings) as environmental protection, China’s definition may be one

of the broader examples known in the world.

Therefore, it is important for investors to keep definition variances in mind, as they may positively or negatively affect things such as tax brackets, incentives, and

market demand.

On a similar note, it is necessary for investors to

understand the Chinese market and adapt themselves

and their products to it rather than try to impose a

change to create a more favorable investment climate

for themselves. The Chinese environmental protection

market is increasingly open to the technology, skills,

and know-how of the foreign sector, but tolerance is

limited for investors who insist on doing things their

way, without considering the situation, needs, and

desires of the Chinese. Thus, techniques and technologies that have proven successful elsewhere may not be

appropriate in China. Investors should keep this in mind

when establishing market-entry strategies and should

China Export Market Plan 9
work hard to adapt themselves to the particular

demands of the country.

It must also be noted that the Chinese do not take

kindly to being used as a testing ground for unproven

environmental schemes, particularly when they are

expected to provide the funding. If newly innovated,

untested, but relatively promising technology or management schemes are presented to China, complete with

funding, there is some possibility that the Chinese will

allow a pilot project to be developed in the country.

However, schemes that are considered suspect or

require financing from the Chinese government will not

be looked upon favorably.

Finally, many Chinese industries still view environmental protection as a significant financial burden. With

policy changes and stepped-up enforcement poised to

increase that burden, many industries may see environmental protection as more of a threat than a boon. For

that reason it is critical to offer, whenever possible,

technologies and innovations that can turn environmental protection into a profitable endeavor. In marketing

technologies or consulting on management methodologies, it is vitally important to clearly and convincingly

stress efficiency, recycling, and the fact that environmental protection need not incur long-term costs but

can in fact be profitable if instituted properly.

Many upgrades that could initiate efficiency and

profitability require heavy doses of capital investment.

Much of China’s industrial sector lacks that capital, and

many of the businesses propped up by the SOE supporting apparatus have barely enough to get by, never

mind invest. Thus, it is necessary to consider these factors at all points of strategy development and to keep in

mind that some enterprises, in some regions, are far

more likely to accept and benefit from eco-efficiency

strategies than others.

10 U.S. Department of Commerce, International Trade Administration
Selected References and Web Sites

References

Policy and Regulation Department, General Customs

Administration. Customs Import and Export Tariffs of

the People’s Republic of China. Beijing: Publishing

House of Economic Management, 2001. (Available for

RMB 220 from the Publishing House of Economic

Management, tel. +86 (10) 6519-4173.)

State Environmental Protection Administration.

China Environment Yearbook. Beijing: China

Environment Yearbook Publishing House, 1999.

Wang Jinnan, Wu Shunze and Luo Hong. Integrating

Economic Development and Environmental Protection

in China During the Tenth Five Year Plan Period.

CRAES: November 2000.

U.S. and Foreign Commercial Service, Beijing.

Environmental Project Approval and Financing in

China: A Perspective for U.S. Companies. Beijing: U.S.

and Foreign Commercial Service, November 2000.

Web Sites

BuyUSA: 

www.buyusa.com

Central Intelligence Agency: 

www.cia.gov/cia/di/products/china_economy

ChinaOnline: 

www.chinaonline.com

Far Eastern Economic Review: 

www.feer.com

National Bureau of Asian Research.

NBR Publications: 

www.nbr.org/publications

South China Morning Post: 

www.scmp.com

U.S.-China Business Council: 

www.uschina.org

U.S.-China Business Council: China and the WTO:

www.uschina.org/public/wto

U.S. Department of Commerce:

www.doc.com, www.usatrade.gov

U.S. Department of Commerce,

International Trade Administration, 

Office of Environmental Technologies Industries:

www.environment.ita.doc.gov

U.S. Embassy, Beijing: 

www.usembassy-china.org.cn

U.S. Embassy, Beijing,

Country Commercial Guide: China:

www.usatrade.gov

The World Bank Group in China Web site:

www.worldbank.org.cn/English/home.asp

China Export Market Plan 11

Box 4. Environment and Social Stability Face Off Across the Country

As 2000 drew to a close, goals set by the Ninth Five Year Plan to bring all polluting industries in the country into compliance with state pollution standards by year’s end had companies scrambling to clean up and governments closing

down operations. 

The SEPA and other related departments intensified inspection processes during the period; proud claims of high compliance rates were heard, as were troubling stories of closing enterprises and distraught laborers. The tricky balancing act of shutting down heavy industrial polluters and preventing unemployment from skyrocketing further out of control was underway. 

Enterprise closure is a stiff threat used to pressure polluters into compliance, and under new air and water laws, it will likely continue to play a strong role. But some enterprises, particularly the antiquated industrial behemoths of China’s fabled “rust

belt,” simply cannot cover the costs of upgrading and protecting. Closures, on the other hand, bring the burden of unemployment and potential social unrest. As an insurance policy, most closures have taken place in dispersed smaller enterprises rather

than in large operations.

Meanwhile, despite initial successes in pollution reduction among those industries still in operation, inconsistent monitoring and enforcement strategies may, in the long term, undermine what has been accomplished. Intermittent and poorly executed inspections in many parts of the country may not be sufficient to prevent enterprises from lapsing back into old habits after

the pressures of the campaign subside.

The economically more dynamic eastern and southern regions of the country have been most successful in bringing about

compliance that is likely to hold, particularly through improved production processes and the development of cleaner technologies. Those regions heavily burdened with decrepit industrial facilities, however, are left balancing concerns of environment and social stability. 
12 U.S. Department of Commerce, International Trade Administration

China’s economy has seen consistent growth since Deng

Xiaoping’s policy of economic reform and opening

began in 1978. For much of the 1980s and early 1990s,

the nation enjoyed double-digit rates of GDP growth.

That growth began to slow, however, in 1992, and

remained in decline as a result of inflation, fallout from

the Asian financial crises, sluggish domestic demand,

rising unemployment, and eventually deflation (see

Figure 2.1). In early 2001, the economy began to show

preliminary signs of picking up, with GDP growth nearing 8 percent (the official target for 2000 was 7 percent),

consumer prices slowly rising, and exports gaining

strength as the rest of Asia began shedding the influence

of the Asian financial crises.

Chapter 2

Economic Overview
China Export Market Plan 13

Economic predictions for the coming years range

from moderate to cautiously optimistic. Most predictions call for annual GDP growth of 7-plus percent over

the next two to three years. Recent increases in domestic demand are viewed as potentially sustainable and

may be a sign that the country’s deflationary spiral has

come to an end. Consumer spending on such substantial

items as residential property rose an estimated 40 percent in 2000 and will likely continue to increase.

Nonetheless, domestic demand remains sluggish and

continues to present a macroeconomic concern. 

The most promising indicator that GDP growth will

be sustained at over 7 percent is the current fiscal policy. Much of China’s growth over the past several years

has been heavily influenced by large amounts of government spending, and it is clear that this spending will

continue. Since 1998, the country has issued RMB 360

billion ($43.5 billion) in government bonds to fund fiscal-stimulus spending on infrastructure development. A

probability model developed by the State Information

Center indicates that GDP growth for the year 1999

would have been 4.3 percent instead of 7.0 percent if

the bonds had not been issued and the funds allocated as

they were. 

Bonds funded 46 percent of government spending in

1998, whereas in 1993 they accounted for 3.8 percent of

expenditure. Approximately 15 percent of 2001 government expenditure was earmarked for interest payments.

The country’s debt burden is currently considered sustainable; however, it is unclear how long this deficit

spending will continue.

The Financial Burden

The assessment of China’s finance and debt structure

is somewhat different, however, if financial sector

reforms, SOE reforms, pension reforms, and agricultural reforms are taken into account. The World Bank singles out these four sector reforms as the major financial

burdens on China’s economy, each of which requires

creative macroeconomic management on the part of

policy-makers. According to the World Bank, the one

temporary reprieve is China’s exceptionally large stockpile of personal savings, which equals around 40 percent of GDP. WTO entry is gradually opening the

domestic banking sector up to foreign banks, which

may draw some assets away from the state.

China’s banks are burdened with tremendous

amounts of non-performing loans paid out to SOEs that

are based more on political interests than on commercial viability. According to the People’s Bank of China,

approximately 20 percent of outstanding loans in the

biggest state-owned banks are non-performing, 75 percent of which can likely be recovered. Outsider estimates of non-performing loans vary (25–40 percent

non-performing, with only about 15 percent recoverable, is not unreasonable), but the widespread consensus is that the People’s Bank of China’s estimate is

significantly understated. In sum, non-performing loans

are estimated at $180–360 billion, or 18–36 percent of

1999’s GDP.

Recently, the central government instituted a debt-toequity swap system by which banks were relieved of a

percentage of their bad loans. Asset management companies have been established to acquire percentages of

selected SOEs’ debts and turn them into equity. These

companies, which become part owners of any SOEs for

whom they have acquired debt, are expected to restructure the enterprises, and make them profitable. Thus far,

the scheme has done little more than relieve the banks

and some SOEs of a degree of the strain resulting from

the debt burden. Significant changes in management

policy are necessary if reduced burdens are to improve

financial management (on the part of the banks) as well

as enterprise management, production efficiency, and

profitability (on the part of the SOEs). So far there has

been little sign of such changes. 

Significant downsizing is also underway in the stateowned sector. Under a strategy of “grasping the large

and letting go of the small,” the government is working

to turn some of the larger SOEs around, hoping they will

develop into self-sufficient, profit-oriented, giant international corporations. At the same time, many of the

smaller SOEs have been left to the devices of local governments, resulting in significant closures and layoffs. 

SOE reform and low profitability in the sector have

led to the functional disintegration of the SOE-based

social security system, resulting in a growing implicit

pension debt. Loss-making SOEs are no longer able to

fund workers’ housing, health care, education, and pensions, all of which are responsibilities that traditionally

rested with SOEs and work units. Some of these funds,

which are estimated at $240 billion, will need to materialize. The same holds true for money needed to support the country’s rapidly aging population.

Finally, the agricultural sector, historically the country’s primary economic sector, is now viewed as the

economy’s weak link. Farmers’ incomes have risen

slowly in comparison with incomes in other sectors and

accession to the WTO may have negative effects that

lead to even poorer overall performance.
14 U.S. Department of Commerce, International Trade Administration

Structural Changes 

It is the assessment of the World Bank that China is

undergoing four types of structural change. Any one of

these changes could result in a significant reallocation

of resources or income distribution, affecting the economy as a whole. However, all four changes are occurring simultaneously:

● A shift from a command economy to a market economy, which began after China’s opening up in 1978

and is marked by progressively deregulated prices

and resource allocation decisions as well as

decreased state activity in the economy. The shares

of retail, agricultural, and capital/industrial goods

sold at prices fixed by the state fell from 97 percent

to 5 percent, 94 percent to 23 percent, and 100 percent to 12 percent, respectively, between 1978 and

1999; the public sector’s share of total fixed investment fell from 82 percent in 1980 to 53 percent in

1999; and direct investment funding from the government budget fell from 30 percent to 6 percent

over the same period of time.

● A shift from an agricultural-based economy to an

economy predominantly based on manufacturing

and services. Between 1980 and 1999, agriculture’s

percentage of total output declined from 30 percent

to 18 percent, and the share of the work force in the

agricultural sector fell from 69 percent to 47 percent. During the 1990s, jobs in the agricultural sector decreased by about 3.4 million per year, while

jobs in the services sector increased by 8 million

per year.

● A demographic profile shift from high fertility and

low longevity to low fertility and high longevity.

The population growth rate has slowed from 1.9

percent per year in 1980 to 0.88 percent in 1999.

Life expectancy rose from 67 years of age in 1980

to 69.5 years of age in 1997. The population’s share

of children (14 years of age and below) has fallen

from 35.5 percent in 1980 to an estimated 24.9 percent in 2000, while the aged population (65 years of

age and above) rose from 4.7 percent in 1980 to an

estimated 6.7 percent in 2000.

● A shift from a relatively closed to a relatively open

economy. External trade in China is now conducted

through over 200,000 direct import-export enterprises, as opposed to the 10–16 state trading firms that

once controlled all import and export activities.

Non-tariff trade barriers have fallen to an estimated

tariff-equivalent level of 9.3 percent, affecting 33

percent of imports. The average weighted tariff rate

for the economy is an estimated 18 percent.

Approximately three-quarters of imports receive

very low tariffs or none at all.

Other Factors of Influence

Other factors that influence the overall performance

of the nation’s economy should also be recognized: 

● Despite the fact that most of the country’s massive

SOEs are loss making, they are the beneficiaries of

most commercial lending and capital account

investment. Large amounts of financial resources

are being used to keep SOEs afloat. In some parts

of the country, much of those resources are used to

provide employees with only the most basic of

necessities, such as housing and food, leaving little

money for investments in production upgrades and

the development of efficient production methods.

Many SOEs are likely to remain unviable for the

foreseeable future.

● Non-state firms account for over two-thirds of the

nation’s industrial output and an estimated onequarter to one-half of GDP, yet access to both bank

loans and public equity markets is dominated by

SOEs. Even under the best of circumstances over 80

percent of private-firm financing is self-generated.

The government is aware of the important role that

private enterprises will play in the future development of the country’s economy, and institutional

changes, although likely to be slow, are anticipated.

● A tremendous development gap exists between the

coastal regions and the western part of the country,

as well as within isolated pockets of the east. 

● Per capita GDP in Guizhou Province, one of the

country’s poorest, is only 8 percent of that in

Shanghai, the country’s richest city. With 16 million

people, Shanghai accounts for little more than 1

percent of the country’s population but accounts for

5 percent of its industrial output. 

● Guangdong Province accounts for 10 percent of

national GDP and 40 percent of foreign trade, yet it

comprises only 5.8 percent of the country’s population. The Pearl River Delta area, which accounts for

25 percent of Guangdong’s provincial population,

receives 80 percent of the province’s foreign direct

investment and accounts for 90 percent of its exports. 

● The western region of China, which is the focus of

the newly unveiled “Great Western Development

Plan,” accounts for 57 percent of the country’s landmass, 23 percent of the population, and more than

half of all verified natural resources, yet it contains

90 percent of the country’s poorest people, with per
China Export Market Plan 15

capita GDP in the region registering at only 60 percent of the national average.

● The country remains rife with corruption and

unscrupulous enterprise management. News coverage of disciplinary action taken against corrupt officials is seen almost daily in the local media. Such

corruption affects the national economy and local

economies and creates tremendous sticking points

for both foreign and domestic investors. Random

audits of 159 companies by the Ministry of Finance

in 1999 revealed that 157 companies had falsely

reported their profit figures, 147 had falsified their

asset accounts, and 155 had falsified their equity

accounts. Each category was both over- and understated to cumulative amounts of $177 million to

$299 million. Some enterprises kept duplicate

records and provided different accounting

statements to different authorities.

Economic Development and

Environmental Investment

Pollution Control Investment

According to CRAES, the leading SEPA think tank,

national economic development and environmental

investment in China have been closely related over the

past 15 years. As GDP grew, so did rates of total investment in pollution control. In fact, TIPC’s percentage of

total GDP increased even as the GDP growth rate

slowed (see Figure 2.2). Investment during the eighth

Five Year Plan was 2.7 times that in the seventh Five

Year Plan, and Ninth Five Year Plan expenditure

exceeded that of the eighth. Environmental investment’s average percentage of GDP rose from 0.6 percent in the seventh Five Year Plan to 0.77 percent in the

eighth. By the end of the Ninth Five Year Plan, investment reached 1 percent of GDP. 
16 U.S. Department of Commerce, International Trade Administration

TIPC as a percentage of total national investment in

fixed assets also showed overall growth. TIPC averaged 2.41 percent of total national investment in fixed

assets during the seventh Five Year Plan, peaked in

1991 at 3.09 percent, dipped in the mid-1990s, and

trended upward after 1995 to reach 2.76 percent in

1999 (see Figure 2.3).

Remarks attributed to Xie Zhenhua, the minister of

SEPA, indicate that environmental investment

reached 1 percent of GDP in 2000, and is expected to

reach 1.3–1.5 percent over the next five years.

Official forecasts are calling for RMB 700 billion

($84.6 billion) in environmental investment over the

course of the Tenth Five Year Plan. In some major

coastal cities such as Beijing, Shanghai, Dalian,

Qingdao, and Xiamen, environmental spending has

reached as high as 3 percent of GDP. However, it

should be noted that the definition of environmental

protection is quite broad and inconsistent in China. It

may include urban beautification and other activities

not normally categorized as environmental protection

elsewhere. Thus, figures for annual environmental

spending cited in various Chinese publications may

vary as much as 15 percent depending on the sources

of data and methods of calculation.

Macroeconomic Perceptions and Finance Tools

The steady development of China’s economy has

increased investor confidence in macroeconomic stability, opening up potential for the use of financial tools such

as stocks and bonds. Although both stock and bond markets in China have a considerable way to go before they

can be considered comprehensively developed, they are

facilitating some degree of environmental investment.

State Development and Planning Commission

(SDPC) reports indicate that a significant portion of the

$43.5 billion in government bonds used for fiscal-stimulus spending on infrastructure development since 1998

has been directed toward environmental protection and

the management of natural resources. The investments

have reportedly increased daily wastewater treatment

capacity by more than 8 million tons and solid waste

treatment capacity by 31,000 tons. Centralized heating,

flood control, forest management, and capacities to

extract and use natural gas also reportedly benefited. 

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%
Over 30 environmentally related companies are currently listed on China’s stock exchange, with reportedly high degrees of success. Stock markets in China

have become a tool for gaining quick infusions of

financing from small-scale Chinese investors, particularly personal investors. However, the relatively underdeveloped and somewhat dubious nature of the

country’s stock markets prevents them from being

more readily exploited for the purposes of environmental financing. (China’s stock markets are discussed

further later in this chapter.)

There is discussion within government think tanks

regarding the development of bond markets, publicly

traded investment funds, and other financial tools to be

focused on environmental sector investment. The effective use of these tools would greatly reduce the financial

burden currently shouldered by government budgets.

However, a more developed and better regulated financial sector is required before such tools can reasonably

be expected to perform in this capacity. Experts have

suggested that the necessary climate for such tools will

not develop during the Tenth Five Year Plan, and perhaps not even during the 11th. (See Chapter 9 for a discussion of finance programs and resources.)

Institutional Changes, Decision-Making,

and Efficiency

China’s gradual shift from a command and control

economy to a market economy has caused a slow

decentralization of decision-making power. The responsibilities of different stakeholders within the financial

decision-making process (such as banks, local governments, and enterprise managers) are being increasingly

clarified. Liability for performance outcome, and therefore financial and enterprise efficiency, is on the rise. 

Particularly among such high-profile and economically important SOEs as Sinopec and Baosteel (see Box

1), as well as among SOEs in some of the more economically and environmentally developed regions of the

country, industrial efficiency and financial bottom lines

are becoming more and more important. Reportedly,

industries with progressively oriented management and

the commercial potential for successful reform are being

given increased flexibility to make investment and management decisions with decreased interference by the

central government. Efforts to increase operational efficiency through cleaner production, improved management, and improved equipment maintenance are already

being seen and are expected to increase.

Privately-owned enterprises, which by their very

nature are more entrepreneurial and competitive than

their state-owned counterparts, have a stronger vested

interest in efficiency than even the most successful and

personally responsible SOEs. The non-state sector is on

the rise and is expected to grow significantly in the near

term. Financial and investment tools remain out of

reach for most private enterprises, making efficiency

that much more important. (For a detailed analysis of

China’s private sector, see the International Finance

Corporation’s “China’s Emerging Private Enterprises,”

available online at www.ifc.org/publications.)

Environmental Prospects for the

State-Owned Sector

Unlike those SOEs with potential for commercial

success, discussed in the previous section, many of the

country’s SOEs are caught in a downward spiral of poor

viability and tremendous burden. Efforts to downsize

and close large numbers of those SOEs that show little

or no hope of reform and future profitability have been

underway for some time; however, mass layoffs and

severance of numerous benefits such as health care and

housing carry significant social impact. Thus, smaller

SOEs are being dissolved while many of the larger ones

are being kept afloat not so much in hopes of turning

them around but simply to prevent mass numbers of

people from becoming disenfranchised.

Many SOEs, particularly those in China’s northeastern “rust belt,” rank as some of China’s worst polluters.

Some facilities in the area date as far back as the

Japanese occupation of the 1930s and 1940s, and have

efficiency capacities to match. Appropriate upgrades

could benefit both the efficiency and the environmental

performance of these enterprises significantly, and

some degree of return would likely be seen relatively

quickly. However, the required initial capital is

extremely difficult to secure, and many such enterprises would face considerable difficulties in paying back

loans from both public funds and commercial lenders

even if they were to begin seeing improved financial

outcomes as a result of increased efficiency.

Institutional Changes and Financial

Liberalizations

Changes in China’s economic and financial institutions are occurring rapidly and may have a tremendous

impact upon the future development of the economy.

No matter how committed the government is to environmental protection in China, there is little hope for

success without the economic capacity to address the

China Export Market Plan 17
issues. What follows is a discussion of several influential factors in China’s macroeconomy, the continued

development of which will affect both environmental

protection and the environmental industry. 

WTO Accession, Trade, and Investment

China’s central planners are acutely aware of the

effects WTO accession is having on the domestic economy, the pressures placed on Chinese enterprises, and

thus the need to reform certain regulatory and institutional systems to increase efficiency in economic

development. Already a number of changes are being

seen, and they will increase and intensify in the coming

years, partially as a result of regulations imposed upon

the country by the WTO itself and partially as a result

of the pressures imposed upon domestic enterprises by

the presence of highly competitive foreign enterprises

operating in China with fewer restrictions than

ever before. 

Some of these changes may benefit foreign enterprises by leveling the playing field and breaking down

barriers established to protect less-competitive domestic enterprises. Others, however, benefit domestic enterprises as much as foreign ones. Ultimately, the

government expects WTO membership to rationalize

the country’s international trading apparatus and foster

highly competitive Chinese enterprises.

The most significant changes anticipated within a

decade of accession will be

● increased regulatory transparency,

● further development and rationalization of the

financial sector,

● intensified SOE reform, and

● growth and development of the private sector.

Regulatory Transparency

The Ministry of Foreign Trade and Economic

Cooperation (MOFTEC) has established a new agency

specifically intended to clarify all rules and regulations

associated with WTO entry and foreign trade laws and

regulations. All foreign trade activities are governed by

formally published laws and regulations. Any internal

laws and regulations that have not been formally published will be void. The MOFTEC has made clear its

intentions to overhaul regulations to bring them more

in line with international standards and has mandated

that any measures formulated and implemented by

local authorities must be consistent with national laws

and reported to MOFTEC. All foreign business laws

and regulations are available to the public, and drafts of

certain laws are available for review and consultation

in the formulation phase. Generally, this is in keeping

with the commitments China made leading up to WTO

accession. WTO entry is catalyzing transparency of

laws and regulations as well as the development of a

rules-based system, thus ensuring some level of predictability and gradually improving the climate for foreign trade and investment.

Other issues of regulatory transparency could remain

troublesome in China for some time to come, though.

As a rule, the country keeps information on what it classifies as state secrets and matters of national security

under tight wraps. The law defines these in a vague and

broad manner. Foreign investors in environmental

industries have reported serious problems with such

issues in the past. Initiatives have been stalled and in

some cases terminated for infractions of laws that have

not been made available to the public. It is also not

unheard of for such laws to be used as an excuse to stall

an initiative even though the true issue of contention is

entirely unrelated.

Development and Rationalization of the

Financial Sector

The Tenth Five Year Plan calls for a dramatic overhaul of the entire Chinese financial sector. Again, as a

result of WTO accession, Chinese administrations are

attempting to bring domestic financial institutions up to

international standards. The central bank—People’s

Bank of China—and the China Securities Regulatory

Commission (CSRC) are raising standards in both the

banking system and the securities markets, to ensure the

viability of the financial sector and increase international investor confidence. Several key components, such as

an efficient and reliable credit rating system, are still

lacking entirely. Other components are in need of further development and strengthening.

Banks. In November 2000, the National Bureau of

Statistics reported that risks borne by the four state

commercial banks had increased by 65 percent over the

past eight years, resulting in a drop in their capital adequacy ratios to an average of 5.51 percent in 1999 (the

internationally accepted critical rate of adequacy is 8

percent). Based on an unpublished internal rating index,

risk assessments in the financial sector as a whole have

risen by nearly 12 percent since 1991.

Administratively, political interference in commercial banking operations remains a stumbling block, and

the independent and efficient promulgation of regula18 U.S. Department of Commerce, International Trade Administration
China Export Market Plan 19

tions is lacking. Meanwhile, competition within the

banking sector is on the rise, placing increased performance pressures on the commercial banks. Two

years after WTO accession, foreign banks will be

allowed to make local currency loans to Chinese companies. Five years after accession, they will have unlimited access to the consumer market. 

There is adequate awareness within the pertinent

administrations regarding the concerns and threats the

banking system faces. Administrative changes are

underway, but some analysts question how efficiently

reforms can be carried out. The People’s Bank of China

is developing an index system to detect and evaluate

financial risks. It will monitor operations within the

banks, security markets, and other fundamental macroeconomic indicators. 

Stock Markets. China’s stock markets are somewhat

chaotic, thriving more on rumor and manipulation than

on market-oriented standards. Regulations and qualifications for listing in the markets are strict, keeping

many companies off the boards. Meanwhile, the stock

exchange is partially used to fund ailing SOEs through

public offerings, and investors often buy in believing

that the government will not allow a listed SOE to go

bankrupt. The Zhengzhou Baiwen Company nearly

proved them wrong in late 2000 when speculation arose

that the massive retailer would be allowed to go under,

but instead the SOE was bailed out once again, only

enforcing the belief. Regulators reportedly feared that

allowing Baiwen to go bankrupt would decimate

investor confidence and possibly drain financial support

from the 1,000-plus listed companies. In April 2001,

China’s first delisting finally occurred, marking the

demise of the Shanghai Narcissus Electric Appliance

Company. The event was accompanied by warnings of

possible future delistings of similarly troubled enterprises, as well as widespread accolades for a sound step

toward the modernization of the Chinese economy.

Prior to the Narcissus event, government-supported

investor confidence led China’s A-shares market to rank

as the world’s second best performing market in terms

of growth in 2000. There is much indication that

changes will arise, making future stock market growth

more quality based in coming years. If faithfully implemented, the initiatives listed below should increase

competition, creating stronger links between stock

prices and profits and thereby shifting capital to the

stronger companies:

● The CSRC has pledged to reduce interference in the

setting of stock prices, slowly allowing market

forces to determine rates of growth in order to

reduce market price distortions and strengthen the

market as a whole. 

● Disclosure rules for listed companies are tightening,

increasing transparency. Increased transparency

limits the likelihood of accruing massive amounts

of bad debt in the market, as has occurred in

the banks. 

● Various market tools such as mutual funds are currently under development. Foreign experts are

involved in the development of these tools; however, their capacity to invest directly in the market will

remain extremely limited for some time. 

● A slow opening of the A-shares market to foreign

companies looking to list in China is expected to

begin soon. The A-shares market is reserved for

domestic investors and firms, and the B-shares market, previously reserved for foreign investors, has

recently been made available to domestic buyers.

● Listing policies are easing, and more enterprises

(SOEs) are listing. 

● Discussion regarding the development of a new

technology-based market similar to the NASDAQ is

ongoing. The bursting of the new economy bubble

late in 2000 stirred speculation that such a new

board may offer opportunities for smaller firms

loosely related to the technology sector to list, as

the resulting dearth of new-economy firms would

fail to saturate the market. At the time of publication, the future of the new board was still uncertain.

Bond Markets. Currently, SDPC examines the issuance

of all corporate bonds and sets limits on their volume.

Each year less than $1.2 billion worth of corporate

bonds are floated, as compared with $48 billion in treasury bonds. The CSRC controls the interest rates of both

types of bonds. Corporate bond interest rates are routinely set below those for treasury bonds.

SOE Reform

In 1998, Premier Zhu Rongji set a goal to turn around

loss-making SOEs within three years. While the time

schedule has been relaxed somewhat, SOE reform policies since then have focused on enterprise restructuring,

downsizing, and adjusting product output mixes. The

government has also been focusing on a small number

of what it calls “key” enterprises and major industries

while deconstructing small and medium-sized SOEs

and encouraging non-state capital to enter more sectors.

During the Tenth Five Year Plan, reform will continue.

The State Economic and Trade Commission (SETC) is

expected to consolidate the state-owned sector into 50

to 100 giant SOEs.
20 U.S. Department of Commerce, International Trade Administration

By the end of 2000, proclamations of attaining Zhu

Rongji’s goal were numerous, even though the government was calling them questionable. The SETC proclaimed that 520 of the country’s best-performing SOEs

registered profits upward of $25 billion in the first 11

months of the year. However, a closer analysis indicates

that 9 of the 14 major industries accounted for 93.6 percent of the total earnings and that petroleum and telecom alone accounted for 50 percent. One hundred

fifty-eight of the 520 key SOEs registered 95.6 percent

of the profits, and the top ten performing SOEs accounted for 74.2 percent of the total profits.

A number of factors such as high international oil

prices, reduced debt burden as a result of debt-to-equity swaps, increased exports, and a number of IPOs on

foreign exchanges are partially responsible for the profits. Varying degrees of sustainability among these and

other factors indicate that a lot of work has yet to be

done if the SOEs are to gain true overall profitability.

The Private Sector

Income tax payments from private enterprises in

Beijing increased 110 times over the past six years, with

their contribution to overall business income tax revenue in the municipality increasing from 0.3 percent in

1994 to 15.7 percent in 2000.

There remains little doubt that regulatory authorities

recognize the importance of the private sector and are

quietly condoning its support. The SETC is taking on

the role of promoting the private sector’s development,

and drafting guidelines. The government has also

expressed a desire for the private sector to participate in

the western development plan, and the Ministry of

Construction has indicated that the tightly controlled

urban utility sector is gradually opening to private

enterprise investment as well.

Nonetheless, a host of barriers continue to hinder the

sector. It is extremely difficult for private enterprises to

access funding from either banks or securities markets.

Private enterprises, like foreign-invested enterprises,

are restricted to certain sectors. State owned and private

enterprises are not treated equally in regard to registration, taxation, government services, international trade,

and access to financing. (For a detailed analysis of

China’s private sector, see the International Finance

Corporation’s “China’s Emerging Private Enterprises,”

available online at www.ifc.org/publications.)

Selected References and Web Sites

References

Asian Development Bank. Country Economic Review:

People’s Republic of China. (Manila: Asian

Development Bank, October 2000. Available online at

www.adb.org/china/default.asp.) October 2000.

Bhattasali, Deepak, and Masahiro Kawai, “Implications

of China’s Accession to the World Trade Organization.”

(Paper presented at a conference sponsored by the

German Institute for Japanese Studies and the Fujitsu

Research Institute, Tokyo, January 18–19, 2001.)

Cao Dong and Sun Rongqing. Environmental

Financing in China: A Review. CRAES/SEPA working

paper presented at a conference sponsored by the

OECD Center for Cooperation with Non-Members,

Environment Policy Committee, November 2000.

CIA Directorate. China’s Economy: 1995–97.

December 1997.

www.cia.gov/cia/di/products/china_economy/.

International Finance Corporation. China’s Emerging

Private Enterprises: Prospects for the New Century.

September 2000. www.ifc.org/publications/.

Wang Jinnan, Wu Shunze, and Luo Hong. Integrating

Economic Development and Environmental Protection

in China During the 10th Five-Year Plan Period.

Beijing: CRAES. November 2000.

Web Sites

BuyUSA: 

www.buyusa.com

ChinaOnline: 

www.chinaonline.com

South China Morning Post: 

www.scmp.com

U.S.-China Business Council: 

www.uschina.org

U.S. Department of Commerce: 

www.doc.gov, www.usatrade.gov
China Export Market Plan 21

U.S. Department of Commerce, Office of

Environmental Technologies Industries: 

www.environment.ita.doc.gov

U.S. Embassy, Beijing:

www.usembassy-china.org.cn

U.S. Embassy, Beijing. Country Commercial

Guide: China: 

www.usatrade.gov

World Bank Group in China:

www.worldbank.org.cn/English/home.asp
22 U.S. Department of Commerce, International Trade Administration

Prior to the 1970s, few administrative measures were

promulgated to facilitate the administration of water and

soil conservation, forestation, health and safety in the

workplace, or urban beautification, and no clear environmental protection goals, laws, or policies existed in China.

This remained the case until after the Chinese government

attended the 1972 United Nations Conference on the

Human Environment (UNCHE) in Stockholm, which is

regarded not only as a milestone in the development of

international environmental protection but also as a turning point in the development of environmental protection

in China. In 1973, the first National Environmental

Protection Meeting was held in Beijing. Following the

meeting the State Council promulgated its Guidelines on

Environmental Protection and its Rules on Environmental

Protection and Improvement, which are regarded as

China’s first environmental policies. At that time, these

policies filled the role of the environmental protection law

promulgated on a trial basis six years later. Since then,

environmental protection has gained increasing prominence on the government agenda.

Following the first National Environmental

Protection Meeting of 1973, the Environmental

Protection Committee of the State Council was established in 1974, culminating in the development of a

national-level environmental protection administration.

Under this organization, several environmental protection regulations, as well as standards on pollution discharge and quality of municipal drinking water and

food, were enacted between 1974 and 1978.

In 1978, the Constitution of the People’s Republic of

China was amended to include Article 11, marking for

the first time an inclusion of environmental protection

therein and providing a constitutional basis toward

those means. The “trial” Environmental Protection Law

of China was then promulgated in 1979, stipulating

many of the basic components of environmental protection in China today. In 1989, the Environmental

Protection Law of the PRC was promulgated, replacing

the trial law of 1979. By the end of 2000, six laws,

around 100 administrative regulations, and over 1,000

local regulations had been promulgated by the National

People’s Congress (NPC), the State Council, various

ministries, and provincial and municipal governments. 

Legal Framework of Environmental Protection

Laws and Regulations

China’s legal system for environmental protection is

based on a broad framework (at the constitutional level)

that is filled in by laws and regulations stipulated by

incrementally lower levels of law-making bodies.

The Constitution 

Article 11 of the Constitution, promulgated in 1978,

initially gave a constitutional basis to the protection of

the environment. Since the article’s promulgation, the

Constitution has undergone further reform, strengthening commitment to environmental protection.

Nonetheless, the constitutional commitment to the

environment is general, serving only as a base of legitimacy for the further development of environmental

laws and regulations. 

Basic Law

The basic, or general, laws are those laws formulated

by the NPC and its Standing Committee, and they rank

second to the Constitution in terms of authority. These

laws are more pointed than the components of the

Constitution that support environmental protection, but

they remain general in comparison with the regulations

devised to carry out their directives. Currently, six such

laws have been promulgated with regard to environmental protection. They are

1. the Environmental Protection Law of the PRC, 

2. the Marine Environmental Protection Law of

the PRC, 

3. the Water Pollution Prevention and Control Law of

the PRC, 

4. the Air Pollution Prevention and Control Law of

the PRC, 

5. the Solid Waste Management Law of the PRC, and 

6. the Environmental Noise Pollution Prevention and

Control Law of the PRC. 

Chapter 3

Legal and Policy Review
China Export Market Plan 23

Regulations

Administrative regulations of the State Council serve

to implement the basic laws promulgated by the NPC and

its Standing Committee. Basic laws rank higher in

authority than regulations; however, regulations are more

numerous, specific, and instrumental than basic laws.

There are many regulations for environmental protection,

including, for example, the Administrative Regulations

for Environmental Protection of Construc-tion Projects,

the Implementation Details of the Water Pollution

Prevention and Control Law of the PRC, and the

Implementation Details of the Air Pollution Prevention

and Control Law of the PRC.

Ministerial administrative regulations rank next in

the authoritative hierarchy, and again they exceed their

superiors in number. SEPA is the major source of ministerial regulations with regard to environmental protection. Several other ministries and commissions, such as

SDPC and SETC, issue them as well. 

The People’s Congresses at the provincial and

municipal levels, as well as other local government

bodies, issue local regulations limited in authority to

their respective localities. It is at this point that China’s

legal structure becomes most specific. Local regulations, and thereby local implementation of national

laws, can vary from locality to locality.

International Treaties

International treaties are a final component of

China’s environmental legal system. China is signatory

to 73 international treaties particular to environmental

protection, 50 of which are multilateral and 23 bilateral. 

Leading Principles of Environmental

Protection Laws and Regulations

Four legal principles define China’s environmental

protection goals and serve as the broad guidelines of

environmental protection legislation:

1. Harmonious Development stipulates that environmental protection must parallel economic and social

development, so as to achieve economic, social, and

environmental benefits in unison. Its ultimate goal

is the realization of sustainable development, and it

is interpreted by the law in that environmental protection must be incorporated into all social and economic development planning. 

2. Stressing Prevention While Strengthening

Control places the emphasis of environmental protection on pollution prevention but recognizes that

in most cases gradual improvements in pollution

abatement efforts are all that can be expected. 

3. The Polluter Pays principle seeks to impose the

costs of environmental degradation on those who

are responsible for that degradation. In practice,

these costs are imposed directly upon Chinese

enterprises, in the form of pollution levies, and

only indirectly upon consumers, in the form of

higher prices.

4. Public Participation is, theoretically, sought out in

China’s environmental protection legal apparatus.

In many cases, the capacity for the public to influence environmental protection remains limited by

the same factors that affect its impact on other public spheres, and public participation is largely

excluded from the policy development process.

However, many environmental protection bureaus

(EPBs) at the municipal level accept and process

public input and complaints in regard to environmental degradation. Administrators are realizing

that encouraging public voicing of dissatisfaction

(within “the bounds of the law”) may help to justify increased spending on environmental protection,

and citizens are increasingly encouraged to support

environmental protection.

National Measures Toward Environmental

Planning and Protection 

The following is a broad-based description of the

processes and measures through which national-level

environmental protection is constituted and carried out.

Although the environmental legal system in China is

increasingly comprehensive and rationalized, it remains

complex and in certain cases contradictory.

Additionally, laws and regulations are sometimes

revised and promulgated quite rapidly. 

Environmental protection planning establishes environmental protection targets and the measures needed to

meet those targets. Local EPBs conduct preliminary

surveys and establish plans that are then submitted to

SEPA for national-level review and incorporation into

the national Five Year Plans. The process takes years

and requires repeated confirmation, evaluation, consulting, and coordination. 

The plan targets set for the year 2000 included

the following: 
24 U.S. Department of Commerce, International Trade Administration

● The development of a relatively well organized

environmental management and legal system appropriate to the socialist market economy

● The placing of environmental pollution and ecological damage “largely under control”

● The facilitation of environmental improvement for

some cities and regions

● The establishment of a number of demonstration

cities and regions whose economies are in rapid

development and whose environments and ecology

are in sound condition

The plan for 2010 includes the following targets: 

● A “fairly well implemented” sustainable development strategy 

● The further establishment of an environmental legal

system 

● A “largely changed” situation of environmental

pollution and ecological deterioration 

● Sharply improved environmental quality 

● The achievement, within a “large number of cities

and regions,” of rapidly developing economies with

sound ecological and environmental conditions

Although the plan targets appear to be vague, general, and in some cases overly idealistic, they serve a

fundamental purpose in setting goals to be achieved

through the administrative capacities of lower-level

governments. 

Environmental Planning During the Ninth

Five Year Plan

Goals for the Ninth Five Year Plan sought to keep the

year 2000 discharge rates of many pollutants near or

below 1995 levels while increasing overall economic

and productivity growth. Table 3.1 lists the official 1995

statistics for 21 major pollution categories and the corresponding goals for the year 2000. 

A number of programs, such as the One Control and

Two Targets (Yi Kong Shuang Da Biao in Chinese), the

3321 Campaign, and the China Trans-century Green

Engineering Program, have been established to facilitate the implementation of the plan.

One Control and Two Targets. One Control and Two

Targets is intended to control pollution in terms of total

emissions, thereby controlling discharge concentration at

point sources of pollution and improving air and water

quality. “One control” refers to the total emissions of a

particular polluting discharge allowed nationwide. Under

the plan, the total allotment for each pollutant is to be

divided among the provinces, and then further divided

within the provinces, all the way down to local EPBs and

ultimately to each enterprise. Older facilities, which are

usually state-owned, are generally given higher allocations for discharge, while newer facilities are seen as

more capable of reducing overall discharge levels.

