Achieving a Balance between Environmental Protection and Economic Benefits during Crisis   
-- for enterprises in China's petrochemical industry    

By Wang Zhifang, Foreign Economic Cooperation Office, the Ministry of Environmental Protection of China (MEP)  

I Conflict between Chemical Industry Development and Environmental Protection   

A. Impact of Chemical Industry Development on Environment and Resources  

Development of the chemical industry in China is characterized by increased environmental pollution and energy consumption. According to a blue paper of the 2009 Corporate Citizenship Report, industrial enterprises surpass all other causes of environmental destruction combined, accounting for 70%. Taking coal production and consumption for example, in 2000, China produced 1.299 billion tons of raw coal and consumed 1.32 billion tons. In 2008, China produced 2.75 billion tons of raw coal while consumed 2.70 billion tons. The sharp increase of coal production and consumption was contrary to the goals of energy conservation and pollutant reduction.
   The Chinese government has increased investment in controlling industrial pollution in recent years, but pollutants discharge continue to increase due to the rapid development of the heavy chemical industry. According to the National Report on Environmental Statistics issued by MEP, China's investment in pollution controls in 2006 was RMB256.78 billion - 1.23% of the GDP - including RMB48.57 billion for industrial pollution controls. In 2007, investment on pollution control totaled RMB338.76 billion, with RMB55.24 billion going to industrial pollution controls - a year-on-year increase of 14.2%. Discharge of sewage hit 24.66 billion tons in 2007, increasing 2.1% over the previous year. In addition, the rate of multipurpose utilization was 62.1% in 2007, compared with 60.2% in 2006.
   Meanwhile, wasting of resources is made more serious by blind and redundant investment in the chemical industry. According to statistics released by the Ministry of Environmental Protection, 1 400 well-established sewage treatment plants in China do not normally function, which wasted resources seriously and idled the environmental protection facilities that are insufficient still.

B. Impact of Environmental Protection on Chemical Industry Development   

The economic crisis made the chemical industry gloomy, and many plants suspended production or even shut down, which may benefit some environmental protection indexes in the short run. However, subject to the objectives of economic growth, measures for economic revival will be taken and enterprises will soon return to regular production, so their impact on the environment will be expected to continue.
   In fact, the government continues to attach great importance to conserving energy and reducing pollution in spite of the economic crisis. The official position is that energy conservation and pollutant reduction should be incorporated in programs designed to expand domestic demand and the economic crisis should be viewed as an important opportunity for promoting environmental protection. To sustainably promote environmental protection and maintain and enlarge the current achievements, the government plans to invest RMB4 000 billion for economic revival, of which RMB210 billion will be used for energy conservation, pollutant reduction and environmental protection.
   The resolve and efforts of the Ministry of Environmental Protection can be seen from the notice of suspending item approval. The Ministry of Environmental Protection gave notice on June 11th, 2009 that environmental impact assessment of the items of hydroelectric development of the Jinsha River by China Huaneng Group and China Huadian Corporation was suspended (the items of new resource development and pollution control are excluded).
   Economic revival plays an important role in the industry revival program, but great importance should also be attached to environmental protection. Enterprises and industries should keep balance in pursuing economic revival and environmental protection, or they will fail in the overall adjustment of the industry or be eliminated in the revived economy.


II Ways for Handling the Relationship between Chemical Industry Development and Environmental Protection during Economic Crisis    

A. Resorting to Favorable Macro Environment     

To expand domestic demand, the Chinese government has promoted a large number of policies in a short time. The policies, benefiting market recovery and rebound, are as follows:

1. Tax and Monetary Policies   
The national government is carrying out a structural tax cut and tax reform centered on reforming the value added tax (VAT). According to statistics, this can reduce the tax burden of enterprises and citizens by RMB600 billion per year. Moreover, since the fourth quarter of last year, the People's Bank of China has reduced the lending and deposit rates five times, and the one-year deposit rate has reduced to 5.31%. New loan in 2009 will total more than RMB5 000 billion, which will be used to increase the loans for state-supported industries.

2. Programs for Stimulus of Ten Industries    
The national government's "Program for Stimulus of Ten Industries" and the chemical industry's proposed "Adjustment and Stimulus Program for the Petrochemical Industry" were officially released (CCR 2009 No.7). The basic chemical industries related to refining, ethylene, synthetic resins, fertilizers, pesticides and high-end petrochemicals are covered. The program aims first to help develop such enterprises with technical advantages and a certain scale of production to ensure their steady operation. In addition, this should ensure that the industrial added value in three years would increase by 15%.
   To achieve the goals, the program specifies preferential loans and taxes provided by the government, encouragement of technical reform and overseas resource development, promotion of industrial restructuring and optimization of export market.
   The adjustment and stimulus programs for the light industry, the textile industry, the automobile industry and the electronic and information industry together with improved logistics will help develop the chemical industry. (CCR 2009 No.29, No.31)

3. Export Tax Rebate Policy   
In order to make it possible for export, the rates of export tax rebates were increased twice in 2008, including those of many chemicals. The rate of export tax rebates for chemicals was generally increased by 4 or 8 percentage point. Therefore, implementation of the newly-established export tax-rebate policy will guide the development of chemical industry.
   The policies mentioned above not only economically provide the stimulus modes, but also adjust finances, marketing and technical issues for the long-term development of chemical enterprises.

B. Suggestions on Handling the Relationship between Environmental Protection and Chemical Industry Development    

Contradictions between chemical industry development and environmental protection must be handled as long as the government wants the economy to grow. Actually, the economic crisis, which can help balance environmental protection and economic development, has brought opportunities for the chemical industry of China to make structural adjustments. Environmental protection can hamper economic development, but the government is supporting the recovery and development of chemical industry in every way possible b