I have a friend in China, Gary Huang, who works with individuals looking to sell Chinese products on Amazon.com. Gary is actually an American living in China which I add only so I can tell his joke which is that he was manufactured in the U.S. and exported to China. OK. Now we have that out of the way.
To combat the serious air pollution in China, China’s EPA has moved to shut down tens of thousands of factories.
In the past the main problem was compliance. Because fines were small and loosely enforced, from a business perspective it was cheaper for a factory to continue operating and paying a small fine than to rehaul their operations and invest in new equipment and processes to cleanup.
In the past, these cleanup efforts were temporary due to large socioeconomic and/or political events such as the 2008 Beijing Olympics, 2010 Shanghai World Expo, and 2012 Hangzhou G-20 Economic Summit.
The difference now is that the government leaders have issued direct orders from the top down. We understand that the environmental cleanup is as important as the anti-graft campaigns in China. This is serious stuff folks.
Chinese inspectors are going into factories and telling the owners to cease their production immediately and indefinitely. If they don’t comply, the inspectors may order the power and gas turned off to the factory.
Gary was recently quoted in this NPR piece saying:
“So, basically, you’re seeing these inspectors go into factories for surprise inspections,” says Gary Huang, founder of 80/20 Sourcing, which connects foreign clients with China’s supply chain. “They’re instituting daily fines, and sometimes — in the real severe cases — criminal enforcement. People are getting put in jail.”
One of the difficulties factories face is that the regulations are unclear and somewhat vague with owners having difficulty understanding what it takes to be in compliance and reopen their factories.
On a macro level, China is moving away from the low end and super cheap products that takes a significant toll on its environment. This makes sense as pollution levels have skyrocketed in the past 20 years since China’s economy has boomed.
To put it bluntly, China is willing to let the “dirty” business go to other countries such as India, Bangladesh, and Southeast Asia. At the same time China is focusing on more valuable products whose manufacturing processes depend more on skilled labor and automation.
As Rush has said on numerous occasions, “the key to cleaning up the environment is unfettered free enterprise, our system of reward. The more economic growth we have, the more a prosperous people will demand a cleaner environment. The poor have other things to worry about.”
Guess he is right again!
Gary’s website is https://www.8020sourcing.com/ if you’re interested in China manufacturing.