The “two targets” are to bring Chinese industries

within local and national standards regarding all industrial pollutants and to improve air and water quality in

Box 5. Public Participation

A number of recent public opinion polls carried out by private market research companies, research centers, and other interest

groups have found that environmental issues are registering as top concerns of Chinese citizens. In a 2000 survey in 10 cities

around the country, about half of the respondents selected environmental protection as their top concern, ahead of issues such

as unemployment, corruption, and economic growth. A 2001 survey found a similar number of people ranking environmental

issues over population growth and an underdeveloped education system.

In accordance with Article 11 of the Environmental Protection Law, SEPA and provincial EPBs have been issuing national

or provincial environmental reports on a regular basis since 1989. The reports, which cover water, marine, air, noise, industrial solid waste, radiation, land and cultivated land, forest and grassland, biodiversity, climate change, and other related issues,

also provide statistical data and information on major environmental protection activities. The purpose of the reports is to arouse

public concern, instigate a degree of pressure on polluters and local governments, and drum up citizen support, interest, and

even supervision over environmental issues. The regularity of these reports varies from locale to locale, with some cities reporting on some subjects daily. Prior to these allowances, such information was not made public.

To further facilitate public participation in environmental protection, SEPA issued a notice on establishing separate offices

at both SEPA and local EPBs to review and respond to citizen complaints in December 1990. According to this and further regulations, such complaints must be responded to within 30 or 90 days, depending upon the intricacies of the issue at hand. If citizens are dissatisfied with the solution proposed by an EPB, they are entitled to refer the issue to higher-level EPBs or to the

courts for reexamination. Citizens dissatisfied with a solution proposed by SEPA may refer the issue to the courts. 
China Export Market Plan 25

municipalities, provincial capital cities, special economic zones, coastal development cities, and major

tourist cities. In 1997, SEPA issued the Ninth Five Year

Plan “total emissions control” (TEC) standards for 12

major pollutants (see Table 3.2). Enterprises unable to

meet the requirements of One Control and Two Targets

face closure. 

Official figures indicate that among 238,000 enterprises affected by the One Control and Two Targets program nationwide, 90 percent reached the targets by the

end of 2000. Among those that did not reach the targets,

520 “key enterprises” identified by SETC were granted

a grace period extending to Dec. 31, 2002. Those enterprises not identified by SETC as “key” will face strict

measures formulated by their local governments, including requisite ceasing of production or closings. There is

reason to believe that the figure of 90 percent is not

entirely accurate, and issues of reversion raise questions

regarding whether all enterprises that met the standards

by the deadline are still operating within them.

The 3-3-2-1 Campaign. The 3-3-2-1 Campaign refers

to the following targets, which have been selected as

key pollution prevention and control zones: three rivers

Table 3.1 1995 Pollution Figures and Year 2000 Targets

Category of Pollutant 1995 Levels Target Levels for 2000

Total soot emission (10,000 tons) 1,744 1,750 

Industrial dust discharge (10,000 tons) 1,731 1,700 

Sulfur dioxide emissions (10,000 tons) 2,370 2,460 

Chemical oxygen demand (10,000 tons) 2,233 2,200 

Oil pollutant discharge (tons) 84,370 83,100 

Cyanide discharge (tons) 3,495 3,273 

Arsenic discharge (tons) 1,446 1,376 

Mercury discharge (tons) 27 26 

Lead discharge (tons) 1,700 1,670 

Cadmium discharge (tons) 285 270 

Hexivalent chromium discharge (tons) 670 618 

Industrial solid waste (10,000 tons) 6,170 5,995 

Wastewater discharge (100 million tons) 356 480 

Industrial wastewater discharge (100 million tons) 222.5 300 

Treatment rate of industrial wastewater (percent) 76.8 74 

Treatment rate of urban sewage (percent) 19 25 

Treatment rate of industrial waste gases 74 80 

Comprehensive utilization rate of industrial solid wastes 40 45 

Decontamination rate of urban refuse (percent) 43 50 

Forest coverage (percent) 13.92 15.5 

Nature reserve area (10,000 hectares) 7,185 10,000 

Note: The amounts of wastewater and industrial wastewater discharged and the treatment rates in 1995 do not cover township enterprises.

Source: Ninth Five Year Plan for Environmental Protection and Year 2010 Long-Term Goals (Beijing: SEPA, 1996); available online at

www8.silversand.net/com/lser/GH/gh_1/2010.htm.
26 U.S. Department of Commerce, International Trade Administration

(the Huaihe, the Liaohe, and the Haihe); three lakes

(Taihu, Chaohu, and Dianchi); two zones (an acid rain

control zone and an SO2 control zone); and one municipality (Beijing). Most of these targets exist in or are

affected by several provinces, thus making strong cooperation among provincial governments necessary. Each

was selected because of serious pollution issues.

The acid rain control zone and SO2 control zone total

1.09 million square kilometers in area, which amounts to

11.4 percent of China’s total territory. Within this, the

acid rain control zone covers about 133 cities and counties in Shanghai, Jiangsu, Zhejiang, Anhui, Fujian,

Jiangxi, Hubei, Hunan, Guangdong, Guangxi,

Chongqing, Sichuan, Guizhou, and Yunnan. The total

area reaches 0.8 million square kilometers, amounting to

8.4 percent of the total Chinese territory. The SO2 control

zone covers about 125 cities and counties in Beijing,

Tianjin, Hebei, Shaanxi, Inner Mongolia, Liaoning, Jilin,

Jiangsu, Shandong, Henan, Shanxi, Gansu, Ningxia, and

Xinjiang. The total area reaches 0.29 million square kilometers, amounting to 3 percent of the total territory.

These regions constitute the most troublesome sources of

SO2 and acid rain; therefore more stringent measures are

being taken in them to address the problems.

The Trans-century Green Engineering Program.

Initiated as part of the Ninth Five Year Plan for

Environmental Protection, and under the auspices of

Agenda 21, the Trans-century Green Engineering

Program is composed of a series of environmental protection projects implemented in key locations and provided for through enhanced financial resources. The

program’s aim is to focus limited financial resources

and manpower on serious pollution issues to bring environmental and ecological deterioration under control.

The project has three phases, corresponding with the

Ninth, Tenth, and Eleventh Five-Year Plans. 

Agenda 21. China’s Agenda 21 is a direct result of the

1992 United Nations Conference on Environment and

Development in Rio de Janeiro, and it was in fact the

first national-level Agenda 21 formulated in the world.

The program is now regarded as the country’s blueprint

for sustainable development and environmental protection. Agenda 21’s primary focuses include capping

industrial pollution at 1995 levels while maintaining

rapid industrial growth; increasing pollution levies so as

to equal or exceed waste-treatment costs; increasing and

improving the use of market-based and financial tools

for environmental protection; promoting clean production; and developing a large-scale plan for environmental protection known as the Trans-century Green

Engineering Program.

The Center for Environmentally Sound Technology

Transfer. The Center for Environmentally Sound

Table 3.2 Pollutants Selected for Total Emissions Control

Category of Pollutant 1995 Levels Target Levels for 2000 2000 vs.1995 (percent) 

Total soot emission (10,000 tons) 1,744 1,750 0.37 

Industrial dust discharge (10,000 tons) 1,731 1,700 21.80 

Sulfur dioxide emissions (10,000 tons) 2,370 2,460 3.82 

Chemical oxygen demand (10,000 tons) 2,233 2,200 21.49 

Oil pollutant discharge (tons) 84,370 83,100 21.5 

Cyanide discharge (tons) 3,495 3,273 26.4 

Arsenic discharge (tons) 1,446 1,376 24.8 

Mercury discharge (tons) 27 26 23.7 

Lead discharge (tons) 1,700 1,670 21.9 

Cadmium discharge (tons) 285 270 25.4 

Hexivalent chromium discharge (tons) 670 618 27.7 

Industrial solid waste (10,000 tons) 6,170 5,995 22.9 

Source: National Total Pollution Control Scheme for the Ninth Five Year Plan (Beijing: SEPA, 1997); available online at

www.zhb.gov.cn/sepa/layout/files/95.htm.
China Export Market Plan 27

Table 3.3 Trans-century Green Engineering Program Project Distribution

Contents of Control Number of Projects

1. Control of water pollution in seven major river basins 650

Huaihe basin 282 

Liaohe basin 30 

Haihe basin 56 

Songhua River basin 44 

Yellow River basin 69 

Pearl River basin 36 

Yangtze River basin 133 

2. Control of water pollution in three major lakes 35

Dianchi 13 

Chaohu 7 

Taihu 15 

3. Control of water pollution in major coastal cities 99

4. Control of water pollution in other cities 17 

5. Major acid rain pollution control regions 109 

East China 9 

Central China 36 

South China 28 

Southwest China 36 

6. Control of air pollution in major cities 219 

7. Control of solid waste pollution 272

Industrial solid wastes 118 

Hazardous waste and radioactive waste 85 

Disposal of municipal waste 69 

8. Ecological environmental protection 118

Ecological environmental protection and restoration 54 

Rural ecological protection 37 

Preservation of nature reserves 27 

9. Actions related to global environmental issues 69 

Greenhouse gas control 28 

Ozone layer protection 14 

Biodiversity conservation 27 

10. Capacity building of national environmental supervision and administration 3

Total 1,591 

Source: The China Trans-century Green Engineering Program (Beijing: SEPA, 1996); available online at

www.zhb.gov.cn/sepa/layout/files/greenhtm.

A total of 801 projects for

prevention and control of

water pollution

A total of 328 projects for

prevention and control of

air pollution

Remarks 
28 U.S. Department of Commerce, International Trade Administration

Technology Transfer (CESTT) was established in 1997

with the intention of further developing China’s Agenda

21. With support from the Ministry of Science and

Technology, technical assistance via the Asian

Development Bank, and under the direction of the

administrative center for Agenda 21, CESTT assists

small and medium-sized enterprises with accessing,

developing, and applying environmentally sound

technologies.

The Tenth Five Year Plan for Environmental

Protection

SEPA completed its draft of the Tenth National Five

Year Plan for Environmental Protection (2001–2005),

which was incorporated into the Tenth National Five

Year Plan for Economic and Social Development (the

Tenth Five Year Plan) in March 2001. The plan stipulates environmental targets for the end of 2005, which

are characteristically general in nature. They include the

further establishment of environmental protection policy, law, and administrative systems appropriate to a

socialist market economic system; a reduction in the

tendency toward environmental pollution and ecological deterioration; the improvement of environmental

quality in key cities and regions; and an increase in the

number of cities and regions in which economic development is rapid while environmental and ecological

conditions remain sound. 

Tasks for the Tenth Five Year Plan include

the following: 

● To continue total emission control and maintain a

continuous decline in total pollution discharge

● To direct economic restructuring toward the promotion of clean production

● To promote municipal sustainable development

focusing on the improvement of environmental

quality

● To emphasize ecological protection and pollution

prevention and control equally

● To launch a “three zone” ecological protection strategy to include special ecological function zones,

key resource development zones, and ecologically

sound zones

● To strengthen environmental protection enforcement

in rural areas and to control rural environmental

pollution effectively

● To develop the domestic environmental industry

and to maintain an effective supply of environmental technologies and products

● To strengthen the management of nuclear environmental safety and prevent and control radiationassociated issues actively

● To accelerate the modernization of environmental

management in the energy industry 

● To protect national environmental safety and participate actively in international environmental

initiatives

In augmentation of the 3321 Campaign of the Ninth

Five Year Plan, key regions identified in the tenth plan

will include the Yangtze River, the Yellow River, and

the Bohai sea; the number of key cities for pollution

control is to be expanded from 47 to 100.

Environmental Protection Standards

By the end of 1999, 426 environmental standards had

been established throughout China, classified as national environmental standards, SEPA environmental standards, and local environmental standards. SEPA is in

charge of the establishment of national environmental

standards and SEPA environmental standards, both of

which are in use nationwide. SEPA environmental standards function for categories for which national standards are not available. Once equivalent national

environmental standards are formulated, SEPA environmental standards automatically become invalid. 

National environmental standards include the

following:

● National environmental quality standards, which

regulate the concentration of toxic substances in a

given environment and serve as the basis for other

environmental standards

● National emissions standards, which regulate the

concentration of pollutants discharged into a

given environment

● National environmental monitoring methods standards, which regulate techniques and methods used

in sampling, testing, analyzing, and processing data

collected for monitoring environmental quality

and emissions

● National environmental sampling standards, which

are used for preparing solutions, adjusting and collating analysis and testing equipment, and regulating other aspects of sampling and analysis 

● National environmental basic standards, which standardize items such as technical terms, symbols,

abbreviations, graphics, and data indexes used in

the environmental protection field 

When no national environmental quality standards or

national emissions standards are available for a particular category, provincial governments may formulate
China Export Market Plan 29

local standards; provincial governments may also set

more stringent standards than the equivalent national

emissions standards. Local standards must be submitted

to SEPA for record keeping.

Three Simultaneous Steps

The Three Simultaneous Steps policy stipulates that

all environmental protection facilities must be designed,

constructed, and operated simultaneously with the main

construction project, as opposed to designing, building,

and operating a facility with the intention of retrofitting

the project with an environmental protection plan and

facility at some stage after its completion. The Three

Simultaneous Steps policy applies to all new, expansion, and renovation projects. For treatment facilities,

the measure is generally applied to those components

that are being expanded or renovated; however, it may

apply to an entire facility once any portion is added,

modified, or upgraded. 

The three steps for treatment facilities can be summarized as follows:

1. Design: The engineering design institution must

ensure that the pollution measures recommended in

the environmental impact assessment (EIA) and

required under the Three Simultaneous Steps measure are included in the facility design. Technically,

this process involves receiving approval from the

same environmental regulatory entity that approved

the project’s initial EIA report (SEPA, the provincial

EPB, or the local EPB, contingent on the scale of

the project). In reality it is often synonymous with

registering the project.

2. Construction: The construction of environmental

facilities must meet the requirements as specified in

the EIA and should be undertaken simultaneously

with the main construction component. 

3. Operation: Upon completion of construction, a trial

operation period commences. Following the trial

operation period, a thorough inspection of the technical, financial, health, safety, and environmental

aspects of the completed project is implemented.

If a facility fails the inspection, the EPB requires

upgrading and a further inspection within a specified

time period.

Environmental Impact Assessment

The EIA concept was first introduced to China in the

Environmental Protection Law of 1979. Beginning in

the mid-1980s, the government began requiring EIAs

for large-scale projects. The program has since developed steadily, incorporating the experiences of other

countries with local practices and constraints and resulting in a system that in many ways is beginning to

resemble EIA programs elsewhere. The Administrative

Regulations for Environmental Protection of

Construction Projects (1990) and the Technical

Guidelines for Environmental Impact Assessment

(1993) are key pieces of legislation strengthening the

country’s EIA program. Other laws, such as the Marine

Environmental Protection Law, the Water Pollution

Prevention and Control Law, and the Air Pollution

Prevention and Control Law, include EIA requirements.

The scope of EIAs is presently restricted to construction projects, including expansion and renovation projects, and does not include major long-term planning,

policy, or regional development considerations. A

revised EIA law is currently undergoing review and,

when promulgated, will reportedly require performance

of the EIA at an earlier stage of the project approval

process, increasingly comprehensive methods and protocols, cost-benefit analysis, fines for non-compliances,

and legal liabilities.

Regulatory guidelines such as the Administrative

Regulations for Environmental Protection of

Construction Projects, the National Technical

Guidelines for Environmental Impact Assessment, and

the Administrative Provisions for the Inspection and

Approval of Completed Environmental Protection

Facilities of Construction Projects (1993) regulate the

EIA process. The most recent EIA regulation is the 1998

Management Protocol. Significantly, the State Council

itself issued this document, while the other regulations

listed above were issued by SEPA. The 1998

Management Protocol is a detailed implementation document backed by the authority of the premier’s office

and is relatively well enforced. It includes existing overall policy goals such as mass loading targets and use of

clean technology and provides greater detail on the regulation of EIAs and environmental facility construction,

including specification of non-compliance fines.

Clean Production

The state encourages the adoption of clean production to reduce air and water pollution and the accumulation of solid waste. The SETC is authorized, in

conjunction with other ministries, to list for elimination

certain “backward” production techniques and technologies known to cause heavy air and water pollution

or to result in the creation of significant amounts of

solid waste. The production, sale, and use of the listed

techniques and technologies are illegal. Similarly,
30 U.S. Department of Commerce, International Trade Administration

SETC publishes listings of clean production technologies and techniques, the use of which is encouraged.

Emissions Registration and Emissions License

Emissions registration requires enterprises constituting a pollution source to register with local EPBs in

regard to those pollutants being legally discharged. The

purpose of the registration is to facilitate comprehensive

accounting by local EPBs regarding emissions under

their jurisdiction. Registration also enables further

administrative action toward pollution prevention and

control, monitoring, supervision, and compilation of statistics. Local EPBs have the right to inspect facilities to

verify the information provided by registered enterprises.

Emissions registration must be filed with local EPBs

following the inspection and approval of pollution prevention and control facilities and prior to official commencement of operation. The scope of registration

includes type, quantity, and concentration of emissions,

receptacle of emission discharge, process of emissions

discharge, type of noise pollution sources, strength of

noise pollution, general conditions of pollution prevention and control facilities, and general conditions of

storage, utilization, and disposal facilities for solid and

other types of waste.

If there are any significant changes to the registered

items during the operation of a facility, including the

removal or disuse of the facility, the enterprise must file

an amending registration with the original EPB 15 days

prior to the change. Enterprises ceasing operations must

inform the original EPB. If emissions do not meet relevant national or local standards, enterprises must specify why and adopt measures to meet the standards. 

In addition to registering, the enterprise must submit

an emissions license application to the local EPB. Upon

successful application, an emissions license will be

issued to the enterprise to serve as legal permission for

the discharge of specified pollutants. This regulation

does not apply to radioactive waste, which is subject to

separate and more rigorous requirements. 

Emissions Fees

Emissions fees are levied on enterprises discharging

pollutants in excess of state standards. Under new air

and water laws, all emissions, even those not exceeding

state standards, receive levies, with heavier levies, legal

liabilities, and potential closure looming for those enterprises exceeding state standards. Local EPBs or their

authorized monitoring institutions survey factors such

as the type, quantity, and concentration of pollutants to

determine the exact amount of the emissions fee, in

accordance with pertinent regulations. 

Revenues collected via the emissions fee system are

generally recycled into the environmental protection

apparatus by servicing loans and grants for upgrading

enterprises (as much as 80 percent of the fees paid by an

enterprise can be returned to the enterprise to finance

environmental upgrades), augmenting EPB budgets,

and financing pollution treatment and the restoration of

polluted environments. The fees do not, however,

exempt enterprises from legal liabilities, compensation

for personal injury or property losses, or other financial

burdens associated with further pollution prevention

and control measures.

The major weakness of the Chinese emissions fee

system is that levies remain too low to provide an incentive for pollution control. Some enterprises find it more

cost-effective to submit emissions fees than to develop

or operate costly pollution control facilities or take other

measures to prevent and control emissions. Additionally,

local EPBs often prefer to maintain emissions fees at the

current lower level rather than increase them and provide a stronger incentive to improve pollution control,

because 20 percent of all collected emissions fees are

used to augment EPB budgets; there has been recent discussion, however, regarding the elimination of this practice. There is also discussion of transforming the current

emissions fee system into a more efficient and betterregulated taxation system, but such a change is not

expected during the Tenth Five Year Plan. 

Coal consumption, which remains the principal energy source in China, reached 1.28 billion tons in 1995,

and SO2 emissions resulting from coal burning reached

23.7 million tons, ranking as the world’s highest. In

early 1992, to tackle the problem, SEPA together with a

number of other ministries and supported by the State

Council initiated a trial SO2 emissions fee for coal burning in industrial sectors. Guizhou Province, Guangdong

Province, and nine cities in other provinces were selected for the trial. Based on the experiences in these

locales, the practice was expanded, eventually covering

the entire acid rain control zone and SO2 control zone by

Jan. 1, 1998. Unlike most other emissions fees, the SO2

emissions fee is collected regardless of whether the

emissions exceeded standards; any emission of SO2

requires a fee, whereas the exceeding of standards constitutes a basis for heavier enforcement measures.

Environmental Monitoring

Under the Environmental Protection Law, monitoring systems must be established to conduct environ-
China Export Market Plan 31

mental monitoring in China. National and local monitoring stations are classified into four levels (national,

provincial, municipal, and county) and are encompassed in a three-level monitoring network (national,

provincial, and municipal). National monitoring stations are operated under SEPA, and local-level monitoring stations are operated under the relevant EPBs.

Additionally, specialized environmental monitoring

networks have been established for major river systems, marine areas, and agricultural environments.

Every monitoring station must write monthly and

yearly reports, as well as any other report requested by

upper-level stations or superiors, and submit them to

the directly superior monitoring station for inclusion

in a more comprehensive report. Some large cities

now provide daily environmental reports, made public

via local media. 

On-the-Spot Inspection 

Both SEPA and local EPBs conduct on-the-spot

inspections of pollution sources to supervise the

implementation and enforcement of all requirements

stipulated by the relevant laws and regulations.

Supervision departments are established within both

SEPA and local EPBs to conduct such inspections,

levy fines for violations of laws and regulations, and

collect emissions fees. Enterprises under inspection

have expressed concern regarding the confidentiality

of trade and enterprise secrets that may be discovered

during the inspection process. Under the Tentative

Procedures on Environmental Protection Supervision,

inspectors are required to maintain confidentiality in

regard to such secrets. 

Abatement Deadlines

Enterprises discharging pollutants in excess of relevant emissions standards over an extended period of

time, as well as pollution sources located in or near natural reserves, historic sites, scenic spots, or other locations under special protection, may be required to carry

out pollution control measures within a prescribed period. The directive to impose an “abatement deadline”

can be handed down only by local governments, not by

EPBs. However, EPBs are responsible for impact

assessments, action plan evaluations, and implementation supervision. 

When considering the imposition of an abatement

deadline, authorities take into account the seriousness

of the pollution. If discharges in excess of standards do

not cause serious pollution, enterprises may simply be

required to pay heavier emissions fees. There are no

detailed stipulations specifying what constitutes serious pollution; however, in practice, the following factors are generally considered when deciding upon

the issue:

● Whether the total volume of the pollutants

discharged continuously exceeds relevant

emission standards 

● Whether multiple types of pollutants are discharged,

many of which do not easily degrade in nature

● Whether discharged pollutants and discharge rates

constitute a threat to public health

● Whether discharged pollutants have become a public nuisance and have instigated dispute

Facilities located in or near natural reserves, historic

sites, scenic spots, or other locations under special protection are less subject to flexibility based upon the

seriousness of the pollution and are more likely to

receive an abatement deadline as opposed to increased

levies. In cases where adequate financial resources and

technical capacity are unavailable, enterprises are generally shut down instead of receiving an abatement

deadline. The time limits for abatement deadlines generally range from one to five years. 

Accident Reporting 

Environmental pollution accidents must be followed

by measures to control the pollution, inform nearby

communities that may be affected, and report to local

EPBs. After an accident is reported, local EPBs must

report to local governments regarding further pollution

control and emergency response measures. Local EPBs

must also conduct on-the-spot investigations and collect

pertinent information to be applied to further prevention

and control measures. Accidents are graded into four

levels based on their seriousness; level three accidents

must be reported to provincial EPBs, and level four

accidents must be reported to SEPA. 

Incentives

Incentives such as tax deductions and waivers, special funds, and honorable awards and certifications, as

well as certain disincentives, have been established both

nationally and locally to encourage improved environmental protection. Several examples of such incentives

and disincentives are introduced below.

Import Tax and Value-Added Import Tax Waiver. In an

effort to accelerate foreign investment and promote the

import of advanced technologies and equipment, import

tax and value-added import tax on some pollution prevention and control products may be waived.
32 U.S. Department of Commerce, International Trade Administration

Income Tax Waiver. Enterprises using certain industrial waste products as major raw materials for new products may have their income tax on the sales of such

products waived for five years.

Adjustment Tax on Investment in Fixed Assets Waiver.

Enterprises investing in fixed assets for the reuse of

the “three wastes” (air, water, and solid wastes)

may have their adjustment tax on investment in fixed

assets waived. 

Value-Added Tax Waiver. Enterprises using coal

gangue, stone coal, coal ash, and certain other items as

raw materials to produce building materials may have

their value-added tax waived provided that the recycled

products constitute no less than 30 percent of the raw

materials in the production process. Enterprises using

wastewater and solid waste to process gold and silver

may have their value-added tax waived. 

Ban on Bank Loans for Outdated Products and

Technologies. The SETC provides listings of outdated

products and technologies that are heavily polluting or

not energy efficient. Commercial banks bear legal liabilities for providing loans to facilities for the production or utilization of these listed items.

“Excellence in Environmental Protection Technology.”

Environmental protection technologies meeting a number of criteria may be considered for SEPA’s

“Excellence in Environmental Protection Technology”

title. SEPA awards the title on a yearly basis, and local

EPBs are charged with the popularization of the technologies. Enterprises must give priority to the utilization of these technologies if feasible; otherwise, their

EIA or application for financial assistance will not

be approved. 

Environmental Protection Certification. SEPA and

provincial EPBs confer environmental protection certification on environmental protection equipment and

facilities that are deemed suitable. SEPA issues, on an

irregular basis, lists of equipment and facilities that are

considered important in environmental protection and

must acquire such certification. When conducting new,

expansion, and renovation projects, enterprises must

use certified equipment and facilities. The conferment is

valid for three years and is renewable.

Environmental Labeling. In order to qualify for environmental labeling, a product must uphold environmental protection requirements throughout its life cycle,

from production to consumption to disposal. Environmental labeling not only increases a product’s competitiveness but also provides consumers with an

opportunity to support environmental protection by purchasing such products. Environmental labels are valid

for three years and may be renewed upon reevaluation. 

Main Regulators of Environmental Protection 

The National People’s Congress

The National People’s Congress is the country’s

highest legislative body and holds exclusive authority in

enacting, amending, and interpreting the Constitution of

China, as well as all laws and policies pertinent to major

aspects of national social and economic development.

Additionally, the NPC supervises the implementation of

laws and policies and determines appointments to positions of central government leadership and the Supreme

People’s Court and Supreme People’s Procuratorate.

About 3,000 representatives from the provinces, municipalities, and autonomous regions are elected to the

Congress every five years and convene in Beijing once

a year. The Standing Committee of the National

People’s Congress is the working organization of the

Congress and maintains its authority and responsibility

while the Congress is not in session. 

Local people’s congresses, which are maintained at

the provincial, municipal, county, and township levels,

constitute the local regulatory bodies, are in charge of

local legislative issues, and determine the appointment

of local government leaders. No standing congress

committees are maintained at the township level. 

The Environmental and Resources Protection

Commission, a subsidiary organization of the Standing

Committee of the National People’s Congress, is the

highest authority in charge of drafting laws and regulations pertinent to environmental and natural resources

protection and supports the National People’s Congress

in overseeing the implementation of relevant legislation. The commission has three divisions: the general

affairs department, the legislation department, and the

research department. Mr. Qu Geping, chairman of the

commission, is currently a central player in regard to

Chinese environmental law and policy.

The State Council

The State Council is the central government body

charged with the implementation of all laws and policies and has authority over all sectors of national social

and economic development. It is comprised of a premier, vice premiers, state councilors, ministers, a general secretary, and vice general secretaries. Leadership

positions are filled by appointment and are approved

by the National People’s Congress every five years.

The State Council formulates administrative regulations and policies based upon the Constitution and laws

of China and maintains the leadership role over all levels of local government. 
China Export Market Plan 33

In 1998, a large-scale restructuring of the State

Council and its subsidiary ministries and commissions

was carried out, followed one year later by the restructuring of all local governments. The restructuring was

aimed at increasing government regulatory and administrative roles and decreasing government roles in specific business issues. Additionally, it was intended to

reduce the bureaucracy and financial burdens that have

long been a serious barrier to the development of the

country. As a result of the restructuring, the number of

subsidiary organizations under the State Council has

decreased from 40 to 29. 

Under the leadership of the State Council, provincial

and lower-level local governments function very much

like the State Council in regard to local social and economic affairs. They must report to both the local people’s congress and the government body operating at the

next-highest level of administration. 

Ministries and Commissions Influencing

Environmental Protection

The following ministries and commissions influence

the environmental protection sector and administer

environmental protection measures within their official

jurisdictions on a daily basis. Like most other ministries

in China, they are structured vertically, from the national level to the county and even the township level. Local

bodies report to both the local government and their

upper-level counterparts. 

The State Environmental Protection Administration

(SEPA). The State Environmental Protection

Administration is the highest strictly environmental

administrative authority in China. Its responsibilities

include the drafting of laws, the issuing of regulations

and standards, the analysis and reporting of environmental indicators, the supervision of nationwide environmental legislation enforcement, and the development

of pollution prevention policy and planning. In setting

environmental protection targets and developing plans to

meet those targets, SEPA works in collaboration with the

Ministry of Construction, SDPC, and SETC, among others, and is responsible for overseeing the implementation and coordination of those targets in cooperation

with the relevant institution and agencies.

As part of the 1998 government restructuring plan,

SEPA was elevated to the ministry level, representing a

theoretical strengthening of its authority. SEPA did

relinquish much of its control over planning and policy

for the environmental industry to SETC but is expected

to increase its role in determining national policy and

objectives. Nonetheless, a perceived conflict of interest

between environmental protection and economic development remains among the ministries, and SEPA’s lesser authority and financial capacity in comparison with

the likes of SETC and SDPC remains something of a

sticking point.

SEPA’s vertical authoritative structure is also troublesome in that local governments exercise control over

most administrative details within local EPBs. EPB

financing, personnel, daily administration, and so forth

are managed by local governments, while SEPA establishes broad operative goals and administrative directives. As a result, local governments have more leverage

to see that EPBs act in accordance with local government interests as opposed to state-level SEPA directives. The administrative details of SEPA’s operations

are a constant topic of policy-making discussion, and

further changes in administration, and possibly even

structure, are to be expected.

The State Development and Planning Commission

(SDPC). The State Development and Planning

Commission develops medium- and long-term social

and economic development plans (thereby defining the

fundamental development goals for the country) and

supervises the implementation of those plans. Thus,

SDPC exerts influence upon all social and economic

sectors, including the environmental field. 

SDPC responsibilities include researching and

advising on the formulation of state economic and

social development strategies with an aim toward

maintaining a development balance and structural optimization; planning for resource development, energy

distribution, and ecological and environmental protection infrastructure development; gathering and analyzing development and economic indicators for the

financial and banking sectors; and proposing

allocations of public investment funds and foreign

capital funds.

The SDPC maintains significant influence over specific projects in order to coordinate overall investment

in various sectors of the economy. However, following

government restructuring, the commission, like all ministries, is intended to assume a more regulatory and

administrative role, becoming less involved in the

determination and approval of specific projects and,

from a macroeconomic planning position, assuming an

increased role in encouraging investment and development by domestic and foreign institutions and companies. At the same time, the State Council appears to be

increasing the relative authority of the State Economic

and Trade Commission while slowly diminishing the

authority of SDPC, which is viewed as a legacy of

China’s former planned economy. 
The State Economic and Trade Commission (SETC).

The State Economic and Trade Commission is the most

powerful regulator of daily national economic operations, particularly in regard to industrial aspects. The

SETC influences most economic sectors directly or

indirectly through implementing and supervising economic and social development plans. It is also responsible for supervising and analyzing national economic

trends, adjusting daily economic operations, establishing short-term economic operational goals, policies,

and measures, and carrying out international cooperation efforts.

Additionally, SETC oversees the drafting and implementation of state industrial policies, plans investment

layout for competitive industries, drafts policy for

reforming state-owned enterprises, promotes enterprise

development, oversees project investment and financing, oversees resource use and application, and coordinates environmental protection and the development of

environmental industry.

The Ministry of Finance. The Ministry of Finance is

the primary organization under the State Council

charged with issues pertinent to state revenues and

expenditures, financial policies, and taxation policies

(in conjunction with the State Taxation Administration).

The Ministry of Finance, independently or in cooperation with other government organizations, formulates,

implements, and supervises laws, regulations, strategies, policies, and planning pertinent to financial and

taxation issues; conducts administration over the state’s

annual budget and expenditures, including the formulation and implementation of plans for the expenditure of

state revenue, arrangements for state project investment, government purchase planning and policies, special financial accounts, and government foundations;

conducts administration over state debts, including the

planning and issuance of state debts, as well as relevant

policies; conducts administration over the accounting

and auditing sectors; conducts administration over

international loans via foreign governments, the World

Bank, the Asian Development Bank, and other such

institutions; conducts administration over the taxation

of foreign-related operations, such as the taxation of

imports and exports; and carries out planning pertinent

to financial research, education, and training. 

The Ministry of Foreign Trade and Economic

Cooperation (MOFTEC). The Ministry of Foreign

Trade and Economic Cooperation’s primary function is

the formulation and implementation of policies, laws,

and regulations concerning foreign trade and economic

cooperation, which includes analysis of international

trade and economic climates and their impact on China,

approval and issuance of international trade and business licenses, and regulation of the import-export markets. MOFTEC is also the main government channel for

bilateral finance cooperation and plays a key role in the

approval process for foreign investment.

The Ministry of Construction. The Ministry of

Construction formulates regulations, policies, and planning with regard to municipal and township design and

construction, the building industry, the residential housing industry, architectural designing and consultancy,

and the municipal public works industry. Additionally,

the ministry’s responsibilities include, in cooperation

with other ministries, the formulation of construction

standards, construction budgets, and feasibility studies.

Many aspects of infrastructure development, including

transportation, energy, communications, water treatment

and supply, and waste management, are directly or partially under the auspices of the Ministry of Construction.

The Ministry of Science and Technology. The Ministry

of Science and Technology formulates policies, strategies, regulations, and planning with regard to the development of science and technology. Planning for and

promotion of scientific and high-tech research, as well

as the facilitation of financing for scientific and technological research, are included in its responsibilities. The

ministry also plays a role in facilitating international

cooperation in scientific advancement.

The Ministry of Science and Technology maintains

an innovation fund for small technology-based firms,

which is the only ministry-furnished support fund at

least partially directed toward environmental protection. Aimed at facilitating the transformation of scientific research achievements into technological

innovations to benefit economic growth, the fund is

gaining in repute and capacity. 

The Ministry of Land Resources. The Ministry of Land

Resources regulates natural resource administration and

is responsible for the protection and rational utilization

of land, mineral, marine (except fishery), and other natural resources, as well as the supervision and pollution

prevention of groundwater resources. The ministry also

develops technology standards, procedures, and solutions for land, mineral, and marine resource use; drafts

and implements general and specific land application

plans; and participates in preliminary city planning. 

The protection of landowners’ and land users’ legal

rights and the investigation and resolution of land ownership and land use disputes fall under the jurisdiction

of the Ministry of Land Resources, as does the devel34 U.S. Department of Commerce, International Trade Administration
opment of international cooperation on land, mineral,

and sea resources.

The Ministry of Communications. The Ministry of

Communications formulates and implements strategies,

policies, and regulations with regard to land and water

transportation and shipping. The ministry is charged

with the maintenance of the public roads, highways, and

related facilities and fee collections. Similarly, the

development and maintenance of the water transportation and shipping infrastructure and the collection of

related fees fall within the ministry’s jurisdiction. 

The Ministry of Communications also supervises

water transport and shipping safety, the inspection of

ships and marine facilities, the prevention and control

of pollution caused by ships, and ocean emergency

response. 

The Ministry of Water Resources. The Ministry of

Water Resources’ responsibilities entail the formulation

and implementation of regulations, policies, and plans

with regard to water resources and efficient water use.

Water quality inspections, investment and management

plans, pricing, taxation, and administration of national

water and soil conservation, as well as flood and

drought prevention, are included.

The State Forestry Administration. The State Forestry

Administration formulates and implements regulations, policies, and development plans regarding

forestry and ecological conservation. Its responsibilities include administration of the state forestation

fund, forestation operations, soil erosion and desertification alleviation, surveying and monitoring of national forest resources, and the approval and supervision

of forest resource utilization. Additionally, its jurisdiction enters the realm of biodiversity and endangered

species. Administration over the protection and management of wild plant and animal species, including

endangered plants and animals, is included.

International trade in both endangered and non-endangered plant and animal species, international treaties

in regard to such species, and other international

treaties relevant to the State Forestry Administration

are included among its responsibilities.

The Ministry of Agriculture. The Ministry of

Agriculture formulates and implements development

strategies, policies, and regulations with regard to agricultural development. Additionally, it coordinates with

relevant ministries to promote sustainable agriculture,

sustainable utilization and protection of fisheries, and

protection for aquatic life, grasslands, and wetlands.

Supervision of fertilizer quality, animal husbandry, and

medicinal treatment of livestock is also carried out, in

collaboration with other affiliated ministries. 

Township and village enterprises fall under the jurisdiction of the Ministry of Agriculture. Industrial enterprises within this category are significant contributors

to environmental pollution but generally remain outside

of the environmental protection apparatus. The few

environmental statistics available on township and village industrial enterprises are compiled by the Ministry

of Agriculture.

The State Taxation Administration. Taxation policies

and procedures, including the development of favorable

taxation policies to promote environmental protection,

and import-export taxation with and without regard to

environmental technologies and related incentive policies, all fall within the jurisdiction of the State Taxation

Administration. There has been some discussion, as

noted above, regarding the possibility of transforming

pollution levies into environmental protection taxes and

shifting the jurisdiction over such funds to the relatively authoritative and administratively better organized

State Taxation Administration.

Major Environmental Protection Laws 

The Environmental Protection Law of the PRC

The Chinese government did not include environmental protection in the Constitution of the PRC until

1978, when it stipulated that the state protect and

improve the ecological environment, remedy pollution

and other public hazards, guarantee reasonable use of

natural resources, and protect rare animals and plants.

The 1978 alteration of the Constitution became the

foundation of detailed environmental legislation. The

NPC established the Environmental Protection Law on

a trial basis in September 1979. The State Council further announced in 1983 that environmental protection

was to become a strategic task in the process of modernizing China. Environmental protection was raised to

the rank of national policy, second in importance only to

family planning. However, environmental protection

was not integrated systematically into politics, causing

some policies to have contradictory impacts on the state

of the environment. An example was the household

responsibility contract system, which stated that the

right to use land belonged to farmers, while the state

was owner of the land and rural collectives were in

charge of public interests. The Environmental

Protection Law of the PRC, effective on Dec. 26, 1989,

China Export Market Plan 35
helped to consolidate environmental directives in a

more systematic way.

The Marine Environmental Protection Law

of the PRC

The Marine Environmental Protection law defines

the respective roles of SEPA, the State Oceanic

Administration, the State Maritime Affairs Administration (under the Ministry of Communications), the State

Fishery Bureau (under the Ministry of Agriculture), and

military environmental protection organizations with

regard to marine environmental protection. SEPA is the

central coordinator and supervisor of marine environmental protection, and oversees prevention and control

of oceanic pollution caused by onshore sources. 

The law stipulates that measures to protect, restore,

and preserve marine ecological systems and historic natural sites and landscapes must be taken. Natural marine

reserves at the local and national level must be set up.

Emergency response plans for marine pollution accidents, offshore oil leakages, and enterprise-related pollution issues are to be formulated, and implementation is

carried out in accordance with such plans in case of accidents. Pollution discharges from onshore sources to

ocean areas must be evaluated and approved by local

EPBs, in consultation with local oceanic bureaus, maritime affairs bureaus, fishery bureaus, and military environmental protection organizations. Such facilities are

not to be located within or in proximity to marine natural reserves, major fishery zones, coastal scenic spots,

and other localities under special protection. Provisions

and guidelines for EIAs related to both onshore and offshore marine-impacting construction, production, discharging, and so forth are outlined in the law.

Dumping standards and relevant evaluation procedures are the jurisdiction of the State Oceanic

Administration. The State Maritime Affairs

Administration has authority to enact compulsory measures to prevent and control pollution associated with

maritime transport and shipping facilities and has

authority regarding accidents associated with such facilities within PRC maritime territory. 

The Water Pollution Prevention and Control Law

of the PRC

SEPA and local EPBs are in charge of the general

administration of water pollution prevention and

control. Organizations under the Ministry of

Communications, charged with the administration of

inland water and ocean transportation, have authority

over water pollution caused by ships. The Ministry of

Water Resources, the Ministry of Public Health, the

Ministry of Land Resources, municipal public works

bureaus, and water resources bureaus coordinate with

SEPA and local EPBs regarding water pollution protection and control.

