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China

Searching For Gold In China's Poison Land

Decades of unbridled industrialization has left much of China's soil badly contaminated. Some are set to make millions cleaning it up.

China already has air and water pollution prevention laws -- but so far nothing regarding soil pollution
China already has air and water pollution prevention laws -- but so far nothing regarding soil pollution
Yu Han

BEIJING - For two years, Zhang Yong has been waiting for a good opportunity to capitalize on China’s polluted soil.

Zhang is a partner at Qiming Venture Partners, and like many other investors, sees a bright future in the soil remediation industry – which purifies and revitalizes polluted soil. The demand for such services has been picking up lately, but Zhang has decided to adopt a wait-and-see approach.

“The nature of land in China is complicated,” Zhang says. “Different land-use rights and distribution mechanisms have a big impact on the interests of soil cleanup investors and beneficiaries.”

Zhang was initially drawn to BCEG Environmental Remediation Co., Ltd. two years ago, but another investor beat him to it. Since then, many soil cleanup companies have emerged, but none have stuck out. Zhang says that the current industry is eager to achieve quick growth and instant returns, but many enterprises don’t have the technology to back up their ambitions. Some just dig out contaminated soil and throw new soil in its place.

So far, this has been a workable model because real estate developers prefer dealing with the issue quickly and cheaply -- and there are not yet suitable government standards to regulate the industry.

Business opportunity

Up to now, it’s mainly been first-tier cities that are trying to tackle chemical factory and metallurgic plant pollution that’s accumulated over several decades.

In Beijing for example, about 200 factories were relocated outside the Fourth Ring Road from 2003 to 2008 in the run up to the Olympics, which left 9 million square meters of land that had been contaminated by various chemicals. These patches are often referred to as “brown land” or “poisoned land”. Before it can be rebuilt upon, the soil must be cleaned up.

The residential block of Songjiazhuang alongside subway line 10 had been occupied by Beijing Chemical Plant No. 3 for 50 years, until it was demolished in 2006. The following year, a new item appeared in the guidelines for whichever developer bid on the land. It said that the winning bidder must strictly carry out the soil pollution management plan that was approved by the municipal environmental protection bureau. The company that won the bidding went to inspect the site with a few specialists and began China’s first soil remediation project.

Ms. Song, 64, has witnessed the rise and fall of Beijing Chemical Plant No. 3. She remembers its once glorious production era, but for her, the most memorable thing was the pungent smell that filled the air. “At that time, who dealt with pollution?” she said. “Who even knew what pollution was?”

When Ms. Song’s family wanted to apply for the affordable housing built on the former factory’s land, she opposed it, saying the groundwater there must have problems. So she and her family moved to the Red Lion community just across the street. But the Red Lion community had actually been a paint factory since the 1980s, and before that, a pesticide factory for 30 years before that. Residents who’ve lived in the area since prior to the 1980s remember that a horrible chemical smell used to emit from the factory.

Before the construction of these two residential blocks, BCEG Environmental Remediation Co., Ltd. undertook the cleanup work on the land, becoming the first successful case of domestic soil treatment.

Predicament

Currently, there are issues regarding who is qualified to clean up the soil, what the standards are and who will be in charge of regulating the industry. Insiders are expecting these issues to be standardized after the launch of the China Soil Pollution Prevention Law.

Work teams have been going through six years of soil research in order to draft the law and last year they entered the legislation stage. China already has an Air Pollution Prevention Law and a Water Pollution Prevention Law, but so far nothing regarding soil pollution.

In 2010, the Ministry of Environmental Protection submitted a draft with soil remediation technical guidance for contaminated sites, but there’s still been nothing codified into law. An official from the technology standards division of the ministry told the Economic Observer that nothing so far has been confirmed and that standards won’t be released before the legislation passes.

The EO learned that both legal and technical branches of the Ministry of Environmental Protection hope to introduce standards as soon as possible, but it’s not a simple process. “How to formulate soil standards is related to a series of factors like the local environment and land usage factors,” the official said. “Some key issues need to be coordinated, and many ideas need to be repeatedly discussed.”

At the beginning of 2013, the State Council proposed making full use of market mechanisms to guide and encourage private funding in soil protection. The 12th Five-Year Plan also listed soil treatment as a strategic focus in environmental protection.

However, China currently has no soil pollution data available to the public. The 2012 Report on the State of Environment in China issued on May 28 by the Ministry of Environmental Protection mentioned that an investigation of the country’s soil pollution situation was completed in 2012, but no specific results have been announced. Companies and investors are waiting for more specific policies and documents.

Zhang Yong thinks the potential of the soil remediation market is huge, but at present he’s keeping a cautious attitude. “On one hand, it’s relatively difficult to treat soil,” he says. “There could be situations where the symptoms are treated but not the root cause. On the other hand, how to divide the returns between investors and beneficiaries still isn’t clear.”

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