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Cross-strait Business

Gunning for Green Opportunities

With China’s dire need for cleaner energy, air, soil, and water, a wealth of opportunity awaits. Which Taiwanese companies will seize the day?

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Gunning for Green Opportunities

By Liang-Rong Chen
From CommonWealth Magazine (vol. 382 )

Most of us probably share the experience of putting off house cleaning, because we are too tired from work or just don’t feel like doing it. Furniture gathers dust, dirty dishes pile up in the sink, and worn clothes are strewn around the bedroom. Only when one day friends are about to visit do we hurriedly accomplish long overdue chores, dusting, sweeping, cleaning, washing, and tidying up our messy home.

With the 2008 Olympic Summer Games in Beijing less than 300 days away, China is now involved in a rushed national clean-up campaign.

During the summer the traditional hutong alleys in Beijing’s Xicheng District were given a facelift as illegal structures were demolished and greenery was put in, giving these old-fashioned neighborhoods a completely new look. Next summer the Olympic marathon will wind its route through these narrow alleys and lanes with their courtyard houses. Against this picturesque backdrop live broadcasts from the Games will showcase the beauty of China, both modern and ancient, for hundreds of millions of television viewers around the world.

Clean Air for Just 1 Percent

Yet in June this year a piece of major bad news came out, when the Wall Street Journal reported that air quality in Beijing had been far from ideal in the first half of 2007. The report said that Beijing was unlikely to meet its target of more than 245 days of good air quality for the year.

This bad news was enough to have people break out in a cold sweat out of concern over air quality during next year’s Beijing Games.

Beijing has been notorious for its bad air quality. However, demonstrating its resolve to make the Olympics happen, the city government has closed down several thousand coal furnaces in the capital and even spent a fortune to move the Capital Steel plant, which employs hundreds of thousands of workers, to the outskirts of the city.

But now it looks as if these measures are still far from enough. Jacques Rogge, the president of the International Olympic Committee (IOC), was quick to warn that air pollution could lead to some events at the Beijing Games being postponed. “Sports with short durations would not be a problem, but endurance sports like cycling are examples of competitions that might be postponed or delayed,” he said in Beijing in early August as the Olympic countdown reached the one-year mark.

The specter of losing face in front of the world spurred Beijing to take action in August. Each day for four days, the city reduced traffic by 1.3 million vehicles, alternately barring cars with even- and odd-numbered plates from hitting the roads. The effort was followed by a voluntary “Car-free Day” campaign in mid-September. The goal was to markedly reduce the city’s worst source of air pollution – car exhaust.

No one dares to make light of Beijing’s resolve to fight pollution, but outside the revamped capital, in other parts of the vast country, the environment is still rapidly deteriorating.

The World Bank estimates that some 500 million Chinese lack clean drinking water.

And based on European Union standards, just 1 percent of China’s 560 million city dwellers are breathing clean air.

History shows that the industrialized nations in Europe and North America, Japan and also Taiwan began to tackle their environmental problems only after reaching a certain degree of affluence. However, China has a per capita GDP barely exceeding US$2,000 and has only recently joined the ranks of middle-income countries. Yet while the majority of people in China remain in poverty, the country’s environmental problems have already become so severe that the government has no choice but to address them.

But China’s environmental clean-up is an experiment without any precedents in history. The New York Times likened China to a child that develops lung cancer right after starting to smoke.

Still, some Chinese officials do not want the public to know how severe the problems are.

In March this year, for instance, the World Bank presented its report “Cost of Pollution in China,” which was produced in cooperation with Chinese government ministries, at a research institute in Beijing. The Financial Times reported that Chinese officials had asked the World Bank to delete about one third of the draft of the report last year, because they thought that it was too sensitive and could cause social unrest.

The deleted passages mainly stated that high levels of air pollution in Chinese cities lead to the premature death of 350,000 to 400,000 people per year.

Moreover, due to poor quality water more than 60,000 people in rural areas die prematurely every year from severe diarrhea, stomach cancer, liver cancer and bladder cancer.