Regarding river protection, SEPA, in conjunction

with other relevant government organizations, is

charged with drafting pollution prevention and control

plans for the major state-designated rivers. Based on

these plans, provincial EPBs and other local government organizations draft pollution prevention and control plans for their respective sections of transprovincial

and transcounty rivers. The plans are submitted to the

State Council or provincial governments for approval. 

Local-level governments must incorporate the protection of municipal water resources, and pollution prevention and control, into municipal development plans.

Focus is to be placed on the construction and improvement of water distribution and sewage systems and

municipal wastewater facilities. 

Groundwater protection zones for drinking water are

to be designated by provincial governments. The zones

are separated into graded levels, the most strict of which

disallows any wastewater discharge, tourism activities,

swimming and other such activities, and new construction projects or expansion projects for non-water distribution or non-water protection purposes. Any facility

producing emissions within such a zone must be

removed or undergo abatement measures. 

The Air Pollution Prevention and Control Law

of the PRC 

The Air Pollution Prevention and Control Law of the

PRC outlines the incorporation of air pollution prevention and control into the state economic and social

development plan. Total emissions control standards,

air quality standards, and air emissions standards are

established. Guidelines for the supervision and implementation of laws and regulations, comprehensive utilizations, scientific research on air pollution prevention

and control, forestation, and municipal beautification

are contained herein. 

The most recently amended version of the law provides more stringent guidelines in regard to emissions

control, thereby making it illegal to exceed relevant

national and local emissions standards. Previously,

enterprises exceeding such standards were made to pay

levies; under the new law such enterprises will be

fined, abatement deadlines may be imposed, and closures are possible. 

36 U.S. Department of Commerce, International Trade Administration
The law also authorizes the State Council and SEPA

to designate the following special regions for the implementation of more stringent measures:

● Acid rain control and SO2 control zones

● Total emissions control zones for air emissions

● Key air pollution prevention and control cities (the

number of which is mandated to rise to 100 during

the Tenth Five Year Plan).

Crude lump coal containing high SO2 and soot concentrations must undergo a washing process before use.

The sale of coal-burning devices unable to meet relevant emissions standards is banned. Newly designed

urban structures depending on coal for fuel must

include central heating facilities. Fireproof and dustproof coal storage facilities are requisite. 

The manufacture, sale, and importation of automobiles and ships failing to meet relevant emissions standards are banned. Provincial governments, when

issuing new emissions standards for automobiles and

ships, must get approval from the State Council.

Provincial EPBs can authorize organizations to conduct

air emissions checks for automobiles and ships, and

local EPBs can conduct random examinations of automobile emissions systems in parking lots. 

Industrial enterprises discharging dust must take relevant preventive and control measures. Flammable

gases must be reutilized if the relevant facilities are

available; otherwise, gases must be processed to reduce

pollutants prior to discharge. Measures to reduce sulfur,

synthetic ammonia, and coal gas must be taken where

applicable. Measures to control dust must be taken at

construction sites. 

In keeping with China’s commitment to the Montréal

Protocol, measures to encourage the production and utilization of substitutes for ozone-depleting substances

will be taken by central and local governments with the

intention of phasing out the use of all ozone-depleting

substances. 

The Solid Waste Management Law of the PRC

SEPA is charged with the general administration of

solid waste management nationwide. Other ministries

coordinate with SEPA and conduct administration of

solid waste management within their official jurisdictions, and local EPBs and government bodies fill their

respective roles on a local basis. The Ministry of

Construction and local municipal public works bureaus

are in charge of the administration of collecting, sorting,

processing, storing, transporting, and disposing of

municipal solid waste. 

Stipulations aim to minimize the production of solid

waste, promote its reutilization, and, wherever possible,

mitigate its harmful capacities. To do this, the state

encourages and supports clean production, comprehensive resource utilization, scientific and technological

research and development, and popularization of technologies suited to solid waste management.

To prevent and appropriately manage industrial solid

waste, SETC in concert with other ministries must

research, develop, and popularize techniques and equipment aimed at reducing the production of solid waste.

Additionally, lists of “backward” techniques and equipment are published, and the production, sale, and use of

such items are outlawed.

The Environmental Noise Pollution Prevention and

Control Law of the PRC

The Environmental Noise Pollution Prevention and

Control Law of the PRC charges government bodies

with the establishment and enforcement of environmental noise pollution standards. The law includes provisions for the prevention and control of industrial noise

pollution, construction noise pollution, traffic noise pollution, and noise pollution caused by social activities. In

the cases of industrial and construction noise pollution,

measures must be taken to reduce or dampen noise, and

time frames are to be established to further regulate the

allowance of varying levels of noise. In the case of traffic-caused noise pollution, all motor vehicles, including

water vessels navigating inland bodies of water and railline locomotives, are to employ sound-dampening

apparatus and restrict the use of horns and sirens within

the limits of the law. It is required that sound-dampening barriers be built in instances where traffic-related or

other sources of noise pollution cannot be brought within the limits of the law.

Environmental Protection Policies for Western

Development

The Chinese government has defined five key priorities for the development of the poorer western regions.

However, the development strategy is dichotomous in

the sense that industrial and infrastructure development

are being strongly pushed while at the same time environmental protection and sustainable development will

be maintained. 

The potential for this development drive to cause

problems for the already desertified and polluted western

areas is significant. Most western provinces suffer severe

China Export Market Plan 37
water shortages, and Lanzhou, the capital of Gansu

Province, is among the world’s most polluted cities. 

Industry is the foremost contributor to western pollution. In comparison with industries in eastern and southern cities, western industries are outdated, inefficient,

and highly polluting. In addition, as coastal regions

attempt to clean up polluting factories by shutting them

down or charging steep fines, these same industries are

pushed to the west, where pollution regulation and

enforcement are more difficult. The hope is that greater

investment brings more efficiency to the region and that

closer government attention eliminates the frontierlike

attitudes that have so far contributed to its deterioration. 

The government places a high priority on environmental protection, investing large amounts in tree- and

grass-planting schemes to stabilize soil and water

resources. However, the western population consists

mostly of rural farmers, among whom are China’s

poorest. Many of these people depend on farming as

their primary source of income and on forest resources

for cooking and heating. Most of their practices of irrigation, agriculture, and forest resource use are highly

inefficient and have a heavy impact. Tree felling for

fuel contributes to massive desertification, poorly managed irrigation leads to salinization and inefficient

water use, and improper use of fertilizer and pesticides

causes untold non-point-source environmental complications. It remains to be seen how the agricultural sector will be “restructured” so that the members of the

local population may retain their livelihood and in fact

better their practices. 

The most pressing concern for the time being is the

lack of water. Serious droughts afflict the region each

year, and water management is practically unheard-of.

Unsustainable farming practices have taken root, and

multilateral irrigation projects have not been successful

outside of project bounds. If western development goes

as planned, the demand for water will soar. The government’s solution—to divert water from the Yellow

River—could have disastrous effects on regions of

southeastern China.

Legal Trends in the Environmental Field 

As a result of amendments to the Air Pollution

Prevention and Control Law, governments at all levels

must now include measures for atmospheric protection

in all economic and social development plans. Similarly,

the awaited environmental impact assessment law will

likely require EIAs to be included in the formulation of

such plans. Thus, a more comprehensive approach to

environmental monitoring and protection is developing

within the legislation itself. At the same time, legal bases

are being developed to promote and support cleaner production, emissions trading, and market-based incentives,

and a growing recognition of the need for legislation

regarding the comprehensive utilization of natural

resources exists. Finally, a definitive shift from concentration-related regulations and end-of-pipe pollution

control to a holistic approach to pollution control (manifested in TEC) is undoubtedly taking place.

Environmental Impact Assessment (EIA) Law 

Major issues expected to be addressed by this new

law include expanding the activities that require an EIA

to include the formulation of laws, the formulation and

implementation of national economic and social development planning, and the formulation and implementation of economic and technological policies; conducting

EIAs at an earlier stage of the approval process; carrying out post-EIAs to regulate activities with a potentially serious impact on the environment; and providing for

public disclosure of EIAs.

Cleaner Production Law 

SETC is the leading authority regarding clean production and the Cleaner Production Law, which may

have implications for new investment and facility

upgrades. The latest draft (issued in July 2000) includes

procedures concerning the formulation of clean production standards, requires that evaluations of clean production be incorporated into EIAs, established efforts

for the promotion of clean production, and sets legal liabilities for violations of the law. The draft also provides

for the identification of enterprises with large production potential but severe pollution problems and allows

for special measures to assist such enterprises in the

development of cleaner production. In the meantime,

pilot activities have been carried out in several industries, among them petrochemicals and chemicals, steel

and iron, and light industries in Beijing, Tianjin,

Shenyang, Taiyuan, Jinan, Fuyang, Lanzhou, Shanghai,

Chongqing, and Kunming.

Water Pollution Law 

The amended Water Pollution Law presently being

discussed by the State Council will most likely facilitate

proper exploitation, effective use, and unified management of water resources with particular emphasis on

water shortage, water pollution, and flood prevention

38 U.S. Department of Commerce, International Trade Administration
China Export Market Plan 39

projects. It is also expected that the Water Pollution

Law will be revised according to the same principles as

the Air Pollution Law; however, details have not yet

been published.

Selected References and Web Sites

References

Gan Shijun and Chen Yuxiang, eds., Sustainable

Development—A Trans-Century Decision (Beijing:

Chinese Communist Party Training School Publishing

House, 1997).

Li Zhou and Sun Yanmei, Environmental Issues In

China (Henan: Henan People’s Publishing House,

2001).

State Environmental Protection Administration, China

Environmental Protection Agenda 21 (Beijing: China

Environmental Science Publishing House, 1995).

State Environmental Protection Administration, China

Environmental Protection Laws and Regulations

Collection, Volume 1–4, (Beijing: Xueyuan Publishing

House, 1997, 2000, 2001).

State Environmental Protection Administration,

International Environmental Conventions and Treaties

Collection China Entered (Beijing: Xueyuan

Publishing House, 1999).

State Environmental Protection Administration, Local

Environmental Protection Regulations Collection

(Beijing: Xueyuan Publishing House, 1999).

Wang, Jin, The Principles of Chinese Environmental

Law (Beijing: Beijing University Publishing House,

2000).

Web Sites

People’s Republic of China, State Economic and Trade

Commission (Chinese only): 

www.setc.gov.cn/

People’s Republic of China, State Development

Planning Commission (Chinese only):

www.sdpc.gov.cn/

People’s Republic of China, State Economic and Trade

Commission (Chinese only):

www.setc.gov.cn/bwlj/setc_bwlj.htm
40 U.S. Department of Commerce, International Trade Administration

Per capita water resources in China are equivalent to

only 26 percent of the world average. The northern

part of the country is plagued by severe water shortages and the widespread contamination of most surface water and groundwater. The southern part of the

country, meanwhile, is subject to annual floods, in

addition to its own widespread pollution. The Yangtze

River clearly delineates water resource disparities

between North and South China; south of the Yangtze,

81 percent of the country’s total water resources face

serious pollution from upstream contamination, while

to the north heavy industrialization and urbanization

contribute to the degradation and misuse of the

remaining 19 percent.

Water supply and quality constraints have prompted

the government to begin discussion of an immense

South to North water diversion scheme, intended to

pump water from the Yangtze to drought-afflicted cities

such as Beijing and Tianjin in the North. The project

may offer opportunities to foreign technology

exporters. That such a major project is underway indicates the severity of water issues in the North.

Over half of the Chinese population does not have

access to potable water, and recently the government

conceded that there are no exploitable clean water

resources left anywhere in the country.

Overexploitation and misuse of groundwater in the

North have caused widespread declines in the water

table, and pollution often renders hazardous what is

available. Although data are limited, it is thought that

overflowing septic tanks and leaking sewers contribute

to much of the deterioration. Similarly influential is the

intrusion of pesticides and heavy metals from agriculture and industry. Aquifers in coastal areas are experiencing seawater intrusion and are becoming brackish as

a result. 

The state intends to focus considerable public environment and resource protection spending over the

next decade on water supply, water treatment, and

water pollution problems. Enormous investments and

changes in the enforcement of regulations can thus be

expected in the next few years. As an example, a

November 2000 State Council notice, the Notice on

Strengthening Water Supply, Water Conservation and

Water Pollution Prevention in Cities, stipulates that all

cities must build sewage treatment plants during the

Tenth Five Year Plan and that all cities should have at

least 60 percent of their sewage undergoing treatment

by 2010 (70 percent in provincial capitals and major

tourist cities). Currently, according to recent statistics,

urban sewage discharges equal 137 million tons per

day across the country, as much as 90 percent of which

goes untreated. 

Water-related exports in a number of subsectors have

found markets in China, despite barriers. Table 4.1 lists

dollar values for these, serving as some indication of

current markets and future potential. Considering

heightened awareness, the growing need for suitable

water resources, and the increasing propensity toward

the development of market-based tools and incentives,

these numbers are likely to grow and the range of market opportunities will increase.

Policy Framework

Pricing and Market-Based Tools

According to the Notice on Increasing Wastewater

Treatment Fees and Establishing an Urban Wastewater

Treatment System, issued in October 1999 by SDPC, the

Ministry of Construction, and SEPA, wastewater treatment fees shall be based on the operation and maintenance costs of wastewater treatment plants. Effective

from Nov. 1, 1999, the wastewater treatment fee—

based on volume—is combined with the water supply

fee and collected centrally; the actual fee is still subject

to the influence of local conditions. Urban public utility bureaus are in charge of fee collection, and wastewater treatment plants receive an appropriate allocation

of funds each month. Table 4.2 reflects the price

changes of November 1999 in three key cities. 

As these fees were still too low to establish an incentive-based environmental protection scheme, the year

2001 saw additional price hikes.

Chapter 4

The Water Sector
China Export Market Plan 41

Current Concerns and Priorities

Discharge of industrial and municipal wastewater represents the top priority for the Chinese government.

Non-point causes of water pollution such as the overuse

of fertilizers and pesticides are increasingly pressing

issues that need to be addressed.

All government officials contacted for this study stated that China is focusing the bulk of its environmental

initiative over the next few years on water projects,

specifically in the “three lakes, three rivers” areas (the

Huaihe, Haihe, and Liaohe basins and the Taihu, Chaohu,

and Dianchi Lakes). Changes in Chinese regulations

include stepped-up requirements for water treatment

capacity; however, few or no funds are provided to facilitate these, leaving municipalities and industries to search

for creative means of financing requisite initiatives. 

In 1998, wastewater treatment projects accounted for

58 percent of pollution control spending, representing the

largest allocation of the environmental budget to an individual sector. In 1999, overall environmental budget

spending on wastewater projects was decreased to 52

percent, with an increase in air pollution treatment. The

Tenth Five Year Plan (2001–2006) places more emphasis

on water conservation methods and supply infrastructure,

but the government continues to emphasize cleanup and

antipollution measures. 

Although issues of poor enforcement remain, the

power and acumen of local authorities are increasing. As

an example, over 1,000 businesses in the Huai River area

Table 4.1 Water Treatment Products: U.S. Exports to China (FAS value in thousands of U.S. dollars)

HTS Number HTS Description As of April 2001 2000 1999 

39269 Biofilm medium, woven fabric sheets 16,490.1 39,314.7 23,609.2 

46012 Erosion control matting, ecologically safe 

ground covers 0.0 53.8 70.3 

560314 Manmade-filament fabric for wastewater 

filtration 275.7 737.3 434.7 

591190 Environmental protection cloth 1,104.0 2,551.3 3,197.9 

84136 Submersible mixer pumps to circulate 

wastewater, sewage pumps 456.5 3,272.0 3,148.3 

84137 Centrifugal pumps lined to prevent corrosion, 

centrifugal sewage pumps 1,987.3 11,098.0 5,878.7 

841381 Wind turbine pumps 4,481.1 2,628.7 1,772.0 

842121 Filtering or purifying machinery 26,544.1 35,350.0 25,596.9 

842129 Filtering or purifying machinery, other 1,874.1 7,194.6 7,505.0 

842833 Belt-type aboveground conveyors used to 

transfer solids or slurries between plants 7.7 1,736.8 3,285.5 

84368 Hot-water weed-killing systems 250.9 1,047.0 260.2 

847982 Agitators for wastewater treatment other than 

kneading machinery 3,813.0 4,249.7 3,470.6 

854389 Ozone production systems 9,756.8 32,243.5 11,619.3 

Source: U.S. International Trade Commission, USITC Trade Database, www.dataweb.usitc.gov.
42 U.S. Department of Commerce, International Trade Administration

were forced by local governments to close for environmental non-compliance in late 2000. By some estimates,

as many as 70 percent of those reopened within three to

six months. However, new regulatory initiatives are

increasing demand for management systems.

Water Pollution and Market Prospects

Ten years ago, central water pollution control concentrated on discharges by state-owned industrial

enterprises. Now, private enterprise overshadows the

state-owned sector. Industrial output has swollen, along

with the wastewater output that goes largely untreated.

Meanwhile, municipal wastewater, in terms of total pollution, has more than doubled. Agricultural pollution is

a worrying contributor, affecting not only lakes and

reservoirs but also groundwater and coastal areas.

Control measures are often sporadic or ineffective.

According to various sources, between 80 and 90 percent of wastewater still flows into China’s rivers and

lakes without any treatment at all. 

State targets aim for sewage treatment rates of 40

percent by 2010, with daily treatment capacity

increasing by 50 million to 60 million tons. This will

require investments of as much as RMB 200 billion to

Table 4.2 Water Treatment Price Changes in Beijing, Guangzhou, and Shanghai

City Date of Change Type Price per m3 before change Price per m3 after change 

Beijing November 2000 Residents RMB1.60 (1.30 water+0.30 RMB 2.00 (1.60 water+0.40

pollution levy pollution levy)

$ 0.19 (0.16 water+0.04 $ 0.24 (0.19 water+0.05

pollution levy) pollution levy) 

Enterprises RMB 2.10 (1.60water+0.50 RMB 3.20 (2.40 water+0.80

pollution levy) pollution levy)

$ 0.25 (0.19 water+0.06 $ 0.39 (0.29 water+0.10

pollution levy) pollution levy)

Guangzhou May 2001 Residents RMB 1.00 (0.70 water+0.30 RMB 1.20 (0.90 water+0.30

pollution levy) pollution levy)

$ 0.12 (0.08 water+0.04 $ 0.14 (0.11 water+0.04

pollution levy) pollution levy)

Enterprises RMB 1.23 (1.05 water+0.18 RMB 1.52 (1.25 water+0.27 

pollution levy) pollution levy)

$ 0.15 (0.13 water+0.02 $ 0.18 (1.15 water+0.03 

pollution levy) pollution levy) 

Shanghai December 2001 Residents RMB 1.58 (0.88 water+0.70 RMB 1.73 (1.03 water+0.70 

pollution levy) pollution levy)

$ 0.19 (0.11 water+0.08 $ 0.21 (0.12 water+0.08

pollution levy) pollution levy) 

Enterprises RMB 1.80 (1.10 water+0.70 RMB 2.00 (1.30 water+0.70 

pollution levy) pollution levy)

$ 0.22 (0.13 water+0.08 $ 0.24 (0.16 water+0.08 

pollution levy) pollution levy) 

Sources: Beijing Water Supply Company (http://finance.sina.com.cn); Guangzhou Water Supply Company; Shanghai Water Supply

Company (www.hwcc.com.cn).
China Export Market Plan 43

300 billion ($24.2 billion to $36.2 billion), excluding

operating costs.

Industrial Discharge

According to World Bank estimates, Chinese industries discharged over 20 billion tons of wastewater in

1999. Discharge rates rose sharply between 1990 and

1995 and then declined through 1999 due to the economic slowdown, restructuring, increased regulatory

effectiveness, and new measures for protection. A major

incident in the Huai River in 1994 prompted a series of

emergency measures and several national regulations,

including the closure of 15 categories of TVIEs

throughout the country. 

Nevertheless, little progress in regard to more

conventional approaches to industrial wastewater

management was made during the 1990s. The enforcement efficacy of EPBs at the local level remains wanting, and Chinese industries continue to install

treatment facilities to meet requirements and then shut

them down when not monitored in order to save on

operation costs.

In addition, although the proportion of treated industrial discharge rose considerably throughout the 1990s,

the quality of that treatment declined, often falling

below Chinese standards. This supports the conclusion

that, although increasingly comprehensive regulations

are in place regarding discharge treatment, facilities are

often of low quality and management and operations

skills are tremendously lacking. 

Municipal Discharge

In 1998, officials at SDPC estimated that the urban

population of China comprises about 36 percent of the

nation’s citizens. In an effort to manage a host of environmental and resource-related issues, the government

intends to increase that number to about 45 percent.

However, current and planned municipal sewage systems lack the capacity to manage the accompanying

increased waste. Upgrades in both capacity and quality

of treatment are required, as are vast extensions and

renewals of sewer pipelines and other support systems,

many of which date from the 1950s. 

Interestingly, although the total sum of wastewater

flows and COD loads (from industrial, municipal, and

agricultural sources) increased only slightly in the past

10 years, municipal wastewater as a proportion of total

discharges nearly doubled in volume and impact. In

large urban centers, municipal wastewater surpassed

industrial contributions for the first time in 1998.

The rate of municipal sewage treatment is estimated

to be around 10 percent to 13 percent per annum, clearly an improvement over the rate of 4 percent in 1991 but

still quite low. The World Bank notes that currently

installed municipal treatment facilities are only used at

about 70 percent of capacity, supporting the view that

operators and municipalities need more training and

management skills. The government plans to initiate

rehabilitation programs and improve operation in many

of these existing plants.

Market Opportunities. China began constructing largescale municipal wastewater treatment plants in the

1980s. According to one industry authority, there are

currently only 178 large-scale, modern municipal

wastewater treatment plants in the country, with about

100 more under construction. The government hopes to

increase the total number to 1,000 by 2010 and plans to

invest over RMB 15 billion ($1.8 billion) in order to

raise the rate of treated urban wastewater to at least 50

percent within the next decade. In key cities such as

Beijing, the goal for the rate is set still higher, at 70 percent to 80 percent. 

According to several sources, the Ministry of

Construction is restructuring the water treatment sector. Officials indicate that the state will sell operating

licenses for city sewer systems, water distribution, and

water treatment. Businesses will still be state regulated and state owned, but not majority owned. This

should significantly increase foreign firms’ access to

profitability.

Late 2000 saw the approval of China’s first domestic

build-operate-transfer (BOT) municipal sewage treatment project. The Beijing Sangde Environmental

Protection Industry Corporation will invest in, construct, and operate two sewage treatment plants in

Xiaojiahe and Tongzhou. In mid-2001, the Beijing

Sound Environmental Protection Enterprise Group

committed to building sewage treatment plants in a

dozen Chinese cities using the BOT model. Service fees

paid to companies operating the plants following construction will service the debt incurred by the Sound

Group, which expects to recoup investment and begin

turning profits after the first 10 years of operation.

Foreign investors with both the financial resources

and the capacity to enter long-term markets may be able

to devise favorable arrangements for investment. A

number of foreign companies are already engaged in

water management projects, which, although they are

not currently generating significant profits, are allowing

for market entry, pilot project development, networking, and other key preliminary steps to large-scale

market entry.
44 U.S. Department of Commerce, International Trade Administration

Smaller-scale exporters, particularly those not looking to invest in the market long-term, might look to

these investors for marketing opportunities. There is

also reason to believe that domestic investors in water

management (for instance, those mentioned above, or

local governments in relatively affluent areas) may

begin to provide increasingly viable markets for such

exporters. As demand for water management increases

and local budgets and central financing continually

shrink, investors will seek better long-term values when

making investments. According to one domestic expert

in the field, some in the industry are finally waking up

to the fact that an initial investment in more expensive

but higher-quality equipment is more viable than purchasing poorer-quality domestic materials and then covering maintenance costs down the line.

Erosion, Agriculture, and Livestock Runoff

Non-point water pollution resulting from fertilizer and

pesticide runoff, intensive livestock production, soil erosion, and other agriculture-related factors are exacting

significant tolls on China’s ecology and can be expected

to increase in severity due to difficulties in prevention

and enforcement. 

Nutrient-rich runoff, low-quality fertilizers, and soil

erosion are contributing to the growing eutrophication of

major water bodies. Overapplication of pesticides and the

use of hazardous pesticides are responsible for significant

contamination of groundwater, the detection of pesticides

in a variety of Chinese foods, and the degradation of over

13 million hectares of cropland. Untreated livestock

wastes already account for a disproportionate amount of

industrial COD loads in some farming regions. A World

Bank study estimated that livestock production in

Chengde might account for 80 percent of its current

industrial COD load. Unfortunately, little data exists on

the issue of non-point pollution, and few prospects for an

improved situation in the near future present themselves.

Market Opportunities. The government’s role in directing farming activities appears to be declining, making

agricultural and livestock runoff more difficult to control.

Current efforts seem to focus on identifying the sources

of problems, which will involve increased water quality

monitoring and more elaborate and complete analyses of

data. However, the current monitoring system is in disarray, and both SEPA and the Ministry of Water Resources

maintain separate monitoring systems with little coordination. Additionally, the location of stations, the frequency of sampling, and issues involving other methods and

standards must be overhauled in order to generate an

accurate overview of the state of water within China. The

government is hoping for a complete overhaul to upgrade

existing monitoring capabilities, including extensive

investments in technology and equipment. 

Additionally, the government is seeking innovative

and large-scale solutions, such as prevention of soil loss

and degradation, improved irrigation schemes, and reclamation of livestock wastes for fertilizer use. (See Chapter

8 for further details on management of resources.)

Water Supply and Market Prospects

According to 1999 statistics, the amount of groundwater extracted in China totals more than 100 billion

Box 6. PACT Case Study

PACT is an engineering company specializing in the custom design, manufacturing, and contracting of water treatment, wastewater treatment, and membrane separation equipment. PACT China acts as a WFOE that conducts design and construction

activities primarily for foreign industries operating in-country. 

Although the bulk of current PACT projects are for foreign multinationals, the company is moving toward the Chinese market. The management believes that economic and market factors are slowly changing, thus making such a move possible;

Chinese end users are increasingly willing to purchase JV or WFOE wastewater management products because they believe

the additional costs of higher-quality products are worthwhile over the long term. 

Unlike Vivendi, Suez-Lyonnaise des Eaux, Thames and Bovis, and other large conglomerates, PACT pursues a smaller subset of projects, utilizing an “economies of scale” principle in order to maximize profits. The majority of its projects are completed for considerably lower fees than would normally be received for similar operations in the U.S. However, many of the

materials and pieces of equipment are manufactured in China, and by increasing market size as a result of reduced retail prices,

PACT has managed to increase its client base and balance its expenditures. 

As one PACT representative sees it, multinationals tend to use criteria such as references, financial stability, and successful reputation when choosing a contractor. However, personal relationships are most often the deciding factor when Chinese

parties are investing in water treatment projects.

All in all, the company feels strongly that, despite some difficulties, PACT has already developed a reasonably strong market presence, something widely seen as a key for success in this developing market.
China Export Market Plan 45

tons annually, accounting for more than 20 percent of

total water use in the country, in comparison with the 2

to 3 billion tons extracted per year in the 1960s. Serious

overextraction of groundwater is resulting in significant

effects such as subsidence at rates exceeding 25 to 40

millimeters per year in some cities. The groundwater

tables of more than 100 cities are declining at a rate of

2 to 3 meters per year. In coastal cities of eastern China,

the continued water table decline has caused more than

1,500 square kilometers of seawater intrusion into

underground reserves.

Inefficient use of the limited water supply exacerbates the country’s situation. China recycles only 20–30

percent of its industrial water, and consumption per

industrial product is 13 times higher than in the United

States. Similarly, only 25–30 percent of irrigation water

is effectively utilized due to the inadequacy of most irrigation schemes. It is estimated that 2.5 million tons of

potential grain yield are lost each year due to inefficient

water usage.

Municipal End Users

Following the lead of cities such as Tianjin, Beijing

introduced its first water conservation mandate, as well

as a water resources committee headed by the mayor, in

December 2000. Under the new regulations, retailers

selling flush toilets with a volume of over nine liters are

fined, as are car-washing facilities that do not install

water-saving or water-reusing devices. Coupled with a

water price hike, these measures have already helped

boost sales of water-efficiency devices such as lowflow showerheads and taps. Nanjing, Guangdong, and a

number of other municipalities announced water-saving

rules in 2001. 

The services and equipment most needed by local and

municipal governments are both high- and low-technology products, including monitoring systems, pumps,

valves, detection devices, and aerators. Guangdong

Province, for example, is installing a world-class watermonitoring system over the next 10 years with an investment of over RMB 450 million (about $54 million).

Throughout China, small to medium-sized cities need

technologies custom-tailored for size, economic, and

logistical requirements. As investment opportunities

increase, the ability to provide “total water management” is also important. 

Industrial End Users

Increasingly, industries find the water in their areas

too polluted to use in manufacturing processes or for

aquaculture purposes. The pharmaceutical, food-processing, and fish-farming industries are only a few of

those affected by this development. On-site water

purification systems are thus sought out, and demand is

increasing. As both private and state-owned enterprises

are increasingly subjected to the demands of intensifying market competition, Chinese industries investing in

such systems may once again find it wise to acquire

more expensive, higher-quality equipment rather than

cover the costs of maintaining lesser-quality equipment

over the long term.

According to Tenth Five Year Plan targets, industrial

water use increases will be stabilized at 1.2 percent per

annum, while the volume of industrial water that is

recycled and reused will increase by 60 percent, again

producing demand for both equipment and management

skills. The government has also announced aggressive

plans in the aquaculture sector to reduce waste, resulting in the implementation of water-saving and waterreuse technologies. Hotels and housing developments

also need water treatment systems to service their

own needs.

Equipment suppliers should find the most receptivity

to their products among multinationals, JVs, and

WFOEs. While the importance of quality and the merits of foreign technology are increasingly important,

cost differentials and local protectionism continue to

influence a considerable percentage of Chinese enduser demand for some time to come. As stated throughout this report, there are indications that this is

changing; nonetheless, the changes will be slow

in coming.

Table 4.3 Total National Investment in Antipollution Projects, 1999

Projects Under Completed Investment Investment in 

Construction in Antipollution Projects Wastewater Treatment

National Total 14,374 RMB 12,204.61 billion RMB 7,167.94 billion 

Source: Chinese Statistical Yearbook, 1999. (Available online at www.stats.gov.cn/english).
46 U.S. Department of Commerce, International Trade Administration

Sales Prospects, Technology, and Equipment

Despite the fact that it is more expensive than that of

domestic competitors, U.S. technology (along with that

of Germany and France) is recognized throughout

China as being high quality and state of the art. On a

number of occasions, in implementing demonstrations

of high-tech water treatment infrastructure and facilities, attempts have been made to secure as much U.S. or

other foreign technology and equipment as possible. If

this is any indication of future market trends, demand

for foreign equipment may rise.

Water Monitoring Equipment 

The U.S. remains strong in the field of water monitoring equipment sales and operational training. China

desperately needs methods to gauge the extent of its

water problems accurately and to monitor the effectiveness of treatment and projects. Monitoring equipment

and management remains a key sector for U.S. manufacturers, as Chinese production in this sector is lacking.

Turnkey Solutions to Large-Scale Water

Treatment Problems

Many authorities and enterprises cite the need for

“turnkey” solutions. Strong competitors in the water

market must provide solutions tailored to the individual

needs and requirements of the client, be it a municipality, an economic zone, or an industry. The most successful foreign companies in water infrastructure have

invested heavily in China, are in the market for the long

term, and maintain some degree of in-country presence. 

Home Water Filter Systems 

A plethora of home water treatment and filter systems

exists in department stores and retail shops. However,

quality treatment systems are not affordable or in some

cases even available; thus, most home- or apartmentowning families purchase Chinese-made filters of low

quality. Research indicates that the majority of Chinese

families would pay more for a unit that was known to be

first-rate if it was assured to stand up to several years of

use with low-quality Chinese water and if replacement

or servicing of core parts was available and affordable. 

U.S. Market Share in Large-Scale Investments

and Foreign and Domestic Competition 

There is fierce competition in the Chinese water

treatment and supply market. Leading companies, such

as France’s Degremont, utilize worldwide subsidiary

networks to obtain projects involving bilateral financing. These projects require a large initial investment,

considerable time to generate returns, and significant

experience in large-scale water infrastructure development. Similarly positioned operators include France’s

OTV, Holland’s DHV, Germany’s Siemens, Belgium’s

Seigas, and a number of other German, Austrian, and

Spanish companies (see Table 4.4). 

Additionally, U.S.-based ITT Industries and its

Chinese JV partners announced in November 2000 two

contracts in different provinces to supply water pumps

at a cost of almost $1.8 million. The operations of

PACT (see Box 6) are also of significance for smallerscale operations. 

Multilaterally financed projects represent the largest

opportunity for U.S. firms. However, companies that

want access to these opportunities must monitor developments long before project bids are announced. Most

deals in the water industry, and for that matter in almost

every industry in China, are the result of serious investigation and long-term pursuit. 

In addition to the major multilateral institutions, such

as the World Bank and the Asian Development Bank,

there are a variety of domestic and internationally supported programs that focus on water treatment infrastructure in China. Of particular interest to the water industry

are the Trans-century Green Project Plan (1997–2012), in

which approximately 50 percent of all projects are waterrelated, and the Center for Environmentally Sound

Technology Transfer (CESTT), sponsored by China’s

Ministry of Science and Technology. 
China Export Market Plan 47

Selected References and Web Sites

References

“China Will Establish Real-Time Water Monitoring

System on Big Rivers.” China News Service. Jan. 18,

2001. 

“Environmental Pollution Costs China RMB 283 billion per Year.” Huasheng Monthly. Oct. 10, 2000. 

“First Water-Use Rights Deal Completed in Zhejiang.”

ChinaOnline, Feb. 22, 2001. 

“Mainland’s Largest Wastewater Treatment Plant Starts

Operation.” ChinaOnline. Mar. 26, 2001. 

“Tapping into an Outside Source: UK to Give

US$10.88M to Aid in Water Shortage.” ChinaOnline.

Sept. 15, 2000.

“Toxic Water Tragedy in Liaoning Province.”

Guangzhou Daily, Sept. 6, 1999. 

“Water Damaged: Pollution Ravages China Rivers:

Urban Waterways Hardest Hit.” ChinaOnline, Aug. 3,

2000. 

“Water Pollution Threatening Water Supplies in Cities.”

Beijing Youth Daily, July 3, 2000. 

Web Site

www.H20-china.com www.h2o-china.com. (Provides

information, particularly news translations, related to

water projects and the water treatment industry in

China.) 

Table 4.4 Examples of Large-Scale Investors in Chinese Water Management

Country Company Investment Amount and Project Locations

France Suez-Lyonnaise des Eaux Total investment: $120 million, including $28 million for 

Shanghai Huangpu River project 

CGE Total investment: $780 million for projects in Huizhou 

(Guangdong Province), Xi’an, Shanghai, Tianjin, Chengdu, and 

other areas 

Degremont Investment in 50 water treatment systems in Beijing, Guangdong, 

Hangzhou, and other areas 

Germany Siemens Has invested or capitalized on aid finances in excess of 

$300 million 

United Kingdom Thames Water and Bovis $68 million for Shanghai water treatment project; $25 million for 

Guiyang water supply system 

Anglian Water Total investment: $16 million 

United States Nalco Chemicals $3 million for Suzhou project 

Lemna International $120 million for Guangzhou Xilang project 

Source: Xin Kuai Bao, August 5, 2000.
48 U.S. Department of Commerce, International Trade Administration

In general, Chinese municipal solid waste collection

systems, although somewhat obsolete, are reliable and

maintain a consistent level of sanitation. In contrast,

transfer and disposal systems are inefficient and of poor

quality, endanger public health, contaminate groundwater, and consume already scarce amounts of arable land.

Due to a combination of scarce funds, inadequate

infrastructure, poor enforcement of disposal and treatment standards, a lack of skilled waste facility operators, and the inability of local companies to produce

modern waste management equipment, the explosive

growth of solid waste produced annually in China

threatens to overwhelm the infrastructure and become a

severe economic and environmental burden.

By the end of 1999, Chinese cities produced 940

pounds of trash per person annually, with that rate

increasing by 8–10 percent each year. Disposal methods

are so inadequate that over 200 of more than 650 cities

surveyed are surrounded by hills of waste. As of August

1999, more than 6 billion tons of municipal refuse had

accumulated and claimed 5.4 billion square feet of land

in China.

Over half of the municipal solid waste in China is

composed of organic content such as food wastes, and

plastics and polystyrene compose the majority of the

bulk, as most metals and other resalable materials are

scavenged. 

China generated between 600 and 750 million tons of

industrial solid waste in 1999. Hazardous waste statistics vary wildly, but estimates range between 5 and 30

million tons annually, much of which goes untreated.

Hazardous wastes are often incinerated and disposed of

improperly and are frequently mixed in with non-hazardous waste in landfills and dumps. China hopes to

improve its management of hazardous wastes by developing facilities, training workers, increasing awareness,

and at some point implementing international hazardous

waste standards. 

Waste Management Legislation

and Policy Priorities

Fundamental waste management legislation in the

PRC consists primarily of the 1996 Solid Waste

Management Law, pre-1996 municipal waste regulations, and the 1997 Hazardous Waste Management

Regulations.

The responsibility for municipal solid waste collection and disposal rests primarily with municipal and district governments (districts are semi-autonomous

subunits of a city). Municipal solid waste management

administrators, refuse collectors, street sweepers, and

refuse transportation and disposal personnel are all government employees. 

Municipal solid waste management is funded directly by the municipal government. A uniform tariff on

waste collection and treatment has yet to be established,

but in some cities residents are charged a fraction of a

percentage of their monthly income for this service.

Waste collection fees cover only a portion of the cost of

managing the waste. Commercial waste is managed in

conjunction with residential waste, while industrial

waste is supposed to be managed separately by the

industry that generates it. 

Several entities at the municipal level are responsible

for solid waste treatment. These include municipal sanitation bureaus, EPBs, municipal construction bureaus,

and municipal planning and development bureaus. 

The municipal sanitation bureaus are responsible for

daily waste collection, transportation, and centralized

garbage treatment including landfills and incineration

plants. These bureaus control solid waste collection,

transfer, and treatment technologies and equipment. The

municipal EPBs are responsible for the issuing of local

solid waste control regulations, compliance monitoring,

and enforcement. Municipal construction bureaus plan

and manage construction projects including the establishment of landfills and incineration plants. The municipal planning and development bureaus coordinate,

evaluate, and approve solid waste treatment projects. 

Government Priorities and Trends

Since the second half of 1999, 10 cities and

provinces have initiated tariff systems for waste disposal, among them Beijing, Chengdu (Sichuan Province),

Nanjing (Jiangsu Province), Shenyang (Liaoning

Province), and Zhuhai (Guangdong Province). In

Beijing, for example, households with permanent resiChapter 5

The Solid Waste Sector
China Export Market Plan 49

dents must pay RMB 3 ($0.36) monthly, and households

with non-permanent residents RMB 2 ($0.24) monthly.

The national government has also expressed support

for the “polluter pays” scheme used in most developed

countries. In line with this, China plans to levy an

industrial solid waste generation and disposal fee on

plants and enterprises and an urban domestic refuse

treatment fee on citizens. These fees will be used to

finance solid waste infrastructure. However, for the next

few years, funding for waste projects will remain

unavailable except through multilateral or bilateral

agencies, as heavy priority is being placed on water and

air pollution projects. 

The use of market-based instruments has not been

sufficiently developed to make public utilities projects

such as waste management economically feasible for

municipalities or attractive for private investment. Thus,

the domestic prioritization of air and water management

has left local governments in perpetual search of foreign

funding in order to meet their waste management needs.

Until such measures as fee-based waste disposal become

profitable, there will be little market for high-technology

goods except through international projects, innovative

schemes formulated by equipment suppliers, and possibly technology and financing consortia.

Although private investment remains unattractive

into the near future, timely market positioning is key.

Precisely because waste management services in

China have not yet become mainstream, now may be

the best time to begin a market positioning strategy.

After this sector begins to become profitable, those

companies that have been nudging the doors open for

several years are likely to reap the greatest benefits,

provided they have ample funding to wait out the market developments. This will certainly require active

and persistent effort. 

