CHINA: Slump Tilts Priorities of Industry in China

Less than a year ago, officials were pressing mines and factories
along this limestone belt of northern China to shut down or move away
to clear the air of dust and smog for the Beijing Olympics.

Now, amid the global economic downturn, priorities have shifted.

Cumbersome environmental reviews have been accelerated, state bank
loans are flowing freely again and workers are welding the grinding
mills of Sanhe Yongsheng Cement, one of the new cement plants under
construction not far from China's capital.

"It's a good thing that officials are working faster," said a
manager at the Sanhe site, who asked not to be identified because he
was not authorized to speak for the company. "The economy is looking
better now."

In the rush to invest $585 billion in stimulus spending and revive
flagging industrial production, China has at least temporarily
backpedaled on some environmental restraints imposed, though with
limited impact, during the country's long boom.

The Ministry of Environmental Protection, citing the urgency of
fighting the downturn, adopted a new "green passage" policy that speeds
approval of industrial projects. In one three-day stretch late last
year, it gave the green light to 93 new investment plans valued at $38
billion.

Provincial environmental agencies quickly followed suit, cutting the
allotted time limit to review environmental impact assessments from the
maximum 60 days to as few as five days in one province. Here in Hebei,
the parched dust-bowl province that surrounds Beijing, officials
announced approval of four new cement plants in a single day in January.

Environmentalists say they worry that the government has squandered
a chance to use the downturn to put China on a cleaner growth path, and
has instead laid the foundation for another toxic cycle of hypergrowth.

"This is the moment to decide whether we want to keep the old growth model or change it," said Ma Jun,
director of the Beijing-based Institute of Public and Environmental
Affairs. "But people worry that this new round of development might
generate more pollution for the future."

China's environmental movement has also been reeling from the
unexplained absence of its most outspoken Communist Party supporter, Pan Yue, the No. 2 official in the environment ministry.

For several years, Mr. Pan led an unusually public campaign to
blacklist polluters and impose more rigorous environmental inspections.
He galvanized the media in "environmental protection storms."

But Mr. Pan's populist cachet exceeded his political clout, putting
him at loggerheads with many chiefs of provinces, state companies and
ministries, including his current boss, according to people with ties
to Mr. Pan who declined to be identified while discussing internal
government affairs.

These people said they did not have direct evidence that Mr. Pan was
sidelined by rivals. But he was replaced last year as the public face
of the ministry. In the fall, as the economic downturn worsened, party
disciplinary inspectors detained two of his top aides and investigated
Mr. Pan, and his wife, they said.

They said Mr. Pan and his wife had been cleared of wrongdoing. He
has made more official appearances in the last month than in previous
months, the ministry Web site shows. But he no longer holds key
responsibilities for environmental reviews and cultural promotion, and
people informed about his situation said it was unclear whether he
would remain at the ministry.

In the short term, China's industrial slump has put the country on
course to meet environmental targets set when production was racing
ahead. By 2010, the government aims to increase China's energy
efficiency by 20 percent over 2005 levels and lower gauges of water and
air pollution by 10 percent. Data from the second half of 2008,
released in March, showed that the country was getting closer to
meeting those goals.

A push to build big, cutting-edge plants and raze filthy, smaller plants like coal-fired power stations, deserves some credit, observers said. But they attributed the cuts largely to tumbling demand.

"We expect the effect of the slowdown to be short-term," said Sze Pang Cheung, campaign director for Greenpeace in China. The push to stimulate the economy, many say, has undercut the environmental agenda.

To free up stimulus money for other uses, the central government
slashed the portion of the package earmarked for environmental
projects, like water sanitation, to almost $31 billion from some $51
billion.

Counting projects like high-voltage power grids and high-speed
railways, an additional one-third of the $585 billion stimulus package
could help increase energy efficiency, said Yang Fuqiang, director of global climate solutions with the World Wildlife Fund International.

But local governments and companies are expected to spend several
trillion dollars more on projects that pollute, Dr. Yang said. In terms
of cleaner infrastructure, "there's still going to be a gap," he said.

In the export centers of Guangdong Province, the party has begun
nudging energy-exhaustive industries like ceramics farther inland to
bring in greener, high-tech enterprises. But now, officials are feeling
pressure to soak up millions of jobless migrants. "The local government
is saying, 'You can stay for now,' " Dr. Yang said.

The government's drive to carry out greener standards remains
plagued by bureaucratic conflicts of interest and poor coordination.
The environment ministry, for example, is mired in a bureaucratic
tussle over raising vehicle emissions standards by next year.

Gas pumps in Beijing switched to cleaner fuel last year to meet the
standard, known as Euro IV, before the Summer Olympics. But China's
powerful state oil companies are pushing hard to postpone the
nationwide rollout scheduled for 2010 because it requires them to
invest billions of dollars in their refineries to produce clean diesel,
said Feng An, the executive director of the Innovation Center for Energy and Transportation, a Beijing-based nonprofit organization that advises the government.

Environmental officials defend their response to the economic
crisis. From November through February, even as they rushed through
nearly 200 big projects, they rejected or deferred 14 other projects
worth $15 billion, including paper and petrochemical plants, they said.

But the ministry has acknowledged local abuses of the "green
passage" policy and issued at least two directives since December aimed
at stemming further problems. Zhang Boju, a researcher at the Chinese
nongovernmental organization Friends of Nature, said the policy would only make it easier for local regulators to gloss over reports and ignore rules on public disclosure.

In a telling twist, the charges against Mr. Pan's aides involved
payments from companies seeking environmental approvals, said people
who were told about the investigation. The environment ministry
declined to provide information about the case.

Mr. Pan himself had ascribed his recent absence from work to
illness, and even checked into a hospital for a time, the people said.
But, they noted, party officials have been known to wind up in the
hospital when troubled by political problems.

• 107 Energy
• 204 Manufacturing