- posted: Jun. 17, 2020
- Business In China,  Legal Updates
In the past, irresponsible industries sought out partnerships with Asian countries in order to avoid environmental regulations. China and its neighboring countries were unwilling “pollution havens” simply by nature of the fact that we did not have the same stringent environmental regulations that became common across North America and Europe over recent decades. As a result, Pacific nations have suffered from escalating environmental degradation in addition to the impacts of global climate change.
Economic growth in China has been remarkable thanks to a booming domestic economy and increasing foreign investment. At the same time, however, we have suffered the effects of a deteriorating environment. Air pollution and damage to the local ecosystem has undermined the local standard of living, and Chinese policymakers are turning increasing attention to environmental protection. On the continental level, this is paving the way towards a “Green Asia,” where economic growth and environmental sustainability go hand-in-hand. On the local level, evolving environmental protection initiatives are demanding quick and complete compliance from enterprises and households alike.
China Makes Environmental Protection a Priority
Granted, China has not stood out as an international leader in environmental protection in the past. However, we are working diligently to improve conservation, climate change, and anti-pollution in policies. In fact, China officially declared a “war on pollution” in 2014. National leaders implemented regulations and strengthened enforcement of environmental policies. Environmental protection has also become common rhetoric in political campaigns, causing more and more Chinese people to consider how their activities impact the environment.
The new priorities of China’s war on pollution were handed down swiftly. While these environmental regulations have leveled the playing field between foreign companies and Chinese domestic companies, they have also caused a degree of disruption. Recent changes in China’s environmental initiatives took place on an accelerated timeline, which has been transformative. However, these new policies have also increased cost and created uncertainty in certain industries.
New Chinese Environmental Laws Begin to Emerge
China updated its Environmental Protection Law in 2015. This was the nation’s first major reform of its environmental policies in more than two decades. The updated law includes stricter punishments on polluters. It also allows non-governmental organizations to file environmental lawsuits against violators in the name of the greater public intertest. These reforms are meaningful, and new environmental protections are likely to emerge soon. The National People’s Congress is working to revise other major pieces of legislation, including the Law on the Prevention and Treatment of Air Pollution and the Law on the Prevention and Treatment of Water Pollution. The legislative body is also considering a new set of policies under the proposed Law on the Prevention and Treatment of Soil Pollution, which will add even more requirements to an expanding environmental regime.
China’s commitment to protecting our environment does not end with domestic policies. As a signatory to the Paris Agreement on climate change, China committed to a Five Year Plan that cuts carbon emissions and shows more dedicated commitment to environmental protection. This year, China is releasing a new plan, the “China Standards 2035,” designed to influence next-generation technologies like telecommunications and artificial intelligence in a manner that encourages climate neutrality and environmental conservation.
Environmental Enforcement Improves Throughout China
After spending years under an outdated environmental law, China created standards and regulations that are even stricter than the international ones. In fact, some of the new mandates exceeded the abilities of current day science and technology, which created some difficulties for companies required to adjust. In some respects, regulators demanded industry meet environmental goals that conflicted with business’ abilities to meet contractual obligations. Some enterprises struggled to keep costs reasonable and keep up with demand. Nevertheless, noncompliance is not an option.
China’s new environmental policies are being robustly enforced. In 2015, a monumental Chinese judicial decision commonly referred to as The Nanping Case sent a strong signal that the courts have jurisdiction to enforce environmental laws beyond just awarding money damages for pollution injuries. This case followed quickly on the heels of another notable environmental public interest lawsuit, The Taizhou Case, which sentenced individuals who illegally dumped hazardous waste into China’s rivers to jail time.
In addition to national reforms, many local governments within China are embracing green initiatives. Shanghai in particular has taken more responsibility for protecting its local environment after the implementation of the Environmental Protection Law of 2015. Through planning, reporting, spending, inspections, and other polices, Shanghai has been an environmental ally for larger national initiatives. The local government of Jiangsu Province has also forbidden new chemical parks and plants from being built within 1 kilometer of the Yangtze River Delta, a hub of China’s chemical industry.