Waste Reduction and Recycling

As is the case in many developing countries, China’s

best hopes for environmentally friendly and practical

solutions to its immense waste management concerns

lie largely in the reduction of waste. There is much disTable 5.1 Solid Waste Management–Related U.S. Exports to China (thousands of U.S. dollars)

As of 

HTS Number HTS Description April 2001 2000 1999

84178 Waste incinerators 766.2 3,322.9 827.8 

84179 Parts for 84178 1,459.3 14,155.4 7,317.4

842220 Machinery for cleaning and drying bottles and containers 70.1 410.4 1,372.2

846291 Shredders, balers for metals, hydraulic presses 69.4 375.9 231.0 

847290 Paper shredders 624.3 4,570.0 4,155.7

84741 Waste foundry sand reclamation equipment 1,225.7 1,530.8 1,694.9

847432 Asphalt-recycling equipment 0.0 70.0 2,240.9 

847989 Radioactive waste presses, trash compactors 29,864.4 196,572.2 112,721.1 

84799 Parts for 847989 12,550.5 48,727.9 40,740.1 

85059 Electromagnets 247.5 899.2 894.7 

851410 Electric or resistance-heated waste incinerators or other 

waste treatment appliances 1,584.9 4,104.7 4,689.0 

851420 Electric, induction, or dielectric waste incinerators or 

other waste treatment appliances 8.4 810.1 330.3 

851430 Electric, other waste incinerator or other waste 

treatment appliances 9,484.6 24,095.3 4,913.6 

851490 Parts of waste incinerators 3,141.2 6,330.0 10,815.9 

Source: U.S. International Trade Commission, USITC Trade Database, www.dataweb.usitc.gov.
50 U.S. Department of Commerce, International Trade Administration

cussion now of sustainable development through an

integrated approach to waste management, including

minimization of the production of wastes and maximization of waste recycling and reuse. Throughout

China, cities have been formally practicing source separation and recycling for the past 10 years, and informally for a much longer period. 

With the exception of large cities, municipally-funded recycling systems are limited in most Chinese

locales. Typically, however, the percentage of recyclable waste is lower than in developed cities of analogous

size, due to lower consumption rates and a brisk trade in

reusable and recyclable materials. 

Recyclable items are bought and sold in the streets of

China. Refuse collection containers, drop-off points,

and landfills are continuously scavenged for recyclables. Middlemen purchase recyclable items based on

an established market value, then in turn sell the items

to additional middlemen who deal in specific classes of

items, such as glass. End buyers include recycling facilities and factories that can use the recyclables directly. 

China is also experiencing an upsurge in waste

imports for recycling from other countries, including

waste paper and scrap metals. However, recognizing

that these imports are relatively expensive and often

contaminated, policy-makers are determining that it

would be more cost-effective and safer to recover

domestic materials. Regardless, the recovery industry

will soon be expected to cope with significant increases

in recyclable materials; it may not be capable of decontaminating or reprocessing those materials due to a lack

of capacity and possibly saturated markets. 

Municipally-Sponsored Recovery 

Waste recovery and recycling procedures are administratively supervised in both private and state-owned

enterprises. Many major cities have large recovery companies that collect recyclables from offices, institutions,

and factories. Neighborhood deposit/trade centers are

often located at transfer stations, where people can sell

recyclable bottles, paper, and clothes. State policies

govern the trading of materials and prices, and these

companies are often inefficient. 

Private enterprises, of which there are thousands,

also participate in recycling, mostly in the southeastern

provinces of Guangdong and Zhejiang. In the past few

decades, there has been a shift to trading in mainly

profitable recyclables, such as metals, rather than in

most household wastes. Other materials are now collected and traded by private entrepreneurs, who may

sell either to the government companies or directly to

factories for reuse. 

The government encourages recycling but has not yet

generated the momentum that could arise through

awareness and a well-developed market. Tax incentives

have been implemented to support enterprises engaged

in recycling, and greater emphasis on source separation

is considered desirable, particularly the separation of

plastics from organic material, in order to make both

composting and incineration of residuals more viable.

Best Sales Prospects

Battery Recycling. Management of products such as

glass, paper, cardboard, drums, containers, and so forth

is adequate, but there is a complete lack of know-how

regarding battery recycling and that of other hazardous

commodities. Chinese cities have launched batteryrecycling programs and have collected millions of disposable batteries. However, there is no feasible

recycling or disposal program for those batteries, which

usually end up buried in disposal sites in order to limit

the area of contamination. Since the most common batteries in China are still mercury-lead, the challenge and

need for recycling is significant. 

Metals and Components. Recycling, compared with

other waste management sectors, generates a quicker

return on investments. However, as in developed countries, the truly profitable recycling enterprises are those

such as metals and electronic components recycling.

Larger recycling facilities with more financial resources

may be able to purchase foreign equipment or form JVs

to take full advantage of this, and larger manufacturers

with the requisite financial resources may be able to

establish in-house facilities to do so. Smaller enterprises and municipal recycling facilities might not be able

to do this, and may have no choice but to rely on local

equipment manufacturers to outfit their facilities due to

both local protectionism and a lack of funds.

Materials Recovery. According to one multinational

health, safety, and environment specialist, a considerable amount of reasonably useful industrial waste material is stockpiled throughout the country, and is neither

moved nor disposed of. Companies do not wish to write

these resources off, as this reduces earnings, but there is

currently no opportunity or push to reuse the material or

search out secondary markets. This may change as

dumping regulations and fees become more stringent

and enforcement is improved.

The recycling and materials recovery industry is one

area that the Chinese government intends to foster.

China has traditionally been successful with this concept despite the fact that the proliferation of plastics and
China Export Market Plan 51

polystyrene has done marked damage to the pre-1970s

mentality of reuse. Nonetheless, due to funding problems and materials costs, China is always open to new

methods of recycling that help achieve profitability or

reduce costs.

Collection and Transfer Equipment

The process of waste collection in China’s large

cities is generally effective. In contrast, however, due to

outdated equipment and a scarcity of vehicles, waste

transfer processes are poor and inefficient. Almost 10

million tons of urban domestic waste annually does not

reach a waste disposal site. 

Urban waste is collected on a daily or twice-daily

basis in China. The most common refuse collection systems in urban China are central drop-off spots in each

neighborhood, often located at street corners. A drop-off

spot may be as simple as a designated spot to pile

garbage or as advanced as a transfer station. Residents

either deliver their garbage to a drop-off spot or deposit

it in a garbage chute, from which maintenance staff collect the refuse and deliver it to a transfer station.

Outside of urban centers, there is little controlled

refuse collection, but there is a higher tendency to reuse

and recycle materials prior to disposing of them.

Unfortunately, particularly at the village level, refuse

accumulates on any unused piece of land and often ends

up in water sources. 

Locally-produced solid waste containers are generally of poor quality, and because they are uncovered and

of low-grade materials, they must be replaced every six

months to one year. Recently, municipalities such as

Shanghai and Shenzhen, with an eye to saving money,

have begun investing in higher-quality containers with

longer life spans. 

Transfer and Treatment

Currently, all collection devices and locations,

including three-wheeled bikes, trucks, and buildings,

are owned by municipalities. The vehicle fleets are generally outdated and of insufficient size and capacity.

Most collection vehicles are open, converted dump

trucks that do not adequately contain waste. Authorities

would like to upgrade and enlarge these fleets, but generally speaking there are no funds available for this.

Until waste management fees are implemented profitably, this sector will remain unappealing to foreign

investment outside of internationally-funded projects

and direct aid. 

Other important areas are pre-treatment and waste

processing. Before delivery to an incinerator or landfill,

waste in most industrialized countries is sorted by type

and then treated in order to maximize disposal efficiency. Most sorting in China today is performed at the disposal site by scavengers and workers, with little pretreatment, making disposal not only inefficient but

also hazardous. 

Street Sweeping

Most Chinese cities provide street-sweeping services

on a daily basis, using everything from bamboo brooms

to mechanized sweepers. Japanese companies that have

been aggressively courting the waste industry for years

dominate the market for equipment. 

However, the process of sweeping is hampered by

inefficiency. Since the minimum-sized street sweeper

must fit through the narrow alleyways that line the traditional housing complexes of Chinese cities, municipalities often purchase many street sweepers of just that

size. A sound market-entry strategy might make use of

a convincing argument to persuade decision-makers to

purchase street-sweeping equipment in a variety of

sizes and types in order to increase efficiency in cleaning up urban highways and construction sites. Market

potential exists for a U.S. company that can demonstrate the efficacy of such a strategy and then provide

the most cost-effective fleet of equipment to implement

the strategy. 

In reality, refuse collection does not appear to present

a whole host of opportunities for the near future, primarily due to a lack of funding and interest. One area of

improvement may be in large-scale transfer stations

capable of pre-sorting and some initial treatment; local

governments have demonstrated some interest here.

Street-sweeping and other service equipment sales may

prove profitable if prospective exporters invest adequate time and resources in their market studies.

Management Strategies

Composting

Many cities in China have established simple in-vessel composting systems to process municipal solid

waste. Mixed municipal solid waste is delivered to the

facilities, and following hand sorting, the material is

fed into digesters. After digestion, the compost is either

sold as is or with the addition of supplemental chemical fertilizers. 
Overall, composting treats a very small percentage of

the total municipal solid waste generated in China.

Composting systems were initially set up to process

municipal solid waste into compost and sell the compost at a profit. Experience in China has shown, however, that the value of the compost is less than the cost

of producing it. Additionally, systems are plagued with

operating problems and do not generally meet their processing objectives. As a result, the majority of composting facilities have shut down, and cities that were

previously composting municipal solid waste have

reverted to uncontrolled land filling. 

At present, composting seems to have fallen by the

wayside. China’s cities would profit, however, if they

were to reinvestigate possibilities for regional or community composting facilities. China’s solid waste, compared with that of developed countries, is high in food

and organic waste content. This makes both land filling

and incineration less efficient because of compaction

problems and low BTU value. Add to this China’s lack

of arable land and land management problems in general, and composting begins to appear a promising alternative. Given the government’s emphasis on

incineration techniques, some pre-sorting of waste into

organics and burnable materials would prove rewarding.

Until the technical expertise and investment necessary to demonstrate that composting may be profitable

is introduced, authorities will continue to focus on

expanding and improving incineration and landfill

capacities. 

Incineration

In addition to strengthening the recycling industry,

the construction of incineration facilities and landfills

represents further priorities for Chinese authorities

within the waste management sector. 

While presented as a panacea for the waste management problem, incineration remains a controversial subject in China. Among the various methods of dealing

with municipal solid waste, the Chinese show great

interest in expanding their incineration capacity despite

the fact that the capital and operating requirements for

such plants often surpass those for landfills. There have

been several arguments raised against incineration (presenting integrated solid waste management as the alternative) for reasons such as the exacerbation of already

critical air pollution and a lack of capacity for burning

toxic wastes. Additionally, China has in the past been

extremely successful in separating out paper, glass, and

other recyclables from the stream of municipal solid

waste so that the remaining waste, which may be more

than 50 percent organic matter, is not highly combustible. Nonetheless, China insists on developing “cutting-edge technology,” in the words of one sector

specialist. Incineration is looked on favorably by many

cities due to the small land requirement and the supposed potential for electricity generation.

Currently, incineration treats only 1 percent of

municipal solid waste in China, although industries

generally maintain their own incineration systems for

in-house processing of wastes. There are only three

types of incineration systems used: the most common is

the smaller, often manually loaded, incinerator

employed by industries, with no environmental protection controls in place (some efforts at cleaning these up

are underway). The second is the municipal waste treatment incinerator, of which there are only a few throughout the entire country. Finally, China is experiencing an

explosion in waste-to-energy plants. It should be noted

that, despite the above distinctions, incineration has a

very broad definition in China and may include the

open burning of mixed wastes.

Since 1987, Shenzhen has operated a 300-to-450-

ton-per-day incinerator for hazardous and medical

wastes. However, data as to its effectiveness, costs, and

hazards is not available. In January 2001, the first

Chinese-made hazardous and industrial waste-to-energy

incinerator opened in Wenzhou, with a capacity of 320

tons per day. One large-scale municipal solid waste

incinerator in Shanghai was under construction at the

time of writing and should be completed by 2002: its

expected operating capacity is 1,000–1,500 tons per day

(tpd). Guangzhou plans to build two waste-to-energy

plants by 2005 that will convert half of the city’s trash

to electricity. Several small-scale incinerators are in the

five-year pipeline. The coastal city of Tianjin has

announced an agreement with France to build a 30-tpd

hazardous waste incinerator, and Wuhan plans to build

three 40-tpd hazardous waste plants using Swiss loans.

Emissions and Ash Management

The country bearing the distinguished reputation of

having the world’s worst air pollution has good reason

to express concern over the implementation of incineration methods to treat solid and hazardous waste. Yet

China tends to look to Japan, which incinerates the vast

majority of its waste due to limited land resources, as a

model for solving its domestic waste problems. China,

however, has neither the funds nor the skills to implement Japanese processes with adequate control and precision and therefore risks further contamination of its

air, land, and water. 

52 U.S. Department of Commerce, International Trade Administration
China Export Market Plan 53

In an apparent contradiction, China seems intent on

both reducing air pollution from its coal-burning industries and increasing its incineration capacity, which if

poorly implemented will exacerbate air pollution issues.

If this strategy is pursued, China will increasingly

require methods of emissions reduction and ash management within the incineration industry that conform

to the strictest standards. Incentive to do so may develop from the progress that has been made in expanding

ash management abilities to facilitate the use of the ash

for road building and other construction initiatives. 

Worst Sales Prospects

Large-Scale Incineration Technologies. Unfortunately,

without the benefit of tied aid, U.S. companies often

find the incinerator market saturated with cheap

Chinese incineration materials and foreign-funded

equipment financed by tied aid programs.

Best Sales Prospects

Monitoring Equipment. U.S. companies are well positioned to provide monitoring equipment and instrumentation, and this market continues to grow in China.

Ash Management and Emissions Technologies.

Companies that provide technologies to capture ash,

treat contaminated ash, and render the ash useful to other

industries are sought after. Authorities within the transport and road-building industry and the recycling industry are pursuing incinerator-ash-use techniques.

Management and Consulting Services. Operating

skills and training are required if China intends to keep

incineration facilities safe. As in the wastewater treatment industry, many facilities deteriorate due to poor

maintenance or lack of qualified staff. Opportunities

exist through multilateral and some governmental projects for capacity building in these areas.

Due to a lack of tied aid from the United States,

American companies in the incineration sector may

have to content themselves with the provision of smaller technologies associated with that sector. Large projects facilitated through multilateral financing may

present an area of opportunity, although the World Bank

and other funding sources appear to be concentrating on

landfills at present. 

Landfills

Land filling is the most common municipal solid

waste management method used in China, and landfills are the final resting place of over 99 percent of all

municipal solid waste. In general, Chinese landfills do

not meet best practices from either a design or a management perspective. Although there is some dissemination of the available literature on land filling

and a variety of regulations and standards, modern

landfills suffer after the design phase from a lack of

construction knowledge and implementation control.

According to the World Bank, of all waste

management facilities possible, China would profit

most sustainably from the development of modern

sanitary landfills.

Landfills fall into two categories in China. The most

prevalent type is the “controlled dump site.” These

landfills allow scavengers on-site, have no leachate collection systems, employ infrequent or no cover systems,

have limited or no compaction, have no gas control systems, keep few or no records, and have no wastescreening systems in place. It is not at all uncommon for

untreated hazardous and medical wastes to be mixed in

with municipal solid waste and industrial refuse. 

The second and far less common type consists of

those landfills currently built near a number of urban

centers according to more modern land-filling standards, and facilitated by outside financing and design.

Although efforts are made to design and build these in

line with high standards, it is still unclear how well they

are operated.

Worst Sales Prospects

Because most waste projects in China are at least

partially funded by multi- or bilateral sources, several

factors affect the viability of landfill equipment sales.

The following are examples of products that typically

have no market access in China.

Compactors and Compacting Equipment. Steelwheeled and other advanced compactors are rarely used

in developing countries because of their prohibitive

cost. Instead, cheap Chinese bulldozers perform compacting, sloping, and other functions. In addition, the

high organic content of most Chinese solid waste makes

compacting less effective, and the intense rains in some

regions of China turn the waste into muck that traps

compactors for the duration of the rainy season.

Liner Materials. As in most developing countries, liner

materials are cheap and locally made. Clay liners, for

example, are inexpensive and function relatively well if

managed properly. Some of the multilateral landfill

projects utilize foreign liners, but manufacturers

prospecting in China are limited to such projects.
54 U.S. Department of Commerce, International Trade Administration

Leachate Collection Materials. Expensive leachate

management technologies find no place in China’s landfills. Typically, the most efficient method used is to collect leachate in concrete-lined holding ponds in order to

evaporate as much as possible or to dilute it during

rainy times. Some wastewater management techniques

have been adapted to this function.

Best Sales Prospects

Monitoring Equipment. The United States excels in the

production of cost-effective and reliable monitoring

equipment. Equipment is required for gas, leachate, and

groundwater contaminant measurements in order to

enforce new regulations. 

Management Technologies. Often, a landfill is constructed with a modern and effective design but then

left to “run itself,” without proper supervision and

controls in place. Corresponding to needs in the

wastewater treatment industry, there is a need in the

solid waste industry for landfill maintenance and

operational know-how. A company with an innovative

and cost-effective turnkey solution to landfill design

and management that can be adapted to the various

regions of China may be suited to market entry. 

Technology to Improve Existing Landfills. Landfill

managers in smaller cities are often told to close openarea dumps and to construct controlled landfills.

However, due to costs and lack of expertise, the dumps

are more likely to be converted simply to conform to

regulations. Hence, there is a need for firms that are

equipped to provide low-cost equipment and expertise

to enable this conversion under a variety of conditions. 

U.S. companies find it difficult to advance in China’s

solid waste sector for several reasons. First, the U.S. provides extremely limited development aid to China;

hence, large landfill projects go to foreign competitors

backed by bilateral programs. Second, the U.S. lags

behind most developed countries in maintaining efficient

and cost-effective landfill operations. Third, many U.S.

companies suffer from an attitude of “watch and wait” as

opposed to early market entry, which will render them

uncompetitive at a later stage of market development.

Besides monitoring equipment and engineering

expertise, U.S. vendors must present a unique and innovative land-filling solution particular to China’s various

problems, in order to have an impact on the landfill sector in the near future. The most promising areas of

opportunity include multilaterally-financed projects and

services such as consulting for the upgrading of landfills to conform to new regulations. 

U.S. Strengths and Opportunities

“Complete Package” Solutions

Within all sectors related to solid waste management,

there is a tremendous need for engineering expertise,

from financing and site selection to design, construction, and maintenance of facilities. Concepts that parallel innovations in the wastewater treatment industry,

such as the BOT model, are even more valuable as

waste management gradually becomes profitable. The

Chinese eagerly seek solutions to their waste problems,

and a company that is willing to provide experience and

expertise in this area will discover a variety of interested parties, from municipalities to state-owned and private enterprises coping with their own waste concerns. 

Lack of funding and a lack of local knowledge in the

waste disposal area mean that, as national government

regulations tighten, every sector of society that produces solid waste feels pressure to manage waste in a

well-planned and cost-effective manner. Some funding

is available from multilateral and bilateral sources, as

well as from various levels of Chinese government. As

the waste problem intensifies, individual entities are

increasingly forced to seek out financing schemes that

make waste management possible and profitable.

Knowledge Transfer and Training

Current facilities and ongoing projects already suffer

from a lack of operational skills and management.

Services in which U.S. companies excel, including consulting and engineering, are required not only for new

projects but for completed and ongoing waste disposal

projects for which funding has expired. The Chinese

government cannot combat the waste explosion without

maintaining or increasing current investments, and the

pressure brought to bear by the deterioration of hastily

planned facilities is increasingly felt. Needs include

employee and managerial training for the operation of

facilities as well as maintenance and monitoring services that local staff cannot provide. 

Trends and Conclusions

The solid waste management sector in China is currently in a stage of development similar to that of the

wastewater treatment industry there three to five years

ago. Current financing for solid waste projects is scarce.

Competitors rely on bilateral aid or take bold investment steps in order to position themselves for the time

when the waste industry in China becomes profitable.
China Export Market Plan 55

Considering the estimated growth rate of this industry

over the next five years and the promulgation of additional regulations that will force municipalities and

industries to take a closer look at their own pollution

disposal strategies, U.S. companies would do well to

investigate and enter the market in order to position

themselves. According to CRAES, the total amount of

waste generated increases by 25 million tons a year.

Seventy-five percent of this waste must be treated. In

order to do this China must increase its waste management capacity by 55 million tons a year. 

Selected References and Web Sites

References

“Beijing to Unify Waste Collection, Recycling

System.” ChinaOnline, June 14, 2001. 

“China’s Mines Scheduled for Cleanup.” ChinaOnline,

Oct. 23, 2000. 

“Domestic Solid Waste Increased by 8–10 Percent in

2000.” Guangming Daily, Dec. 8, 2000. 

“Guangzhou Trash-Burning Plant Blazes Trail for

Private Environmental-Protection Projects.”

ChinaOnline, Aug. 17, 2000. 

Henderson, J. Paul, and Terrill J. Chang. “Solid Waste

Management in China.” Edited by H. Lanier Hickman,

Jr. May 1997. Available at www.ecowaste.com/swanabc/papers.

“Tianjin Begins to Levy Fee for Domestic Solid Waste

Treatment.” People’s Daily, June 26, 2001. 

Web Sites

Human and Nature in Harmony: China Environment

and Development Information (categories include:

waste management, waste disposal/treatment. Site

consists of a collection of articles pertinent to this subsector): www.enviroinfo.org.cn. 

United States Environment Program, Division of

Technology, Industry, and Economics. Municipal solid

waste management (an on-line technical publication

provided by the United Nations Environment Program

Web site. Includes Asia- and China-specific information): www.unep.or.jp/ietc/ESTdir/pub/MSW/index.asp. 

Box 7. SULO Case Study

In 1998, SULO, a German-based waste management company, established a joint venture in Beijing. SULO is Germany’s number-three provider of waste services, with activities in New Zealand, Australia, and Singapore in addition to China. Although

SULO provides a variety of services internationally, including composting, pre-treatment, and waste sorting, it is currently producing only garbage bins in China, for both local consumption and export markets. 

SULO has experienced many problems with regard to the Chinese solid waste market. Local Chinese authorities are unwilling to invest in new waste management systems due to insufficient funds, and SULO expects that the market will remain unsuitable for the next few years. Despite many efforts to convince municipal governments, SULO has been unsuccessful in providing

services other than the sale of garbage bins. An example is SULO’s recent attempt to experiment with a new waste management system in a small city in Inner Mongolia. Half the project was to be financed by the German Ministry of Cooperation and

half by the Chinese government counterpart; after much deliberation, the latter refused to provide financing and the project

was aborted.

SULO now has three representative offices in China, based in Shanghai, Guangzhou, and Kunming (where it controls 100

percent of the market share). In three to five years, the company hopes to offer waste treatment technologies and services. Only

three Chinese competitors exist in the whole country, all of which produce garbage bins of much lower quality; similarly, no

foreign competition has stepped up. Some foreign companies have established offices in Hong Kong from which to watch the

Chinese market and perhaps await more favorable conditions. Nevertheless, SULO feels it is well positioned, having prospected for the past two years and built up a solid network of governmental and organizational relations. 

The development of this market, according to SULO, will be a result of changes in attitudes as opposed to policies, although

policy will play a large role in strengthening the market in smaller cities and municipalities.
56 U.S. Department of Commerce, International Trade Administration

Air pollution in China represents the most serious

threat to public health and to the continued economic

development of the country. Half of the 322 largest

Chinese cities have serious air pollution problems and

total suspended particulate (TSP) concerns exist in

every city in the country, causing an estimated $3.65

billion in losses each year. Air pollution in a number of

Chinese cities is among the highest ever recorded

worldwide, reaching more than 10 times WHO standards. Beijing itself ranks high on the national list of

cities with excessive nitrogen oxide emissions, and

Taiyuan, in Shanxi Province, and Lanzhou, in Gansu

Province, rank among the 10 most polluted cities in the

world. The threat to public health and welfare is significant: it is estimated that air pollution-related health

problems are responsible for over 300,000 deaths and

over 11 million emergency clinic and hospital visits

annually in China. Similarly, air pollution is responsible for tremendous agricultural and other economic

losses. At least 30 percent of China’s total territory suffers from acid rain, most of it falling in the southern

part of the country. 

Coal consumption remains a major contributor to

poor air quality, but throughout the 1990s the profile of

contaminants has been changing. After peaking in 1996,

growth in energy demand turned negative, leading to

current reports indicating that China’s recent CO2 and

SO2 discharges are lower than expected. Yet nitrogen

oxide pollutants (of which automobiles are a significant

contributor) are on the rise; barring significant changes

in transport technology, Chinese oil demand could double in the next 20 years. Similarly, despite moderate

reductions in the median TSP levels of many of China’s

largest cities over recent years, total TSP exposure has

actually increased, as the numbers of exposed individuals have outpaced pollution reductions. Dust from construction sites and windblown soil are increasingly

important TSP components. In addition to these parameters, a host of other equally important air pollution factors such as carbon monoxide, ozone, and lead are not

systematically monitored, and therefore their prevalence and impact are unknown.

Large point sources remain key contributors to air

pollution, which in some ways could ease the process of

mitigation; the power sector, for example, could

account for 50 percent or more of total coal use in the

next 20 years.

Policy Framework

The Air Pollution Prevention and Control Law

China has made marked progress in the area of air

pollution management since 1987, when the first Air

Pollution Prevention and Control Law went into effect.

Recent amendments of the law (which was first amended in 1995) illustrate the Chinese government’s pursuit

of increasingly sophisticated legislation. The most

recent changes, effective on Sept. 1, 2000, substantially

revised the law. In the law’s newest form, its jurisdiction is extended beyond industrial enterprises and

power plants to pollution sources such as automobiles,

ships, construction dust, and domestic heating and

cooking stoves. The new amendments also increase the

number of regulated parameters, introduce total emissions control (TEC) to bolster concentration-based standards, provide for far more rigid penalties, and clarify

the responsibilities of relevant authorities. The potential

enhancement of enforcement capacity resulting from

these final two changes may affect impact upon market

demand for pollution-reducing technologies if they are

faithfully carried through. 

If the amendments are fully implemented within the

next 10 years, the law could reduce the total volume of

air pollutants to 1995 levels, control sulfur dioxide emissions within the SO2 and acid rain control zones at 10

million tons, achieve national level II air quality standards in 34 of the 47 currently identified key cities selected by the State Council, and reduce dust emissions from

construction sites in Beijing by as much as 70 percent. 

A notably significant amendment is the shift to TEC,

an initiative attempted thus far on a limited scale in

areas such as the Liao River and the SO2 and acid rain

control zones. The policy shift clearly indicates a progression in regulation that moves from point-source and

concentration-based approaches to a holistic, “ecologically based” regulatory framework. Additionally, TEC

establishes a basis for market-based air pollution control tools such as emissions trading. 

Chapter 6

Air Pollution
Priority Issues

SO2 Emissions. China’s national standards for allowable

SO2 emissions are comparatively strict at 50 micrograms

per cubic meter; the WHO standard is 60 micrograms,

and the U.S. standard is 80 micrograms per cubic meter.

From 1991 to 1998, levels of SO2 in some of the worstpolluted cities dropped due in part to increased regulation

and control. Despite this, most cities experienced worsening pollution over the past decade due to the previously noted increases in pollutants such as nitrogen oxides. 

Revisions in the Air Pollution Prevention and Control

Law aim to keep annual SO2 emissions at 10 million tons

until 2010 in the acid rain and SO2 control zones. Three

main policy measures in the acid deposition control program are directed toward SO2 emissions:

1. There will be a gradual phasing out of coal with

sulfur content of 3 percent or more. Presently the

extraction of such coal is restricted, although not

forbidden, since the western regions of China have

access only to low-quality coal. Thus, enterprises

wishing to burn coal with sulfur content of over

3 percent must install environmental control

technologies. 

2. Newly built or renovated coal-fired power plants

using coal with sulfur content of over 1 percent

must install sulfur-scrubbing technology. Existing

facilities must adopt SO2 reduction technology

including flue gas desulfurization (FGD) by 2010. 

3. The current fee level of RMB 200 ($24) per metric

ton of SO2 emissions represents a shift in policy

from the former scheme, in which charges were

imposed only on air emissions that exceeded standards. However, the margins remain far too low to

encourage investment in abatement. 

These regulations face a number of criticisms and

constraints. First, the prohibited use of coal with more

than 3 percent sulfur content means that even facilities

utilizing FGD technology cannot use low-quality coal,

despite the fact that environmental requirements could

be met in a cost-effective manner. Additionally, the

installation of FGD equipment is considered prohibitively costly for China.

Second, improving the quality of the coal supplied to

large power plants has actually increased the supply of

high sulfur coal to industrial and residential facilities (as

an alternative market), which are less likely to employ

clean and efficient utilization systems, therefore maintaining high pollution outputs in urban areas. Issues of

coal pricing must also be noted; in general, coal prices

do not reflect coal quality and sulfur content.

Counterproductive subsidies are sometimes provided to

power plants.

Finally, since mass-loading criteria are not yet effectively enforced in any city in China, ambient air quality in any given area may not be affected by the

initiatives even if all industries and power plants conform to the standards. 

Indoor Air Pollution. Indoor air quality parameters are

measurable in any environment, from rural domestic

spaces to office buildings and industrial plants. In

China, however, most concerns over indoor air quality

arise from cooking and heating. Poor-quality fuels and

a lack of electric and clean fuel facilities contribute to

heavy concentrations of pollutants in domestic households, causing widespread health problems.

The severity of indoor air pollution and its resulting

consequences are difficult to measure due to a lack of

statistical data on both the national and local levels.

According to the World Bank, in 1991 there were 40

million people using gaseous (i.e., non-solid) fuels for

cooking and water heating; by 1998, that level had risen

to 156 million. Additionally, the quality of combustible

material rose considerably with the increased utilization

of briquettes and gaseous fuels. 

Indoor air pollution is also exacerbated by China’s

rapid urban growth and widespread construction of

high-rise buildings. In construction during winter

months, urea is used in the concrete mix as a curing and

anti-freeze agent. During the hot humid days of summer, the urea hydrolyzes, releasing high concentrations

of ammonia into indoor areas and resulting in significant health concerns. 

Asbestos is yet another concern. Although asbestos

was long considered an issue of little significance in

China, heightened awareness is increasingly forcing

mitigation and the use of alternative materials.

Auto Emissions. The number of vehicles nationwide

grew to over 13 million by 1998, about 10–20 percent

of which were private cars. That number has further

increased in the past three years, resulting in significant

congestion and air pollution. The emissions of motor

vehicles in China are quite different from those in

industrialized countries, due to obsolete manufacturing

technologies utilized in the local automobile industry,

inadequate auto maintenance, and poor fuel quality.

SEPA and other agencies are currently working to

develop effective strategies to reduce vehicle pollution

and improve performance.

The State Council issued regulations forbidding the

production, distribution, and utilization of leaded gasoChina Export Market Plan 57
line by September 1998, and it decided to consolidate

the fuel market and close down small refineries that

could not meet regulations. Leaded fuel production

ceased on Jan. 1, 2000, and sales of leaded gas ceased

on July 1, 2000. 

In January 2000, SEPA also issued emissions standards equivalent to EURO-1 standards for light-duty

vehicles. Heavy-duty vehicles must conform to EURO2 standards, and all new cars must have electric fuel

injection and catalytic converters. According to the law,

all vehicles must be inspected annually; however,

enforcement capacities present a problem. More reductions could be accomplished with stricter supervision at

all levels. 

Monitoring. Anecdotal evidence suggests that China’s

air quality monitoring network has not kept up with regulatory changes over the past 10 years. As the pattern of

urban development has shifted, the number of stations

and the location of most of them have not changed. For

example, government efforts to push small industries

outside of cities have led to a worsening of air quality

on the outskirts of most urban areas, while the majority

of monitoring centers remain in the city centers.

Similarly, as noted above, the parameters monitored do

not reflect the current profile of contaminants and are

not widely established. Monitoring systems exist only

in large cities and provide information on SO2, nitrogen

oxides, particulates, and settled dust. Carbon monoxide

is measured in a few cities, but pollutants such as hydrocarbons and ozone are not. 

As expressed in the Tenth Five Year Plan, SEPA

plans to upgrade and expand the country’s monitoring

network. This is in order to monitor the effectiveness of

specific environmental efforts and also to gain a more

accurate and comprehensive analytical view of the state

of China’s environment. 

Policy Priorities

According to the Tenth Five Year Plan, SO2 emissions are to be reduced by 2.5 million tons. Achieving

national air quality standards for the 100 key municipalities during the Tenth Five Year Plan requires RMB

200 billion of investment. According to CRAES, overall investment in air pollution requires at least RMB

300 billion. 

The monitoring network must be extended, upgraded, and better maintained. China has an enormous need

for training toward these ends, as well as a need for

effective analysis of monitoring data. Furthermore, to

prove effective, monitoring must include SO2, TSP,

PM10, PM2.5, ozone, volatile organics, and nitrogen

oxides. These variables are likely to be addressed in

future legislation.

Legislative Trends

China is increasingly aware of the steps that must be

taken to reduce air pollution. Measures to guard against

SO2 emissions, for instance, are widely seen as steps in

the right direction, although current legislation needs to

be refined to lower its concentrations effectively. In

addition, there is concern that other factors such as nitrogen oxide are excluded from calculations, despite the

fact that they play a large role in ambient air quality. 

Most regulations pertain to thermal power plants

and industrial boilers, which constitute a sound first

step in controlling emissions and improving air quality,

but they do not comprehensively address the majority

of harmful air emissions. For example, the drastic

increase in TSP concentrations in Beijing in the 1990s

seems to contradict the reduction of ground-level

emissions from coal-burning sources. Coal combustion

contributes only a portion of urban pollution, whereas

natural dust from sandstorms and fine dust from

unregulated construction sites around the city

requires attention. 

Jurisdictional Responsibilities and Enforcement

The national government has made swift progress in

adopting air pollution control measures in the past six

years. SEPA, through a variety of agencies and

enforcers, is responsible for monitoring air quality and

making recommendations. However, the responsibility

of monitoring and enforcement ultimately falls upon

local EPBs, the operations of which are plagued with

structural problems. EPBs receive policy instruction

through a vertical hierarchy at the top of which is SEPA.

However, it is the local governments that currently

administer day-to-day operations of the EPBs, such as

budgets and personnel. Thus, if a local government

views a SEPA policy as contradictory to local ambitions, a hindrance to economic growth, or likely to

cause unemployment and similar issues that could

affect social stability, it has far more capacity to influence the EPB than does SEPA. Similarly, as with other

forms of pollution, EPBs often experience logistical difficulties in enforcing government mandates on air emissions. Insufficient inspection capacities, undertrained

staff, shortage of personnel and requisite utilities, and

numerous other barriers hinder their operations. Finally,

reversion rates are high: although over 1,700 polluting

58 U.S. Department of Commerce, International Trade Administration
China Export Market Plan 59

enterprises were shut down at the end of 2000 to meet

state targets, it is believed that as many as 70 percent of

them restarted operations shortly thereafter. 

The Market 

The Chinese air pollution control market is exceptionally competitive. Japan maintains a distinct presence, accounting for over 30 percent of all imports.

Foreign imports account for over 50 percent of all sales

in this area because of two factors: local manufacturing

capabilities are low, and air pollution control projects

have traditionally been financed, at least in part, by

multilateral or bilateral aid. 

While U.S. equipment is seen as very advanced, the

price is often too high for use in all but multilaterally

financed projects. Several manufacturers have nevertheless made progress in the Chinese air pollution control market due to a variety of factors (see U.S.

Strengths and Opportunities). As the government places

higher priority on air pollution control projects, U.S.

firms will see more opportunities to win bids. 

SO2 Control

SO2 control equipment is a tough sell in the widespread Chinese market. There is a mandate for highly

polluting coal-fired power plants to install waste gas

treatment facilities or technology, but many plants are

instead utilizing cleaner coal to avoid retrofitting or

installing expensive equipment. 

With power demands increasing by a rate of 5-6 percent annually, the power market has been restructuring in

order to improve efficiency and reduce pollution. Small

thermal power plants are being closed, and priority is

being given to clean coal-based pilot projects with singlegeneration capacity in excess of 300,000 kilowatts. 

Indoor Air Pollution 

Three factors determine levels of indoor air quality:

fuel quality, burner technology, and ventilation. Studies

indicate that even when solid fuels are used, improvements in flue gas ventilation can achieve a reduction of

almost 90 percent in indoor air pollution levels. While

cleaner fuels and cleaner-burning technology often

provide the best reduction in indoor air pollution, the

most cost-effective option has typically been adjustments in ventilation.

Auto Emissions

According to the World Bank, motor vehicle emissions are already a major source of pollutants in the

cities of Beijing, Shanghai, and Guangzhou. It is estimated that vehicles contribute to over 60 percent of the

air pollution in urban zones: they are the source of

45–60 percent of nitrogen oxide emissions and approximately 85 percent of carbon monoxide emissions. A

number of factors contribute to the problem:

● More vehicles. The number of vehicles on the road

has nearly tripled since 1990, and the demand for

new vehicles is growing by 13 percent per annum. 

● Poor manufacturing techniques. Obsolete manufacturing techniques, while slowly advancing, have led

to extremely poor fuel efficiency in most Chinese

vehicles. The average emissions level of new

domestic vehicles is almost 10 times greater than

that in developed countries. 

Table 6.1 Air Pollution Control: U.S. Exports to China (FAS value in thousands of dollars)

HTS Number HTS Description As of April 2001 2000 1999 

84041 Boiler parts (super-heaters, gas removers) 833.6 29,830.8 112,849.2 

84042 Condensers for steam/other vapor power units 81.0 275.9 N/A

84051 Gas generators 443.0 615.2 144.3 

840999 Parts for use with engines of heading 8407, 8408 10,091.7 13,482.7 9,931.3 

841459 Fans and blowers 542.1 1,850.4 761.8 

842139 Filtering or purifying machinery for gases 4,106.3 6,986.3 12,016.8 

842199 Parts for 842139 7,025.5 25,592.9 16,126.1 

Source: USITC Trade Database, www.dataweb.usitc.gov.
60 U.S. Department of Commerce, International Trade Administration

● Poor automobile maintenance. Most auto owners

and manufacturers are careless about maintenance

measures. Promotion of annual safety and maintenance procedures will lead to greater efficiency and

fewer emissions.

● Lack of infrastructure. A lack of planning and infrastructure has resulted in vehicle emissions levels

comparable to those of industrialized countries 25

to 35 years ago. This lack can be redressed only by

efficient policy measures designed to reduce and

control the number of cars in key areas and manage

traffic effectively. 

Air Monitoring

All 100 key cities already identified or to be identified in keeping with the Tenth Five Year Plan are

expected to install automatic air quality monitoring systems and transmit this data by satellite to data bases and

monitoring centers. According to conservative estimates, this project will require the importation of over

$300 million in monitoring equipment and associated

technology during its early stages. 

The equipment needed for both government (regulatory) and industrial use ranges from sampling and flow

monitoring units to analysis equipment. Local manufacturers cannot compete in this market, as they lack the

capacity to produce high-quality products. 

In addition, employees of monitoring centers require

advanced training in the operation of monitoring and

analytical equipment. Firms able to provide equipment,

effective training, and after-sales service will see

increasing demand. 

U.S. Strengths and Opportunities

SO2 Control

Achieving the targets of the Tenth Five Year Plan

requires a minimum investment of RMB 100 billion

($12 billion) in desulfurization technology, broken

down in the following manner:

● RMB 55 billion ($6.6 billion) in desulfurization

technology for thermal power plants

● RMB 30 billion ($3.6 billion) in the control of

domestic SO2 emissions

● RMB 15 billion ($1.8 billion) in desulfurization

technology for industrial furnaces

Approximately RMB 6.4 billion ($2 billion) of the

RMB 55 billion ($6.6 billion) investment in FGD

equipment for thermal plants will go toward installing

this equipment on 51 coal-fired power plants within the

acid rain control zones. 

Clean coal and scrubber technologies such as FGD

and circulating fluidized bed (CFB) are prohibitively

expensive for the Chinese end user. Often, despite mandates passed down from the central government, no

funds or incentives are provided for the use of such

advanced air pollution control technology. A key to

increasing the use of such technology involves nurturing the capacity to manufacture a substantial portion of

the technology within China. Technology acquisition

and deployment through licensing agreements, JVs, and

other avenues may be critical. 

Indoor Air Pollution

As China becomes more aware of the problems of

poor air circulation and office building air quality problems, there are opportunities for air cleaners, filters,

fans, and blowers of various types as well as coatings

and chemical absorbers used for remediation efforts.

