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China’s anti-pollution effort paid off amid economic downturn


A "war against pollution" declared by China's leaders is getting a boost from the slowing economy as the government forces bloated industries like steel, cement and glassmaking to slim down.



The results of cuts in overcapacity are already visible in notoriously smoggy Beijing. Official air-pollution data released by China's government and monitoring by the U.S. embassy show levels of fine-particulate matter damaging to human health—known as PM2.5—fell more than 15% in the capital in the first half of 2015, compared with a year earlier. The city’s 21 million residents have been greeted with unusual stretches of blue skies.



While measures taken by Beijing are partly behind the change, just as important is what's happening in the sprawling industrial areas that encircle it.



The bleak industrial city of Shahe, 200 miles south of the capital, boomed for much of this century. These days, small glass producers there that haven't already closed for lack of business have been targeted by local authorities to upgrade equipment or shut operations. Dozens are already gone.



"The entire country is demanding pollution controls," said Li Jianglu, an executive at Jindong Glass Co., which had to close one factory last year and is now investing to move up the value-chain instead. "All we can do is to answer their call. There is no other way."



When they came to power more than two years ago, President Xi Jinping and Premier Li Keqiang promised to move away from a nearly four-decade-old model of economic growth that prioritized heavy industry, leading to overcapacity, while also declaring a "war against pollution."



To accomplish its goals, economists have said the government must let economic growth—which has already slowed to 7%—sag further in a transition that will see workers laid off but more money spent on environmental controls and better-quality manufacturing.



In Hebei province, where Shahe is located, the government said it invested nearly a billion dollars last year on environmental protection, with most of the funding coming from the central government.



Interviews with executives, local officials and pollution experts show the government taking a multipronged approach, squeezing out small-time industrial producers that contribute to smog and overcapacity while tightening inspections of big producers and forcing them to upgrade equipment.



"The pollution problem was originally caused by distortions in the economy that favored very energy intensive industries over services sectors or the consumption side," among other reasons, said Anders Hove with the Chicago-based Paulson Institute, a think tank. "Improved environmental enforcement is one potential way to reduce those distortions."



Beijing has been a particular problem. Quality-of-life concerns have risen with incomes and middle-class professionals have complained volubly on social media about the air.



As recently as January 2013, days of toxic pollution saw PM2.5 levels in Beijing rise to 35 times World Health Organization standards, drawing global and local scorn. In response, the capital shut down multiple coal-fired power plants and removed nearly half a million outdated vehicles from the roads last year.



Despite the modest improvement in and around Beijing, air-quality elsewhere remains a problem.



Then a real estate glut swamped the market, prices and demand for plate glass crashed and Shahe's growth rate fell by half. "No one is making money here these days," said Liu Zhiqi,a vice president at Jindong Glass. Executives declined to discuss revenues.



Today, Jindong Glass is investing in new equipment at the closed factory to produce reinforced glass, a process executives say has lower emissions than simple plate-glass production.



Others in Shahe are faring similarly, scrapping the low margins of plate-glass production and turning to value-added glass processing instead.



One local official said Shahe is looking for guidance from places like Toledo, Ohio, America's "glass city," which also went through a transition to higher value, less polluting production.



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