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Pollution Curbs Target Processing

Denise Tsang – Updated on Feb 27, 2008 – SCMP

Beijing aims to further curb polluting manufacturing activities by cutting tax rebates and banning processing trade of 141 product types in six industries.

The State Environmental Protection Administration (Sepa) proposed yesterday to the Ministry of Commerce and China Customs to scrap tax rebates on agricultural chemicals, paint coatings, batteries and organoarsenic compounds – used to produce agricultural fertilizers – as part of the country’s environmental policy.

The policy will apply only to manufacturing using imported materials, which for years has enjoyed tax incentives.

The majority of manufacturers engaged in the affected industries are Hong Kong companies.

Described by Sepa vice-minister Pan Yue as this year’s first batch of products deemed hazardous to health and the environment, the list heralds more restrictions in the pipeline.

Market observers said the proposal would add to the financial burdens of tens of thousands of Hong Kong factory owners operating along the Pearl River Delta, who were already dealing with higher production costs, increasing wages, power shortages, a stronger yuan and other policies aimed at discouraging the production of low-value goods.

The rules would require greater environmental commitments from battery makers such as Hong Kong-listed Gold Peak Industries (Holdings) and Tianneng Power, which produce batteries in Guangdong and Zhejiang respectively, market observers said.

Neither company was available for comment yesterday.

At stake are eight types of batteries including those containing chrome, which is classified as a non-biodegradable material.

Also affected are 24 agrochemicals, 25 organoarsenic compounds and related products, 43 dyeing materials and 21 coatings that contain toxic lead oxide.

Without naming any companies, Mr Pan condemned many for making money at the expense of the environment.

He said about 500,000 tonnes of chrome waste was produced annually on the mainland, and four million tonnes had yet to be dealt with.

Green Manufacturing Alliance chairman Sunny Chai Ngai-chiu said the Sepa proposal would inevitably raise Hong Kong manufacturers’ costs and responsibilities for reducing pollution.

“It adds to the burdens of factory owners,” he said. “We are facing a lot of new environmental requirements and restrictions from the European Union and the United States.”

However, Mr Chai said the proposal to ban just the processing sector of such products meant that mainland companies were exempt.

“This is unfair,” he said. “Why does the proposal apply only to manufacturers in the processing trade? Why does the country allow domestic companies to engage in polluting and energy-consuming production activities?”

The mainland has been seeking to reduce its record trade surplus by limiting processing exports.

State statistics show the Pearl River Delta has about 90,000 processing trade factories, of which 57,500 are owned by Hong Kong investors who collectively employ 9.6 million workers.

Since June last year, the Ministry of Commerce has eliminated tax rebates in two rounds on processing exports involving about 3,300 product types deemed to be heavy energy and resource consumers and heavy polluters.

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