China withdraws credit from polluting companies

By George Reynolds

- Last updated on GMT

Related tags: Pollution, China

A blacklist of polluting companies, including two well known food
processors, was issued by China's environmental watchdog yesterday,
which denies bank loans in attempt to punish those that flout
regulations.

Enforcing environmental regulations through fiscal penalties demonstrates the China's determination to clean up in earnest, which could increase costs and risks for companies choosing to invest in the country. Some of China's rivers are among the most polluted in the world, while some of its cities suffer the worst smog, as laws to protect the environment have been ignored by companies operating in a period of rapid economic growth. This policy appears to be aimed at companies that have found it cheaper to pay fines or bribe local authorities rather than to install pollution-controls. The list of 30 companies, which includes Kedi Food Group. and Xiaoyangren Milk Products, will be denied credit if they continue to violate pollution standards in a collaboration between the State Environmental Protection Agency (SEPA) and central bank, People's Bank of China and the China Banking Regulatory Commission. It is not known whether affected companies can appeal to the State Environmental Protection Administration, or what changes they must make before they can be removed from the blacklist. Meanwhile, companies that already have loans, but are later found to have violated environmental protection regulations will have their loans called in, according to the so-called "green credit policy". Pan Yue , vice-director of SEPA, said administrative means alone can not control a deteriorating environmental situation and so China should make more use of economic levers, according to China's official news agency, Xinhua. "Increasing the fund-raising costs for heavy industries and even cutting off sources of credit for companies that seriously violate the laws has become an urgent need for curbing their investment impulse,"​ he said yesterday. Pan said the SEPA will work with the Ministry of Finance, the China Insurance Regulatory Commission, and the China Securities Regulatory Commission to develop further economic policies to promote environmental protection. Earlier this month, SEPA announced it had decided to delay approval of construction projects in eight provinces and autonomous regions where serious violation environmental laws and regulations had taken place. Projects that focus on pollution prevention and treatment and economic development were excluded from the suspensions. SEPA also said that polluting projects in the areas need to be environmentally-friendly within three months or face continued to delays. The administration also required local environmental agencies in the regions to suspend approval of polluting projects according to the country's environmental policies. According to a report, "The cost of pollution in China", a collaboration between the World Bank and SEPA, between 2001 and 2005, on average about 54 per cent of the seven main rivers in China contained water deemed unsafe for human consumption. Total energy consumption in China has increased 70 per cent between 2000 and 2005, with coal consumption increasing by 75 per cent, polluting the skies with emissions such as carbon dioxide (CO2) and sulphur dioxide. The Acid Rain alone caused as a result of the (SO2) is estimated to cost ¥30bn (€2.9bn) in crop damage and seven billion in material damage annually, according to the report. To meet energy demand, China is building about two new fossil fuel power stations every week, making it almost impossible for the country to meet the 10 per cent emission reduction target between 2005 and 2010. The result is that 750,000 people die prematurely each year in China due to extremely poor air and water quality, according to the report. This study report shows that the total cost of air and water pollution in China in 2003 was ¥362bn (€35bn), or about 2.68 per cent of Gross Domestic Product (GDP), a measure of economic wealth, for the same year.

Related topics: Policy, Supply chain, East Asia, China

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