The P.R.C. sets new fines and strategies to fight water pollutants
In an effort to reduce the water crisis, the Standing Committee of the People’s Republic of China issued the Water Pollution Prevention and Control Law, together with the Environmental Protection Tax Law, on January 1st, 2018. The law addresses the problem of polluters’ discharges into water to crack it down with new measures and a new strategy. Both Chinese manufacturing companies and WFOEs must adjust production discharges to meet the law’s requirements and standards, as well as to avoid being significantly fined.
The following short article gives an overview of the new law’s main aspects together with a useful, yet brief, case study.
Quick Data about Water Contamination in China
Water poisoning in China is a serious problem. The country is going through a water crisis since a long time, and it is now implementing instruments to increase safety measures and allow better living standards. In 2015, 85% of the water in major Chinese cities was undrinkable. Almost a third of rivers monitoring stations and more than 60% of sampled groundwater swells show water is seriously polluted.
According to a recent report, data for 2015 related to surface water contamination in major cities is alarming.
Water Pollution Prevention and Control Law
As reported by China’s Ministry of Water Resources, the law main changes are related to new fines and to the implementation of the “River Chief” system.
Fines
- Drinking water suppliers who do not meet standards will be fined up to CNY 200.000 and their operations will be suspended;
- One million Chinese yuan fine is set to those who build sewage outfalls in protected drinking water source areas.
The “River Chief” System
After its first implementation in Wuxi (Jiangsu Province) ten years ago, the system has been successfully expanded into a pilot reform across the country to control and fight water poisoning.
Under the River Chief system, officials at diverse government levels take the responsibility to monitor not only water pollution but also resources protection, waterline management, and ecological restoration. To reduce the risk of corruption among officials and company managers, the outcomes of the leading officials’ monitoring and reporting work will affect the valuation of their personal performance. The River Chief system may be an effective solution to fight China’s water crisis, even if it may take long time to collect its results.
Rural Areas
To decrease contamination’s levels in Chinese rural areas, where there is a lack of water treatment systems, the law stipulates that local governments must build sewage treatment and garbage disposal facilities.
Case Study
In most cases, consultation with experts is beneficial to understand differences that may occur from province to province. In the P.R.C. nothing should be given for granted.
Our Client, a WFOE working in the diary sector, specialized in ice-cream mix and novelty ice-cream, opted to buy the plant belonging to a Chinese company in Xiantao (Hubei Province). In order to operate the acquired factory, the WFOE had to build a water treatment facility. The transaction structuring was complicated, as the company had to buy a building, the land around it, and machinery.
Our Client could have acquired the Chinese enterprise without facing extra costs related to the construction of a water treatment unit. Nonetheless, as the new law was about to come into effect, the management team was forced to comply with the regulation.
This shows that businesses must consider China’s new laws seriously to avoid losing resources. Foreign investors should consider taking professional advice when planning an investment, as well as a relocation project, in the Chinese territory.
Contact us if you need guidance to navigate the Chinese business environment.