China’s Environmental Quality Improves Under New Laws
During the past three years, China has worked to balance economic growth with the beautification of our nation. Under the new Ministry of Ecology and Environment (MEE), China has demonstrated its ability to improve air emissions, water pollution, solid waste permitting, and soil pollution. This has been achieved through direct enforcement of environmental laws as well as increases in incentives for companies to cut pollution, protect against soil pollution, increase environmental inspections, shut down or relocated heavy polluting facilities, and commit to clean energy alternatives.
China’s progress towards a greener economy continues. This year, China plans to launch a National Green Development Fund (NGDF) focused on encouraging green investments within China. The MEE is also seeking to promote the private finance sector in ways that will help it achieve more sustainable economic goals. And despite what some anti-conservationists may believe, a green economy is a healthy economy.
China’s New Green Economy
Xu Bijiu, the Director of the General Office of the Ministry of Ecology and Environment, reported an increase of gross domestic product from 59 trillion yuan in 2013 to 90 trillion yuan in 2018. Notably, this growth did not have an undue environmental cost. In fact, air pollution had actually reduced over that time.
Businesses operating in China should prepare themselves for stronger environmental compliance. In the near future, environmental performance will be vital to the social credit score a company receives. Environmental compliance issues can cause Chinese regulators to remove tax breaks, increase factory inspections, and increase restrictions on business licenses. As a result, poor environmental practices will devastate businesses just as much as pollution devastates our natural environment.
In addition to stricter pollution control measures, China has revised the permitting process for any level of pollution. Businesses can also expect regular audits of suppliers, industrial parks, and partners to maintain supply chain integrity. All this helps to ensure that due diligence is conducted by companies in accordance with Chinese regulations and business demands.
Green Supply Chains Encourage Environmental Compliance
Green policies imposed on international buyers is increasing the pressure on Chinese manufacturers to adopt environmentally sound practices. Many multinational corporations are adopting green supply chains, which can force change among local companies.
In one a particular case, a shoe company in Fujian Province opted to pay fines to the local environmental protection bureau rather than installing the necessary clean-up equipment to decrease their air and wastewater pollution. The company made this decision because fines were cheaper than compliance. However, after Chinese nongovernmental organizations notified Walmart, the shoe manufacturers’ key customer, of the repeated violations, Walmart demanded that the shoe company properly address the issue or threatened to discontinue their buying.
Companies up and down the supply chain are being affected by increased environmental enforcement. Some companies are being pushed out of the market because they cannot afford the higher costs of compliance. Other businesses with effective pollution controls in place and are hardly batting an eyelash at the new regulations. Overall, environmental demands have reduced competition and caused more reliable suppliers to rise to the top of their industries. This has helped to level the playing field between domestic and foreign based companies, as they are now all held to the same environmental standards.
The Quickly-Evolving Landscape of International Environmental Law
Beyond China’s national reforms and local initiatives, private demand for green supply chains is growing. The United States Environmental Protection Agency and China’s Ministry of Ecology and Environment are also collaborating on ways to strengthen their response to cross-border environmental and public health challenges. Altogether, the many stakeholders enforcing environmental policies in China is causing international businesses to shift their operations rather quickly. Companies will need to interact with regulators and work closely with the environmental community to navigate goals, roadblocks, new policies, and improved transparency throughout their organizations.
China will continue to roll out new campaigns to reduce environmental pollution. The best way for international businesses to ensure compliance with the quickly-evolving landscape of environmental law in China is to work with Chinese attorneys who have a clear understanding of both domestic and international laws and norms. Attorneys can help businesses identify, monitor, and mitigate risks to business operations in a manner that minimizes risk and helps them plan for the future. By leveraging internal and external resources, attorneys can also inform suppliers and customers about changing polices. Altogether, this will help minimize or eliminate disruptions and increased costs causes by China’s evolving environmental laws.
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