Auto Emissions

Several U.S. auto emissions control technology companies are demonstrating a strong presence in the

Chinese auto emissions control market. Corning

International, in April 2000, moved a large part of its

catalytic converter ceramic substrate manufacturing

operation to China. While raw materials for this operation are still imported from the U.S., a strong local presence and reduced production costs make Corning a

tough competitor in the auto emissions control market. 

Air Monitoring

Some U.S. firms, such as Thermo Instrument

Systems and Hewlett-Packard, are already well known

by Chinese end users. Thermo Instrument Systems has

a 70 percent share in the environmental air quality monitoring market in China. In March 2000, Dasibi

Corporation, a much smaller player, arranged to install

$13.4 million of air monitoring equipment in 33 key

cities in China, with the help of the Export-Import Bank

of the United States (Ex-Im) and commercial banks.

Other active firms include Advanced Pollution

Instruments and Environmental Systems Corporation. A

strong U.S. capacity to produce high-quality monitoring

equipment, coupled with weak capacities among

domestic producers to do so, makes this a particularly

promising market for U.S. companies. 
China Export Market Plan 61

Foreign Competition, Market-Entry Strategies,

and Success Rates

Many Japanese, German, Canadian, Australian, and

other foreign firms have gained a solid foothold through

numerous tied-aid projects funded by their respective

governments. Such strong backing and incentives for

export and financing are generally not available to small

and medium-sized U.S. manufacturers. Meanwhile, for

projects financed solely by the Chinese government,

equipment and services will tend to be procured from

local Chinese firms—despite quality issues—due to

price differentials and protectionism. (As in other sectors, this is starting to change, but only very slowly.) 

Nonetheless, Chinese authorities and local decisionmakers view U.S. air pollution control technologies as

highly respectable. Thus, U.S. companies in the air pollution control field must keep in mind the importance of

cutting costs. Outside of multilaterally financed projects, air pollution control technology engineered and

manufactured in the United States will have an extremely difficult time penetrating the market in China, but

reducing costs will assist in overcoming one of the two

primary barriers and will prove vital to obtaining market opportunities as the budding trend of procuring foreign equipment continues to develop.

A Chinese project manager with the Environmental

Defense Fund who deals specifically with air pollution

has noted, however, the saturation level of the air pollution control market in China. He maintains that unless a

foreign company has an innovative or cheap product

that can be tailored to fit key policy goals and priorities,

it will prove difficult to make headway at this time. 

A viable commercial strategy might involve an

approach that capitalizes on relatively inexpensive local

materials and low manufacturing costs. Of course, intellectual property rights (IPR) protection is a concern, as

is quality control of locally-generated equipment, parts,

and services. Additionally, as is the case in most

Chinese markets, firms must consider the importance of

maintaining good relations with Chinese authorities,

buyers, and other market players. 

The World Bank and other multilaterally financed

projects still provide the best opportunities for U.S.

technology exports due to the availability of hard currency, an open bidding process, and a number of riskmitigating factors. 

Selected References and Web sites

References

Hu Chengnan. “Development and Market Analysis of

Control Technologies for Motor Exhaust Gas in China.”

ChinaEnvironment.

Lee Chyen Yee. “Smoggy China must do more to curb

global warming.” PlanetArk Nov. 10, 2000. www.planetark.org/dailynewsstory.cfm?newsid=8880&newsdate=10-Nov-2000.

Weisbrod, Roberta E. ”Solving China’s Urban Crisis:

China’s Transportation Energy Future.” Journal of

Urban Technology 6, no. 1 (April 1999): 89–100.

Web Sites

Environmental Defense Fund: www.edf.org

World Health Organization: www.who.int (includes air

pollution control standards and regional concerns).
62 U.S. Department of Commerce, International Trade Administration

The services sector is among the most challenging sectors in China’s environmental market to enter successfully. To a great degree, the sector remains the territory

of anointed domestic institutions, monopolies, and those

with ties that can only be developed over a long period

of time. All services requiring official approval at any

point, such as EIAs and engineering services, must be

conducted through an appropriately licensed institution;

such licenses are not available to non-Chinese operators,

making cooperative initiatives requisite for all foreign

investors. Additionally, service providers, with the

exception of consultants, are required to operate incountry, through either a JV or a WFOE. 

Likewise, the sector remains hostile to anyone without

a sound, in-depth understanding of both Chinese business

culture and China’s environmental sector. Past business

experiences in China clearly indicate the complications

and barriers that all foreign investors doing business in

China face. In the environmental services sector, many of

these complications are compounded, making extensive

in-country experience an arguably more valuable asset

than extensive environmental industries experience.

Environmental service providers who have been successful in other parts of the world are cautioned against

believing that directly transferring service models from

elsewhere to China will be categorically successful. It is

not unreasonable to assume that non-environmental companies already operating in China that wish to expand

their scope into environmental services may have more

potential for success than foreign environmental service

providers wishing to expand their operations into China.

Although China needs progressive, efficient, and

innovative management, service providers offering

standard, boilerplate initiatives will not be successful.

Generally speaking, the Chinese have a well-founded

understanding of basic environmental services; what are

needed are high caliber solutions custom designed to

meet the unique and complex needs of China. Providing

such innovation requires an in-depth and accurate

understanding of China’s development goals, environmental situation, institutional and regulatory structures,

and business culture, which again requires long-term

and profound China experience.

While there is no formula for success in China’s

environmental services sector, several points should be

considered: entering the sector is a long-term prospect,

requiring years of experience and laboriously cultivated

working relationships; innovation is an absolute must,

and all innovation must take into account the particular

needs of China’s unique situation; successful navigation

of China’s bureaucratic apparatus can be difficult—certain players are to be avoided while others must be

courted—an appropriate approach is critical yet difficult to determine; and it is easy to develop a bad reputation in China and difficult to mitigate the effects of a

bad reputation after acquiring one, so service providers

absolutely must deliver.

Institutional and Structural Points

Registration Requirements for Service Providers

Foreign service providers are able to establish operations in China through WFOEs, JVs, or representative

offices. Normally, the lowest-risk and least costly

option for small to medium-sized companies is to establish a representative office to oversee marketing and

provide a base for operations until enough familiarity is

gained to move toward a WFOE or JV. While representative offices have some disadvantages related to

restrictions on the signing of contracts, on the direct

provision of services, and on the exchange of currency,

many small companies have been able to establish firm

foundations by operating in China under this category

and then moving on to other legal entities once they better understand the market conditions. Such entities have

historically been either an equity JV, in which an international company forms a new Chinese-registered entity with a local partner, or a contractual JV, which is

usually task or project specific and requires little financial investment. Both these types of legal entities have

advantages and disadvantages that need to be thoroughly understood, with the assistance of competent legal

counsel, before a decision is made. Finally, in recent

years international companies have been able to establish service/consulting WFOEs in certain areas of

China, thus circumventing the need to partner with a

Chinese entity except for specific projects. While these

legal entities make management simpler and more

Chapter 7

The Environmental Services Sector
transparent, they are costly to establish and may be

unable to obtain requisite professional licenses and

permits that allow the direct provision of environmental services.

Registration of a WFOE, JV, or representative office

is a routine, yet at times lengthy, legal process in most

areas of China. The majority of the services that can be

provided are for multinational companies or multilateral agencies that seek international services of a standard

not yet available in China. However, any activity regulated by Chinese law that requires a specific permit,

such as undertaking an EIA, laboratory services, engineering design, process fabrication, or equipment installation, requires teaming with a local entity holding an

appropriate license. In some cases, even the services

provided by a foreign entity in partnership with a local

entity are not accepted; thus, the services need to be

subordinated to and under the title of the local entity.

Foreign consulting service providers are also allowed to

offer consulting services via cross-border delivery, but

all other service providers must operate in China or

through a local partner.

For some services, such as those provided by analytical laboratories, it may be prudent to consider establishing a facility in a bonded zone. These zones, which

were primarily developed as export-reprocessing zones

that would create jobs and generate revenue without

entangling operators in customs formalities, are being

increasingly used as bases for certain categories of

operations in China. For example, an analytical laboratory wishing to establish operations in China may find

the barriers to importing the necessary specialized analytical instrumentation into China prohibitive. But by

establishing a base in a bonded zone, the laboratory can

bring analytical samples from the mainland into the

zone, complete the analysis there, and generate results,

avoiding the levies associated with bringing the equipment into the country and bypassing the cost and logistical difficulties of shipping samples overseas. (See Box

10 for further discussion of bonded zones.)

Market Profile

China’s environmental services market potentially

requires a very broad range of services. However, lack

of awareness, protectionism, and opting for conventional engineering solutions currently make the reality of

the market quite narrow and limited. As awareness progressively increases in the government and industry

sectors, much of the initial need is filled by local environmental institutes and private companies that generally have good engineering skills but lack innovative

solutions. Thus, the market is increasingly open to service providers in the fields of environmental impact

assessment (in conjunction with local institutions),

energy efficiency, water recycling and reuse, waste-toenergy solutions, integrated environmental systems,

ecological water treatment methods, waste reutilization,

and a range of services classified as cleaner production

and sustainable development services.

The market for the above services has grown significantly in the past five years. While the body of environmental regulation has increased greatly, enforcement

has not. Environmental protection in China is primarily

driven by economic and profit considerations, not by

regulation. Because of this, business development

strategies must always focus on increased efficiency

and profitability, with increased environmental protection as a side benefit. Because many of these solutions

fall outside the bounds of normally recognized possibilities in China, the basic concepts must often be communicated and demonstrated in the form of case studies

presented in seminars, so that detailed economic justifications are made. However, if approached properly, this

strategy can be quite fruitful, as most Chinese managers

see environmental protection as an added expense that

is required to be put at the end of a dirty process. If an

alternate vision of efficiency and process reengineering

is presented, particularly in a scheduled format in which

the initial investment is minimized, significant interest

can be generated.

Generally, U.S. service providers and technologies

are respected in China for their professional and timely delivery. A further recognized advantage is the

robustness of U.S. technology and services compared

with their European and Japanese counterparts.

However, several barriers put U.S. service providers at

a disadvantage. Foremost among the barriers is the lack

of a meaningful U.S. bilateral aid program to China.

While most other industrialized countries support their

national environmental markets in China through provisions of tied aid, the lack of such a program from the

U.S. normally disqualifies U.S. service providers in

favor of those bringing bilateral aid with them. This

problem is further exacerbated by the lower priority

given to U.S. vendors and service providers in multilateral aid programs as a favor to providers from other

bilateral aid donors. A further disadvantage often cited

by Chinese decision-makers is the often tumultuous

political relationship between China and the U.S.:

when U.S. goods and services are procured, it is uncertain whether delivery can be completed or after-sales

service can be guaranteed, in light of the frequent

threats of sanctions.

China Export Market Plan 63
Additionally, some barriers faced by U.S. companies

and service providers are self-inflicted. A lack of understanding of Chinese business practices and sensitivities,

unfamiliarity or impatience with the time-consuming

process of relationship building, dependence on overseas Chinese expertise (which is often resented) rather

than local professionals, and a lack of understanding of

laws and regulations all contribute to the creation of

misunderstandings and frustrations. 

Many of the barriers that U.S. investors face are the

same ones that all foreign investors face, providing a

relatively level playing field from the perspective of

China-sourced complications. Many companies say that

the single biggest barrier that limits U.S. competitiveness in relation to that of other foreign service providers

is the lack of a U.S. government bilateral assistance program. Bilateral institutions such as the Canadian

International Development Agency (CIDA) and

Germany’s GTZ can exploit mechanisms that allow

them simultaneously to act as development consultants

to the Chinese and to lay groundwork for private companies (from their respective countries) to win contracts; in some cases, they are able to tie large sums of

multilaterally sourced funding to companies in their

country by entering into co-financing operations (see

Box 9). The return of the U.S. Trade and Development

Agency to China is a positive first step; however, the

absence of the U.S. Agency for International

Development (USAID) is a glaring vacancy in the

realm of bilateral operations in China. 

WTO and Environmental Services

With China’s accession to the WTO, foreign service

suppliers now may establish a commercial presence in

China and provide environmental services in the form

of joint ventures with foreign majority ownership permitted. Language in the U.S.-China bilateral agreement

indicates that China’s environmental services commitments cover sewage, solid waste disposal, cleaning for

exhaust gases, noise abatement, nature and landscape

protection, and other environmental protection services,

yet they do not cover environmental monitoring or pollution source inspection. 

Although foreign service providers are generally

kept out of environmental monitoring and pollution

source inspection, foreign firms are contracted to provide such services on an ad hoc basis. CH2M Hill, the

U.S. company that carried out air-monitoring operations

in Sydney prior to the Olympic Games there, has been

contracted to perform air-monitoring operations in

Beijing as it prepares for the 2008 games.

Capacity and Awareness Building

One of the single biggest breakdowns in China’s

environmental protection apparatus today is a deficiency of capacity and awareness. As discussed elsewhere

in this document, many local EPBs lack clarity regarding how best to approach the diverse and complex environmental problems within their jurisdictions, industrial

leaders lack vision regarding the possibilities for clean

production and eco-efficiency, and the dearth of comprehensive solutions that can benefit both the environment and the economy sometimes makes environmental

protection a secondary priority after economic development. Foreign investors might want to consider marketing equipment and carrying out consulting operations in

China through a method that disseminates information

in regard to these deficiencies. Investment packages

might also include components that seek to implement

corporate and industrial training, eco-efficiency capacities, health and safety management, and other initiatives

that cover both environmental and economic needs. A

number of Chinese companies already recognize economic benefits through efficiency and sound management. As China’s socialist market economy continues to

develop, the need for such efficiencies is increasing, as

are the demands for companies and consultants that can

provide the means to achieve them.

Market-Entry Consulting

A successful strategy used by several service

providers entering the Chinese market employs marketentry companies to introduce potential partners or projects to prospective service providers. This allows a

foothold to be gained with a low financial commitment

or risk. Conversely, several U.S.-based associations and

market-entry groups have attempted to help their clients

enter China with the aid of U.S.-based or U.S.-educated

Chinese professionals. Overall, the success rate of such

efforts has been low, as the value of market-entry consultants lies with their local presence and contact network.

Below, two specific approaches are presented that

may be considered by a group of service providers

working through an association or consortium with a

well-established office in China.

Specialized Representation Associations

Foreign investors seeking to operate in China might

benefit from the development of a number of special64 U.S. Department of Commerce, International Trade Administration
China Export Market Plan 65

ized, privately operated associations that simultaneously

function as monitors for business opportunities in China

and as foreign technology and services sources. In addition to helping form partnerships between end users and

suppliers, the associations might facilitate legal, administrative, and logistical consulting. Specialized associations might represent particular U.S. industries in

China’s environmental sector as a whole or direct attention toward particular industrial sectors in China with

environmental needs. A strong need currently exists for

an association that monitors opportunities and facilitates

participation in multilateral and untied bilateral assistance operations. Such an association should not only

monitor for opportunities and keep its constituents

informed of potential projects at the very earliest stages

of assessment and development, but should also develop

the capacity to facilitate viable bidding for such projects,

a task that is difficult, particularly for small operations

and firms with no experience in doing so.

The Consortium Approach

Because of the logistical and financial constraints of

operating in China, as well as the increased capacities

resulting from the pooling of experiences and

strengths, foreign investors may find it beneficial to

enter the market via a consortium scenario. Consultants

and other service providers can work together to offer

complete packages of planning, design, financing,

engineering, implementation, and long-term operation

management and training. Service providers with a

clear understanding of the needs discussed in the introduction of this chapter might be in a position to play

the invaluable role of bringing together the most appropriate players for a particular project and then bridging

the gap between those players and the domestic entities. It goes without saying that the central organizers

of such a consortium must have extensive and profound experience not only in the environmental sector

but in China as well.

Conclusion

The services sector in China presents many opportunities and challenges to U.S. service providers. On the

one hand, U.S. services and technologies are respected,

yet on the other, they are at a distinct disadvantage compared with many Western countries due to a lack of

bilateral funding and the tumultuous political relationship between China and the United States. A bilateral

environmental program in China would help level the

playing field with other Western countries and encourage Chinese entities to consider U.S. vendors for projects. U.S. companies also need to take a long-term view

of the Chinese market and establish long-term representation that actively markets and builds alliances on their

behalf. In the case of small and medium-sized companies unable to afford an in-country presence, associations or consortium relationships should be considered

as a method of market entry.
66 U.S. Department of Commerce, International Trade Administration

This section includes a number of resource management

issues and technologies that have not been covered in

other sections. Some subjects may not be appropriate

for technology providers, but they may be appropriate

for consultants and innovative management and protection systems providers. 

China’s territory encompasses the third largest land

area in the world, after Russia and Canada. However,

land resources per capita fall far below world averages.

According to the Food and Agriculture Organization,

China accounts for 22 percent of the world’s population

but has only 10 percent of the world’s arable land. The

arable land totals about 130 million hectares, or only 0.1

hectare per person. Additionally, the quality of the arable

land is generally poor, with almost 80 percent classified

as low- or mid-yield land. Unsustainable agricultural

and irrigation practices, water supply problems, severe

degradation due to pollution, deforestation, erosion, and

urbanization further exacerbate the problem. 

China is rich in grasslands of many varieties, which

cover over 40 percent of its territory. A massive push to

“improve” the grasslands for agriculture in the 1950s

and 1960s led to rapid erosion and ultimately desertification. Intense livestock production, overgrazing, and

permanent settlement of traditional nomads contributed

to further deterioration. Over a third of the grasslands

are overgrazed, and the desertified areas have doubled

in size since the mid-20th century. 

According to China’s fourth forest resources survey,

“forested land” covers about 260 million hectares,

although only about half of this is actually covered by

forests. Forests in China suffer from overlogging, illegal logging, and conversion to agricultural use. The

aftereffects of forest destruction are noticeable in the

form of serious soil erosion and massive flooding in

certain areas. Efforts are underway to arrest this situation. Since the 1970s, deforestation trends have been

reversed due to major afforestation efforts. Because of

this, the area of forested land has increased, but the state

of forests in terms of biodiversity and age continued to

decline right up until 1998, when the government

imposed a logging ban. Even now, this ban is consistently violated.

The main concern regarding sustainable land management in China is food security. China has been experiencing a net loss of cultivatable land due to massive

urbanization, especially in the fertile eastern regions

where the majority of the population resides. Even

worse, most additions to arable land resources have

been made by the reclamation of fragile grassland, wetland and coastal ecosystems. Major land reclamation

work, such as that in the desert region of Xinjiang, has

generated an increased demand for irrigation water, but

unsustainable water practices have led to the deterioration of nearby water-rich areas. 

Policy and Legislation

Environmental awareness has significantly

increased since 1978, and higher priority has been

placed on the strengthening of policies related to land

management. Legislation, administrative research,

institutional restructuring, and education have all contributed to a much stronger framework for conservation

and land resource planning. Administrative actions

have included merging the National Land Bureau and

the Ministry of Geology into the Land and Natural

Resources Ministry and reclassifying the Ministry of

Forestry as the State Forestry Bureau. Since the implementation of these changes, SEPA has been the main

entity responsible for the administration of rural ecology and conservation. However, at the ministry level,

there is still some confusion: while SEPA is the highest

authority relating to ecology, the Ministry of Water

Resources is responsible for water and soil conservation, and the Ministry of Agriculture oversees farming

and productive lands. There is no national parks service or the equivalent, and the setting aside of nature

reserves is undertaken in a sporadic and quantity-driven manner. 

The government has expressed several ambitious

goals concerning land use and management for the next

10 to 20 years. Priority is being placed on undoing the

damage of the past half century by increasing and protecting forests and grasslands as well as restoring wetlands, halting the spread of desertification, and

Chapter 8

Resource Management
China Export Market Plan 67

preventing further arable soil loss in order to maintain

the current level of self-sufficiency in food production. 

Shortfalls of the Ninth Five Year Plan are not affecting the Tenth Five Year Plan. Goals stated in the Tenth

plan cite an increase in percentages relative to the

amounts and distribution of resources at 1995 levels;

however, few 1995 baselines relevant to these percentages exist. In addition, certain definitions are vague, as

demonstrated by the overlap between “reduced farmland” and “eroded areas.” 

Despite the policy advances of the past decade, many

government organs and state mouthpieces remain confused, as illustrated by a recent statement issued by the

minister of land and natural resources:

China will strengthen management of farmland and prevent

the destruction of cultivated land; it will press ahead with

improvement of land, intensify reclamation efforts, and

appropriately exploit the reserve resources of cultivated

land. Meanwhile, it will pursue the policy of tapping the

potential of land for construction purpose and vigorously

promote the intensive use of land. (People’s Daily, Feb. 1,

2001. Emphasis added.)

The effectiveness of resource regulation and policy is

hampered by conflicts of interest, often within and

among the very entities that are responsible for regulation. The State Forestry Bureau, for example, is on the

one hand responsible for protecting and monitoring the

national forest reserves. The same bureau has traditionally been involved in the exploitation and use of national forest resources, often benefiting directly from the

sale of licenses and contracts for such activities or indirectly from the formation of companies that conduct

business using these resources. 

Additional and perhaps more dangerous constraints

to resource management are coming into focus as the

government restructures to meet the demands of a more

deregulated and global economy. As the government

relaxes control over economic activities, it needs to take

steps to ensure firmer control over resource utilization,

an outcome that seems unlikely given current efforts.

Desertification

Desert regions, which cover over a quarter of China,

are expanding. This expansion accelerated with unsustainable land reclamation, agricultural practices, and

livestock production that began in the 1960s and 1970s,

as well as urban development and deforestation

throughout the 1990s. Desertification affects two distinct regions in China; most notably, the northern plains

of Inner Mongolia and several provinces to the south of

it, but also the drainage basins in the West, mostly in

Xinjiang and Gansu provinces (see the map at

www.din.net.cn). 

Desertification contributes to a host of problems in

China, in both rural settings and urban centers.

Unfortunately, desertification is often caused by problems to which it contributes, forming a vicious cycle.

These include:

● Reductions in farmland. Heavy losses of arable land

are devastating the economies of many communities, forcing them to increase their exploitation of

marginal land. Overuse of water resources and overgrazing destroy the resources that many rural communities depend on.

● Sandstorms. Dust storms and sandstorms throughout the country are noticeably increasing in both

intensity and number. A series of sandstorms that

struck Beijing in the springs of 2000 and 2001

caused millions of dollars’ worth of property damage. A particularly ferocious sandstorm in 1993

killed 78 people in the western province of

Xinjiang, and a sand-and-snow blizzard at the

beginning of 2001 killed 39 people.

● Soil erosion. Desertification in some parts of the

country affects the resources of other regions.

Desertification of the grasslands of the northern

regions, for example, adversely affects the rivers of

the south. The north also contains the headwaters

for many of Asia’s major rivers. As grasslands and

other types of cover decrease, soil washes downstream, contributing to water pollution and floods

farther down the Yangtze and Yellow Rivers. 

Anti-Desertification Efforts

Tree and grass planting seems to be the most

effective way to combat desertification for now.

Reforestation and shelterbelt efforts are increasing. In

December 2000, the chief of the State Forestry Bureau

announced that $11.6 billion would be spent over the

next 10 years on forest protection and reforestation

efforts. However, the majority of reforestation consists

of plantations of cedar in the South and poplar in the

North, which do not adequately compensate for the

loss of biodiversity and old-growth forests. 

Typical methods of preventing sand movement and

stabilizing the advance of sand areas include the erection of barriers and the planting of scrub or grasses on

the windward sides of dunes. 

One method to control desertification is the planting

of seabuckthorn, a local economically valuable and

hardy grass. United Nations Development Program

(UNDP) and Food and Agriculture Organization efforts
68 U.S. Department of Commerce, International Trade Administration

are concentrating on the viability of this plant as an economically profitable solution to the loss of farmland. 

Salinization and Irrigation

China is predisposed to heavily salinized lands, especially in its western regions. Furthermore, ongoing salinization in China results from poor irrigation and other

water-use techniques in areas with scarce water

resources. According to recent World Bank estimates,

salinized land occupies about 80 to 100 million hectares,

10 percent of which are cultivated land. Salinized coastal

zones in the east also serve as a source of sandstorms.

The Ministry of Water Resources estimates that the

rate of salinization is actually decreasing due to prevention and remediation measures introduced in the

late 1980s. 

Best Sales Prospects

Soil Reclamation Technology

In order to increase overall crop yields, the agricultural sector is in great need of innovative and low-cost

equipment or technology that can improve the yield of

highly alkaline soil. A Sino-Japanese cooperative project is underway to improve the quality of saline soil in

North China’s Shanxi Province by applying soil conditioners that are a byproduct of Shanxi power plants.

Soil Remediation Technology

Pollution caused by landfill leakage, pesticides,

industry, and heavy mining has harmed over 13 million

acres of farmland in China. Although soil remediation

technology is typically expensive, innovative approaches may find a niche, as the government sees this as a

high priority. 

Irrigation Technology

The key to alleviating China’s flood and drought problems is water efficiency. Implementation of water-efficient irrigation systems does not require high technology

or great expense. It does require a knowledge transfer in

regard to system design, efficient use of resources, and

the manufacture of parts that are designed for efficient

purposes. Multilaterally financed irrigation projects use

efficient equipment and design in isolated projects, but

these techniques are not replicated and do not spread.

Box 8. Plantation Timber Products Case Study 

Plantation Timber Products, a Singapore-based company, recently made headlines as one of the most successful foreign-funded companies in China. After embarking on an ambitious economic development project that helped restructure the timber

industry in inner China, the company secured an International Finance Corporation (IFC) loan for an afforestation project in

Hebei Province. 

Plantation Timber Products’ efforts encourage farmers in poverty-stricken western regions to substitute sustainable treefarming techniques for traditional agriculture. The switch has had several effects: an improved economy in the region with

direct effects for farmers, the stabilization of large tracts of flood-prone Yangtze valley areas, and the development of sustainable wood reserves. 

In some cases, timber plantations are criticized for encouraging the destruction of biologically diverse native forests for the

plantation of one species of fast-growing timber. China’s case is different. With so much of the country’s natural forest completely devastated, timber plantations represent a reforestation effort that provides economic benefits through the transmission

of sustainable development practices. Plantation Timber Products is gaining the approval and trust of the government as well

as of major multilateral lending organizations such as the IFC.
China Export Market Plan 69

Selected References and Web Sites

References

Jiang Xueqin, “Standing Tall: Plantation Timber

Products Overcomes the Odds to Succeed in China’s

Impoverished Interior.” Far Eastern Economic Review,

Sept. 7, 2000. 

“Pollution, Landfills Devouring Agriculture.”

ChinaOnline, June 9, 2000. 

“Sino-Japanese Project to Upgrade Saline Soil.”

People’s Daily. June 22, 2000. 

“Sustainable Agriculture and Rural Development in

China, Part 1: The Agro-Ecosystem and China’s Rural

Economy.” Promotion of Sustainable Agriculture and

Rural Development in China: Elements for a Policy

Framework and a National Agenda 21 Action

Program. (Beijing: FAO/UNDP/Ministry of

Agriculture of the PRC, 1997.)

Web Sites

Hunan and Nature in Harmony; China Environment

and Development Information: www.enviroinfo.org.cn

(Categories include: land resources, land use, desertification, salinization, soil erosion, land degradation,

sandstorms. Consists of a collection of articles pertinent to this subsector.)

ChinaOnline agriculture section:

www.chinaonline.com/industry/agriculture/agriculture_center.asp

United Nations Food and Agriculture Organization:

www.fao.org

(Contains project documents and publications of interest in the area of land resources.)
70 U.S. Department of Commerce, International Trade Administration

There are five financial sources pertinent to environmental investment in China today:

1. Government investment funds

2. Policy and commercial bank loans

3. Enterprise investment (SOEs, the domestic private

sector, JVs, and WFOEs)

4. Multilateral and bilateral assistance programs

5. Securities

Government investment funds are capitalized primarily through central budget funds earmarked for a specific use, or through national and subnational

governments and affiliated agencies via charges and

levies on individuals and enterprises. Theoretically,

these resources are available to all Chinese legal bodies,

including JVs and WFOEs. However, in reality they are

primarily reserved for SOEs and occasionally for highprofile JVs that authorities consider to be of special

importance. Although these funds are rarely made available to foreign investors, they should be understood, as

they constitute a significant source of funding for SOEs

that may contract foreign-invested enterprises to service

their needs.

The structure and availability of policy and commercial bank loans, like those of government investment

funds, are important to foreign investors in terms of

how they apply to the Chinese enterprises that may contract their services. Both policy and commercial banks

continue to function as the tools of government-directed spending, but commercial banks are becoming

increasingly independent in the decision-making

process when extending loans to operations that have

not been anointed by government planners. Both types

of banks claim to be increasingly cognizant of commercial viability when making loan decisions, and at least

in theory they are granting loans to those ends.

Nonetheless, the ultimate function of Chinese banks is

to service the financial needs of state and provincial

planners. Very little in the way of preferential environmental loans is available. 

Enterprises themselves are expected to produce

increasing amounts of money to furnish environmental

protection investments. Pressure to do so stems both

from government policies decreeing pollution abatement and from commercial competition, which necessitates increased production efficiency. Additionally,

access to many governmental funds requires enterprise

contributions.

As discussed further in Chapter 10, projects funded

by multilateral and untied bilateral assistance offer the

most secure point of market entry for foreign exporters

and foreign-invested enterprises due to relatively strict

assessment and implementation standards as well as

guaranteed available hard currency. This chapter

includes a brief introduction to the major assistance programs active in China, including points on how best to

monitor their current affairs.

Although securities may one day play a significant

role in environmental financing, the financial sector

remains generally inaccessible to the environmental

sector at this time. The securities markets of China are

far too unregulated and immature to support creative

environmental finance tools, and they are much too protected (i.e., reserved for the purposes of larger, anointed

SOEs) to service capital demands for environmentally

oriented startups (although a number of environmental

enterprises are listed). There is some discussion regarding the development of a green investment fund in

China; however, its implementation is still a long way

off, and the financial climate requisite for its success is

arguably even farther away. Because securities are not

immediately applicable, there is no further discussion of

them in this chapter. See Chapter 2 for more information on China’s macroeconomy and economic issues.

Government Investment Funds

Local Environmental Funds

Local environmental funds are essentially rotating

funds capitalized by pollution levies, or non-compliance charges, imposed upon enterprises discharging

pollutants in excess of relevant national standards.

Approximately 80 percent of the revenues generated by

these funds are redirected to the polluting factories from

which they came, in the form of grants (or loans in the

case of the “special fund”), with the intention of financChapter 9

Finance Programs and Resources
ing pollution abatement projects. The remaining 20 percent augments EPB budgets and is theoretically aimed

at enhancing capacity-building programs. Enterprises

submitting proposals for grants from this source are

required to match a proportion of the funds sought

through means of their own. 

Various models for the collection and distribution of

these funds exist throughout the country, but in each

case procurement and disbursement responsibilities do

not extend beyond the provincial government. In all

cases, city, county, and provincial government bodies

have various degrees of involvement in collecting and

redistributing these finances; however, the central government neither receives a share of the revenues nor

plays a role in determining how they are used. In most

cases, the funds are jointly managed by environmental

and financial agencies, and in some cases commercially-oriented investment corporations have been established. The corporations are not, however, completely

independent, as they are established and monitored by

the associated EPBs.

The Special Fund for Pollution Control

The efficiency of local environmental funds is low

because: local environmental funds traditionally have

been disbursed as grants; the finances are recycled to

enterprises that initially capitalized the funds through

levies (reportedly reinforcing a perception among the

contributing enterprises that they own the funds); and,

after environmental funds have been granted to enterprises, project selection is left mainly to the enterprises’ discretion. In 1998, environmental investment policy began

shifting from grants to loans and, in keeping with this

shift, a special fund for pollution control was initiated.

The working mechanisms of the special pollution

control fund are established by EPBs at provincial or

municipal levels and remain entirely under the control

of the EPB finance departments, except in some regions

where semi-independent investment corporations have

been established under EPBs to manage the accounts.

The fund is capitalized by transfers of 20–30 percent of

the revenue from pollution levy funds each year, interest payments on loans paid out through the fund, allocations from local governments, and so forth. Loans are

provided at low interest rates (2.4–3.0 percent) to enterprises that previously paid pollution levies, are clearly

capable of repaying the loan, can match a determined

proportion of the loans from their own finances, and

have project objectives (which must be clearly stated at

the point of application) that are deemed feasible. 

Priority applications for loans through these funds

include demonstration projects addressing key pollution

issues and projects with eco-efficiency capacities, as

well as the closure, revamping, or removal of major polluting enterprises.

Although finance use under the special fund provisions is reportedly more efficient, effective, and directed toward specified and appropriate uses, a number of

issues are notable, including the fund’s relatively small

size, inaccessibility to enterprises that have not paid

pollution levies, continued government intervention,

and various other administrative issues.

The National Environmental Fund

There has been some discussion of the development

of a national environmental fund, ostensibly to facilitate

comprehensive, large-scale projects and to act as a highlevel monitor of overall investment practices. SEPA has

on several occasions solicited opinions from a number

of domestic government bodies, as well as the World

Bank and the Asian Development Bank, in regard to the

merits of establishing such a fund, its feasibility, and

what form it might take. There is little indication that

such a fund might come into existence any time soon.

Many national-level government bodies would need to

collaborate and agree upon its form and function, something yet to be attempted or accomplished.

Other Levy-Based Funds

Two other government funds used to finance environmental protection, the levy for enterprise renovations and redevelopment and the levy for urban

infrastructure projects, are capitalized through various

fees and levies as well as government allocations. Only

a small portion of the funds generated by the levy for

enterprise renovations and redevelopment is focused on

environmental protection (in 1998, 0.28 percent of the

fund’s total expenditure was environmentally oriented,

down from 1.68 percent in 1991). The fund is a relatively small overall contributor to environmental investment and is viewed as an underachiever in this regard. 

Funds from the levy for urban infrastructure projects,

on the other hand, have increasingly financed urban

environmental infrastructure (see Figure 9.1). Local

governments are directing more urban infrastructure

development funds to environmentally-specific projects

(such as water and waste management) and are increasing their own contributions. This fund accounted for 58

percent of domestically sourced investment in pollution

control in 1999, as opposed to just over 32 percent in

1991. Nonetheless, urban environmental infrastructure

China Export Market Plan 71
72 U.S. Department of Commerce, International Trade Administration

remains woefully inadequate, with urban sewage treatment rates reaching only 30 percent and waste collection rates reaching only 60 percent in 1998. In both

cases, the quality of treatment carried out was

generally of lesser quality than is necessary to achieve

notable results.

Government Support Funds for Environmental

Enterprises

The only government ministry-furnished support

fund in any way directed toward environmental technology development is the Ministry of Science and

Technology’s Innovation Fund for Small TechnologyBased Firms. The fund’s purpose is to facilitate the

transformation of scientific research achievements into

technological innovations, particularly those that can

play a significant role in economic growth.

Environmental protection innovations are eligible, and

the fund is available to all registered legal bodies in

China, including JVs and WFOEs. 

The Innovation Fund for Small Technology-Based

Firms is gaining attention and is considered to be run

relatively well, with accrued finances of over RMB 1

billion as of 1999. Proponents of the development of

an environmental industry investment fund may use

the Innovation Fund for Small Technology-Based

Firms as a model upon which to base a fund specifically geared toward the support of environmental technology development.

A number of other funds and organizations exist, such

as the China Foundation for Environmental Protection.

However, their activities are minimal. Other than acting

as showpieces and bureaucratic administrations, they

serve little purpose for environmental protection.

Policy and Commercial Bank Loans

Policy Banks

Of China’s three policy banks, the China

Development Bank (CDB), the Export-Import Bank of

China, and the Agricultural Development Bank of

China, only the CDB works to facilitate investment

directly associated with environmental protection. CDB

loans for environmentally-related projects are generally

long-term loans, and they are not offered at preferential

interest rates. The China Ex-Im Bank finances environmentally-related investments, but it has no special

program geared specifically toward environmental

investment.

The CDB apparently intends to draw a balance

between functioning as a tool to implement government

mandates and granting loans based on commercial viability. All CDB loans undergo thorough feasibility studies that bear significant weight in the final decision to

grant a loan. However, political pressure still exerts significant influence, and many loans are provided through

the bank to facilitate programs that are deemed critical,
despite poor commercial viability. CDB finances are

domestically sourced, including a significant amount

of capital drawn through bonds issued directly by

the bank.

The World Bank and the Asian Development Bank

(ADB) work with the CDB in granting joint loans, which

constitute a small percentage of the bank’s lending. All

joint loans are subject to the relatively strict assessment

standards of the multilaterals, thereby increasing the

assurance of commercial viability for projects that have

received the loans. As a result, the likelihood for timely

repayment of joint loans is increased. Because the loans

are all long term, it is still difficult to determine the prognosis for their return rates. 

It is also difficult to assess the commercial viability

of non-joint loans by CDB that do not undergo feasibility studies by the multilaterals. World Bank and ADB

involvement in the CDB presumably affects the knowhow and standards of the development bank, helping it

to hone its future viability. In its current manifestation,

the commercial intentions of the bank continue to be

waylaid by political pressure from central and provincial planners.

Commercial Banks

China’s commercial banks, like its policy banks,

claim that increased attention is being paid to commercial standards. Particularly when extending loans

to small operations, commercial banks increasingly

look at the commercial viability of the projects at

hand. Commercial banks are gaining more independence from central planners, particularly in relation to

lending practices toward smaller operations. In this

context, commercial banks are wary of financing environmental projects that are not government mandated,

due to the long-term and low-yield nature of such

loans. However, commercial banks, like policy banks,

generally heed central and provincial government

mandates for financial support of large projects requiring massive expenditure. 

For the most part, commercial banks do not offer

preferential terms for environmental projects. Any

firm that does manage to arrange a commercial

bank loan for environmental investments pays the

standard interest rate of approximately 5 percent. The

exceptions are those initiatives with SDPC (or the

appropriate lower-level development and planning

commission) approval. Such initiatives qualify for a

preferential interest payment program, at the discretion of the lending bank. Investors repay the loan at an

interest rate of approximately 2 percent; the remaining

percentage of the interest is furnished by budgetary

finances from the local government most closely associated with the project. This scheme has not seen

tremendous success, however, as local governments

choose not to accept the burden, banks consider the

extra steps of collecting interest from numerous

sources troublesome, and commercial viability

remains difficult to achieve.

The State Development and Planning Commission

and Bank Loans

SDPC approval is necessary to obtain preferential

commercial bank loans, policy bank loans, and bilateral or multilateral financing. Regional and local development and planning commissions must review all such

projects for feasibility and approval. Any project over

$30 million must be approved at the national level.

Enterprise Investment

About 55 percent of the $85 billion that CRAES

expects is needed to achieve the environmental goals of

the Tenth Five Year Plan is likely to be covered by business enterprises themselves. Most loan programs and

preferential funding for enterprise development and

upgrades require some degree of fund matching from the

enterprises, and regulations, particularly the Three

Simultaneous Steps policy, impose significant spending.

The Three Simultaneous Steps policy requires enterprises to take steps to prevent and control pollution

simultaneously with the design, construction, and operation of projects, as opposed to addressing pollution

issues after project implementation is completed.

Revenues generated as a result of compliance with the

policy have grown steadily since 1991 and have consistently represented about 4 percent of total expenditure

on construction projects. However, the policy’s share of

total investment in environmental protection has trended down, suggesting increased performance on the part

of other investment channels (see Figure 9.2).

Multilateral and Bilateral Assistance Programs

About 15 percent of environmental funding in China

is sourced from multilateral and untied bilateral lending

agencies. Aside from financial assistance, such lending

programs aid Chinese development by guiding investment toward feasible and financially viable projects, by

pressing for the development of stronger assessment

China Export Market Plan 73
74 U.S. Department of Commerce, International Trade Administration

and implementation standards, and by offering technical assistance, policy advice, seminars, and training.

The Project Cycle

Local or provincial governments initiate project proposals that need foreign financial assistance. Some projects are listed on the Agenda 21 or the Trans-century

Green Projects list. MOFTEC screens all proposals and

is responsible for ensuring that all loans associated with

a particular project can be repaid. Ministry of Finance

and SDPC approval are usually required at some point

in the initial project cycle, and SEPA may screen projects as well. After clearing all domestic hurdles, a project is forwarded to the lending agencies for the lengthy

review and approval processes.

The Ministry of Finance meets with donor

agencies annually to discuss financing arrangements.

Government and lending agencies then collaborate to

analyze project details and feasibility further.

