February 20, 2008 / 2:36 PM / 12 years ago

China factories move inland to avoid green scrutiny

HONG KONG (Reuters) - New “green laws” and growing public intolerance for polluters are driving dirty Chinese factories inland from coastal regions to escape higher costs and tighter scrutiny, a think-tank said on Wednesday.

The Institute of Public and Environmental Affairs (IPE), a pioneering environmental campaign group in China, said while tougher anti-pollution laws and a more vigilant public might force greener investing in China, some of the country’s worst polluters were opting to relocate inland rather than clean up.

“It’s quite prevalent, especially in the Pearl River Delta where the government is trying to clear the mess and strengthen the enforcement,” said Ma Jun, the think tank’s director.

In certain counties “there are very, very loose environmental rules. They create local policies and rules saying that they’ll only check companies once a year ... and ensure these companies will not be disturbed,” Ma added.

The trend comes at a time of surging costs in China’s major manufacturing hubs, including Guangdong’s Pearl River Delta and other coastal regions, which have forced thousands of factories to close and relocate to lower-cost centers, such as Vietnam.

While cheap labor made China the world’s manufacturing base, stricter pollution control measures are among a basket of factors adding to the cost of manufacturing there, including rising wages and a strengthening yuan and cuts in export tax rebates.

China has struggled to control chronic air and water pollution, a consequence of decades of unchecked economic growth, not only to curb degradation but also because pollution has become a trigger for social unrest.

Despite the trend of polluting factories moving inland to provinces such as Hunan, Guangxi, Zhejiang and Jiangxi, there have been examples of authorities hitting back.

Hundreds of chemical plants were forced to close around China’s giant Taihu lake, after authorities raised pollution charges last year, following an outbreak of putrid green-algae that left tap water undrinkable for millions.

IPE now lists about 15,000 companies that have broken emissions standards across China, including multinationals such as Pepsi, LG and Samsung — a tiny proportion of which have later improved waste treatment measures as verified by third-party audits.

A new IPE report, written in collaboration with investment bank CLSA and green group WWF, found Chinese public and media pressure was playing a crucial role in filling a void in official enforcement, with complaints made to environmental authorities increasing 30 percent annually and hitting 600,000 cases in 2004.

Reporting by James Pomfret; Editing by David Fogarty

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