China Blue Sky Action tailors China industry development?

On 27 June 2018, The State Council has released a Notification on the Three-Year Plan on Successful Defense of Blue Sky (“国务院关于印发打赢蓝天保卫战三年行动计划的通知”, “Blue Sky Action Plan”), in which the State Council set the target of air condition’ improvement by 2020 (e.g. reduction of total emission of SO2 and NOx by 15%, reduction of heavy polluted days by 25%) as well as a dozen of implementing measures. The Blue Sky Action Plan will have a significant impact on manufacturing industries in the near future.

The Blue Sky Action Plan provides for the following highlights:

Expanded scope of “Key Regions”

The “Key Regions” defined in the Blue Sky Action Plan include:

• Beijing-Tianjin and adjacent regions: Beijing City, Tianjin City, major cities in Hebei Province (including Shijiazhuang City, Tangshan City, Handan City, Xingtai City, Baoding City, Cangzhou City, Langfang City, Hengshui City and Xiong’an New Area), designated cities in Shanxi Province (Taiyuan City, Yangquan City, Changzhi City and Jincheng City), designated cities in Shandong Province (Jinan City, Zibo City, Jining City, Dezhou City, Liaocheng City, Binzhou City and Heze City), designated cities in Henan Province (Zhengzhou city, Kaifeng City, Anyang City, Hebi City, Xinxiang City, Jiaozuo City and Puyang City), etc.;
• Yangtze River Delta region: Shanghai City, Jiangsu Province, Zhejiang Province and Anhui Province;
• Fen-Wei Plain region: designated cities/regions in Shanxi Province, Henan Province and Shaan’xi Province, i.e. Jinzhou City, Yuncheng City, Linfen City, Lvliang City, Luoyang City, Sanmenxia City, Xi’an City, Tongchuan City, Baoji City, Xianyang City, Weinan City, Yangling Demonstration Area, etc.;

Comparing to various air pollution control “key regions” previously defined by the Ministry of Environmental Protection (now the Ministry of Ecology and Environmental Protection, “MEP”), the expanded Key Regions now include more major cities in North China (e.g. Xi’an City, Baoji City, Luoyang City); Pearl River Delta region is no longer addressed as a Key Region, yet some measures in this Blue Sky Action Plan will still apply thereto.

Automotive industry

• Early implementation of China VI Emission Standard
  • In Key Regions, Pearl River Delta and Chengdu-Chongqing region, China VI Emission Standard for HDT (GB17691-2018) shall be implemented as of 1 July 2019, earlier than the standard time schedule under the China VI Emission Standard for HDT. The standard implementation time schedule as follows.
  • Correspondingly, GB19147-2016: Automobile Diesel Fuels and GB 17930-2016: Gasoline for Motor Vehicles shall be implemented nationwide as of 1 January 2019; non-compliant fuels shall not be supplied from then on.
    
    

• Phasing out old type trucks
  • At least 1 million diesel powered trucks (HDT and MDT) failing to comply with China III Emission Standard shall be phased out in Beijing-Tianjin and adjacent regions and Fen-Wei Plain region by the end of 2020.
• Promotion of new energy vehicles (“NEV”)
  • The annual production/sales volume of NEV shall reach 2 million in year 2020.
  • The ratio of use of NEV for public transportation, sanitation, postal, taxi, commuting traffic and light duty logistics within Key Regions shall reach 80% by the end of 2020.
  • Urban buses in Beijing, Tianjin, Shijiazhuang City, Taiyuan City, Jinan City, Zhengzhou City, Nanjing City, Hangzhou City, Hefei City, Xi’an City and Ningpo City shall be changed to NEV by the end of 2020.
• Local environmental type approval shall be cancelled, while supervision on vehicle emission by local environmental protection bureaus should be intensified.

Transportation Industry

• Within the Key Regions, road transportation of bulk materials for construction projects shall in general be prohibited.
• Rail transportation is strongly promoted. According to the Blue Sky Action Plan, by the end of 2020 rail freight volume shall increase by 30% nationwide 40% in Beijing-Tianjin and adjacent region, 10% in Yangtze River Delta region and 25% in Fen-Wei Plain region respectively.

Others

• Establishment of new chemical parks in Key Regions is prohibited.
• Establishment of new capacity of solvent based coating, printing and adhesive ink in Key Regions is prohibited.
• Capacity control over construction materials (e.g. steel, concrete, etc.) will continue and intensified.
• Control on total coal consumption in Key Regions will continue and be further strengthened.
• The ratio of non-fossil energy consumption in total energy consumption by 2020 shall reach 15%.

Outlook

The Blue Sky Action Plan brings about both challenges and opportunities for foreign investors. Growth points in industrial sectors such as NEV, railway and clean energy are surging. On the other hand, the pressure on polluted industries will become higher in near future.