20 July 2016
China’s Environmental Market
I. Market overview
The environmental market in China covers the equipment manufacturing and engineering of a wide spectrum of technologies and their related services. It includes the provision of equipment and services for environmental pollution control, removal of pollutants, waste treatment, energy conservation, clean production, as well as the collection, secured treatment, recycling and recovery of waste resources. It also covers services related to the protection of resources and the natural ecology.
Equipment produced in China for environmental protection is mainly for the prevention and treatment of water and air pollution. Other China-made equipment includes devices for the disposal and recycling of solid waste; noise control; prevention of pollution from radioactive and electromagnetic wave; and environmental monitoring.
The environmental services offered in China are largely in the areas of the design and construction of environmental engineering projects as well as the operation of treatment facilities. Other service areas include the research and development of environmental technologies; environmental monitoring; and environmental consultancy services.
China also stresses the integrated utilisation of waste resources as well as the recovery, utilisation and renewal of resources. Industry players concerned focus on key businesses such as the integrated utilisation of solid waste. Integrated utilisation of waste resources mainly covers the integrated development and utilisation of intergrown and associated ores in the mining process; solid waste, wastewater, waste gases, residual heat and residual pressure generated in the production processes; as well as the recovery, utilisation and renewal of various kinds of waste resources generated in the course of production and consumption by different sectors of society.
Some industry players provide natural ecology protection services. These include measures adopted to protect the natural ecological environment from damage or to restore the impaired ecological environment. Special efforts are put into the protection of natural resources (e.g. forests), vegetation, conservation works to address the water and soil erosion issue, prevention of desertification, cultivation of grassland and promotion of eco-agriculture.
Figures released by the Ministry of Environmental Protection of China show that in 2014, the total nationwide emissions of pollutants, namely COD (chemical oxygen demand), ammonia nitrogen, sulphur dioxide and nitrogen oxides decreased by 2.47%, 2.90%, 3.40% and 6.71% respectively. However, the extensive economic development in the past has resulted in serious environmental pollution and the concomitant economic cost and social problems have aroused great concerns from both the government and the public. The demand for cost-effective solutions is therefore very keen on the mainland, forming a huge market for environmental protection service providers.
The demand for pollution control and treatment services is great in China. In 2014, the country’s investment in pollution control and treatment reached Rmb957.6 billion, which was 6% more than that of 2013 and corresponded to 1.50% of the annual GDP. Among these, investment in the construction of urban environmental infrastructure accounted for Rmb546.4 billion, which represented a 4.6% increase, whereas environmental investments such as the environmental acceptance of construction projects was increased by 5% to Rmb311.4 billion.
The new Environmental Protection Law, which came into effect on 1 January 2015, aims to tackle environmental pollution issues, including authorising environmental protection departments to seize, impound or close down facilities which caused serious environmental pollution and to order units emitting excessive pollutants to limit or cease production for rectification, as well as imposing heavier penalties and punishment on non-compliance.
During the 13th Five-Year Plan period, China will step up the implementation of policies to save energy, reduce emissions and protect the environment. For example, the 13th Five-Year Plan pinpointed the need to strengthen environmental protection and pollution control to ensure sustainable social and economic development. Steps will be taken to implement pollution control action plans, strictly enforce various environmental indexes, and promote pollutant discharge standards and reduction of total emissions by over 10%, including the orderly relocation, transformation or closure of heavily polluting enterprises in the built-up areas of cities, and the implementation of clean production transformation in key industries. Regulatory requirements for industrial pollution sources to meet emissions standards will be fully implemented; polluting enterprises that fail to meet pollutant discharge standards will be transformed; projects that cause serious pollution will be banned; urban domestic sewage and refuse treatment will be fully implemented; and enforcement of relevant laws will be strengthened.
The recovery and treatment of waste electronic products is also one of the businesses under development. The Regulations for the Administration of the Recovery and Disposal of Waste Electrical and Electronic Products (China WEEE) came into force from 1 January 2011. Five types of waste/used electronic products including televisions, refrigerators, washing machines, air conditioners and computers are included in the First Product Catalogue of China WEEE. Subsequently the 2014 edition of the WEEE Catalogue increased the number of types of waste electronic products to 14 by adding such products as printers, mobile phones and telephones. This new catalogue, in force since 1 March 2016, aims to bolster the recovery and administration of waste electronic products.
II. Market competition
As of today, a number of leading enterprises are already well-positioned in the environmental market of China. They include Tsinghua Unisplendour Environmental Engineering Centre, Zhonghang Yinyan and Guangzhou Yueshou Environmental Holdings. These key enterprises provide a range of credible technologies and products in the areas of wastewater, air pollution and solid waste treatment.
Quoting a survey report, China Statistical Yearbook on Environment 2015 indicated that 23,800 units were engaged in environmental protection and related industries in the country, with total revenue amounting to about Rmb3.07 trillion, of which Rmb370 billion was attributed to the production of environmental protection goods and provision of environmental services.
