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Firms in China face higher costs as regulators tighten anti-pollution rules

环保法规趋紧 在华外企“绿化”成本上升.jpg

Apple Inc is planting trees, Mars may move to 'zero carbon' and Foxconn Technology Co Ltd is spending millions of dollars to give its factories a 'green' makeover, as companies operating in China face tighter rules on pollution.


Beijing introduced tougher regulations this year to combat pollution, keen to overhaul China's unwanted image of smog-choked cities, fouled waterways and heavy-metal tainted soil.


This won't come cheap; the country's central bank estimates China will need to spend 2 trillion yuan a year over the next five years on reducing pollution, and government coffers will only cover about a tenth of that – leaving local and international firms to pick up the rest of the tab.


"For companies and factories which need to seriously cut levels of pollutants, it's going to be extremely costly – we're talking millions of dollars," said Philip Cheng, Shanghai-based partner at law firm Hogan Lovells.

“对于需要减少污染物水平的企业和工厂来说,这种成本将极其高昂–数以百万计的美元,”霍金路伟律师事务所上海合伙人Philip Cheng说道。

Harsher penalties were also introduced this year, and local governments – with tougher targets of their own – have been putting more pressure on businesses making anything from chocolate to clothing, China-based executives said.


A Beijing regulator last month fined a leading supplier of fries to McDonald's Corp for water pollution, while the cost of meeting pollution targets for China's mostly state-owned steel firms has jumped 50 percent on average since last year.


"China's environmental law is becoming one of the strongest in the world," said Manuel Baigorri, senior director of sustainability at Levi Strauss & Co, which is working on a project to use less water and power at its China mills.


Executives in China noted the new regulations were already driving up costs, especially in high polluting sectors such as energy, natural resources, chemicals, metals and apparel.


Others added that costs were rising, but were worth paying to stay on the right side of regulators and local governments, often the gatekeepers to business in the world's second-largest economy. "This can be a competitive advantage for multinational companies, leading the market where the government has quite firmly said it would like it to go," said David Frey, China-based partner at KPMG.


A major question, though, is whether China has the resources to enforce the new rules, especially with local governments torn between growth and environmental protection.


"We're seeing Beijing issue policies pushing factories to reduce water and energy use, but local regulators often don't have the systems in place to properly implement them," said a Shanghai-based executive at a global consumer goods firm.


Major manufacturing firms such as Apple supplier Foxconn invested around $33.5 million on green projects last year, and said it is looking to improve energy efficiency further in 2015.


"Government policies are highly influencing companies to switch to renewables," said Rosie Pidcock, a Beijing-based business development manager at renewable energy project developer UGE, noting her firm has seen an increase in new business since the tougher rules were announced last year.



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