Hundreds of Highly-Polluting Factories Relocated to

UNCLAS SECTION 01 OF 02 GUANGZHOU 000212

SIPDIS

SENSITIVE
SIPDIS


STATE FOR EAP/CM AND OES/PCI
EPA FOR OFFICE OF INTERNATIONAL AFFAIRS

E.O. 12958: N/A
TAGS: PHUM SENV ECON PGOV CH
SUBJECT: Hundreds of Highly-Polluting Factories Relocated to
Outskirts of Guangzhou

(U) This document is sensitive but unclassified. Please protect
accordingly.


1. (U) Summary: Guangzhou's municipal government will force more
than 400 hundred highly-polluting enterprises to move to designated
zones on the city's outskirts to improve environmental conditions
downtown. Many of the factories are scheduled to relocate to
Nansha, despite the area's delicate ecological system. While
concerns have arisen about simply 'relocating' pollution problems
from Guangzhou's city center and close periphery to a place ninety
minutes from Guangzhou, Nansha insists that relocated factories will
be held to higher environmental standards (through certifications
and approvals). What is unclear is whether government has the
capacity to follow through with this claim. End summary.

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Guangzhou Pushing Out Polluters
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2. (SBU) Guangzhou plans to force 427 highly-polluting enterprises
to move away from the city's center, according to Zeng Lei, Deputy
Director General of Guangzhou Nansha Economic and Trade Bureau. Most
will be required to move to industrial parks located in the city's
outskirts in an effort to improve environmental protection. These
include the Conghua Economic and Technology Development Zone, the
Huadu Textile and Rubber Industrial Parks, the Panyu Innovation
Technology Park, and the Nansha Heavy Machinery Equipment
Manufacturing Base.


3. (U) Several factories forced by the Guangzhou government to
relocate will soon call Nansha Economic Zone their new home. Located
in the southeast section of Guangzhou, about one and a half hours
away from city center, Nansha lies on the mouth of the Pearl River
Delta Region. With easy access to all of Guangdong's major cities,
Nansha prioritizes eight industrial sectors in its economic
development plan: shipbuilding; electronic information; iron and
steel; automobiles; petrochemicals; machinery and equipment;
high-tech; and port logistics.


4. (SBU) With many polluting enterprises scheduled to relocate to
the area, some have asked whether the government is simply moving
the pollution problem from one area to another. However, Nansha's
administration emphasizes that environmental protection will remain
a high priority, and that enterprises are required to be in
compliance with stringent environmental regulations. They argue
that in many cases Nansha's regulations are more stringent than
those other parts of Guangzhou municipality.

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Making Sure Pollution Isn't Relocated, Too
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5. (U) For enterprises relocating to Nansha, emphasis on adherence
to environmental regulations begins during step one of the
relocation process: government approval. Once Nansha's government
receives an inquiry from an individual enterprise, or receives the
Guangzhou government's list of enterprises required to relocate, the
local government requires several procedures prior to approval,
including the establishment of an Environmental Impact Assessment
(EIA),which addresses the nature of the proposed location's
environment, and the hazards that a factory may cause to the
ecological system as well as to the public. The EIA is conducted by
a certified third-party, who subsequently files the report with the
local Environmental Protection Bureau (EPB). In the case of
large-scale projects, additional approval regarding environmental
suitability may be required from the State Environmental Protection
Administration (SEPA). Finally, the EIA must be approved by the
Development and Reform Commission (DRC),a policy mandated from the
state-level.


6. (SBU) According to Zeng, Nansha does not approve all factories
that Guangzhou recommends for relocation, or individual requests by
companies, regardless of potential for economic development in the
area. Zeng cited the case of Haotian Chemical Company as a prime
example. Haotian, Guangzhou's largest chlorine alkali chemical
enterprise, recently appeared on Guangzhou's relocation list because
it is a heavy polluter. Following an EIA that revealed potential
chemical hazards Haotian might pose to nearby residents, the
relocation request was denied. (Note: Despite Zeng's claim, a
subsequent media report indicated that Guangzhou is still planning
to relocate the 50-year-old company to Nansha.)

GUANGZHOU 00000212 002 OF 002




7. (SBU) For those enterprises that are approved, Zeng told us they
must install and utilize 'state-of-the-art' equipment to adhere to
Nansha's current environment standards. According to one senior
official at the Nansha EPB, the local government currently relies on
factory-located air and water emissions monitors, installed at
discharge points, to evaluate factories' pollution levels. Data
collected from the monitors is recorded in an online EPB system.

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One Relocated Company Raises Its Standards
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8. (SBU) Guangzhou Paper Company, one of the city's oldest
enterprises and largest sources of factory pollution, has been
forced by the municipal government to relocate to Nansha. According
to Jiang Peng, Vice General Manager and Chief Engineer, the firm is
planning to make upgrades in order to meet Nansha's environmental
standards. It will install new production lines that reduce energy
consumption for every unit of output; upgrade end-treatment
technologies to include anaerobic and aerobic treatments to reduce
pollutant levels; and use 100 percent recycled raw materials. With
these and additional upgrades, the firm expects to discharge 50
percent less wastewater for each ton of output.

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Challenges for Nansha's Government...
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9. (SBU) Nansha will face many challenges in living up to its claim
that the influx of factories will not adversely affect the local
environment. One Guangdong official to whom we talked speculated the
Nansha government might place environmental protection second to
economic development. The official further pointed out that based on
a past EIA, Nansha has been identified as an ecologically-fragile
area, suggesting that it is a less than optimal site for factories
that have already been identified as heavy polluters. The official
said that in many cases local environmental authorities are more
accountable to local government priorities, including economic
development goals, regardless of national or provincial
environmental mandates.


10. (SBU) In addition, the city lacks resources to enforce
environmental regulations. Due to installation and operating costs,
the factory-located air and water emissions monitors described by
the Nansha EPB only cover key enterprises, such as power plants or
factories that discharge more than 100 tons of waste water daily.
The capacity of the EPB to monitor other enterprises is less
certain. The Guangdong official explained this is because national
and provincial level environmental bureaus provide very little
funding, if any, to local level EPBs, leaving them dependent on the
local government's budget. In addition, municipal governments award
promotions and raises to EPB officials.

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...and Enterprises
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11. (U) Many enterprises forced to relocate will find it difficult
to fund both relocation costs and costs of employing energy
efficient, less-polluting technologies. For Guangzhou Paper Company,
the new Nansha-based plant is expected to cost RMB 7.5 billion (more
than USD1 billion). For those company's identified as 'pillars' of
economic development, like Guangzhou Paper, the government will
allocate subsidies for relocation and will give preferential access
in obtaining land in industrial parks. Those enterprises not
included must scout a location on their own, as well as foot
relocation costs.

GOLDBERG