Consulting firms should position themselves for future

involvement in particular projects at this stage. Detailed

feasibility studies are required and the borrowers, who

are responsible for project preparation, often need to

augment their in-house analytical capabilities.

Contractors and equipment suppliers should create contacts at this point to determine whether or not their services or goods will be procured for the project. Once the

project details are finalized, the lending institution and

various Chinese government bodies must approve the

final plan. Implementation generally begins within a

few months of final approvals, by which time contractors and suppliers should already be in contact with the

appropriate implementing agencies. 

Chinese implementing agencies, not lending organizations, are responsible for contracting goods and services. Firms that have identified projects suited to their

capacities should approach the implementing agencies,

not the lenders. This should be done as early on in the

project assessment stage as possible, as waiting for

projects to go out for bid before initiating contact will

result in failure.

There are a number of ways to monitor business

opportunities through multilateral and bilateral assistance programs:

● Each institution maintains a Web site, many of

which are conscientiously updated. However, not all

sites provide information well enough in advance to

keep potential bidders prepared to tender in a timely

fashion. Firms need to contact these institutions

proactively in order to keep a close eye on developments and should demonstrate interest in particular

projects as early as possible.

● UN Development Business, published by the United

Nations Department of Public Information, is a

comprehensive resource for enterprises providing
China Export Market Plan 75

goods and services to projects financed by the

major multilateral institutions. It is available by

subscription online or in hard copy. Subscription

information is available at www.devbusiness.com/

about.cfm. 

World Bank

As of June 2000, World Bank commitments to China

were in excess of $34 billion, accounting for a total of

226 projects. About half are still under implementation.

The bank’s primary targets are poverty alleviation,

infrastructure development, and human resource development. Aside from initiatives aimed specifically at

environmental protection, many World Bank projects

afford residual benefits to those ends; for example, all

World Bank–assisted power projects aim to incorporate

environmental sustainability in their design and therefore draw on environmental industries.

China’s environmental protection sector has been

the fastest-growing recipient of World Bank loans over

recent years. In fiscal year 2000, the World Bank furnished $700 million in loans for three environmentally

oriented projects: the $349 million Second Beijing

Environment Project, aimed at air and water pollution

alleviation in Beijing; the $150 million Hebei Urban

Environmental Project, with a strong emphasis on

wastewater management and a lesser focus on capacity

building for industrial pollution control; and the $200

million Chongqing Urban Environment Project, with

an emphasis on solid waste management, wastewater

management, water supply and monitoring, and capacity building for urban management and environmental

rehabilitation. The bank also works as an implementation agency for the Global Environment Facility (GEF)

and the Montréal Protocol.

Future environmental focuses will include air and

water pollution, wastewater treatment, vehicle emissions control, and reduced coal use in urban areas.

Focus is also shifting toward the poorer and institutionally weaker inland provinces. As of 2000, nearly 70 percent of recent and proposed World Bank lending

targeted the nation’s interior, as opposed to 50 percent

several years earlier. One intention of this shift is to mitigate environmental impact as development in the

region is pushed forward.

The structure of World Bank assistance to China is

changing, drawing a mixed reaction from experts. The

bank still categorizes China as a “developing country,”

but it is no longer considered one of the less-developed

countries. Thus, China is increasingly being expected to

fund its own development as its domestic economy continues to grow. Soft loans (i.e., low-interest loans) and

grants are no longer being made available.

The World Bank Group maintains an extensive Web

site (www.worldbank.org/) that contains a section particular to China (The World Bank Group in China,

www.worldbank.org.cn/English/home.asp). Included on

the site are numerous resources such as the World Bank

Monthly Operational Summary, (www.worldbank.org/

html/opr/procure/MOS/contents.html), research papers,

project descriptions, and statistics.

Asian Development Bank

The Asian Development Bank (ADB) is a development finance institution owned by 59 members. The

bank’s goals, which are effected through loans and technical assistance, are poverty reduction, economic growth,

human development, improved status for women, and

environmental protection. Only nationals of ADB member countries, of which the United States is one, are permitted to bid on service and procurement contracts for

ADB-financed projects. The bank places considerable

stock in the BOT and build-operate-own models, which

are being put to use in the PRC with increasing support

from the government (see Chapter 10).

The ADB’s country assistance plan, available online

at www.adb.org/China/default.asp, outlines the intended assistance program for the PRC. The social infrastructure and environment section of the plan defines

urban development and environmental protection goals

including waste management; air and water quality

issues; capacity building for and implementation of

market-based instruments for environmental management; strengthening of institutions, policies, and management systems; promotion of cleaner technologies;

and promotion of sustainable natural resource utilization. The plan also portends a shifting focus toward

the western regions, in keeping with China’s Western

Development Plan.

Guidelines for procurement and consulting services

are available online at www.adb.org. The ADB publication Business Opportunities outlines opportunities for

vendors and consultants, is updated regularly, and is

available online and free of charge at

www.adb.org/business/opportunities/default.asp. The

bank also maintains two data banks, one each of consulting firms and individual consultants, known respectively as DACON and DICON. Bank staff refer to

the data banks during the initial consultant selection

process for ADB-financed projects. Registration qualifications and information are available online at

www.adb.org/consulting/dacon.asp. The country assis-
76 U.S. Department of Commerce, International Trade Administration

tance plan is available at www.adb.org/China/

default.asp.

International Finance Corporation

The International Finance Corporation (IFC) operates under the supposition that sustainable economic

growth based on private investment and successful

entrepreneurship is the cornerstone to poverty alleviation. Thus, it works to further the development of the

non-state sector in developing countries, foster the

development of financial institutions, and advise private

companies and governments in achieving such ends. 

In fiscal year 2000, the IFC approved $95 million in

financing to China. The current strategic emphasis

includes enterprise reform and private sector development, increased involvement in financial sector

development, continued involvement in western development, support for industry rationalization and SOE

reform, increased private participation in infrastructure

and social sector development, and continued limited

recourse financing for projects bringing technology and

management skills into China.

The IFC’s Environmental Projects Unit (EPU)

works to accelerate market acceptance of goods and

services that benefit the environment and emphasize

eco-efficiency by identifying and developing innovative private sector initiatives with environmental benefits and by integrating environmental opportunities into

the project cycle wherever possible. The EPU draws on

IFC resources and, when applicable, other sources such

as the GEF. EPU projects, like all IFC projects, must be

within the private sector, be technically sound, have

good prospects for profitability, and benefit the local

economy. The main sectors targeted by the EPU are

biodiversity, climate change and greenhouse gas reduction, energy efficiency, technology development, pollution abatement, renewable energy, solid waste

management, sustainable agriculture and forestry, sustainable tourism, water supply and wastewater treatment, and environmental investment fund

development. The IFC office in Beijing has expressed

a good deal of interest in carrying out environmentallyrelated projects and can assist investors in accessing

the capacities of the EPU.

Enterprises seeking EPU assistance should submit

applications via the IFC. There is no formal application

process by which to do this. Both Chinese and U.S.

companies can directly approach the IFC in Beijing or

Washington, D.C. A preliminary review is required

Box 9. Opening Doors Through Co-financing and Concessional Funding 

The initial outlay of funds by bilateral government organizations to assist development and environmental protection in China

can generate contracting opportunities and financing for private investors. Most bilateral assistance is tied to contractors in the

country of origin and helps facilitate the development of a market presence that over time may lead to further contracts. Bilateral

spending can open channels by which to tie outside funding to contractors that are nationals of the bilateral’s origin. In China,

where relationships are of great importance, spending to enhance domestic initiatives (such as Canada’s spending in support of

the China Council for Sustainable Development) has built relationships that have created well-established inroads. Except for

the United States, every major donor country engaging in development assistance throughout the world is active in China. The

United States has several small-scale operations, such as the Trade and Development Agency (www.tda.gov); however, no U.S.

program in China compares to the programs of such countries as Germany, Australia, Canada, and others in terms of scale,

financial capacities, or overall impact.

Bilateral assistance agencies that co-finance operations with the World Bank and the ADB are essentially able to tie entire

loan packages for technical assistance projects to consultants and technology providers from their own countries. Technical

assistance projects through the ADB often draw grants in the neighborhood of $750,000. Bilateral assistance agencies can cover

a portion of such loans in the form of a grant, equaling, for instance, $300,000. In doing so, the bilateral can take over procurement operations for the project and source equipment, consultation, and management training, entirely from its own country, in essence transforming the entire $750,000 (the $450,000 grant from the multilateral and the $300,000 grant from the

bilateral) into tied financing. Bilaterals engaging in such co-financing operations have created contracting opportunities for private enterprises in their respective countries, generating revenues several times the outlay of the original grant.

The Canadian government has financed both the first and second five-year budgetary rounds of the China Council for

Sustainable Development, each equaling investment of around $5 million. The China Council for Sustainable Development’s

purpose is to maintain high-level consultation on sustainable development between the Chinese government and representatives

of governments, donor agencies, and multinational corporations. Through its significant financial and administrative involvement with the council, the Canadian government has provided a tremendous inroad for private Canadian firms. In this way, a

country with a relatively small development budget has facilitated good will and private sector contracts for its national industries far exceeding its original investment.
China Export Market Plan 77

before the IFC decides whether a full feasibility study

will be carried out.

The IFC’s Web site can be accessed at www.ifc.org,

where it is possible to link to the EPU’s site, www.

ifc.org/enviro/EPU/epu.htm. In addition, the IFC’s

“China’s Emerging Private Enterprises,” the first comprehensive analytical study of China’s emerging private

sector, is available online at www.ifc.org/publications/.

Multilateral Investment Guarantee Agency

The Multilateral Investment Guarantee Agency

(MIGA) encourages foreign direct investment in developing countries by furnishing investors with political

risk insurance against such possibilities as transfer

restriction, expropriation, contract breach, civil disturbance, and war. The agency also helps developing countries promote private investment opportunities through

its Investment Marketing Service (IMS). As of late

2000, MIGA had 18 contracts of guarantee, with liabilities totaling $130 million, benefiting infrastructure and

manufacturing in China.

Current IMS projects include capacity building for

attracting foreign direct investment in Guizhou as well

as collaboration with UNDP China and the World

Bank’s Foreign Investment Advisory Service to promote investment in the Tumen River region, a common

border zone delineated for economic cooperation

among Russia, North Korea, and northeastern China.

MIGA’s Investment Marketing Service manages an

on-line information service called IPAnet, which offers

information on investment opportunities worldwide.

Nearly 300 China-based individuals and organizations

participate in IPAnet, and the Web site contains over

200 documents related to business and investment conditions and potential projects as well as links to national and subnational investment promotion agencies.

Applications and other details regarding MIGA are

available online at www.miga.org, and IPAnet’s Web

address is www.ipanet.net.

United Nations Development Program

The programs of the United Nations Development

Program (UNDP) in China are funded via UNDP core

resources, the GEF, and the Montréal Protocol.

Activities focus on sustainable energy development, air

and water pollution, natural resource management, and

environmental governance. UNDP activities in China

can be monitored via UNDP-China’s Web site

(www.unchina.org/undp/). The site contains descriptions of past and current projects, with occasional brief

descriptions of upcoming projects and calls for bidding.

Specifics regarding these programs and the potential for

business opportunities are generally not noted on the

Web site and should be sought directly from UNDP or

the implementing agency.

UNDP operational plans in China are laid out

through the agency’s country programs. CP4, also

known as Country Cooperation Framework 1, was completed in 2000. The time is right for interested suppliers

and consultants to begin interaction with UNDP and its

various implementing agencies. SEPA, Agenda 21, and

the China International Center for Economic and

Technical Exchanges are UNDP implementation agencies (see Appendix B, China Contacts list).

UNDP’s Web address is www.undp.org. Chinaspecific UNDP information is available at www.unchina.org/un/undp.

United Nations Industrial

Development Organization

The United Nations Industrial Development

Organization (UNIDO) is a specialized UN program

working for the development of sustainable and economically competitive industry in developing nations.

Many of UNIDO’s current operations in China have

components that are directly or indirectly associated

with environmental technology providers. Focuses

include industrial pollution and waste management,

cleaner production programs, the phasing out of ozone

depleting substances, and institutional capacity building. Listings of current and past UNIDO programs in

China are available online at www.unchina.org/unido. 

UNIDO is implementing a recently approved GEFfunded UNDP program to improve industrial efficiency

in China’s town and village industrial enterprises.

TVIEs are generally small-scale collective or privately

owned enterprises. They are significant contributors to

industrial output and local economies, but they slip

through many environmental protection regulatory

apparatuses and are thus major contributors to overall

pollution discharge as well. The project, currently

aimed at small-scale brick, coke, cement, and foundry

industries, is in its second phase. After identifying and

prioritizing the barriers to energy efficiency in the sector in phase 1 and phase 2 seeks to initiate a market

transformation and strengthen regulatory capacities to

govern clean development in the sector as it grows.

Equipment procurement begins in 2002. Interested parties are encouraged to contact UNIDO and the Ministry

of Agriculture (the Chinese government implementing

agency) as soon as possible.
78 U.S. Department of Commerce, International Trade Administration

Registration information for involvement in UNIDO

programs, as well as the weekly informational

newsletter UNIDOscope, are available online at

www.unido.org. Reviews of China-specific UNIDO

projects are available at www.unchina.org/unido.

Unfortunately, prospects for the direct participation of

U.S. companies in UNIDO projects are uncertain, as the

U.S. no longer directly supports UNIDO.

Global Environment Facility

The Global Environment Facility (GEF) is a grant

and concessional funding source for environmental

and economic growth projects with global implications. Activities focus on climate change, biodiversity,

international waters, and stratospheric ozone. Projects

are generally implemented through UNDP, the United

Nations Environment Program (UNEP), and the World

Bank; however, GEF is an independent international

institution. GEF financing is intended to cover only

the incremental costs of activities with environmental

benefits. Incremental costs are calculated by comparing the costs of environmentally superior operations

with the costs of similar projects undertaken without

additional expenditures to benefit the environment.

UNDP manages GEF technical assistance projects in

China, and the World Bank manages GEF investment

projects. 

Project development funds (PDF) are also available

through GEF for projects in the development phase that

are expected to need partial GEF financing during

implementation. Three PDF funding levels exist: PDF

Block A grants, of no more than $25,000, are intended

for initial pre-feasibility studies; PDF Block B grants,

of no more than $350,000, fund specific project

preparatory and feasibility studies; and PDF Block C

grants, of no more than $1 million, can be used to fund

detailed engineering design and complex technical and

financial preparatory work. Matching funds from the

sponsor are usually required for access to PDF.

For specific details on eligibility for GEF financing

and documentation on pipeline processes, see the GEF

Web site at www.gefweb.org.

Japan Bank for International Cooperation

In October 1999, Japan’s Overseas Economic

Cooperation Fund (OECF) and the Export-Import Bank

of Japan (JEXIM) merged to form the Japan Bank for

International Cooperation (JBIC). Previously the OECF

was Japan’s operative institution for extending Japanese

donations, loans (including a considerable amount of

untied loans), and technological cooperation to China.

Under the JBIC, the operations that were previously

within the jurisdiction of the OECF remain differentiated from those of JEXIM.

In fiscal year 1999, China was the second largest

recipient of Japanese overseas development aid, receiving $1.22 billion in direct aid and soft loans. A considerable amount of those funds were spent on major

infrastructure, such as airports, railways, and sewage

treatment projects, yet of the 19 projects approved by

the OECF itself, 14, or 74 percent, were related to environmental improvement, and 13, or 68 percent, were

related to inland development. Unlike many bilateral

aid programs, the Japanese program offers untied loans

for infrastructure development and environmental protection, thereby opening the bidding for some JBICfinanced projects in China to non-Japanese contractors. 

However, Japanese domestic pressures to overhaul

its financial aid practices, an increasing perception that

China’s growing economy warrants a more independent

approach to the country’s development financing, and

concerns over Chinese military spending may begin to

affect the JBIC’s overseas development aid to China

and its availability to non-Japanese contractors. Japan’s

plans for future financial aid to China remain unclear.

Loan programs are evaluated on a project-to-project

basis, and loans are no longer provided in lump sums of

five years at a time. It is also now unclear to what

degree JBIC loans are tied to Japanese contractors. A

Foreign Ministry spokesman did tell media sources that

JBIC aid policy is shifting from major infrastructure development to poverty reduction, technical

cooperation to assist human resource development,

and environmental protection. Japanese financing for

environmental protection may decrease overall.

The JBIC’s Web address is www.jbic.go.jp. The

OECF Web site is no longer available, but information

pertaining to the OECF and its new manifestation is

available via the JBIC site.

Export-Import Bank of the United States

For an overview of the Ex-Im’s pertinent programs,

see Chapter 10 or visit the Web site at www.exim.gov.
China Export Market Plan 79

Selected References and Web Sites

References

Cao Dong and Sun Rongqing. Environmental

Financing in China: A Review. CRAES, SEPA,

November 2000.

Gao Shuting, Ge Chazhong, Yang Jintian, Wang Jinnan,

Li Xiaoning. Environmental Funds in China: Past

Experience and Future Prospects. Beijing: CRAES,

Tianjin Industrial Pollution Control Fund Office,

November 2000.

Stover, Jim, Justin Harris, and Christopher Adams.

Hard Currency Financing for Environmental Projects

in China: International Market Insight. U.S. and

Foreign Commercial Service, August 1999.

U.S. and Foreign Commercial Service, Beijing.

Environmental Project Approval and Financing in

China: A Perspective for US Companies. Beijing:

November 2000.

Wang Jinnan, Wu Shunze and Luo Hong. Integrating

Economic Development and Environmental Protection

in China During the 10th Five-Year Plan Period.

Beijing: CRAES, November 2000.

Web Sites

Asian Development Bank: 

www.adb.org

Asian Development Bank Business Opportunities:

www.adb.org/business/opportunities/default.asp

Asian Development Bank Country Assistance Plan:

www.adb.org/China/default.asp

Export-Import Bank of the United States:

www.exim.gov

Global Environment Facility: 

www.gefweb.org

International Finance Corporation: 

www.ifc.org

Japan Bank for International Cooperation:

www.jbic.go.jp

Multilateral Investment Guarantee Agency:

www.miga.org

United Nations Department of Public Information:

UN Development Business:

www.devbusiness.com

United Nations Development Program:

www.undp.org

United Nations Development Program, China:

www.unchina.org/un/undp.

United Nations Industrial Development Organization:

www.unido.org

U.S. Embassy, Beijing: 

www.usembassy-china.org.cn

World Bank Group: 

www.worldbank.org

World Bank Group in China:

www.worldbank.org.cn/English/home.asp

World Bank Monthly Operational Summary:

www.worldbank.org/html/opr/procure/MOS/contents.html
80 U.S. Department of Commerce, International Trade Administration

China’s environmental market is highly competitive,

somewhat restricted, unwieldy, and not easily understood. Accurate data illustrating demand and market size

is scarce, problems are large in scale, and the intricacies

of how to address problems efficiently are not well

understood by the domestic players, making it difficult

for outsiders to determine where their services are needed and how access can be achieved. As a result, making

sweeping strategic statements on market entry is unrealistic. Market potential exists for service and technology

providers and for consultants with the capacity to gain a

deep understanding of needs in specific localities and

facilitate solutions that are both economically and logistically feasible.

Market access for foreign companies is further limited in that market demand remains largely aid driven. For

U.S. companies, this poses further complications. The

severe shortage of bilateral assistance from the U.S.

eliminates possibilities for tied financial aid and leaves

only the resources of multilateral agencies and the Trade

and Development Agency (TDA). As indicated throughout this document, regulatory pressures, as well as the

aims of increasing efficiency and positive corporate

image, are increasingly contributing to market demand,

but they do remain (to varying degrees) limited instigators. At the same time, the bulk of domestically-sourced

spending on environmental protection is aimed at

domestic suppliers. This, too, is changing (albeit on a

small scale), as Chinese buyers realize the long-term

benefits of spending more money up front on better

equipment as opposed to covering the maintenance costs

needed to keep mediocre, locally-produced equipment

up and running. Nonetheless, price remains a strong

determinant factor for many purchasers.

U.S. exporters also must consider in which sectors

they can be most competitive vis-à-vis the strengths of

third-country and local competitors. U.S. versus thirdcountry competitor advantages are discussed in some

detail in each of the sector analysis chapters; however, it

should be restated that, although U.S. technology in a

number of sectors is considered superior or of high caliber, prices may remain prohibitive. One sector in which

the United States does excel is monitoring equipment,

and the inabilities of local producers coupled with

increasing mandates for stricter monitoring may play out

to the advantage of exporters in this sector. Generally

speaking, certain sector strengths (such as the French

domination of the water sector) and tied assistance programs constitute advantages for third-country competitors. Various benefits associated with local production

account for a large part of local competitor advantage.

Entering the Chinese market requires due diligence

and feasibility analyses. Even more important, it

requires a willingness to take risks and determined perseverance. This approach of informed risk taking combined with a strategy of starting modestly and allowing

natural business growth has been proven in the Chinese

market. Many large companies have entered the market

with a reasonable budget and, as a result of engaging the

government at the wrong level (usually too high), positioning a high-cost expatriate, or hiring an inexperienced

Chinese national, have failed and pulled out. Personnel

issues also account for the failure of many overseas businesses in China.

The formula for success could in fact be quite simple.

A midlevel Western manager with a proven business

sense and a desire to prove himself or herself is often the

best solution for in-country management in the startup

phase. Contrary to conventional wisdom, overseas

Chinese and experienced managers from other Asian

countries (even Hong Kong and Taiwan) are rarely a better option. Although they may know the language, cultural differences between Hong Kong and the mainland

and between Taiwan and the mainland can be as significant as those between the U.S. and the mainland, and

while Western-looking American managers are allotted a

margin of error by Chinese business partners, nonChinese Asians and overseas Chinese who purport to

have a flawless cultural sense are not. Chinese nationals

who were trained in the U.S. and lived abroad for

extended periods fall into the same category, while

Chinese nationals who were trained in American institutions of higher education but have not worked in the

U.S. lack the necessary business experience. While

Western-educated Chinese constitute the best of the

overseas hiring options, care should be taken to train and

immerse them fully in corporate culture, and when transferred to China they should remain under the management of a midlevel corporate manager until they are

fully trained. In sum, the best option is typically a forChapter 10

Positioning U.S. Exporters in the Market
China Export Market Plan 81

eign, mid-level team player who knows the business

well and hungers to prove his or her capabilities. Highlevel corporate executives demanding large salaries and

first-class living accommodations are not ideal. Startup

managers need a couple of years’ time to fully enter the

market before achieving financial viability.

To assist in this process, or if local representation is

required, a variety of private consulting and law firms

are available for consultation, and a growing number of

environmentally-specialized firms exist. If a long-term

entry plan is not feasible for a U.S. company, then a

local representative with a proven track record, which

may be a Chinese or a Western company, may be

engaged to market on behalf of the U.S. firm.

Alternatively, a general representative office serving the

interests of environmental industries toward a particular

state business or sector may be established to promote

the interests of its constituents in-country. Again, the

management of such an office should follow a pattern

similar to that described above. In all cases, broadbased consultations with the U.S. Embassy, the

American Chamber of Commerce’s environment,

health, and safety forum, and other businesses should be

undertaken to achieve the broadest possible perspective

before decisions are made.

A number of countries offer bilateral aid and assistance programs to guide environmental protection development while generating investment opportunities for

their nation’s industries. Although the United States

offers very little along these lines, monitoring other programs may help in pinpointing market opportunities that

are tangentially related. (See Box 12 for further discussion of U.S.-China bilateral assistance.)

The U.S. and Foreign Commercial Service in China

provides environmentally specific market analysis services, works to bring potential Chinese and U.S. partners

together, and maintains an informative Web site

(www.usembassy-china.org.cn/english/commercial/

index.html) that contains links to a number of periodical

briefs, resources, and statistics and to an introductory

pamphlet guide to the Chinese market. The China

Country Commercial Guide is available online at

www.usatrade.gov, and further useful information can be

found online at www.buyusa.com.

Monitoring the Market

Market Potential Versus Market Demand

Environmental conditions in China often lead

investors to believe that opportunities in the environmental market are manifold and that increased legal and

governmental pressures to improve the situation are

causing even faster growth of market size. While these

assessments are theoretically true, it is important to consider them in the context of market potential as opposed

to market demand. A number of factors continue to prevent the market’s potential from developing into

demand. Several of these have been alluded to in other

sections of this document; however, their importance

cannot be overstated.

Market-Based Incentives. Fees and tariffs levied on

services and resources in China still do not reflect their

actual costs or values, making it difficult for service and

resource providers to generate profits. Authorities have

started to implement fees based on the costs of construction, operation, and maintenance of environmental

infrastructure facilities and to establish new policies

encouraging private investment. Yet, in many cases,

these efforts do not constitute a real market approach

and remain inefficient.

Enforcement of Legislation. China’s environmental

legislation has become quite complex and continues to

grow more comprehensive. However, the ability to

enforce this legislation and affect environmental protection in the localities varies considerably, primarily as a

result of conflicts of interest, inadequate capacity and

financial resources, and difficulties in locally interpreting and implementing national decrees. 

Conflicts of Interest. Several conflicts of interest

stymie environmental protection in China today. The

primary conflict is between environmental protection

and economic development. Officials and business

leaders believe that environmental protection costs limit

industrial profitability and development plans. A similar

conflict of interest exists between various ministries and

other administrative bodies within the central government, in which some of the more powerful ministries

oriented toward economic and industry development

trump the authority of SEPA in the overall implementation of development plans. 

A third conflict of interest exists in the administrative

structure that governs the local EPBs. EPBs receive

their regulatory directives from SEPA at the national

level. SEPA has little means to enforce the implementation of those directives. Meanwhile, local government

administrations control the budget, personnel, and other

administrative details of the EPBs, giving them a vested interest in following the policy objectives of the local

government as opposed to those of SEPA. Thus, if

national environmental initiatives inhibit local government initiatives, the local government has more leverage to impose its preferences. 
Fourth, and most meaningful in terms of commercial

interests, is the conflict within regulatory institutions,

which usually have a “consulting” institute. Most EPBs

are supported by a research institute that acts as both

inspector and consultant. Because of this, the market for

environmental services and technologies is distorted by

the local monopolies of regulatory institutions. Where

monopolies are seemingly neutralized, institutional corruption often fills the void. 

National Decrees and Local Implementation. There is

an old adage in China, “Here, where the heavens are

high and the emperor is far away.” That still rings true

today. The EPB structure discussed above is only one

of a number of issues that illustrate this. The ability to

monitor local compliance with national standards

effectively depends to a great degree on the local government’s interest in complying. Similarly, the national

government has trouble implementing local-level

price, fee, and tax increases aimed at improving market-based incentives. Governments in some localities

are apparently concerned that such increases affect

industrial productivity and development and could stir

social unrest.

Because of these factors, a regulation-driven market

in China has yet to emerge, and the potential market

remains more promising than actual market demand. In

a number of instances, however, signs already exist that

some of these factors are changing, particularly in the

more progressive coastal areas. Optimistic speculation

indicates that future changes will generally err toward

the side of improved regulation, increased market

demand, and increased liberalism. The timely establishment of a market presence is increasingly important.

Nonetheless, it is critical to consider all factors and to

assess the degree to which and the speed with which

national policies are carried out within a given locality.

Regional Specificity

Because the factors addressed above vary considerably across the country and from locality to locality, it

is critical that potential investors think not about the

market as a whole but about the market climate of the

particular region or locality in which they will be

investing. Perhaps the most important aspect of regional specificity is overall development and the ability to

finance environmental protection. As previously indicated, development in China has been skewed over

the years, resulting in a tremendous gap. This gap

continues to play out in the environmental sphere in

two ways.

The more underdeveloped regions of the country suffer some of the most severe environmental degradation.

Because production capacity, municipal and township

infrastructure, and awareness regarding environmental

protection all remain underdeveloped, degradation continues. Environmental needs in these areas are often

basic but overwhelming in terms of scale. Additionally,

these are often the areas that are most hard-pressed to

finance their environmental protection.

More developed regions have more financial

resources to invest in environmental protection. As a

result of relatively rapid development, a higher profile,

and a relatively high degree of public awareness and

pressure, they have managed to build better environmental protection capacities in recent years. These

areas are often more attractive for foreign investors and

are able to sustain stronger environmental protection

measures. As a result, China’s gaps increase.

In researching the market and considering marketentry strategies, technology and service providers need

to consider where their strengths most suitably fit local

needs. An obvious initial conclusion could be that the

more developed and wealthier regions offer the best

market opportunities. However, it should be remembered that, as pressure increases upon local governments to improve fundamental environmental quality,

they look to experienced and capable technology and

service providers for efficient solutions needed to make

improvements affordable. Technology and service

providers with innovative products and management

techniques, who can profitably exploit large market

bases with relatively inexpensive solutions, find an

increasingly warm market climate. In such cases, selling in quantity and offering money-saving or

revenue-generating management techniques is the key

to profitability.

Policies and Priorities

China clearly expounds its environmental development priorities through policy initiatives such as its Five

Year Plans, Agenda 21, the Trans-century Green

Engineering Program, and other programs intended to

decree or urge action for environmental investment.

These policy drivers are good indicators regarding central priorities and should be consulted by foreign

investors while investigating the market; however, they

should not be viewed as the only or the ideal path to

market access.

Foreign exporters should remember that these central priority plans are just that: centralized policy

regarding widespread and intricate local problems. As

82 U.S. Department of Commerce, International Trade Administration
indicated earlier in this chapter, central government

commitment does not presuppose local government

commitment, and any government commitment

does not necessarily indicate commercial viability.

Government assurances or state priorities are not a satisfactory substitute for standard due diligence.

Furthermore, targeting the correct level of government

decision-makers for information or permits is critical in

order to reduce bureaucratic red tape and the risk of

investment losses.

The Tenth Five Year Plan refers to the central economic development plan for the years 2001–2006 and

in part refers directly to the environmental protection

agenda during that period. Agenda 21 and the Transcentury Green Engineering Program are ongoing environmental development initiatives under the auspices of

different and competing government ministries. The

structures of these as well as other policies and priorities are outlined in Chapter 3, and contact information

provided in the China Contacts list in Appendix B indicates channels for monitoring the most up-to-date

developments in regard to these initiatives. 

As previously noted, laws and enforcement trends

are also key indicators that should be considered by

investors. 

Environmental Protection Bureaus

It is often stated that the best way to learn about local

environmental needs is to contact the local

Environmental Protection Bureaus (EPBs). EPBs are a

primary inroad for assessing environmental stresses and

thereby understanding protection and abatement

demands. In theory, EPBs should have up-to-date statistics and indicators categorized by industrial sector on

hand and should be knowledgeable about the specific

needs of polluting industries under their jurisdiction. 

However, it is often the case that EPBs themselves,

particularly those in the more backward and environmentally stressed regions, are as much in the dark about

how to address local environmental problems effectively and efficiently as everyone else in China. Simply

calling various EPBs and inquiring about local needs

will yield few specifics of interest. The reply will often

constitute an indication that all sectors are lacking and

that there is a need to address all of the most basic pollutants. (Additionally, the EPBs often indicate that only

affordable, even cheap, solutions are viable, as finances

are tight and the scale of the issues quite large.)

This lack of clarity on the part of the EPBs opens yet

another market opportunity to highly motivated and

entrepreneurial environmental market analysts and

consultants who can personally visit locales and gather

firsthand insight into regional needs. By becoming well

acquainted with the intricacies of issues within the

jurisdictions of particular EPBs, such consultants can

offer insights to the EPBs regarding efficient abatement schemes and can offer market-entry consulting

for technology and service providers. (See the section

on monitoring and consulting for market entry later in

this chapter.)

Many EPBs maintain Web sites (of varying quality

and usefulness) and have departments specifically oriented to working with international contacts. The

China Contacts list in Appendix B contains updated

contact information for EPBs. Where possible, the

names and contact information of those members of

each EPB who focus specifically on business affairs

dealing with international parties and who can speak

English have been provided.

Other Government Agencies

EPBs represent the first line of inquiry regarding

environmental conditions and needs in an area.

Agencies such as local economic and trade bureaus,

planning bureaus, and bureaus of foreign trade and economic cooperation are often more knowledgeable and

focused on servicing business needs. In many cases,

local-level branches of these agencies outside the more

developed regions may be unable to respond to international inquiries. In such cases, the next level (possibly

the provincial level) of government must be consulted.

Unless an extremely large investment is being considered, contact with national-level agencies is unnecessary and often inefficient.

For an overview of the various roles played by individual government agencies in the project cycle, see the

section on market-entry procedures later in this chapter,

as well as Chapter 3.

Special Zones and Industrial Parks

Special economic zones and industrial parks provide

another channel for gaining insight into environmental

protection needs. Administrators within the zones and

parks may be interested in addressing the environmental needs of the zone as a whole (for example, through

a common waste management facility), and many

administrators have insights into the particular needs of

the entities operating under their jurisdiction. (A list

containing contact information for most Chinese development zones has been provided at the end of this document as Appendix F.)

China Export Market Plan 83
84 U.S. Department of Commerce, International Trade Administration

Additionally, there are parks specializing in environmental industries (such as the Yixing Environmental

Industry Park), acid rain and SO2 emissions control

zones, and priority regions, rivers, and lakes and “key”

cities, all of which can offer insights into what technology and services are needed, and where. 

Market Entry

Market-Entry Vehicles

There are essentially three general methods by which

to enter the Chinese market, each with its own positive

and negative aspects. Potential vendors must assess

which market-entry strategy is best suited to their needs

based on what services or technologies they provide,

who their potential customers are, their financial constraints, and their various strengths and weaknesses.

Investors should also be certain to understand the inherent benefits and complications of each market-entry

method. Choosing one over another often constitutes

exchanging one set of complications for another (see

Table 10.1).

Local Presence. Foreign investors hoping to provide

equipment, component parts, consulting, contracting, or

engineering services should consider establishing a

presence in China. Establishing a local presence, either

through a JV with a Chinese company or through a

WFOE offers a number of advantages: 

● Due to high import tariffs and reduced labor and

raw material costs in-country, local foreign-invested

operations can provide goods at a lower cost than

competitors that are importing foreign-produced

goods into China.

● Local foreign-invested operations can take advantage of the above-mentioned points and benefit

from the local perception that American-made environmental protection products (including those

produced in China under the supervision of a

Western company) are of a consistently higher caliber than wholly Chinese-produced goods.

● Companies with a local presence can accept payment in renminbi, important because foreign currency is tightly controlled and domestic companies and

government organizations are often hard-pressed to

pay in U.S. dollars.

Box 10. China’s Bonded Zones

Business operations in China’s 16 bonded zones (see the map in Appendix A) operate under the most liberalized albeit least

clearly delineated regulations in the country. Originally conceptualized as extraterritorial export reprocessing zones where foreign manufacturers could establish operations and employ Chinese labor without being subject to various taxes, the zones have

developed into leniently regulated trading hubs facilitating various operations, some of unclear legality. Extraterritoriality

allows foreign investors to avoid certain regulations, quotas, foreign exchange issues, and taxes that hinder foreign investors

operating elsewhere, and trends indicate that leniency in the zones is increasing.

As a result of regulatory leniency with regard to national policy enforcement, foreign investors operating in the zones can

increasingly circumvent restrictions to facilitate their commercial operations in China. Among various creative arrangements,

companies inside bonded zones have been established to administer sales and marketing outside of the zones (which is not

intended under the preferential tax and incentive policies available only to operators within the zones), retailers have arranged

to provide after-sales services (a sector currently reserved for Chinese operators and JVs), and foreign investors have even

become involved in domestic trading. However, each bonded zone operates under its own set of rules, and what is possible in

one zone may not be possible in another. Investors considering operating out of a bonded zone should fully understand the intricacies of each zone before determining which best suits their needs.

Service providers doing laboratory work for environmental analysis might consider establishing operations in a bonded zone.

Customs and fixed asset investment taxes, which are normally levied on facilities and equipment brought into the PRC when

establishing such an operation, are waived inside the zone. The service provider could then partner with a Chinese laboratory

holding a Class A license (required to approve and validate samples tested) and offer services to clients throughout the mainland. A number of laboratories have already established such arrangements and are operating successfully.

The potential for foreign environmental industries to exploit the possibilities afforded by the bonded zones is broad; however, pushing the outer limits of the law runs risks. With the assistance of competent lawyers experienced in the operations of

bonded zones, foreign investors can get quite creative and remain safely within the ambiguous bounds of the law. Those who

wish to push those bounds should seek reliable counsel in determining the benefits and potential costs of doing so. As liberalizations associated with WTO entry increase market accessibility, the benefits of operating in bonded zones are dissipating, as

the regulatory leniency currently governing the zones is reined in.
● A local presence facilitates the development of

personal relationship networks, which are vital

for successful business operations in China. Ideal

local partners have a relatively strong, established network.

● China’s regulatory environment is lacking in transparency. Although this is changing since WTO

entry, a reliable and capable local partner well

versed in the daily procedures of Chinese business

is invaluable.

● Chinese customs procedures are notoriously opaque

and troublesome. Local producers that can minimize

reliance on imported goods are able to reduce those

complications.

It is to be noted that, in addition to the above-mentioned advantages, establishing a local presence may

generate difficulties:

● Locating and partnering with competent, trustworthy, and commercially viable Chinese counterparts

can be difficult. Protecting intellectual property is a

very real challenge, financial disclosure regulations

for enterprises are minimal, bookkeeping is often

creative, and potential partners are known to present

themselves deceptively. 

● Investors have reported complications as a result of

conflicting interests between JV partners. Chinese

counterparts have sometimes been described as unreliable in the long term and competitors in the short

term. Furthermore, due to financial pressures, the

local partner often views the overseas partner, not

the success of the project, as the source of income.

● Drafting the JV contract can be a trying experience,

yet the frustrations may pale in comparison with the

difficulties involved in seeing that the contract is

honored in its entirety.

● The opaque legal system previously discussed can

also create difficulties for foreign JV partners. The

lack of a rule of law makes contract disputes and

other partner-related affairs difficult to manage,

often leaving the foreign investor at a disadvantage.

● Establishing a WFOE as opposed to a JV can alleviate some of the above issues, and with regulations

easing, the establishment of a WFOE is becoming

an increasingly popular option. However, WFOEs

must make up for the relationship network gap that

is not filled by a Chinese partner, making the

recruiting of very capable and experienced local

players requisite if the foreign players lack their

own network.

● In the past, foreign-invested companies have been

urged to focus on producing for export unless they

are bringing technologically-advanced production

methods or products into the country. Priorities and

policies are constantly changing, but it remains

difficult to predict what might be expected of foreign-invested enterprises operating in various parts

of the country.

Cross-Border Entry. Some investors considering the

establishment of a local presence may be able to

achieve their goals via cross-border entry. Others may

want to enter the market initially through cross-border

entry with the intention of establishing a local presence

over time.

Technology and equipment providers can export

directly to China, but they face high import tariffs, making it difficult to offer competitive pricing. Additionally,

current industrial reform policies are aimed at developing domestic production capacities, placing exporters at

a disadvantage. Such an approach does, however, open

exporters up to certain preferential treatment by the ExIm (see the section in this chapter that discusses U.S.

government programs facilitating environmental

exports to China, on page 90) and eliminates the necessity of establishing a corporate body in the country.

Nonetheless, a local representative office, local partner,

or hired representative remains necessary to maintain a

market presence. For those uninterested in establishing

an office or partnership in China, an increasing number

of market analysts and representatives are available.

The well-established players in this field have a strong

understanding of the China business climate, the ins and

outs of day-to-day business, and pre-established relationship networks. 

An option that is increasingly being considered by

overseas investors is the establishment of a base in one

of the coastal bonded zones in China. These areas are

designed for importation of parts for assembly and reexport without the encumbrance of duties and taxes.

The benefits provided by this mechanism are that while

a physical presence is established in China, in effect all

activities are technically “cross-border.” If the legal

mechanisms for such a presence are properly understood (with the assistance of an experienced law firm)

and properly utilized, significant operational flexibility

and access can be achieved. (See Box 10.)

Chinese procurement agencies work to bring buyers

and suppliers together. Traditionally these agencies,

particularly those carrying out government procurement, have targeted domestic producers or unscrupulous agents of foreign companies (a strategy that may

create difficulties for U.S. companies with regard to the

Corrupt Foreign Practices Act). Although this entry

China Export Market Plan 85
86 U.S. Department of Commerce, International Trade Administration

method is still somewhat tight, insiders have noted that,

as a slowly increasing number of domestic contracts are

being opened to unrestricted bidding, opportunities are

increasing for foreign producers offering unique products at competitive prices.

