China New Environmental Protection Laws Impact on Business
The Law is going to strike industries that contribute the most to the air and water pollutants, solid waste, and noise in China, such as coal-fired power, steel, cement, aluminum, construction, mining, chemicals, petroleum, pharmaceuticals, paper, and textiles.
In particular, the following industries will face mounting pressure.
Energy and chemicals: Once major producers of air and water pollution, large state-owned enterprises in the chemicals and energy sector could pay 40%-300% more in the new tax regime than they were paying under the discharge fee system, according to Kenneth Leung, EY Greater China’s indirect tax leader.
Textile: Wastewater discharge from dying and printing accounts for 6% of the total industrial wastewater and is often dumped directly into rivers and lakes without decontaminating the toxic byproducts. Coupled with the shrinkage in textile and apparel exports, the Law could squeeze companies which are either unprepared for tougher taxation or lagging behind in adapting their operational procedures out of the market.
Mining and mineral processing: The introduction of environmental taxes could drive up prices in specialty metals like vanadium, tungsten, antimony, etc., putting a large number of Chinese mining and mineral businesses on the brink of bankruptcy. Though China’s fast-growing economy continues guzzling a swell of minerals, most of them will be sourced through more environment-friendly processes or replaced by greener alternatives.
Light industry: Manufacturers of paper, plastic, furniture, and other daily use products will experience an upsurge in cost, for discharging pollutants and lacking high-quality recycled materials due to China’s waste import restrictions and a stricter resource law that urge the responsible use of natural resources.
Within these industries, small to medium-sized companies are also clearly identified as targets for the tax.