China Update

China Update

11th August 2006

China’s sulphur dioxide (SO2) emissions increased by an alarming 27% in 2005, as against the previous year, according to the regime’s State Environmental Protection Administration (SEPA). Each tonne of S02 is estimated to cause US$2,500 “economic damage” – and half the total attrition is the result of burning coal.

The government now plans to reduce S02 emissions by some 10% over the next four years, substituting nuclear power and strengthening de-suphurisation technologies. It’s also lumped carbon trading and purchasing programmes into this purportedly “cleaner” agenda.

Steel production rose nearly 20% in the first six months of this year and the regime is getting worried about oversupply and “excess fixed-asset investment.” It’s therefore urging small and outdated steelmakers to consolidate into larger enterprises, while also “tightening” foreign acquisitions in its domestic iron and steel sector (Mittal-Arcelor is currently the only foreign company with a major stake in China’s ferrous industry.) Local governments are being told to cancel expansions and new construction, not only of steel but also electrolytic aluminium, ferroalloy and coke plants. [see Interfax China updates, July 29 – August 4 2006].

However, as we have pointed out several times over the past few months, these restrictions at home run in parallel with further incentives encouraging Chinese firms to make acquisitions overseas – specifically in the aluminium sector. Nor, for the time being at least, are future fortunes to be amassed by multinational mining companies – specifically BHPBilliton and Rio Tinto – under threat.

Workers under the hammer

The program to privatize state-owned enterprises has led to unemployment, or greatly reduced living standards, for tens of millions of urban employees, according to China Labour Bulletin (CLB). Around 150 million workers have shifted from the countryside to urban areas, where their working and living conditions are as bad as before - if not worse.

To remedy this (and no doubt also pre-empt “unrest”) the central authority has drafted a new Labour Contract law, granting workers collective labour contracts.

But, says CLB, this will do little to address the roots of the crisis, since it precludes the essential rights of collective organising, bargaining, and to strike.