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China's war on smog will be won or lost in polluted Hebei

Source: Reuters - Sun, 30 Mar 2014 21:00 GMT
Author: Reuters
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Weeds are pictured near an abandoned steel mill of in Qianying township, Hebei province, Feb. 18, 2014. There are dozens of "zombie" mills that can no longer afford to operate in and around Tangshan, an industrial city of 7 million people in China's northern Hebei province. China has told Hebei to slash steel capacity, stirred by growing public resentment about pollution. REUTERS/Petar Kujundzic
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By David Stanway

BEIJING, March 31 (Reuters) - China's war on pollution is only a few weeks old, but the battle lines are already being drawn between Beijing and Hebei, the province most synonymous with dirty air.

A succession of Hebei officials used the annual session of parliament in Beijing this month to urge the central government to boost subsidies to help with job losses and other costs from mandated cuts in industrial production across the country. One local official said Hebei was taking on too much of the burden.

The pleas came after Premier Li Keqiang, in his opening address to parliament on March 5, declared war on pollution in an attempt to head off growing anger over the quality of China's air, water and soil.

Hebei, which surrounds Beijing in the country's north, was home to seven of China's 10 most polluted cities last year. Researchers blame its steel, coal and cement plants for some of the hazardous smog that increasingly envelops the capital.

It is seen as a test of China's determination to build a cleaner economy after a decades-long obsession with growth.

Gao Hongzhi, the Communist Party secretary of Handan, a key steel producing city, said Hebei was contributing 75 percent of the national reduction in steel capacity when it accounted for only a quarter of total output.

Hebei was also contributing 50 percent of coal consumption cuts and had been set emission reduction targets that were "much higher" than national levels, Gao told a meeting of parliamentary delegates in the days after Li spoke.

Such cuts in capacity in Handan alone would put 43,000 people out of work and cost 15 billion yuan ($2.41 billion) in "asset losses", Gao said without elaborating.

"Once our tasks are completed, it won't just be good for Hebei or the region - it will have a big impact and will make a huge contribution to the entire country," Gao said at the meeting, which was attended by Reuters.

"We are asking for the state to provide policy support and funding to help with layoffs while we close outdated capacity and ease overproduction."

Hebei has pledged to cut steel capacity by 60 million tonnes, more than a fifth of its total, from 2013 to the end of 2017. Coal consumption would be slashed by 40 million tonnes, around 15 percent of the total. It has also promised to cut major pollutants by around 25 percent.

Wang Yifang, former chairman of China's biggest steelmaker, Hebei Iron and Steel, called for a stronger "subsidy mechanism" to cover the cost of shutdowns, according to documents made available by parliament.

Wang Zengli, chairman of the Hebei branch of the state-backed All China Federation of Trade Unions, urged the government to provide funds for high-tech sectors.

PAINFUL PROCESS

Hebei's Communist Party chief, Zhou Benshun, suggested the province would get help.

"The structural adjustments are certainly going to be painful, but we can work to ease that pain as quickly as possible," he said at the meeting of parliamentary delegates.

Beijing has already been paying compensation for several years to firms across China that demolish outdated steel facilities to meet new technical standards. The cuts to capacity are on top of that.

Local governments have already begun to shut old plants under the new targets, most recently the demolition of 6.71 million tonnes of iron smelting capacity in late February across Hebei.

Handan had closed eight steel smelters since last year, Gao said.

"This has brought about a series of problems that will affect social stability," he said.

While local officials said Hebei was making a sacrifice, environmentalists say it has been given a free ride for too long, routinely allowing its industries to beat rivals by ignoring environmental regulations and industrial standards imposed by Beijing.

Critics also say Beijing has long turned a blind eye to Hebei's excesses to avoid the risk of unemployed steel workers spilling over into the already strained capital.

With at least 16 steel firms stopping production, according to remarks by the Hebei governor earlier this month, those employment pressures have arrived.

($1 = 6.2122 Chinese Yuan) (Editing by Dean Yates)

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