Foreign providers are also allowed to offer consulting services via cross-border delivery. All other service providers must operate in China or through a local

partner. Any foreign service provider requiring official

approval at any stage of project execution needs a local

partner. Some areas of activity, such as undertaking

EIAs or providing engineering services, are severely

restricted and require collaboration with a properly

licensed local agency. To carry out baseline studies,

EIAs, sample analysis, or other services in which final

reports or designs require official approval, a foreign

provider must establish either a permanent local

presence or a contractual JV. Contractual JVs may be

established for a prescribed period of time or may be

project specific.

Foreign investors might also consider the direct

needs of multinational and other large foreign enterprises operating in China. Such enterprises generally

seek to outsource procedures that are not considered

profit generating; however, they often have difficulty

finding local service providers that can manage these

procedures in accordance with their relatively strict

internal standards.

Multilateral and Untied Bilateral Projects. Entering

the Chinese market via multilaterally funded and

untied bilaterally funded projects remains one of the

Table 10.1 Advantages and Disadvantages of Various Market-Entry Vehicles

Vehicle Advantages Disadvantages 

Local production Can accept payment in renminbi. Requires investment.

Can (possibly) compete better on cost. Could require higher operating costs.

Proximity to end user allows faster delivery time Presents potential dangers in technology transfer. 

and other such benefits.

Offers many options for manufacturing. 

JV Partner may provide some benefits. Loss of technology is possible.

May make it easier to get investment approval. Must run business with partner.

Involves more difficult exit strategy. 

WFOE Lack of partner allows a free hand in the market. No partner is available for assistance. 

Direct imports Technology is easier to protect. Cannot accept payment in renminbi.

Costs lower all around. May face import restrictions.

Poses less risk and exit strategy is easier. Products will likely cost more. 

Representative Offers cost-effective market entry. Unlike other direct import options, involves 

office Can understand market better before setting operating costs for China presence. 

up production. 

Agents/distributor Can be very useful for broad footprint of end users. Poses dangers of losing control of marketing.

Can provide service. Does not cover all products.

Franchise In-country presence is not needed. Poses risk of technology theft. 

Monitoring and controlling are very difficult.

Little recourse is available in disputes. 

Direct sales In-country presence is not needed. Presents operational difficulties. 

(no distributor or Covers only products with small end user 

representative) footprint. 

Source: U.S. Department of Commerce, International Trade Administration, Partnering in China’s Environmental Sector (Washington, DC:

U.S. Department of Commerce, 2001). Available online at www.ita.doc.gov/media/publications.html. 
China Export Market Plan 87

most secure methods. These projects have available

hard currency, undergo lengthy feasibility assessments, and are subject to the internal policies and standards of the implementing agency. Although bidding

for some Chinese government-funded projects is

opening up to foreign contractors, multilateral and

untied bilateral projects have the further advantage of

employing reasonably transparent and competitive

bidding procedures.

Bidding for multilateral projects, however, is highly

competitive and remains a difficult task for inexperienced vendors. Potential bidders that have no experience in tendering a multilateral project are best advised

to work cooperatively with one that does. It is also necessary to monitor the development of projects from the

earliest possible stage. Most competitors are usually

quite well positioned for the bidding process long

before the call for bids is issued.

The barriers to untied bilateral projects are similar to

those mentioned above, but they are compounded by

the scarcity of such projects. Essentially, the only consistent untied bilateral aid donor to China that has significant operations in this sector is Japan’s JBIC

(formerly the OECF; see Chapter 9). However, the

country’s overall aid to China may yet decrease, as

pressure in Japan to review its China aid program has

been mounting.

Most other bilateral aid programs of significance are

tied to contractors within the country from which the

aid stems. Tied bilateral aid has in fact helped many

companies establish a very strong presence in China.

U.S. companies complain they are at a decided disadvantage resulting from a lack of tied bilateral aid from

the U.S. government (see Box 12). 

Public Private Partnerships and Build-OperateTransfer Projects

Several large foreign companies have entered the

Chinese environmental infrastructure market via models

known as public private partnerships (PPPs) and buildoperate-transfer (BOT) projects. Currently, most of these

projects take the form of BOT and are water-management

oriented. Although PPPs are less commonly seen in

China, the possibilities for them also exist, and at least one

clear example of a successfully initiated PPP is known.

Official press coverage of infrastructure projects being

developed through these models has been positive and

outspoken, and insiders have indicated that the official

sphere looks on them with increasing favor. As other

infrastructure markets open up in China, these models,

while challenging to implement, may grow in importance.

A BOT project differs from a PPP project in that,

although it does constitute a relationship between the

client (the public entity) and the supplier (the private

entity), it is not a partnership in which the players

cooperatively invest in and operate a facility. Rather,

the building and operation of a facility in a BOT project is 100 percent funded and owned by the private

investor prior to its transfer to the public entity at a predetermined time. In contrast, a PPP project is a partnership in which both the public and private entities

make equity investments in a facility, each maintaining

a percentage of ownership. It is possible for a BOT

facility to be included as part of a larger PPP project in

which part of the private entity’s agreement is to build

a facility that is to be transferred at a pre-determined

time in the future.

The current number of BOT and PPP projects in

China amounts to little more than a handful.

BOT Projects in China. Currently, BOT projects in

China are limited to the building, operation, and transfer

of facilities whose specifications are defined by government planners prior to contracting the foreign investors.

This approach limits the capacity of the contractor to

develop a comprehensive service infrastructure and fails

to take advantage of foreign expertise and know-how,

thus affecting overall efficiency. Concession agreements, in which a firm is contracted to develop a comprehensive system to service a given geographical area

in its entirety, are preferred by foreign investors because

such agreements afford them the flexibility to develop

an efficient system suited to the greater needs of the

locality. Currently, contractors are rarely consulted in the

planning of such projects, and product distribution, pricing, and billing remain under the control of the local

government. Industry insiders have indicated that local

governments are beginning to recognize the decreased

efficiency resulting from these constraints, and they

appear optimistic regarding the potential for more comprehensive BOT agreements in the future. 

Many of the foreign BOT operations in China have

been funded through official aid programs, helping the

involved firms to develop a strong market presence.

Tied bilateral aid has been a significant contributor, but

the ADB is also a strong proponent of the BOT model.

The tied bilateral aid option is not available to U.S.

companies; however, the potential markets are far from

saturated in China. Companies seeking to enter them

are well advised to establish a market presence sooner

rather than later.

A number of domestically-generated BOTs were

announced in the first half of 2001, indicating further
88 U.S. Department of Commerce, International Trade Administration

acceptance of the model by both Chinese authorities

and Chinese enterprises. Several proposed projects are

quite large in scale; however, it is not at all clear what

opportunities they might hold for foreign vendors. 

PPPs in China. PPPs are less commonly seen in China

than BOTs. They have considerable potential to become

important. In one instance of a true PPP in China, a subsidiary of a large multinational entered into what is

essentially a JV with a state-owned municipal facility.

The public entity contributed its previous facility for a

lesser stake in the company, while the multinational

subsidiary agreed to build, operate, and transfer additional facilities, establish sound management, and train

local hires. Contract negotiations included agreements

with the local government regarding pricing structures

that the private entity deemed sufficient. The public

entity viewed the training (including training modules

based in the U.S.) and positioning of locally hired highlevel managers as beneficial to the socioeconomic

development of the locality.

The managing director of the private entity conceded

that this operation has been fortunate in that the public

sector partner is progressively oriented and willing to

compromise. Additionally, the project is located in a relatively affluent region, thereby facilitating pricing

structures that are sustainable. The director also

explained that such a project would not have been possible at this time without funding from the parent multinational. The project is expected, however, to function

as an influential pilot program that will attract other

local government leaders in search of similar arrangements, and it has afforded the foreign investor a market

presence without the assistance of any outside funding.

As is the case in any partnering scheme in China, the

compatibility of PPP partners and their goals is critical

to success.

Potential Complications and Requisite Precautions

Whether foreign investors choose to enter the market

via JV, WFOE, cross-border entry, or any of the various

other methods, a number of potential complications

exist. China remains a country with an underdeveloped

rule of law, and investors have been victims of robbery,

embezzlement, IPR infractions, and similar issues with

little or no recourse to the law. Nearly all entry methods

require some degree of partnering or interaction with

local entities. Each method should be carefully screened

and well understood.

Below is a list of some of the most commonly

encountered complications to watch for. It is not, however, exhaustive, and investors considering entering the

Chinese market are strongly urged to consult experts in

the field. 

● Partnering in China can be confusing. Expectations

must be very clearly communicated and understood.

The most common issue that arises is that overseas

investors do not understand their partners well and

do not nurture a trusting relationship over time. The

agreements reached need to be simply stated and

put in writing regardless of the goodwill that may

exist in early negotiations. Seeking out progressively-oriented partners that have worked with foreign

investors before or that have worked overseas

is ideal.

● Delinquent payment for goods and services is a

serious problem faced by both exporters without an

in-country presence and locally operating firms. It is

Box 11. Protecting Intellectual Property Rights in China

Intellectual property rights violations are a fact of life in the Chinese marketplace. Foreign investors of all types and sizes,

from single-person operations to multinational conglomerates, are subject to the possibility of IPR infringement.

Unfortunately, breakdowns in the rule of law, the pervasiveness of the issue, and the ingenuity of the perpetrators make it difficult for companies to protect themselves completely. Some enterprises accept IPR infringements as a cost of doing business

in China; however, those that cannot afford that cost should seriously consider whether potential successes in the Chinese market justify the risks. 

Environmental equipment providers producing technologically unsophisticated yet innovative equipment must be cautious.

Enterprising Chinese can easily reverse-engineer such products and flood the market with cheap copies. One market consultant

with years of experience in the China marketplace insists that the best method to prevent such a scenario is to network an awareness of a particular product heavily, making clear to end users, local officials, and other producers its origin and rightful owner,

and then to establish the necessary relationships to ensure its protection. Other companies invest large sums in contracting firms

to manage IPR issues, some becoming deeply involved in local politics. Ongoing efforts to dismantle vast production and distribution networks of pirated goods, upon which entire local economies are based, continue in China today and will likely continue for some time. 
China Export Market Plan 89

advisable to seek out creative means by which to

ensure delivery of payment.

● Regulations governing business practices in-country

can be restrictive and can vary from place to place.

As an example, companies operating in the Suzhou

Industrial Zone are required to hire only local

Suzhou residents unless the employee is a university graduate. Some firms operating in the zone have

expressed dissatisfaction with the restricted labor

pool while competitors operating in a nearby zone

are not hindered by such restrictions. Investors

establishing operations in-country are advised to

understand not only the intricacies of local policies

where they will invest but the likelihood that those

policies will remain consistent in the future.

● Intellectual property rights are constantly infringed

upon in China, resulting from a weak rule of law,

enforcement difficulties, and a local failure to

understand the importance of personal property

rights as they apply to intellectual property. This

problem continues to frustrate even the most seasoned investors in China. Those without creative

means to protect themselves are advised to consider

the costs of potential IPR infringements seriously

and to determine whether the benefits of market

entry justify the risk. (See Box 11 on page 88.)

● Corruption in China is an unavoidable fact. Many

investors have encountered situations in which

progress cannot be made without delivery of “gifts,”

“favors,” or expensive dinners. Some operations

have been held up due to the absence of “suitable

transportation,” such as four-wheel-drive vehicles or

new sedans. Few investors in China can honestly

claim never to have encountered one type of corruption or another. Some try to fight or avoid it, while

others accept varying degrees of it as a cost of

doing business.

Market-Entry Procedures

Contracting in the Chinese market is best facilitated

through a “bottom-up” approach, meaning that U.S.

investors and suppliers should establish preliminary contact with local purchasers, partners, or government bodies

as opposed to national-level ministries. Provincial- or

municipal-level government offices directly or indirectly

involved in potential projects are ideal places to begin. If

possibilities for a project materialize, such partners are

instrumental in facilitating various permitting processes

and obtaining necessary authorization; foreign investors

should take advantage of local partners’capacities to do so.

● For industrial pollution control projects, local EPBs

are the primary contact point (generally via a wellestablished consultant or market representative).

Despite the lack of overall clarity alluded to earlier,

EPBs are well situated to report on the state of

affairs for individual point sources of pollution

within their jurisdictions, and interaction with them

is almost always requisite in one manner or another.

SEPA is not involved in the implementation of such

upgrade projects; however, national level approval

from SEPA, SETC and SDPC is needed if overall

expenditure exceeds a certain amount. The dollar

level at which national-level authorization is needed

varies among provinces and municipalities.

● For municipal water, wastewater, and solid waste

management projects, the Ministry of Construction

and local construction bureaus are the primary contact points. The ministry may be useful in directing

investors to local construction bureaus, through

which project implementation is conducted. The

Ministry of Construction should also be consulted

as project plans materialize to verify that all national requirements are met throughout implementation.

● For facilitation of partnerships with equipment producers, investors should seek advice from private

consulting firms, the U.S. and Foreign Commercial

Service in Beijing, and EPBs at various levels.

● For facilitation of the sale of equipment, whether it

consists of cross-border sales or sales of domestically produced JV or WFOE equipment, providers

should proactively monitor the interactions of

potential buyers with the Ministry of Finance, various-level development and planning commissions,

and various-level economic and trade commissions.

Projects that are preparing to procure equipment go

through a series of approvals with each of these

government bodies, and may apply for financing,

before publicly announcing a call for bids. In reality, however, arrangements for procurement are likely to be firm before the call for bids is made. The

best way to secure a contract is to interact cooperatively with project facilitators as they move through

the bureaucratic processes and establish a solid

working relationship. Those equipment providers

lacking the capacity to do this should hire a consulting firm or market representative to do it for them. 

The Approval Process

The approval process for environmental and infrastructure projects in China is confusing and relatively

opaque. All projects require approval at some level
90 U.S. Department of Commerce, International Trade Administration

(state, provincial, or municipal) by SDPC, SETC or

MOFTEC, as well as EIA approvals from SEPA. The

required administrative level of approval is based upon

the investment size of the project:

● Investment of less than RMB 30 million ($3.6 million) requires approval at the municipal level.

● Investment of RMB 30 million to RMB 200 million

($24.1 million) requires approval at the provincial

level.

● Investment of over RMB 200 million requires

approval by SDPC or SETC and the State Council.

In some cases, coastal special economic zones and

some municipalities have increased discretion when

approving projects with investments of up to RMB 200

million. Ministries or bureaus that are directly sponsoring a particular project also have a considerable say in

approval processes regarding that project. EPB

approval is necessary for all projects, and nationallevel SEPA approval is required for projects with

investments of more than RMB 200 million,

transprovincial projects, projects with potential for

causing transprovincial pollution, nuclear facility projects, and projects that involve a degree of state secrecy

or state security concerns.

The approval process—which can take from 12 to 24

months, contingent upon project complexity, financial

sourcing, and requisite approvals—generally proceeds

as follows:

1. Project proposal and pre-feasibility study

2. Review meeting of all associated local officials

3. Initial approval by the appropriate-level planning

commission, trade commission, or finance bureau

4. Completion of feasibility study and EIA

5. Second review meeting of all associated

local officials

6. Feasibility study approval

7. Project implementation

For a detailed discussion of the approval process, as

well as of project financing, see the U.S. and Foreign

Commercial Service’s Environmental Project Approval

and Financing in China: A Perspective for U.S.

Companies.

For up-to-date information on customs regulations

and procedures, import documentation, finance regulations, economic and market information, laws and procedures for licensing and investment, and U.S.

government regulations and restrictions, see the

China—Country Information section of the U.S.

Department of Commerce’s International Trade

Administration Web site (www.trade.gov/td/tic/) and

consult the U.S. Embassy’s Country Commercial Guide

available online at www.usatrade.gov.

The following three documents published by the

General Customs Administration of the PRC provide

comprehensive information on Chinese customs

regulations:

1. The Practical Handbook for Custom Clearance

(March 2002; price: RMB 240; includes CD;

Chinese only)

2. Customs Import and Export Tariff of the People’s

Republic of China (December 2001; price: RMB

220; Chinese and English)

3. Administrative Measures for Tariff and

Import/Export Trade (February 2002; price: RMB

240; Chinese only)

All three books are issued yearly. They can be purchased from the General Customs Administration

Bookshop, No. 6 Jiannei Dajie, Dongcheng District,

Beijing 100730; tel. +86 (10) 6519-4173.

Facilitating Market Entry

U.S. Government Programs Facilitating

Environmental Exports to China

There are several U.S. government programs that

specifically support environmental exports to China.

The U.S. Ex-Im offers several applicable programs. In

addition, the U.S. and Foreign Commercial Service in

Beijing assists exporters and facilitates ad hoc arrangements with other federal- and state-level government

agencies.

The Export-Import Bank of the United States. The ExIm has a number of non-environmentally specific short-,

medium-, and long-term programs to support U.S.

exports to China. Spare parts, raw materials, quasi-capital goods, consumer goods, and bulk agricultural commodities can be supported by the bank’s short-term

credit insurance policies, while capital goods and related services can be supported by medium- and long-term

loan and guarantee programs. 

Operational agreements between the Ex-Im and both

the Bank of China and the CDB are in place. Several

other banks can and do work with Ex-Im, and loans to

other entities are considered provided they meet all necessary standards to the satisfaction of the Ex-Im and

PRC law. Prior to October 2000, Ex-Im lending and

finance relationships were mainly restricted to government entities. The bank now allows U.S. exporters and
China Export Market Plan 91

Chinese buyers of U.S. goods to apply for financing of

private sector transactions. 

The Ex-Im’s Environmental Exports Program supports

exporters of applicable goods and services as well as

exporters involved in foreign environmental projects. The

program includes the following elements:

● A short-term environmental export insurance policy

for small businesses, which offers as much as 95

percent commercial coverage and 100 percent political coverage with no deductible. 

● Enhanced medium- and long-term support for environmental projects, products, and services, including local cost coverage equaling 15 percent of U.S.

contract price, capitalization of interest during construction, and maximum repayment terms allowed

under OECD guidelines.

Foreign currency-denominated debt through the ExIm’s medium- and long-term programs requires Chinese

government approval, and final Ex-Im approval is contingent upon proper documentation indicating that this

approval has been granted. The Ex-Im Web site

(www.exim.gov) contains all pertinent details, as well as

standards for environmental qualifications. 

In March 1999, the Ex-Im, the U.S. Department of

Energy, and the CDB signed a memorandum of understanding to initiate a $100 million clean energy program. Under the memorandum, the Department of

Energy and Ex-Im encourage U.S. private industry to

work cooperatively with Chinese planners in identifying, assessing, and implementing projects by which to

showcase cost-effective and environmentally sound

energy technologies. The terms associated with this

fund are the most favorable that Ex-Im offers; however,

it remains unused because local purchasers believe that

the interest rates are too high.

Environmental Technologies Industries Office. The

U.S. Department of Commerce’s Environmental

Technologies Industries (ETI) Office provides U.S.

environmental technology enterprises with valuable

resources and contact information pertinent to environmental markets around the world. ETI works collaboratively with the U.S. and Foreign Commercial Service in

Beijing and other public and private organizations to

monitor the market and to assist U.S. enterprises in market entry.

The ETI Office’s China-specific resources are available online at www.environment.ita.doc.gov. The U.S.

Department of Commerce’s International Trade

Administration offers assistance on more general

aspects of trade. Information is available online at

www.trade.gov/td/tic/.

U.S. Trade and Development Agency. In mid-January

2001, President Clinton lifted the suspension of TDA

activities in China. TDA programs had been suspended

in 1990 in line with the legislative reaction to the

Tiananmen incident of 1989. The legislation permits the

president to terminate the suspension if doing so is

determined to be in the interests of the United States.

The TDA is an independent government agency

charged with promoting U.S. private sector participation in projects based in developing and middle-income

countries. The agency supports market development

with pre-feasibility studies, orientation visits, training

programs, and technical symposia focused on helping

U.S. firms enter new markets. Prior to its suspension in

1990, the TDA committed approximately $24 million to

projects in China. Over $1.4 billion in U.S. exports have

been associated with those projects. Environmental protection is a focus for TDA in China. Information about

TDA projects and activities is available at www.tda.gov.

Monitoring and Consulting for Market Entry

Several consulting firms in China monitor marketentry potential and specialize in bringing technology

and service providers together with clients. However,

the consulting sector is not saturated, and given the

potential for growth, an increasing number of knowledgeable, experienced, and innovative specialists are

needed. Consulting firms can select from several specialized approaches as follows.

Monitoring Multilateral Opportunities for Small

Manufacturers. As noted earlier, bidding for multilateral projects can be difficult, particularly for small manufacturers and companies with little experience in

tendering for such projects. Part of the difficulty stems

from the necessity to monitor projects and prepare to

bid from the very earliest assessment stages of project

development. Keeping close watch over all the opportunities can be difficult, particularly for small operations watching for opportunities in more than one

country. Another difficulty stems from the logistical

challenge of bidding successfully, something not easily

overcome by small companies with no experience tendering for multilateral projects.

Small foreign manufacturers could benefit from the

presence of a small manufacturers’ association or private consultants that would simultaneously monitor

multilateral project development and the capabilities
92 U.S. Department of Commerce, International Trade Administration

of small manufacturers bidding for such projects. The

consultants might not only work to match potential

clients with business opportunities but also assist in

the bidding process for those manufacturers lacking

the experience to manage the bid on their own

successfully.

Local Assessments and Partner Facilitation. Given

many EPBs’ lack of clarity in assessing overall local

environmental needs and efficient strategies to address

them, ambitious and savvy consultants may find success by proactively approaching EPBs, comprehensively assessing the regional situation, and facilitating the

implementation of environmental protection plans that

can deliver the greatest impact possible, based on budgetary and social constraints. Such players would have

the dual function of consulting for EPBs on the best

overall abatement strategies and bringing appropriate

technology and service providers into contact with the

appropriate EPBs.

Consultants interested in such a scenario should look

to various BOT and PPP projects currently existing in

China as operational models, draw lessons from successful and unsuccessful implementation schemes, and

consider undertaking pilot projects to illustrate their

potential to local officials. Consideration should be

given to which environmental issues in the region can

be most effectively addressed for the lowest possible

abatement costs. Efforts should be made to draw funding from diverse sources while simultaneously working

to exploit opportunities presented by various programs

(such as UNIDO’s program to address the issues of

town and village enterprises).

Consortium Development. Foreign investors might

want to consider addressing potential projects through a

consortium scenario. A consortium would ideally bring

together planners, designers, engineers, managers, and

financial support. Some European groups are currently

experimenting with this model, with some degree of

success. In effect, a consortium able to address issues

within smaller cities travels to the cities (in the form of

a traveling exhibition) and—through consultations and

demonstrations—provides cost effective modular solutions, which include technology inputs as well as management tools.

Creating and Maintaining a Market Presence

Many foreign-invested environmental industries in

China currently operate with small profit margins.

Their initial purpose is to establish market presence

and name recognition that facilitates future market

expansion rather than to reap immediate profits.

Creating and maintaining a market presence in China

now could be vital to future success; however, it

requires more than innovative products and a solid

marketing plan. Firms without reasonable budgets,

innovative personnel, patience, and solid relationships

are unlikely to succeed. 

Timing Market Entry

Establishing a market presence sooner rather than

later is important for several reasons:

● Many large firms already maintain strong market

presence in several sectors. Some claim to hold as

much as 50 percent of market share in their respective sectors. Name recognition is important in the

Chinese market, and a select few are well

established. Few markets are saturated, and opportunities arise for those well positioned to exploit them.

Box 12. Market Development and Bilateral Assistance

Of all officially assisted environmental exports to China, approximately 60 percent are from Japan, 35 percent from Germany,

and less than 1 percent from the United States. Industries from countries with strong bilateral aid programs to China are quickly establishing significant market presence by capitalizing on opportunities generated by publicly funded development assistance programs. 

Most end users of environmental technology and services in China have a tremendous need for guidance and consulting

regarding equipment manufacture and procurement, as well as general planning and management. Bilateral assistance programs

providing this guidance often lead to opportunities for numerous types of contracts.

The U.S. Agency for International Development (USAID) remains inoperative in China. Economic support funds cannot be

used in China without specific legislation waiving sanctions imposed after the Tiananmen incident of 1989. Occasional sums

of money from the Department of Energy or the EPA are available to facilitate bilateral assistance. The recent reintroduction of

the U.S. Trade Development Agency into China is a positive first step in addressing this issue.
China Export Market Plan 93

● Those hoping to introduce relatively innovative

methodologies and technologies need to prove their

feasibility to convince local planners and enterprises

of their worth. Pilot projects can be useful in doing

this; however, it takes considerable time and effort

to establish a sound operation. Having a strong pilot

program in operation may be invaluable as the market continues to open and planners begin looking

for the most effective and efficient methodologies to

address particular issues. However, attempts to

introduce unproven technologies into China are not

usually welcome.

● Understanding the market and key relationships is

critical to success in China. As in most business

climates, personal relationships and networks can

open doors that otherwise would remain closed.

However, in China, relationships are arguably more

important than in other markets. It takes time to

develop the connections and trust that good relationships are based on. As market opportunities increase

in the near- to medium-term future, those most able

to capitalize on the opportunities will be companies

that have established a presence and have the proper

connections to exploit them. It must be clearly

understood, however, that relationships do not necessarily need to be with powerful national figures or

those who claim to be such figures. Rather, through

proper research, government functionaries who are

reliable decision-makers can be found. Such relationships need to be nurtured and used gently.

● Chinese guanxi (relationships) can be stronger than

foreign guanxi, regardless of the quality of particular operations and products. Chinese companies

with little or no experience or name recognition

have won contracts over foreign competitors, seemingly based on guanxi. Therefore, the role of reliable Chinese personnel in local operations is critical

in order to understand the politics of such relationships, which appear totally mysterious to most U.S.

businesspeople regardless of their experience or

business acumen. A longer-term in-country presence

provides ample time to bring such local players into

an enterprise and fully train them in its intentions

and operations.

Opening Doors

Those having difficulty breaking into the market or

establishing a pilot program might consider donating a

piece of equipment or services to a wholly Chinese-initiated project. Many Chinese environmental initiatives

are hard-pressed for financing and equipment and could

benefit greatly from financial and technical support.

The Chinese partner’s successes may in time open

doors and help establish valuable connections for the

foreign partner, particularly if the Chinese entity is conBox 13. Seeking Market Representation and Entry Facilitation

Exporters and foreign investors entering China’s environmental protection market are often directed toward one or more of a

variety of Chinese environmental protection foundations or societies, or governmental research and policy institutions. These

institutions, such as the China Environmental Science Society, the China Environmental Protection Foundation, and even

Agenda 21 and the CRAES, are not ideally positioned to assist foreign investors in entering the market. Some are research institutions with no commercial capacities, some are bureaucratic gateways designed to attract and absorb inordinate amounts of

foreign capital, and almost all of them lack a sound understanding of commercial viability and the savvy to facilitate market

entry successfully.

In contrast, an increasing number of Chinese industries and Chinese and international private consultants are available to

provide market analysis, partner facilitation, legal consultation, and numerous other commercially-oriented services. The best

suited of these entities are usually companies that were founded in China by experienced expatriates or Chinese nationals with

substantial international experience. They have an in-depth understanding of China’s public and private marketplaces, extensive partnership networks with industry and government leaders at all levels, and well-tuned communication skills.

Additionally, such entities benefit from a privatized commercial business orientation and a definitive separation from centralized planning and bureaucracy. Investors are advised to forgo, as much as is possible, any dependence on cumbersome bureaucratic obstacles and to seek out private entities with the capacity to streamline bureaucratic interactions and facilitate market

entry by commercially-oriented means. A partial list of these organizations is provided in Appendix D.

Investors should not, however, be misguided into believing that analysts and consultants based in Hong Kong or Taiwan

are tantamount to such entities based on the Chinese mainland. The Taiwanese and Hong Kong marketplaces are separate entities from China. Operators based there are also, in essence, foreign investors. Enough capable and experienced facilitators

operate with extreme dexterity within the mainland; little logistical or financial incentive exists to seek consultation from outside sources.
94 U.S. Department of Commerce, International Trade Administration

tracted to implement its scheme on a larger scale and

subcontracts the foreign entity as a supplier.

This approach, however, requires extreme caution.

As a single example, one French company attempted

the strategy by donating a piece of equipment to a

Chinese firm establishing a pilot program. The expectation was that the French company would be contracted

to provide the equipment if the Chinese firm developed

a commercial project. Instead, the Chinese firm simply

reverse-engineered the equipment and facilitated its

delivery through other means.

Dispelling “Neocolonialism”

Chinese planners are wary of anything resembling

“neocolonialism,” fearing that foreign investors will

profit while not contributing to the overall advancement

of the locality. Investors working with local planners

may find that offering training and high-level positions

with good wages to local hires, as well as various tangential initiatives such as the renewal of public space,

supporting local education, and furthering overall social

advancement, will ease such concerns.

Selected References and Web Sites

References

Cao Dong and Sun Rongqing. Environmental

Financing in China: A Review. Beijing: CRAES,

SEPA, November 2000.

U.S. Department of Commerce International Trade

Administration, Environmental Technologies

Industries Office. Partnering in China’s Environmental

Sector. Washington, D.C.: U.S. Department of

Commerce, 2001. (Also available online at

www.environment.ita.doc.gov link to “Market

Research,” “by country,” “China.”)

General Customs Administration. The Practical

Handbook for Custom Clearance. Beijing: General

Customs Administration, March 2002.

General Customs Administration. Customs Import

and Export Tariff of the People’s Republic of China.

Beijing: General Customs Administration,

December 2001.

General Customs Administration. Administrative

Measures for Tariff and Import/Export Trade. Beijing:

General Customs Administration, February 2002.

Stover, Jim, Justin Harris, and Christopher Adams.

Hard Currency Financing for Environmental Projects

in China, International Market Insight. Beijing: U.S.

and Foreign Commercial Service, August 1999.

Wang Jinnan, Wu Shunze, and Luo Hong. Integrating

Economic Development and Environmental Protection

in China During the 10th Five-Year Plan Period.

Beijing: CRAES; November 2000.

U.S. and Foreign Commercial Service, Beijing.

Environmental Project Approval and Financing in

China: A Perspective for US Companies. Beijing:

November 2000

Web Sites

BuyUSA: 

www.buyusa.com

China Economic Information: 

www.cei.gov.cn

ChinaOnline: 

www.chinaonline.com

State Statistics Bureau: 

www.chinastatistics.com

U.S. Department of Commerce: 

www.doc.com, www.usatrade.gov

U.S. Department of Commerce,

International Trade Administration,

Office of Environmental Technologies Industries: 

www.environment.ita.doc.gov

U.S. Embassy, Beijing: 

www.usembassy-china.org.cn

U.S. Embassy, Beijing. Country Commercial

Guide: China:

www.usatrade.gov
China Export Market Plan 95

Appendix A

Maps

Map A.1 Levels of COD Discharge by Province in the People’s Republic of China, 1999

Source: SEPA Environmental Protection Yearbook, 1999. 
96 U.S. Department of Commerce, International Trade Administration

Source: SEPA Environmental Protection Yearbook, 1999. 

Map A.2 Levels of SO2 Pollution by Province in the People’s Republic of China, 1999
China Export Market Plan 97

Map A.3 Bonded Zones in the People’s Republic of China
98 U.S. Department of Commerce, International Trade Administration

Ministries and Agencies

State Environmental Protection Administration (SEPA)

Address: No. 115 Xizhimennei, Nanxiaojie

Beijing 100035, China

Tel: +86 (10) 6615-3366

Fax: +86 (10) 6615-1768

Web site: www.zhb.gov.cn

E-mail: miyichu@cenpok.net

SEPA Department of International Cooperation

Director: Wang Zhijia

Tel: +86 (10) 6615-1936/+86 (10) 6615-3366,

ext. 5542

Fax: +86 (10) 6615-1762

Deputy Director: Zhang Shigang

Tel: +86 (10) 6615-9816/+86 (10) 6615-3366

ext. 5534

Fax: +86 (10) 6615-1762

Administrative Center for China’s Agenda 21 (ACCA21)

Address: No. 109 Wanquanhe Road

Haidian District, Beijing 100089, China

Tel: +86 (10) 8263-6607

Fax: +86 (10) 8263-6017

Senior Advisor: Rolf Dietmar

Tel: +86 (10) 8263-5364

Fax: +86 (10) 8263-6017

E-mail: dietmar@acca21.edu.cn

Division of Resources and Environment

Program Management

Director: Ke Bing

Tel: +86 (10) 8263-4438

Fax: +86 (10) 8263-6192

E-mail: kebing@acca21.edu.cn

Center for Environmentally Sound Technology Transfer

(CESTT)

Address: No. 109 Wanquanhe Road

Haidian District, Beijing 100089, China

Director: Shi Han

Tel: +86 (10) 8263-6021

Fax: +86 (10) 8263-6607

E-mail: shihan@acca21.edu.cn

Ministry of Construction 

Address: No. 9 Sanlihe Road 

Beijing 100835, China

Tel: +86 (10) 6839-4053

Web site: www.cin.gov.cn

Department of Foreign Affairs

E-mail: lizhe@mail.cin.gov.vn

Director: Li Xiankui

Tel: +86 (10) 6839-3655

Fax: +86 (10) 6831-3669

Ministry of Water Resources

Address: No. 1 Ertiao Baiguang Road 

Xuanwu District, Beijing 100053, China

Tel: +86 (10) 6320-2114

Web site: www.mwr.gov.cn

E-mail: webmaster@mwr.gov.cn

Department of International Cooperation and Science and

Technology 

Director: Dong Zheren

Tel: +86 (10) 6320-2821

Fax: +86 (10) 6320-2822

State Forestry Administration

Address: No. 18 Hepingli Dongjie 

Dongzheng District, Beijing 100714, China

Tel: +86 (10) 8423-8800

Web site: www.forestry.gov.cn

E-mail: webmaster@forestry.gov.cn

Appendix B

China Contacts
Department of International Cooperation

Director: Qu Guilin

Tel: +86 (10) 8423-8721

Fax: +86 (10) 8423-8749

Ministry of Agriculture

Address: No. 11 Nongzhanguan Nanli 

Chaoyang District, Beijing 100026, China

Tel: +86 (10) 6419-3366

Web site: www.agri.gov.cn

E-mail: webmaster@agri.gov.cn

Department of International Cooperation

Director: Tang Zhengpin

Tel: +86 (10) 6419-2484

Fax: +86 (10) 6419-2451

Ministry of Land and Resources

Address: No. 3 Guanyingyuan Xiqu 

Xicheng District, Beijing 100035, China

Tel: +86 (10) 6617-5371

Fax: +86 (10) 6617-5348

Web site: www.mlr.gov.cn/english/english.htm

Department of International Cooperation

Director: Sun Wensheng

Tel: +86 (10) 6612-7001

Fax: +86 (10) 6612-7005

Ministry of Communications

Address: No. 11 Jianguomennei Dajie 

Beijing 100736, China

Tel: +86 (10) 6529-2114

Web site: www.moc.gov.cn/

Department of International Cooperation

Director: Hu Jinglu

Tel: +86 (10) 6529-2202

Fax: +86 (10) 6529-2248

Ministry of Science and Technology

Address: No. B15 Fuxinglu

Xicheng District, Beijing 100038, China

Tel: +86 (10) 6851-5544

Fax: +86 (10) 6851-5004

Department of International Cooperation

Director: Wang Shaoqi

Tel: +86 (10) 6851-5048

Fax: +86 (10) 6851-5004

China Development Bank

Address: No. 29 Fuchengmenwai Dajie

Xichang District, Beijing 100037, China

Tel: +86 (10) 6830-6357

Fax: +86 (10) 6830-6350

Web site: www.cdb.com.cn 

Foreign Affairs Division of the International

Finance Department

Director: Guo Lei

Tel: +86 (10) 6830-6568

Fax: +86 (10) 6835-8748

State Tax Bureau

Address: 5 Yangfangdian Xi Road,

Haidian District, Beijing 100038, China

Tel: +86 (10) 6341-7114

E-mail: master@chinatax.gov.cn

Department of International Cooperation

Director: Zheng Faguang

Tel: +86 (10) 6341-7114

Fax: +86 (10) 6341-7114

State Development Planning Commission (SDPC)

Address: No. 38 Yuetan Nanjie 

Beijing 100824, China

Web site: www.sdpc.gov.cn

Department of Foreign Investment

Director: Zhang Xiaoqiang

Tel: +86 (10) 6850-1621

Fax: +86 (10) 6850-2977

Department of Investment 

Director: Jiang Weixin

Tel: +86 (10) 6850-1780

Fax: +86 (10) 6850-1761

State Economic and Trade Commission (SETC)

Address: No. 26 Xuanwumen Xidajie 

Beijing 100053, China

Tel: +86 (10) 6319-2114

Web site: www.setc.gov.cn

Department of Resources Conservation and

Comprehensive Utilization

E-mail: jmwbgt@setc.gov.cn

Director: Mrs. Zhao Jiarong 

Tel: +86 (10) 6319-3449

Fax: +86 (10) 6319-3460

China Export Market Plan 99
100 U.S. Department of Commerce, International Trade Administration

Ministry of Foreign Trade and Economic Cooperation

(MOFTEC)

Address: No. 2 Dong Chang’an Avenue

Beijing 100731, China 

Tel: +86 (10) 6519-8114

Web site: www.moftec.gov.cn

E-mail: moftec@moftec.gov.cn

MOFTEC Department of Foreign Investment 

Fax: +86 (10) 6519-7322

E-mail: zhaohong@moftec.gov.cn

Director: Hu Jinyan 

Tel: +86 (10) 6519-7321

MOFTEC Division of Investment Promotion

Fax: +86 (10) 6519-7839

E-mail: tangxl@moftec.gov.cn

Director: Zhou Ming

Tel: +86 (10) 6519-7886

MOFTEC Department of Foreign Trade 

Fax: +86 (10) 6519-7952

E-mail: mgsbg3@moftec.gov.cn

Director: Guo Li 

Tel: +86 (10) 6519-7419

Imports Division

Fax: +86 (10) 6519-7952

E-mail: sqzhou@moftec.gov.cn

Director: Zhou Shanqing

Tel: +86 (10) 6519-7727

MOFTEC Department of Mechanical and Electronic

Product Import and Export

Fax: +86 (10) 6519-8775

E-mail: jdxcw@moftec.gov.cn

Director: Chang Xiaochun

Tel: +86 (10) 6519-8771

Imports Division

Fax: +86 (10) 6519-8775

E-mail: jdjkc@moftec.gov.cn

Director: Jia Xiaozuo

Tel: +86 (10) 6519-8780

Institutes and Associations

China International Center for Economic and Technical

Exchanges (CICETE)

Address: No. 18 Beisanhuan Zhonglu

Beijing, 100011, China

Tel: +86 (10) 6441-2438

Fax: +86 (10) 6441-2443

Web site: http://cicete-env.chinascape.cn.net

Chinese Research Academy of Environmental Sciences

(CRAES)

