Page 196 - 2017 White Paper
P. 196
7 White Paper on the Business Environment in China
In late 2012, chemical purveyor BASF not only [had] been growing by 29 percent annually in recent years”
completed a $1.4 billion petrochemical joint-venture with (Zhao 2012).
China Petroleum and Chemical Corporation (also known as
Sinopec) in Nanjing (Xinhua 2012a), but also “inaugurated” Increased scrutiny from both the public as well as
an unsubtly-named “innovation campus” in Shanghai— municipal authorities’provincial- and central-level masters
the company’s first such facility in Asia Pacific, according will likely have positive effects for the environment.
to China Daily (Chen 2012). Whether this scrutiny has any substantive effect on foreign
investment or the relative ease of completing large-scale
In addition to KPMG’s positive outlook and foreign chemical and energy projects will be seen in coming years.
parties’ increased participation in the sector, here has
also been an increase in ‘NIMBY’, or “Not In My Backyard” Notable Policy Activity
protests by ordinary Chinese citizens against industrial
projects; in several cases, the source of locals’ ire has been Fuel Tax Increases
a chemical facility planned to produce paraxylene (PX).
Perhaps China Daily said it best:“You pay as you fill up
In late 2012 protests against one such planned expansion the tank. In other words, the more you drive, the more it
by China [Sinopec] in Ningbo led to “a spokesman for the costs you – and the planet. This is a simple market rule but
Ningbo government [saying] in a statement […] that there it has taken nearly two decades for the government to pick
would be no further work done on the massive project […] a ‘proper time’ to implement it (Fu 2008).”
pending further ‘scientific debate’” (Rutwich and Stanway
2012). Sinopec is a publicly-traded subsidiary of the state- The announcement of the reform of fuel taxation, and
owned China Petroleum Corporation. the attendant price cuts, were a welcome change to the
environment upon their announcement in late December
Although the facility’s expansion would appear to have of 2008.
been halted—at least temporarily—by the local citizenry’s
discontent, Reuters reported that the $8.8 billion project While tax rates on gasoline, diesel, naphtha, solvents,
will likely proceed “once the public furor dies down”, and lubricants and jet kerosene on January 1, 2009 increased
that public concern might simply lead to the project being by nearly seven- to eight-times their former amounts, the
renamed in order to “downplay or disguise [it]” (Rutwich changes were accompanied by price cuts of between 14
and Stanway 2012). percent (for gasoline) and 32 percent (for jet kerosene).
Facilitated by artificially-high prices (relative to the market)
Similar demonstrations in Qidong (near Shanghai), preceding the announcement, the restructuring—aimed
Dalian, Xiamen in 2012, 2011 and 2007, respectively, also to allow fuel prices in China to fluctuate more in line with
delayed or deflected industrial projects due to concerns the going rate on the global market and to discourage
over hazardous chemicals (Rutwich and Stanway 2012). conspicuous consumption—aimed to result in better
efficiency in the long term, more organic control over
Seemingly in response to these surprisingly effective consumption in general, and a more equitable distribution
campaigns by local citizenry, Environmental Protection of tax burden among users (Xinhua 2008b).
Minister Zhou Shengxian went on the record as saying that,
“The government will increase transparency and public The historically tight control of fuel pricing was by
involvement in decisions regarding major projects with a many parties attributed to a preference for maintaining
potential environmental impact” and that “his ministry will social stability over wasteful consumption (Chen and Miles
make concerted efforts with other government agencies 2008).
to ensure that the requirement [for all large projects to
undergo stringent risk assessments] is fully honored” The timing alluded to by China Daily above is often
(Zhao 2012). attributed to the large discrepancy between extremely low
international crude oil prices at the end of 2008 and the
Minister Zhou’s attention is unsurprising; China Society artificially-inflated rate for fuel paid by Chinese consumers,
for Environmental Sciences’ Yang Zhaofei indicated earlier which was, according to Reuters, “roughly equivalent to
in 2012 that “the number of environmental ‘mass protests’ $83.50 crude” (Chen and Miles 2008).