Meanwhile, multinational companies have been actively pursuing the China market through exports of their products, technology transfer or the establishment of joint ventures with local entities. Majority of the processing equipment used in China is imported from overseas. A case in point is Stuttgart University of Germany which joined hands with Wuhan Iron and Steel Corp and China Ecotek Corporation of Taiwan to set up Wuhan Huade Environmental Engineering & Technologies Co Ltd in 2003. It aims to provide environmental solutions in wastewater, air, solid waste treatment, energy from waste and advanced biological technologies. At the same time, the French Veolia Environmental Services Group has also established an office in China to offer special waste, wastewater treatment and other environmental services as well as the management of water resources.
- The China Environmental Labelling Programme is a voluntary product certification labelling scheme administered by the Ministry of Environmental Protection. Products carrying this label comply with specific environmental requirements on their design, production, usage, handling and disposal, and have such environmental advantages as low toxicity, low hazard and resource conservation over similar products. With green consumerism on the rise, certified products are increasingly in demand, urging more manufacturers to apply for environmental labels for their products which have passed relevant tests.
Currently, the environmental market in China is still in its development stage. Related exhibitions and expositions serve as business platforms for industry players to learn from one another, share experiences and explore business opportunities. Following are some of the upcoming exhibitions to be held in major mainland cities.
IV. Import and trade regulations
Since the implementation of Supplement II to the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) in January 2006, all products of Hong Kong origin, including those related to environmental protection can be imported into the mainland at zero tariffs. On the other hand, Hong Kong service providers can set up wholly-owned enterprises on the mainland under CEPA to provide architectural design and engineering services etc, including those in relation to environmental system engineering services. When Hong Kong service providers set up construction engineering design enterprises in China, their track record in Hong Kong and on the mainland can be used by the authorities as the basis for assessing their application for enterprise qualification on the mainland.
Also, under Supplement IV to CEPA, starting from 1 January 2008, Hong Kong service providers may set up wholly-owned enterprises on the mainland to provide the following environmental services (not including environment quality monitoring and pollution source inspection):
A. Sewage discharge service (CPC 9401)
B. Solid waste treatment service (CPC 9402)
C. Waste gas cleaning service (CPC 9404)
D. Noise abatement service (CPC 9405)
E. Nature and landscape protection service (CPC 9406)
F. Other environmental protection service (CPC 9409)
G. Sanitation and similar services (CPC 9403)
Pursuant to Supplement V to CEPA, the mainland agreed that with effect from 1 January 2009, Guangdong province is permitted to approve the qualification of the Hong Kong service suppliers for setting up enterprises to operate environmental pollution control facilities in Guangdong. Also, pursuant to Supplement IX to CEPA, from 1 January 2013 Guangdong can approve Hong Kong service suppliers for undertaking entrusted environmental monitoring activities in the province. These have greatly simplified the formalities involved in the application by Hong Kong service companies to mainland authorities for permission to provide environmental services in Guangdong.
Pursuant to Supplement X to CEPA, the mainland agreed that with effect from 1 January 2014, the substantive business engaged by Hong Kong service suppliers in the operation of environmental pollution control facilities in both Hong Kong and the mainland can be taken into account in assessing their applications for the qualification in the operation of environmental pollution control facilities in the mainland.
Pursuant to the Agreement between the Mainland and Hong Kong on Achieving Basic liberalisation of Trade in Services in Guangdong, with effect from 1 March 2015, Hong Kong service providers providing the aforementioned environmental protection services (A to G) in Guangdong by means of commercial presence are entitled to national treatment.
Pursuant to the Agreement on Trade in Services under CEPA signed on 27 November 2015, from 1 June 2016, Hong Kong service providers can enjoy national treatment when providing environmental protection services listed in items A to G above on the mainland in the form of commercial presence.
China adopts a system to license qualified operators of pollution treatment facilities. Pursuant to the Measures for the License Administration of Qualification for Operation of Environmental Pollution Control Facilities implemented in December 2004, entities engaged in the management of pollution control facilities should apply for an operation permit according to the rules established in the above-mentioned Measures, and upon receipt of the permit, operate the facility accordingly. Entities not awarded the permit are prohibited from operating such facilities.
China has implemented the Measures for the Administration of Pollution Control of Electronic Information Products (commonly called China RoHS) since 1 March 2007 and the Measures for the Administration of the Prevention and Control of Environmental Pollution by Electronic Wastes since February 2008 to control and reduce the possible environmental pollution brought about by electronic products. Moreover, the China WEEE came into force on 1 January 2011.
The Ministry of Environmental Protection has established various national environmental standards and related technical requirements, and amended existing ones in response to changes in actual situations. These industrial standards are directly related to the environmental industry and several of its related businesses, including:
- The Environmental Protection Standard for Water
- The Environmental Protection Standard for Atmosphere
- The Environmental Noise and Vibration Standard
- The Environmental Protection Standard for Soil
- The Solid Waste and Chemical Pollution Control Standard
- The Environmental Protection Standard for Nuclear Radiation and Electromagnetic Radiation
- The Environmental Protection Standard for Ecology
- The Clean Production Standard
- The Technical Regulations for Environmental Protection Works
- The Technical Requirements for Environmental Protection Products
Detailed information (in Chinese) on these standards and technical requirements is available from the relevant section in the website of the Ministry of Environmental Protection: http://kjs.mep.gov.cn/hjbhbz/