Too Obvious to Keep Secret

With China’s environmental pollution at the explosion point, the government can no longer keep a lid on the truth, try as it may.

Even now, the summer of 2007 has already become engraved in the Chinese people’s memory as the “summer of blue-green algae.”

In early June, Lake Tai, China’s third largest freshwater lake and drinking water source for millions of people, was covered with a thick layer of fetid blue-green algae fed by industrial and agricultural run-off. As a result, city officials had no choice but to cut off water supplies to Wuxi, the city of 2.3 million residents that stands on its shores.

The algae bloom was no laughing matter, since the region around Lake Tai is one of the most densely populated and affluent parts of China, including major cities like Suzhou, Wuxi, Changzhou, Jiaxing and Huzhou.

The entire incident was a major embarrassment for Li Yuanchao, the Communist Party secretary of Jiangsu Province, who had always boasted of his “environment first” policy. Li subsequently vowed to impose the "strictest environmental protection system to clean up the lake, even if the GDP drops 15 percent."

In this precarious situation even the seemingly environmentally friendly solar cell manufacturers of Wuxi asked water treatment experts of Singapore’s Hyflux Group for help. They needed advice on how to recycle the microfine silicon dust from solar wafer production, instead of continuing to flush it into the algae-infected Lake Tai.

Recently, Chinese officials have displayed a stunning vigor when it comes to taking environment protection seriously and executing relevant measures.

The True Olympic Business Bonanza

One of the companies hardest hit by China’s environmental clean-up campaign is Formosa Plastics Group, Taiwan’s largest petrochemical conglomerate. Formosa Plastics founder Wang Yung-ching had long hoped to build a huge petrochemical processing plant in Ningbo, Zhejiang Province. At a proposed investment of US$10 billion, the “Ningbo mega ethylene” plant, modeled after the Group’s naphtha cracker No. 6 petrochemical complex in Taiwan’s Yunlin County, would comprise an oil refinery with a capacity of 10 million tons per annum and a mega ethylene cracker plant.

But four years after proposing the project, Wang has yet to get the go-ahead from Chinese officials. In the past it was believed that the scheme had foundered because Formosa Plastics had balked at making it a joint venture with a Chinese state-owned enterprise.

But China’s 21st Century Business Herald, a semiweekly economic newspaper, reported that environmental considerations are the main reason for the hold-up. China’s State Environmental Protection Administration is imposing “regional license restrictions” on high-pollution and high-growth industries, measures that are similar to Taiwan’s total quantity control system for emissions. Since Ningbo’s Beicang Port area has already reached its emission limits, it will be difficult to accommodate another heavy polluter like the planned mega ethylene plant.

Nowadays China even experiences environmental protests at dimensions that could hardly be imagined in the past.

In June, more than 1,000 angry residents of the southern port city of Xiamen staged a street protest in the bustling city center. The protesters, who had circulated news of the demonstration via mobile phone text messages, even tried to break through a police cordon. The crowd demanded that the government promise to scrap plans for the construction of a petrochemical plant in the Haicang Industrial Zone. The people took to the streets even though the Xiamen city government had already announced several days earlier that it would “suspend” the said project to conduct a stricter environmental impact assessment.

The object of the environmentalists’ wrath was the leader of the project, former Tuntex Group chairman and current fugitive Chen You-hao, who is wanted in Taiwan on charges of breach of trust, and now runs Xianglu Petrochemicals in Xiamen.

The Beijing Olympics are a catalyst compelling the face-conscious Chinese government to survey the nation’s environmental woes with a more open attitude, using world standards.

Foreign environmental businesses are keenly aware of this point, since they will only get an opportunity to do business in China if the nation’s environmental laws and regulations are rigorously implemented. Sam Ong, CFO of the Hyflux Group, knows where China’s newly won environmental zeal comes from. “Luckily there are the Beijing Olympics,” he says with a broad smile.

For companies that are perspicacious and quick enough to perceive the needs of the 1.3 billion Chinese clamoring for a cleaner environment, plenty of business opportunities lie ahead.

Translated from the Chinese by Susanne Ganz


Chinese Version: 追捕「綠色商機」 企業淘金中國

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