Address: No. 8 Dayangfang Andingmenwai

Chaoyang District, Beijing 100012, China

Web site: www.craes.unep.net

International Cooperation Center

Director: Zhang Yutian

Tel: +86 (10) 8491-3949

Fax: +86 (10) 8491-5194

China Association of Environmental

Protection Industries

Address: No. 9 Sanlihelu

Beijing 100835, China 

Director: Wu Sanjiang

Tel: +86 (10) 6839-3827

Fax: +86 (10) 6839-3748

Web site: www.caepi.com.cn

Regional Environmental Protection Bureaus

Anhui Provincial Environmental Protection Bureau

International Cooperation Division

Director: Yin Fucai

Address: No. 8 Changjiang Xilu 

Hefei, Anhui 230061, China

Tel: +86 (551) 282-9112

Fax: +86 (551) 282-2745

Web site: www.aepb.gov.cn

E-mail: xxzx@aepb.gov.cn

Beijing Environmental Protection Bureau 

Technology and Foreign Affairs Division

Director: Fan Jiansheng

Deputy Director: Wen Ying

Address: No. 14 West Chegongzhuang Road 

Handian District, Beijing 100044, China

Tel: +86 (10) 6842-8670

Fax: +86 (10) 6842-4576

Web site: www.bjepb.gov.cn

E-mail: webmaster@bjepb.gov.cn
Chongqing Environmental Protection Bureau

International Cooperation Division

Director: Huang Hong

Address: No. 212 Renmin Road 

Yuzhong District, Chongqing 400015, China

Tel: +86 (23) 6387-6166

Fax:+86 (23) 6387-6166/6385-0021

Web site: www.cepb.gov.cn

E-mail: eic@cepb.gov.cn

Fujian Provincial Environmental

Protection Bureau

Planning and Finance Division

Director: Lin Junsheng

Address: No. 138 Fufei Road 

Fuzhou, Fujian 350003, China

Tel: +86 (591) 786 8018

Fax: +86 (591) 786 8398

Web site: fjepb.fj.cn.net

E-mail: fjepic@public.fz.fj.cn

Gansu Provincial Environmental Protection Bureau

Planning and Finance Division

Director: Ms. Qiao Caiyu

Address: No. 249 Gaolan Road 

Chengguan District, Lanzhou, Gansu 730030, China 

Tel: +86 (931) 886-9839/841-7170

Fax: +86 (931) 841-8970

Web site: http://gsep.gansu.gov.cn

Guangdong Provincial Environmental

Protection Bureau

Science and Technology Division

Director: Li Zisen

Address: No. 335 Dongfengzhonglu 

Guangzhou, Guangdong 510045, China 

Tel: +86 (20) 8355-7483/8313-4685

Fax: +86 (20) 8354-9381

Web site: www.gdepb.gov.cn

E-mail: hbkjc@gdepdb.gov.cn

Guangxi Autonomous Region Environmental

Protection Bureau

Planning and Finance Division

Director: Wu Xingwen

Address: No. 1 Minle Road 

Nanning, Guangxi 530012, China 

Tel: +86 (771) 283-0476

Fax: +86 (771) 283-0476

Web site: http://gxephb.nn.gx.cn

Guizhou Provincial Environmental

Protection Bureau

Foreign Affairs, Trade, and Economy Division

Director: Yang Lingsheng 

Address: No. 83 Zunyi Road 

Guiyang, Guizhou 550002, China 

Tel: +86 (851) 586-7314

Fax: +86 (851) 586-7314/581-3414

Web site: www.gz.cninfo.net

E-mail: epbfaec@public/gy.gz.cn

Hainan Land and Ocean Environment and

Resources Bureau

Planning, Finance, Science, and Technology Division

Director: He Shaoqun

Address: No. 59 Haifu Road 

Haikou, Hainan 570204, China 

Tel: +86 (898) 533-8010

Fax: +86 (898) 533-7757

Web site: www.8.silversand.net

Hebei Provincial Environmental Protection Bureau

Planning and Finance Division

Director: Wang Dechun

Address: No. 448 Yuhuaxilu 

Shijiazhuang, Hebei 050051, China

Tel: +86 (311) 399-5237

Fax: +86 (311) 303-6864

Web site: http://huanbao.hebei-window.com.cn

Helongjiang Provincial Environmental

Protection Bureau

Foreign Cooperation Division

Director: Guo Yuan

Address: No. 6 Hengshan Road

Xiangfang District,

Harbin, Helongjiang 150036, China

Tel: +86 (451) 233-1019/234-4758

Fax: +86 (451) 233-1019

Web site: www.hl.cninfo.net

E-mail: dguo@mail.hrb.hl.cninfo.net

Henan Provincial Environmental

Protection Bureau

Planning and International Cooperation Division

Director: Yi Xusheng

Deputy Director: Ding Xiaoyang 

Address: No. 1 Shunhe Road

Zhengzhou, Henan 450004, China

Tel: +86 (371) 632-2701/632-0284

Fax: +86 (371) 632-2701

Web site: www.henan-window.com

E-mail: hnpcpe@371.net

China Export Market Plan 101
Hubei Provincial Environmental Protection Bureau

Science and Technology Division

Director: Sun Gongsheng

Address: No. 346 Nanchangbayi Road 

Wuhan, Hubei 430072, China 

Tel: +86 (27) 8987-0681

Fax: +86 (27) 8786-1455

Web site: www.whepb.gov.cn 

Hunan Provincial Environmental

Protection Bureau

Planning and Finance Division

Director: Wang Huilong

Address: No. 75 Chennandonglu 

Changsha, Hunan 410007, China 

Tel: +86 (731) 549-5269/546-4944

Fax: +86 (731) 546-4923

Web site: http://grwy.online.ha.cn

E-mail: hnepa@public.cs.hn.cn

Inner Mongolia Autonomous Region Environmental

Protection Bureau

Planning and Finance Division

Director: Wang Xiaoyi

Address: Building No. 5 Xinchengxijie, 

Hohhot, Inner Mongolia Autonomous Region 010010,

China

Tel: +86 (471) 692-5254

Fax: +86 (471) 696-1772

E-mail: cht@public.hh.nm.cn

Jiangsu Provincial Environmental

Protection Bureau

Foreign Affairs Division

Director: Huang Yibing

Address: No. 7 Xikang Road 

Nanjing, Jiangsu 210024, China

Tel: +86 (25) 663-8459

Fax: +86 (25) 331-2450

Web site: http://jshb.jlonline.com

E-mail: jseic@jlonline.com

Jiangxi Provincial Environmental

Protection Bureau

Planning and Finance Division

Director: Zou Chengjun

Address: No. 16 Hubinnanlu 

Nanchang, Jiangxi 330006, China 

Tel: +86 (791) 850-9564/851-6177

Fax: +86 (791) 851-6195

Jilin Provincial Environmental Protection Bureau

Technology and Foreign Affairs Division 

Director: Zhang Yan

Address: No. 54 Renmindajie 

Changchun, Jilin 130051, China

Tel: +86 (431) 271-7436

Fax: +86 (431) 271-9168

Liaoning Provincial Environmental

Protection Bureau

International Cooperation Division

Director: Sun Jiaming

Address: No. 34 Chongshandonglu

Shenyang, Liaoning 110032, China

Tel: +86 (24) 8689-0919

Fax: +86 (24) 8689-0919

Web site: www.lnepb.gov.cn

E-mail: gjhz@lnepb.gov.cn

Ningxia Hui Autonomous Region Environmental

Protection Bureau

Regulations Division

Director: Jin Guoxing

Address: No. 79 Minzubeijie 

Yinchuan, Ningxia 750004, China 

Tel: +86 (951) 668-3354

Fax: +86 (951) 602-5596

Qinghai Provincial Environmental

Protection Bureau

Planning and Finance Division

Director: Yin Dahai

Address: No. 116 Nanshandonglu 

Xining, Qinghai 810007, China 

Tel: +86 (971) 817-5650 

Fax: +86 (971) 813-5112

Shaanxi Provincial Environmental

Protection Bureau

Planning and Investment Division

Director: Hao Yanwei

Address: Floor 10, Provincial Government Building 

Xincheng, Xi’an, Shaanxi 710004, China

Tel: +86 (29) 729-1440

Fax: +86 (29) 729-1327

Web site: http://sxhbj.shaanxi.gov.cn

E-mail: sxhbj@sei.sn.cn

102 U.S. Department of Commerce, International Trade Administration
China Export Market Plan 103

Shandong Provincial Environmental

Protection Bureau

International Cooperation Division

Director: Peng Zhenhua

Address: No. 12 Zhijinshijie 

Jinan, Shandong 250012, China

Tel: +86 (531) 692-5081, ext. 2308

Fax: +86 (531) 603-8443

Web site: www.sdein.gov.cn

E-mail: sdei@in-public.sd.cninfo.net

Shanghai Environmental Protection Bureau

International Cooperation Division

Director: Wu Chengjian

Address: No. 161, 1038 Nong, 

Huashan Road

Shanghai 200050, China

Tel: +86 (21) 6226-2351

+86 (21) 6226-2788, ext. 9015

Fax: +86 (21) 6211-7850

Web site: www.sepb.gov.cn

E-mail: sepbkicl@Mx2.sh.cei.gov.cn

Shanxi Provincial Environmental

Protection Bureau

Planning and Finance Division

Director: Qu Zhongrang

Address: No. 10 Xijihuying

Taiyuan, Shanxi 030009, China

Tel: +86 (351) 304-8239

Fax: +86 (351) 304-8239

Web site: www.sxeic.public.ty.sx.cn

Sichuan Provincial Environmental

Protection Bureau

International Cooperation Division

Director: Zhang Yong

Address: No. 31 Xiyujie 

Chengdu, Sichuan 610015, China 

Tel: +86 (28) 612-5462/611-2219

Fax: +86 (28) 611-2219

E-mail: epaghc@swww.com.cn

Tianjin Environmental Protection Bureau

International Cooperation Division

Director: Qiao Shousuo

Address: No. 17 Fukang Road 

Nankai District, Tianjin 300191, China

Tel: +86 (22) 2336-2553

+86 (22) 2336-2558

Fax: +86 (22) 2366-8231

Web site: www.tjhb.gov.cn

E-mail: tjhb@nankai.net.cn

Tibet Autonomous Region Environmental

Protection Bureau

General Office

Director: Huang Guojin

Address: No. 61 Jinzhuzhonglu 

Lhasa, Tibet 850002, China 

Tel: +86 (891) 681-1955

Fax: +86 (891) 683-5242

Xinjiang Uigur Autonomous Region Environmental

Protection Bureau

Planning Division

Director: Wang Yijian

Address: No. 11 Jiankang Road 

Urumqi, Xinjiang 830002, China 

Tel: +86 (991) 281-3946

Fax: +86 (991) 281-9429

Web site: http://public.xj.cninfo.net

E-mail: xjeic@mail.xj.cninfo.net

Yunnan Provincial Environmental

Protection Bureau

International Cooperation Division

Director: Yang Weimin

Address: No. 27 Xiyuannanlu 

Kunming, Yunnan 650034, China 

Tel: +86 (871) 410-4554/410-4963

Fax: +86 (871) 410-4963

E-mail: ftecd@public.km.yn.cn

Zhejiang Provincial Environmental

Protection Bureau

International Cooperation Office

Deputy Director: Ge Weihua

Address: No. 43 Tianmushan Road

Hangzhou, Zhejiang 310007, China

Tel: +86 (571) 705-5411/705-5412

Fax: +86 (571) 705-5412

Web site: http//zepb.zj.cninfo.net

E-mail: gjhzb@zjepb.gov.cn
104 U.S. Department of Commerce, International Trade Administration

World Bank

World Bank Country Office in China

Tel: +86 (10) 6554-3361, ext. 2030 

Fax: +86 (10) 6554-1686 

E-mail: lli2@worldbank.org

Washington External Affairs Office

Jill Wilkins/Kimberly Versak 

Tel: (202) 473-1792/473-4919

Fax: (202) 522-3405 

E-mail: jwilkins@worldbank.org/kversak@worldbank.org 

World Bank Web site: www.worldbank.org

World Bank Group in China

Web site: www.worldbank.org.cn/English/home.asp 

World Bank Monthly Operational Summary: www.worldbank.org/html/opr/procure/MOS/contents.html 

Asian Development Bank 

ADB Headquarters

Postal Address:

P.O. Box 789 Manila Central Post Office

0980 Manila, Philippines

Street Address:

6 ADB Avenue

0410 Mudaluyong City, Philippines

Tel: +63 (2) 632-4444

Fax: +63 (2) 636-2444

E-mail: information@mail.asiandevbank.org

ADB Liaison, U.S. and Foreign Commercial Service

Stewart Ballard, Senior Commercial Officer

E-mail: Stewart.Ballard@mail.doc.gov

ADB PRC Resident Mission

7th Floor, Tower D

Beijing International Financial Building

156 Fuxingmennei Dajie 

Xicheng District, Beijing 100031, China

Tel: +86 (10) 6642-6603/05/07

Fax: +86 (10) 6642-6601

Resident Representative: Bruce Murray

ADB Web site: www.adb.org

ADB PRC Resident Mission Web site: www.adb.org/PRCM

ADB Business Opportunities publication:

www.adb.org/business/opportunities/default.asp

DACON and DICON data base information:

www.adb.org/consulting/dacon.asp 

ADB Country Assistance Plan and other, China-specific

information: www.adb.org/China/default.asp

International Finance Corporation 

2121 Pennsylvania Avenue, N.W. 

Washington, DC 20433

East Asia and Pacific Department

2121 Pennsylvania Avenue, N.W. 

Washington, D.C. 20433

Tel: (202) 473-0400

Fax: (202) 974-4340

Director of East Asia and Pacific Department: Javed Hamid

China Office

9th Floor, Tower B

Fuhua Mansion

8 Chaoyangmen Beidajie

Beijing 100027, China

Tel: +86 (10) 6554-4191

Fax: +86 (10) 6554-4192

Resident Representative: Davin MacKenzie

IFC Web site: www.ifc.org

Environmental Projects Unit Web site:

www.ifc.org/enviro/EPU/epu.htm

Appendix C

International Contacts
Multilateral Investment Guarantee Agency

Postal Address:

1818 H Street, N.W.

Washington, DC 20433

Street Address:

1800 G Street, N.W., Suite 1200

Washington, DC 20433

Guarantees

Tel: (202) 473-6167

Fax: (202) 522-2630

Investment Market Services

Tel: (202) 473-0394

Fax: (202) 522-2650

Marketing

Tel: (202) 473-6170

Fax: (202) 522-2630

MIGA Evaluations

Tel: (202) 473-2060

Fax: (202) 522-7458

Legal and Claims

Tel: (202) 473-5245

Fax: (202) 522-2640

MIGA Web site: www.miga.org 

IPAnet Web site: www.ipanet.net 

United Nations Development Program 

UNDP, China Office

No. 2 Liangmahe Nanlu

Chaoyang District, Beijing 100600, China

Tel: +86 (10) 6532-3731

Fax: +86 (10) 6532-2567

UNDP Web site: www.undp.org 

UNDP in China Web site: www.unchina.org/undp 

United Nations Industrial Development Organization 

UNIDO New York Office 

New York, NY 10017, USA

Tel: (212) 963-6890 

Fax: (212) 964-4116

UNIDO, China Office

2 Liangmahe Nanlu 

Chaoyang District, Beijing 100600, China

Tel: +86 (10) 6532-4425

Fax: +86 (10) 6532-6315

E-mail: office.china@unido.org

Representative: Sergio M. Miranda Da Cruz 

(E-mail: smiranda-da-cruz@unido.org)

UNIDO, China Investment and Technology

Promotion Office

No. 5-1-41 Yayuan Diplomatic Compound 

No. 1 Xin Dong Lu 

Beijing 100600, China

E-mail: ipschina@iuol.cn.net

Information on China Investment Promotion Service:

www.unido.org/doc/50130.htmls

UNIDO Web site: www.unido.org 

UNIDO in China Web site: www.unchina.org/unido 

Global Environment Facility 

GEF Secretariat

1818 H Street, N.W.

Washington, DC 20433

Tel: (202) 473-0508

Fax: (202) 522-3240/3245

E-mail: gef@gefweb.org

Global Environmental Facility Web site: www.gefweb.org 

Japan Bank for International Cooperation 

Takebashi Godo Building, 4-1

Otemachi 1-chome, Chiyoda-ku

Tokyo, Japan 100-0004

Tel: +81 (3) 3215-1370

Fax: +81 (3) 3215-1597

Beijing Office

3102 China World Tower

No. 1 Jianguomenwai Dajie

Beijing 100004, China

Tel: +86 (10) 6505-3825/6/7/8

Fax: +86 (10) 6505-1198

JBIC Web site: www.jbic.go.jp

China Export Market Plan 105
106 U.S. Department of Commerce, International Trade Administration

Export-Import Bank of the United States

Washington, D.C., Office

811 Vermont Ave., N.W. 

Washington, DC 20571 

Tel: (800) 565-EXIM (3946)/(202) 565-EXIM (3946) 

Fax: (202) 565-3380

U.S. Ex-Im Bank Web site: www.exim.gov 

(Check Web site for regional offices)

Beijing Representative: Doug Lee

31st Floor, North Tower

Beijing Kerry Center

Beijing 100020, China

Tel: +86 (10) 8529-6655

Fax: +86 (10) 8529-6558/6559

International Trade Administration,

Trade Information Center

U.S. Department of Commerce

Washington, DC 20230

Tel: 800-USA-TRADE

E-mail: TIC@ita.doc.gov

Web site: www.trade.gov/td/tic

International Trade Administration,

Trade Development

Office of Environmental Technologies Industries

1401 Constitution Ave. N.W., Room 1003

Washington, DC 20230

Tel: (202) 482-5225

Fax: (202) 482-5665

Web site: www.environment.ita.doc.gov

International Trade Administration,

U.S. and Foreign Commercial Service

Please visit the Web site (www.usatrade.gov) to determine

the most suitable local contact, or see below. 

Beijing 

31st Floor, North Tower

Beijing Kerry Center

Beijing 100020, China

Tel: +86 (10) 8529-6655

Fax: +86 (10) 8529-6558/6559

Web site via www.usembassy-china.org.cn

Chengdu

No. 4 Lingshiguan Lu

Renmin Nanlu Section 4

Chengdu, Sichuan 610041, China

Tel: +86 (28) 558-3992

Fax: +86 (28) 558-9221

Web site via www.usembassy-china.org.cn

E-mail: chengdu.office.box@mail.doc.gov

Guangzhou

China Hotel Office Tower, #1461

Liuhua Lu

Guangzhou 510015, China

Tel: +86 (20) 8667-4011

Fax: +86 (20) 8666-6409

Web site via www.usembassy-china.org.cn

E-mail: guangzhou.office.box@mail.doc.gov

Hong Kong

26 Garden Road

Hong Kong

Tel: +85 2521-1467

Fax: +852 2845-9800

E-mail: hong.kong.office.box@mail.doc.gov

Shanghai

Shanghai Center, Suite 631

1376 Nanjing West Road

Shanghai 200040, China

Tel: +86 (21) 6279-7630

Fax: +86 (21) 6279-7639

Web site via www.usembassy-china.org.cn

E-mail: shanghai.office.box@mail.doc.gov

Shenyang

No. 52 Shisiweilu

Shenyang, Liaoning 110003, China

Tel: +86 (24) 2322-1198 ext. 189

Fax +86 (24) 2322-2206

Web site via www.usembassy-china.org.cn

American Chambers of Commerce in China

Beijing 

China Resources Building, Suite 1903

No. 8 Jianguomenbei Avenue

Beijing 100005, China

Tel: +86 (10) 8519-1920

Fax: +86 (10) 8519-1910

Web site: www.amcham-china.org.cn
China Export Market Plan 107

Chengdu 

606 Hongchuan Mansion

17 Lingshiguan Lu

Section 4, Renmin Nanjie

Chengdu, Sichuan 610041, China

Tel: +86 (28) 524-2405

Fax: +86 (28) 524-8577

Web site: www.ecomchina.com

Guangdong

Guangdong International Hotel, M-1115

339 Huanshi Donglu

Guangzhou 510098, China

Tel: +86 (20) 8335-1476/8331-1898

Fax: +86 (20) 8332-1642

E-mail: amcham@gitic.com.cn

Shanghai

Portman Ritz-Carlton Hotel, #435

1376 Nanjing Xilu

Shanghai 200040, China

Tel: +86 (21) 6279-7119/7180

Fax: +86 (21) 6279-7643

Web site: www.amcham-shanghai.org

Shenyang

City Plaza Shenyang, Tower 1, #1107

206 Nanjing Beijie, Heping District 

Shenyang 110001, China

Tel: +86 (24) 2334-1888, ext. 2117

Fax: +86 (24) 2334-1198

Tianjin

Sheraton Tianjin Hotel, Apt. 2205

Zijinshan Lu, Hexi District

Tianjin 300074, China

Tel: +86 (22) 2334-3388, ext. 2205

Fax: +86 (22) 2353-7765

E-mail: amchamtj@public.tpt.tj.cn

Wuhan

David Perry English Training Center, #302

32 Dazhi Lu

Wuhan, Hubei 430021, China

Tel: +86 (27) 8277-3508

Fax: +86 (27) 8284-2730

Hong Kong 

Bank of America Tower, #1904

12 Harcourt Road

Central, Hong Kong

Tel: +852 2526-0165

Fax: +852 2810-1289

Web site: www.amcham.org.hk

U.S.-China Business Council

Washington, D.C.

1818 N Street, N.W., Suite 200

Washington, DC 20036

Tel: (202) 429-0340

Fax: (202) 775-2476

Web site: www.uschina.org

Beijing 

CITIC Building, Suite 902

19 Jianguomenwai Dajie

Beijing 100004, China

Tel: +86 (10) 6592-0727

Fax: +86 (10) 6512-5854

E-mail: USCBC@eastnet.com.cn

Shanghai 

Jinjiang Hotel

2312 West Building

59 Mao Ming Road

Shanghai 200020, China

Tel: +86 (21) 6415-2579

Fax: +86 (21) 6415-2584

E-mail: uscbc@uninet.com.cn 

Hong Kong 

2802 Admiralty Centre, Tower 1

18 Harcourt Road

Hong Kong, China

Tel: +852 2527-5397

Fax: +852 2527-1516

E-mail: uscbc@netvigator.com
108 U.S. Department of Commerce, International Trade Administration

This list provides contact information for a small number of legal and market consultants specializing in

China’s environmental industry market. This list should

not be considered comprehensive, and it does not imply

the endorsement of the listed entities by the U.S. and

Foreign Commercial Service.

Future Trends International (Group) Corporation

Web site: www.future-trends.org

Shanghai Office:

Central Plaza, Suite 801

227 North Huangpi Road

Shanghai 200003, China

Tel: +86 (21) 6375-8886

Fax: +86 (21) 6375-8887

E-mail: ftichina@public.sta.net.cn

Contact: Farzam Kamalabadi

Virginia—USA:

13876 Park Center Road

Herndon, VA 20171

Tel: (703) 471-1984

Fax: (703) 471-1909

California—USA: 

Coronada Plaza, Suite I

1085 N. Main Street

Orange, CA 92867

Tel: (714) 997-0120

Fax: (714) 997-1334

PACT Industrial Water and Wastewater

Treatment Processes

Shanghai Office:

9E Aibang Building

585 Lingling Road

Shanghai 200030, China

Tel: +86 (21) 6481-2155/6481-2156/6439-9468

Fax: +86 (21) 6427-6210

Web site: www.pactchina.com

E-mail: pact@uninet.com.cn

Seattle—USA:

5808 Princeton Avenue, N.E.

Seattle, WA 98105

Tel: (206) 524-5611

Fax: (206) 526-1588

E-mail: info@pactusa.com

Web site: www.pactusa.com

Sinosphere Corporation

Suite 1720, Sunflower Tower

37 Maizidian Street

Beijing 100026, China

Tel: +86 (10) 8527-5700

Fax: +86 (10) 8527-5701

Web site: www.sinosphere.com

E-mail: anwar@sinosphere.com

Contact: Husayn Anwar

Golden State

Suite B343 Sunshine Plaza

68 An Li Road

Chaoyang District, Beijing 100101, China

Tel: +86 (10) 6492-6688

Fax: +86 (10) 6492-9388

Web site: www.chinaenvironment.com 

E-mail: bjogsiee@public.bta.net.cn 

Environmental Resources Management (ERM)

Web site: www.ermchina.com

Beijing Office:

1603 Peng Run Mansion (B)

26 XiaoYun Road

Beijing 100016, China

Tel: +86 (10) 8458-4031/2/3

Fax: +86 (10) 8458-4030

E-mail: post@ermchina.com

Guangzhou Office:

37th Floor, Guangfa Finance Center

83 Nonglin Xia Road

Guangzhou 510083, China

Tel: +86 (20) 8731-0216

Fax: +86 (20) 8731-0199

E-mail: guangzhou@ermchina.com

Appendix D

Legal and Market Consultants
China Export Market Plan 109

Shanghai Office:

Suite 2401, Harbour Ring Plaza

18 Xizang Zhong Road

Shanghai 200001, China

Tel: +86 (21) 5385-3050/1/2

Fax: +86 (21) 6469-2185

E-mail: shanghai@ermchina.com

Beverage and Diamond

1350 I Street, N.W., Suite 700

Washington, DC 20005-3311

Tel: (202) 789-6000

Fax: (202) 789-6190

Contact: Richard J. Ferris, Jr.

Paul, Weiss, Rifkind, Wharton & Garrison

Beijing Representative Office

2918, China World Tower II

1 Jianguomenwai Dajie

Beijing 100004, China

Tel: +86 (10) 6505-6822

Fax: +86 (10) 6505-6830

Contact: Lester Ross
110 U.S. Department of Commerce, International Trade Administration

China Environmental Web Sites

SEPA English-language Web site: http://english.zhb.gov.cn

Chinese Agenda: 21 www.acca21.edu.cn

Center for Environmentally Sound Technology Transfer:

www.cestt.org.cn

● Asia-Pacific Economic Cooperation Virtual Center,

information on environmental technologies:

www.cestt.org.cn/apec-vc

● List of Environmental Web Sites in China:

www.cestt.org.cn/apec-vc/Web site.asp

“Sinosphere,” a free on-line journal providing wellresearched articles pertaining to Chinese environmental

issues: www.chinaenvironment.net/sino

www.chinaenvironment.com 

● Selection of reports and articles written by environmental specialists 

● Articles classified according to main environmental

issues: water treatment, air pollution

● Lists of projects

www.enviroinfo.org.cn

● Selection of main Chinese newspaper articles

(in English translation) about environment;

updated daily

● List of Chinese environmental technology companies and contact details

● Environmental legislation

● Forum and other services

www.ied.org.cn 

● Links to other environmental Web sites

● Case studies

● Environmental research engines

● NGO forums

● China facts

www.environment.ita.doc.gov

● U.S. Department of Commerce, Environmental

Technologies Industries 

● Analysis of Chinese environmental market by

American experts

● Description of environmental projects

in China

● Schedule of international exhibitions

● News on the environment

● Financing assistance

● Detailed contacts of U.S. local bureaus for export

of environmental technologies

www.ita.doc.gov 

● U.S. Department of Commerce, International

Trade Administration 

● Chinese trade relations working group report on

China permanent trade relations

Golden State’s home page:

www.chinaenvironment.com/english/whorwe/index.html

German Embassy: www.ahk-china.com

World Resources Institute: www.wri.org

Ondeo Nalco Co.: www.nalco.com

Degremont: www.degremont.fr 

European delegation in China: www.delchn.cec.eu.int 

Links to Chinese newspapers (see selections in the

“news” repertory) www.chinadaily.com.cn

● Selected articles are inserted in “Newspapers and

Magazines articles” chapter; to access them, go to

repertory “News/China Daily Online” 

ChinaOnline: www.chinaonline.com

● Specialized independent on-line source for business-related China news

www.eco-web.com 

● Listing of environmental technologies companies,

environmental organizations, and governmental

institutions

● Links to each body’s country of origin

● Classification by sector of activity (see listing of

environmental technologies repartition per sector,

which can be used as a data base reference)

● “Green Pages Editorial,” list of projects with contact details

● Apparently has not been updated for a

long time

TUV: www.tuv.com

China Quality Certification Enterprise Network:

www.isochina.com

Appendix E

Web Sites
China Export Market Plan 111

The U.S. Embassy, Beijing (connect to Environment,

Science, Technology): www.usembassy-china.gov

Links to provincial and local environmental regulatory

agencies including the SEPA’s English-language reports

on the state of the environment in China:

www.usembassy-china.gov/english/chenvlnk.html

Reports of recent developments in China’s environmental

marketplace (including Hong Kong) via ETI’s Web site

at www.environment.ita.doc.gov (visit the “Market Plans”

section)

Daily updates (in English translation) on water-related

environmental projects: www.h2o-china.com

Search on China for trade-related information:

www.tradeport.org

U.S. Department of Energy’s “Energy Information

Administration”: www.eia.doe.gov

U.S. Department of Energy’s “Energy Information

Administration” analysis of, China:

www.eia.doe.gov/emeu/cabs/china.html

U.S. Department of Commerce’s International Trade

Administration Trade Information Center; includes up-todate tariff and tax information, resources, links, and

assistance: www.trade.gov/td/tic 

UN Development Business, a comprehensive resource on

business opportunities for enterprises providing goods

and services to projects financed by the major multilateral institutions: www.devbusiness.com

U.S. Government Sites

Department of Commerce, Office of Environmental

Technologies Exports: www.environment.ita.doc.gov

Department of Energy, Energy Pollution Prevention

Information Clearinghouse: http://epic.er.doe.gov/epic

Energy Information Administration:

www.eia.doe.gov/environment.html 

Department of State: www.state.gov

Bureau of Oceans and International Environment and

Scientific Affairs: www.state.gov/www/global/oes

Environmental Protection Agency: www.epa.gov,

www.epa.gov/oia/crp.htm

Envirofacts Database: www.epa.gov/enviro

Export-Import Bank of the United States: www.exim.gov 

Global Network for Environmental Technologies (GNET):

www.gnet.org

National Technology Transfer Center (NTTC): www.nttc.edu

Overseas Private Investment Corporation: www.opic.gov

Small Business Administration: www.sbaonline.sba.gov 

Trade and Development Agency: www.tda.gov 

U.S. Bureau of Reclamation: http://usbr.gov 

United States Information Agency (USIA): www.usia.gov

Environmental Issues and Resources:

www.usia.gov/topical/global/environ/content.htm 

USAID, Center for Trade and Investment Services

www.info.usaid.gov/business/ctis/index.html 

Environmental Technologies Network for Asia/Americas

(ETNA): www.info.usaid.gov/business/ctis/etna.html 

U.S. Business Advisor: www/business.gov 

U.S. House of Representatives Law Library:

http://law.house.gov 

U.S. International Trade Commission: www.usitc.gov 

USDA Foreign Agricultural Service: www.fas.usda.gov

White House: www.whitehouse.gov 

President’s Council for Sustainable Development:

www2.whitehouse.gov/WH/EOP/pcsd/index.html 

State Government Environmental Sites

California EPA Envirotech Program:

www.calepa.ca.gov/envtech.htm

California Environmental Exports:

www.environmentalexports.com 

International Trade Council of New Mexico: www.itcnm.org

Wisconsin Environmental Industry Export Forum:

www.dnr.state.wi.us/etef 

International Organizations/Foreign

Government Sites

Asian Development Bank: www.asiandevbank.org 

Electronic Embassy: www.embassy.org

Environment Canada (the Green Lane): www.doe.ca 

European Environment Agency: www.eea.eu.int 

International Atomic Energy Agency: www.iaea.or.at 

International Institute for Sustainable Development:

http://iisd1.iisd.ca
ISO (International Organization for Standardization):

www.iso.ch/welcome.html 

Interamerican Development Bank: www.iadb.org 

United Kingdom Environment Agency

www.environment-agency.gov.uk 

World Bank: www.worldbank.org 

Global Environment Facility:

www.worldbank.org/html/gef/gefgraph.htm 

World Trade Organization: www.wto.org/Welcome.html 

United Nations Sites

United Nations Environment Program (UNEP):

www.unep.no 

CEDAR (Central European Data Request Facility):

www.cedar.univie.ac.at 

INFOTERRA: www.cedar.univie.ac.at/unep/infoterra 

UNEP publications: www.cedar.univie.ac.at/unep 

United Nations Trade Leads Network:

www.unicc.org/untpdc 

Business/Private Sector Sites

Environmental Industry Association: www.envasns.org 

Aqua Online: www.aquaonline.com 

EcoTradeNet: www.ecotradenet.com 

Eldis (Electronic Development and Environmental

Information System): www.ids.ac.uk/eldis/eldis.html 

Envirolink Network: www.envirolink.org

Environment Expert: www.environmental-expert.com 

Environmental On-Line: www.cleanwater.com 

CNN Environmental News:

www.cnn.com/EARTH/index.html 

Environmental Law:

www.webcom.com/staber/welcome.html 

Envirotech-Online: www.envirotech.org/index.html 

Global Recycling Network: grn.com/grn 

Great Lakes Information Network (GLIN):

www.great-lakes.net 

Environmental Systems Corporation:

www.envirosys.com/corp.html 

Envirobiz: www.envirobiz.com 

International Trade Law Monitor:

http://itl.irv.uit.no/trade_law 

ISO 14000 Infocenter: www.iso14000.com

MVTI Technologies: http://members.aol.com/mvti/mvti.html 

Water Online: www.wateronline.com 

Engineers Online: www.engineersonline.com 

Pollution Online: www.pollutiononline.com

Public Works Online: www.publicworks.com 

Recycler’s World: www.recycle.net/recycle/index.html

Rubber Waste Technology:

www.interpublish.com/rwt/index.html 

Sedgwick Insurance: www.sedgwickna.com/infocen.htm 

Solid Waste Online: www.solidwaste.com 

U.S. Council for International Business:

www.imex.com/uscib

Water and Wastewater Utilities: www.magicnet.net/~metzler/page4.html#WaterInterna-tional 

WaterWorld: http://waterworld.com 

World Trade Exchange: www.wte.net 

Yahoo:

www.yahoo.com/Business/Corporations/Environment 

Associations

American Waterworks Association (AWWA):

www.awwa.org 

WaterWiser: www.waterwiser.org

Environmental Export Council: www.ecotradenet.com 

Environmental Industry Associations: www.envasns.org 

Hemispheric Center for Environmental Technology

(HCET): www.hcet.fiu.edu

International Environmental Liability Management

Association: www.magic.ca/ielma/ielma.home.html 

International Tire and Rubber Association:

www.itra.com/recycle.htm 

National Groundwater Association (NGHWA):

www.h2o-ngwa.org 

Water Environment Federation: www.wef.org

Water and Wastewater Equipment Manufacturers

Association: www.wwema.org 

112 U.S. Department of Commerce, International Trade Administration
China Export Market Plan 113

World Resources Institute: www.wri.org

Trade Show Information

Envirobiz: www.envirobiz.com

Expoguide: www.expoguide.com

Pollution Engineering: www.pollutioneng.com

Trade Show Central: www.tscentral.com

Magazines, Journals, and Periodicals

Asia Environmental Review: www.asianenviro.com

Canadian Environmental Journal:

www.greenware.ca/cejindex.htm 

Corporate Environmental Strategy:

www.rpi.edu/dept/mgmt/SOM.pages/EMP/ces.html 

Electronic Newstand: www.enews.com

Pollution Engineering: wwwpollutioneng.com

Riskworld: www.riskworld.com 

Soil and Groundwater Cleanup Online Magazine:

www.sgcleanup.com

The Wall Street Journal: www.wsj.com 

Directories and Indexes

The Amazing Environmental Web Directory:

www.webdirectory.com

Biz Web: www.bizweb.com 

EcoTradeNet: www.ecotradenet.com 

Environmental Industry Web site:

www.enviroindustry.com 

Environmental Route Net: www.csa.com/routenet 

IMEX Exchange: www.imex.com/imex/menu.html 

Infomanage—International Trade Resources:

http://infomanage.com/International/Trade 

International Business Network: www1.usa1.com/~ibnet 

International Trade Zone: www.std.com/intltrade 

Export Yellow Pages (includes Green Pages):

www.export.uswest.com 

Trade Compass: www.tradecompass.com 

Yahoo Business and Economy Page:

www.yahoo.com/Business_and_Economy 

Chinese Business, Economic, and Financial

Web Sites

WTO and PNTR documents and information:

www.pntrchina.gov

U.S.-China Business Council magazine:

www.chinabusinessreview.com

China Country Commercial Guide: www.usatrade.gov

U.S. Embassy, Beijing: www.usembassy-china.org.cn

APEC, China meetings: www.apec-china.org.cn

U.S.-China Business Council WTO page:

www.uschina.org/public/wto

National Bureau of Asian Research WTO page:

www.nbr.org/publications

Singapore International Business Institute links:

www.chinaupdates.com

Translated articles from Chinese sources:

www.sinopolis.com/Archives/Focus/WTO.htm

Harvard University trade negotiations page:

www.cid.harvard.cidtrade

China economic information, Hong Kong Trade Council:

www.tdc.org.hk/mktprof/china.htm

Gallup survey on China:

www.gallup.com/poll/reports/china.asp 

CNN news and information roundup:

www.cnn.com/ASIANOW

Chinese stock information: www.stockstar.com

Official Chinese Xinhua news agency: www.xinhua.org

People’s Daily Web site with government information:

www.peopledaily.com.cn

China Daily business weekly:

www.chinadaily.com.cn/bw/bw_cate1.html

Information on marketing and advertising on China:

www.shanghai-ed.com/j-market.htm

China Council for Promotion of International Trade:

www.ccpit.org/engVersion/index.html

China information: www.chinainfornet.com

Chinese Business World: www.chinesebusinessworld.com

U.S.-China Business Council: www.uschina.org/press
World Trade Data Base:

www.wtdb.com/investment/ininvest.htm

China Web: www.comnex.com/stocks/stocks.htm

People’s Bank of China: www.pbc.gov.cn

State Administration of Foreign Exchange (SAFE):

www.safe.gov.cn

Bank of China: www.bank-of-china.com

Ministry of Foreign Trade and Economic Cooperation:

www.moftec.gov.cn

PRC Embassy in Washington, D.C.:

www.china-embassy.org

State Development Planning Commission: www.sdpc.gov.cn

China tax laws and news: www.chinatax.gov.cn

Soho: www.soho.com

Net Ease: www.netease.com

China Economic Information: www.cei.gov.cn

Beijing Economic Information: www.beinet.cn

State Statistics Bureau: www.chinastatistics.com

Icapital, China data service, Hong Kong:

www.statchina.com

China Pages directory: www.china.pages.com.cn

China Business Net: www.china-businessnet.com

Foreign Trade Cooperation Network: www.bcic.com

Beijing Business Administration Network: www.bigs.cn.net

China Business Resources: www.chinatrading.com

Chinabyte: www.chinabyte.com

Shanghai Stock Exchange: www.shstock.cn.net

UNIDO investment network: www.cci.com.cn

Securities Times: www.securitiestimes.com.cn 

South China Morning Post, China news:

www.scmp.com/news/china/topchina.idc

China Market: www.chinamarket.com.cn

China Standard Service Net: www.cssn.net.cn

The Economist: www.economist.com

Far Eastern Economic Review: www.feer.com

China Big Yellow Pages: www.chinabig.com

Chinalaw Web: www.qis.net/chinalaw/index.html

Government White Papers: www.china.org.cn/WhitePapers 

China information: www.chinainfo.gov.cn

Industry Web Sites

Chemical sector e-commerce: www.chemease.com

Chemical sector e-commerce: www.chemross.com

Chemical trade information: www.chem-trade.net.cn

China Chamber of Commerce of Metals, Minerals and

Chemicals Importers and Exporters: www.cccmc.org.cn

Capital Steel: www.shougang.com.cn

China copper market information (in Chinese):

www.copperchina.com

Oil market news information (in Chinese):

www.oilnews.com.cn

China Oil, Gas and Petrochemicals magazine:

www.chinaogp-online.com

China Chemical Reporter (magazine): www.ccr.com.cn

Chemical Products Purchase Information:

www.chem.sinobnet.com 

Chemical Business Web Sites

Chemicals information: www.chempages.com

Chemicals information: www.cheminfo.gov.cn

Chemicals information: www.chemhot.com

General industry information: www.ChinaCCM.com

Chemicals information: www.chem-trade.net.cn

Chemicals information: www.chem.com

Chemical information in South China:

www.qjy-chemonline.com 

Plastics: www.cpinfo.net 

Chemicals information: www.chchin.com

Chemicals information: www.chem.com.cn

Chemical Products: www.chemmarket.gov.cn

Chemical Policy Making Information: www.jcw.gov.cn 

Chemical Technology: www.techmarket.com.cn

China Chemical Week (English newspaper):

www.chemweek.com.cn

China Chemical Daily:

www.ccin.com.cn, www.chem35.com

Technology transfer information: www.chemmarket.gov.cn,

www.techmarket.com.cn 

114 U.S. Department of Commerce, International Trade Administration
Chemical information:

www.jcw.gov.cn, www.sinoproject.com

SINOPEC: www.sinopec-ec.com.cn

China and Asia rubber information:

www.asiarubbernet.com, www.asiarubber.com.cn 

Steel: www.chinasteel.com.cn

Copper: www.copperchina.com

Metals: www.worldmetal.com 

Coal: www.coalinfo.net.cn

China coal information: www.chinacoal.com

China coal information: www.coalnews.com.cn

China Export Market Plan 115
116 U.S. Department of Commerce, International Trade Administration

Appendix F: Development Zones
China Export Market Plan 117
118 U.S. Department of Commerce, International Trade Administration
China Export Market Plan 119
120 U.S. Department of Commerce, International Trade Administration
China Export Market Plan 121
122 U.S. Department of Commerce, International Trade Administration
China Export Market Plan 123
124 U.S. Department of Commerce, International Trade Administration
China Export Market Plan 125
126 U.S. Department of Commerce, International Trade Administration
China Export Market Plan 127