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Although Jamie Dimon, chairman and chief executive officer of J.P. Morgan Chase claimed that the dispute over trade and escalating tariffs between the United States and China is more aptly described as a "trade skirmish" rather than a trade war, there haven’t been obvious signs that the trade dispute will stop anytime soon. The U.S. government announced in September that it will increase tariffs by 10% on $200 billion worth of Chinese imported goods and will further increase this to 25% by the end of the year.
Recently, Chinese Ministry of Ecology and Environment (MEE) jointly issued a notice on the work plan of air pollution control in the autumn and winter between 2018 and 2019 in Beijing-Tianjin-Hebei area (关于印发《京津冀及周边地区2018-2019年秋冬季大气污染综合治理攻坚行动方案》的通知), with a number of other State Council branches like the National Development and Reform Commission (NDRC) and Ministry of Industry and Information Technology (MIIT), and some local provincial governments. According to the work plan, the Chinese government will ease up on the pollution control campaign and decrease pressure on local governments and industries in an effort to offset the negative impact on economic growth caused by the trade dispute.
The work plan also detailed the new target of air quality improvement for this autumn and winter from Oct 1st, 2018 to Mar 31st, 2019:
The average PM2.5 concentration goals set for the Beijing-Tianjin-Hebei area will only increase by 3%;
Goals related to the reduction in the number of days of heavy pollution will also only increase by 3%.
Not only is this target much lower than 15%, the figure in last year’s work plan, it is also less than 5%, the target raised in the draft of this year’s work plan which was published in early August.
Along with the continuously lowered target on PM 2.5 concentration and number of days of heavy pollution, China will also soften its stance on production limitation requirements. In last year’s work plan, the central government adopted a “one size fits all” policy in which arbitrary and mandatory production reduction rates were specified for different industries. Specific production cut rates were set for a number of industries, such as 30% for electrolytic aluminum industry, 50% for carbon factories, etc. The local economy was seriously negatively impacted in some regions. In the draft of this year’s work plan, the iron and steel industry was also required to cut production capacity by 50%. However, the final version of this year’s work plan deleted the production cut rate for the iron and steel industry and didn’t specify any specific production rate reduction figures for other industries.The local governments were given the power to tailor their respective reductions in production based on their individual economic and environmental situation. Factories with good emission conditions are allowed to continue their production.
Looking at the changes and differences in the new work plan when compared to its draft version and compared to the approach adopted last year, it is obvious that China’s government is trying to adopt a more flexible and softer approach on air pollution control and environmental quality improvement. Local governments and industries are allowed to adjust production capacity based on their individual economic and environmental situation, instead of following the stipulations and production reduction metrics arbitrarily articulated within the administrative measures. Despite this transient change in strategy, China’s government has reiterated that its focus on the improvement of environmental quality is still a top priority. Industries should proceed with the phase out of outdated production techniques and be prepared to meet future emission control metrics requirements when the trade dispute is resolved.
