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The Impact of China’ Environmental Inspections on Supply Chain

More than 30,000 business have been penalized during a major campaign against environmental violations in China. Two hundred teams with a total of some 18,000 inspectors and support staff will be sent out, tripling the workforce for the inspections carried out during this past winter.

Chinese authorities have taken proactive measures in regulating environmental laws. The curbs and other anti-pollution measures have added to industry costs and disrupted growth. Supply chain get disrupted, many production lines are stopped and an increasing number of importers are suffering long delays. This has temporarily stopped production from wide swaths of factories along China’s east coast and forced some factory owners to move supply chains to other countries.

China is drawing up plans for tougher curbs on smog levels during the two years until 2020, with the details due to be released in H1 of this year. Some of those details may emerge during March’s National People’s Congress – China’s annual meeting of its parliament. For companies sourcing consumer goods from China, including toys and textiles, risks get higher further down their supply chains, as raw material suppliers and dyeing facilities are among the worst polluters, and therefore, at the highest risk of closure.

What Foreign Importers should do

Your challenge is to keep up with changes to environmental policy in China and ensure that your supply chain is robust enough to avoid any unpleasant surprises which can lead to adverse results, such as production delays. Even if you have previously been compliant, the new EPL regulations may now have changed that. This is especially true of the more polluting industries, such as mining, chemical production, and smelting, to name but a few. This is also true of very common processes such as paint. Try to move those processes to more environmentally-responsible suppliers, if at all possible.

China’s environmental crackdown is likely to have a significant impact on the global business. International enterprises and firms need to act according to China’s environmental law in order to safeguard their manufacturing units in China.

About Michael Wong

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