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Going Green To Pay BIG Dividends(HKTDC Enterprise, Vol 08,2007)

Business Brief



The Chinese mainland has been quick to respond to demands from regulators in key markets for more environmentally-friendly goods

China is expected to issue six more regulations in the second half of 2007 to tighten pollution controls on electronic products, according to the mainland's Ministry of Information Industry (MII).

The regulations will be published in response to the European Union's Energy Using Products (EUP) Directive that will officially take effect this month.

The EUP Directive includes eco-friendly standards on the design, production, transportation, application and recycling of electronic products.

The EUP is the EU's approach to force considerations for energy conservation factors into the design phase of a product, where they estimate more than 80% of all product-related environmental impacts are determined.

The ultimate purpose of the directive is to reduce energy dependency and to improve the environment, but the drafters of the legislation believe it may also improve other areas too, such as water consumption, waste generation and extension of the product's lifetime.

Energy-using products are targeted for a number of reasons, including an EU Commission belief that home appliances and office equipment account for more than 25% of electricity use, and yet show a poor environmental performance "although they could perform better at little or no cost".

The commission also maintains that "regulation is a motor for eco-design activities, in particular among small- and medium-sized enterprises", and is convinced that the EUP legislation will ultimately lead to innovation, better products for customers and savings to manufacturers in reduced materials and energy costs.

Electrical products are most affected immediately, but the commission is expected to pen future directives imposing environmental requirements and standards on other sectors and on other kinds of power.

So far, the commission has identified 14 areas that represent the first targets for implementing measures:

  • battery chargers and external power
  • public street lighting
  • personal computers (desktops and laptops) and computer monitors
  • consumer electronics: televisions
  • office lighting
  • standby and off-mode losses
  • boilers and combi-boilers (gas/oil/electric)
  • water heaters (gas/oil/electric)
  • imaging equipment: copiers, faxes, printers, scanners, multifunctional devices
  • residential room-conditioning appliances (air-conditioning and ventilation)
  • electric motors 1-150 kW, water pumps (commercial buildings, drinking water, food, agriculture), circulators in buildings, ventilation fans


  • commercial refrigerators and freezers, including chillers, display cabinets and vending machines
  • domestic dishwashers and washing machines The following studies will also be launched in 2007:
  • solid fuel small combustion installations
  • laundry driers
  • vacuum cleaners
  • set-top boxes
  • domestic lighting

The mainland's exports of electronics could be adversely affected without consideration of the new foreign standards, MII official Huang Jianzhong said recently. "The production of electronic devices has caused pollution from toxic substances, including lead, mercury and chromium," Huang said.

China has already issued three regulations governing the maximum allowable level of the hazardous substances in electronic products, plans to publish a new regulation this month requiring firms to guarantee toxic substances will not leak from the devices and will introduce another five standards on non-lead soldering by the end of the year.

On a related note, China is expected to issue national standards for portable digital players by the end of 2007 after many were found to have defects.

MII recently announced that 22 of the 33 MP3 players it inspected in 2006 were defective, with many offering poor sound quality and unsafe power adaptors.

The findings raised concerns over the quality of China's MP3 players among overseas purchasers. "The players will have to pass stringent quality tests before being exported," MII's science and technology department deputy director Han Jun said.

"The General Administration of Quality Supervision, Inspection and Quarantine will apply the new national quality standards for exported MP3 players."

China has approximately 1,000 MP3 player makers, who exported about half of the 100 million players produced last year, reflecting the fact that the mainland has surpassed Japan and the US to become the world's largest integrated circuit (IC) producer.

"The country's semiconductor market reported sales of US$75bn in 2006, with the IC market contributing US$63bn," China Semiconductor Industry Association head Yu Zhongyu told the annual integrated-circuit forum IC Market China 2007 in Shanghai.

China's IC industry chalked up US$S130m in sales in the early 1990s and grew tenfold in a decade, with sales topping RMB10bn by 2000.

Driven by booming global IC market development, the country's IC industry maintained strong momentum in 2006, producing 35.56 billion IC chips, representing year-on-year growth of 36%.

As a result of these developments, China's electronics production will likely grow 20% or more this year, predict sources with the National Development and Reform Commission (NDRC).

They said the sector expected to garner US$16.9bn in profit this year, up 20.9% from the year-earlier level, having posted big-margin increases in both output and profit but a slowdown in export growth last year.

According to the top economic planning agency, the electronics sector overall realised approximately US$109.1bn in value-added output last year, up 20.1% over the previous year.

The NDRC sources said the electronics industry's export value accounted for 65.5% of the sector's gross output in 2006, up from the 55% level in 2003.

Overseas-funded enterprises claimed a 79.9% share of the sector's total sales income last year, up 0.7 percentage points from the year-earlier level.