196
In late 2012, chemical purveyor BASF not only [had] been growing by 29 percent annually in recent years”
completed a $1.4 billion petrochemical joint-venture with (Zhao 2012).
China Petroleum and Chemical Corporation (also known as
Sinopec) in Nanjing (Xinhua 2012a), but also “inaugurated” Increased scrutiny from both the public as well as
an unsubtly-named “innovation campus” in Shanghai— municipal authorities’provincial- and central-level masters
the company’s first such facility in Asia Pacific, according will likely have positive effects for the environment.
to China Daily (Chen 2012). Whether this scrutiny has any substantive effect on foreign
investment or the relative ease of completing large-scale
In addition to KPMG’s positive outlook and foreign chemical and energy projects will be seen in coming years.
parties’ increased participation in the sector, here has
also been an increase in ‘NIMBY’, or “Not In My Backyard” Notable Policy Activity
protests by ordinary Chinese citizens against industrial
projects; in several cases, the source of locals’ ire has been Fuel Tax Increases
a chemical facility planned to produce paraxylene (PX).
Perhaps China Daily said it best:“You pay as you fill up
In late 2012 protests against one such planned expansion the tank. In other words, the more you drive, the more it
by China [Sinopec] in Ningbo led to “a spokesman for the costs you – and the planet. This is a simple market rule but
Ningbo government [saying] in a statement […] that there it has taken nearly two decades for the government to pick
would be no further work done on the massive project […] a ‘proper time’ to implement it (Fu 2008).”
pending further ‘scientific debate’” (Rutwich and Stanway
2012). Sinopec is a publicly-traded subsidiary of the state- The announcement of the reform of fuel taxation, and
owned China Petroleum Corporation. the attendant price cuts, were a welcome change to the
environment upon their announcement in late December
Although the facility’s expansion would appear to have of 2008.
been halted—at least temporarily—by the local citizenry’s
discontent, Reuters reported that the $8.8 billion project While tax rates on gasoline, diesel, naphtha, solvents,
will likely proceed “once the public furor dies down”, and lubricants and jet kerosene on January 1, 2009 increased
that public concern might simply lead to the project being by nearly seven- to eight-times their former amounts, the
renamed in order to “downplay or disguise [it]” (Rutwich changes were accompanied by price cuts of between 14
and Stanway 2012). percent (for gasoline) and 32 percent (for jet kerosene).
Facilitated by artificially-high prices (relative to the market)
Similar demonstrations in Qidong (near Shanghai), preceding the announcement, the restructuring—aimed
Dalian, Xiamen in 2012, 2011 and 2007, respectively, also to allow fuel prices in China to fluctuate more in line with
delayed or deflected industrial projects due to concerns the going rate on the global market and to discourage
over hazardous chemicals (Rutwich and Stanway 2012). conspicuous consumption—aimed to result in better
efficiency in the long term, more organic control over
Seemingly in response to these surprisingly effective consumption in general, and a more equitable distribution
campaigns by local citizenry, Environmental Protection of tax burden among users (Xinhua 2008b).
Minister Zhou Shengxian went on the record as saying that,
“The government will increase transparency and public The historically tight control of fuel pricing was by
involvement in decisions regarding major projects with a many parties attributed to a preference for maintaining
potential environmental impact” and that “his ministry will social stability over wasteful consumption (Chen and Miles
make concerted efforts with other government agencies 2008).
to ensure that the requirement [for all large projects to
undergo stringent risk assessments] is fully honored” The timing alluded to by China Daily above is often
(Zhao 2012). attributed to the large discrepancy between extremely low
international crude oil prices at the end of 2008 and the
Minister Zhou’s attention is unsurprising; China Society artificially-inflated rate for fuel paid by Chinese consumers,
for Environmental Sciences’ Yang Zhaofei indicated earlier which was, according to Reuters, “roughly equivalent to
in 2012 that “the number of environmental ‘mass protests’ $83.50 crude” (Chen and Miles 2008).
196
