A Possible Olympic Legacy: A Greener China

Green FlagLong after the last athlete leaves Beijing, the legacy of the 2008 Olympics will be seen for many years. Terminal 3, the airport train, new subways, roads and stadium venues, a refurbished Forbidden City and countless landscaping projects are all part of the $40 billion makeover that Beijing is receiving in preparation for August. Most, if not all, of these projects would have been done anyway as part of Beijing’s ongoing development. The effect of the Olympics has been to pull them forward in time. When my oldest daughter told me several years ago that she wanted to have a wedding reception at our farm in New Jersey, her upcoming marriage had the same effect on me. All of those projects on my “to do” list immediately became high priorities that now had a hard deadline.

Apart from the physical infrastructure, though, the most lasting legacy of the 2008 Olympics may be a China which has at least begun to walk down the long road to becoming “greener.” I don’t want to overstate the case, because anyone who has traveled here can easily see that cleaning up the environment is one of the country’s biggest challenges. However, it is increasingly clear that environmental issues are coming front and center with business leaders and government officials alike. Whereas the word “environment” had never been part of any discussions I had during my earlier days in China, it comes up in almost every one today.

Evidence of an emphasis on going green is growing. Several major Chinese companies were forced to delay initial public offerings last year to comply with environmental rules. Ten domestic IPO’s—including one by China Coal Energy Co., China’s second largest coal producer by output—were held back in the second half of 2007, after the government began vetting such deals for environmental factors. Environmental issues are now taken into consideration in the annual evaluation of local government officials. Banks are restricting loans to companies that aren’t dealing properly with the environment.

It’s also no accident that Chang’an Auto Corp, China’s fourth largest automaker, has developed a hybrid that will be mass-marketed this year. Or that Chery, China’s largest local car maker, has had an R&D team of 100 engineers working on hybrid projects for the past seven years. Chery is now testing a hybrid model in the Wuhan taxi market and expects to hit the market in the second half of this year. Even the newcomers are getting into the act.  BYD, a cellphone battery company that began developing an auto business in 2005, displayed a plug-in hybrid model at the Detroit Auto Show that it said will be available later in 2008.

I believe that the mindset in China regarding the environment began to change when it was announced seven years ago that Beijing would host the 2008 Olympics. (That might explain why companies like Chery began working on hybrid projects in that timeframe.) At once, the prospect of millions of new visitors coming to China for the first time, as well as daily TV broadcasts that are part and parcel of such a large, global event, made it painfully obvious that environmental conditions in Beijing and China would be brought into sharp focus in 2008. I imagine that the worst nightmare of every Beijing official is to have NBC open its broadcast every night with a picture of a grey, smoggy Beijing, followed by a five-minute discussion about the sad state of China’s air quality.

To prevent that from happening, a number of temporary measures will be taken. Factories in and around Beijing will be closed for business ahead of the games; construction activity will stop well before the start of the Olympics, and at least one-half of the vehicles will be taken off Beijing’s streets in August. We are hearing that transportation may begin to be affected as early as this June, and I wouldn’t be surprised if curbs on the use of autos are even more severe than the odd/even system that has been announced. We have two factories near the Fourth Ring Road (neither of which creates pollution) and are being told that transportation in and out of those factories will be nearly impossible during the period of the games.

In addition to these temporary measures, China is taking even more drastic steps that will have a longer term impact on a large part of China. As reported in the Wall Street Journal:

Six provinces and municipalities—Hebei, Inner Mongolia, Shandong, Shanxi, Tianjin and Beijing—have already started shutting down polluting factories and curbing power-plant production in an ambitious attempt to cut down on air pollution. Collectively, these provinces represent an area larger than France, Germany and Italy combined, but pollutants from factories far from Beijing are believed to be partially responsible for the capital’s often smoggy air.

The worst polluting factories will not only be closed during the Games, but will be shut down for good. While these factories are already in violation of China’s environmental standards, it has been difficult to overcome the strong vested interests of local officials who have every incentive to keep them open. We know this from personal experience, because we happen to have a factory in the area discussed that, unfortunately, has been dealing with a particularly dirty neighbor. A nearby steel factory spews out clouds of orange smoke that make it nearly impossible for our workers to breathe when it is running. Repeated efforts to convince the local officials to force the factory to clean up its act have fallen on deaf ears.

If the pressure to clean up the air in Beijing for the Olympics provides the extra push needed to close or clean up factories like this in a large part of China, the impact will be positive and long term, and the Olympic legacy may be a greener China.

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