27 ELR 10228 | Environmental Law Reporter | copyright © 1997 | All rights reserved

The Environmental Regulatory Regime of the People's Republic of China: A Primer Addressing Practical Concerns of Foreign Investors

Editors' Summary: At the heart of China's economic development boom lies the investment of an increasing number of foreign companies. China's transition to a more market-based economy, however, has brought about swift regulatory changes that serve to confound the investment community, particularly in the environmental arena. This Article seeks to alleviate this confusion by describing China's environmental regulatory regime and what it requires of foreign investment projects. An effort has been made to cover topics of particular concern to investors, such as access to regulatory information, enforcement, environmental crimes, citizen-suit and comment provisions, judicial review of administrative decisions, liability for historical contamination of land, availability of waste-disposal facilities, and basic environmental requirements for foreign investment projects.

Part I of this Article describes the scope of China's environmental legislation and the structure of the Chinese legal system. Part II provides an overview of the environmental regulatory system. Part III sets out China's environmental "legislative plan" for the period 1993-98. Part IV provides a description of particular areas of Chinese environmental law and regulation that may concern foreign investors operating or contemplating operations in China.

Zhang Hongjun is Director of the Legislative Division of the Environmental Protection & Natural Resources Conservation Committee (EPNRCC) of the National People's Congress (NPC) (Beijing, China). Among other things, Mr. Zhang is responsible for the drafting and amendment of China's national environmental legislation, and oversight of local implementation of this legislation. Richard J. Ferris Jr. specializes in Asian environmental regulatory systems at Beveridge & Diamond, P.C. (Washington, D.C.). Mr. Ferris also serves as Geographic China Counsel for the Center for International Environmental Law (CIEL) (Washington, D.C.). Mr. Ferris has assisted the EPNRCC with the drafting of new national environmental legislation. The views of the authors are their own and do not necessarily reflect those of the Chinese government, Beveridge & Diamond, or the CIEL.

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Throughout modern history, China placed little emphasis on the development of a comprehensive legal system for various philosophical, political, economic, and cultural reasons. Since the late 1970s, however, law has acquired greater importance and become a considerable factor in the country's economic, political, and social transformation. The proven benefits of a stable legal system have not been ignored by China's leaders and the public-at-large. The development of China's various environmental regulatory regimes has played a prominent role in the evolution of the country's overall legal system and is increasingly seen as integral to China's future prosperity. China's well-publicized economic development boom is fueled, in large part, by the investment of an increasing number of foreign companies. The rapid pace of development in China, however, has been matched by equally swift regulatory changes that serve to confound the investment community. The authors hope that the information provided in this Article will assist those actively or prospectively operating in the China market to understand the origins and future directions of these changes.

I. Environmental Legal Framework of China (See Diagram 1)

A. Summary: Law-Making Institutions

The principal organs responsible for the enactment of laws and other documents with legal effect are identified in the Constitution.¹ The National People's Congress (NPC) is the highest-level legislative institution in China. The NPC has the power to enact and amend "fundamental" national statutes, such as the Civil Law,² including statutes related to the establishment and organization of other government institutions. The NPC may also amend the Constitution via a procedure that requires a two-thirds majority of the legislators. The Standing Committee of the NPC is authorized to enact and amend all laws with the exception of those "fundamental laws" that may only be enacted by the NPC itself. During times when the NPC is not in session, the Standing Committee may supplement and amend laws enacted by the NPC only insofar as these supplements and amendments do not contravene the laws' "basic principles."³ [27 ELR 10229] The State Council⁴ may enact administrative regulations in accordance with the Constitution and applicable law. The provincial people's congresses, the people's congresses of special municipalities (Beijing, Chongqing, Shanghai, and Tianjin), and the standing committees thereof, may enact local regulations provided they do not contravene the Constitution, applicable laws, and administrative regulations. Last, the people's congresses of national autonomous regions may enact autonomous region regulations and specific regulations, the latter covering more specific subject matter than the former.

B. National Environmental Administration

At the highest level are the NPC, the newly formed Environmental Protection and Natural Resources Conservation Committee, and the State Council, all of which serve advisory, as well as drafting and oversight roles with respect to environmental legislation and regulations. The NPC and the Standing Committee are also responsible for legislative matters related to international environmental agreements. As one of the agencies under the State Council, the National Environmental Protection Agency (NEPA) is delegated responsibility for formulating national environmental rules, methods, and standards. A national environmental protection commission convenes periodically to discuss pressing items of environmental policy and make recommendations to the NPC, the State Council, and NEPA. For example, this commission held meetings in 1995 to discuss the serious pollution of the Huai River and directed the relevant environmental protection departments and provincial governments to focus on the problem.

Most important for those investing or contemplating investment in China, are the industrial ministries and "general companies"⁵ under the State Council that wield significant influence on the implementation of environmental statutes and regulations enacted by the NPC and the State Council, respectively. Each industrial ministry or general company has an environmental protection department, office, or division responsible for overseeing and issuing approvals for industrial operations and other foreign investment projects within their jurisdiction. The total number of specialized administrative entities changes frequently as the result of government restructuring initiatives. As of this writing, there are over 20 specialized administrative entities.⁶

C. Local Environmental Administration

At the local level, provincial environmental protection agencies, and county and municipal environmental protection bureaus (EPBs), oversee compliance with national environmental statutes, regulations, rules, methods, and standards, as well as local counterparts enacted by local people's congresses and standing committees. Similar to the situation at the national level, provincial and local environmental protection commissions meet periodically to address issues of concern and make recommendations to the appropriate-level government and environmental protection authorities.

As discussed later in this Article, local governments have been identified as the keys to the success of the country's environmental protection programs. Quite recently, Premier Li Peng admonished local officials for their apathy toward [27 ELR 10230] environmental protection. Because the results of industrialization severely impact the quality of life in China's municipalities, it is likely that national government and citizen pressure to overcome this indifference will increase.

D. National Legislation

Environmental Statutes.⁷ In 1979, the Standing Committee of the NPC enacted China's first major environmental statute, the Environmental Protection Law (EPL) of the People's Republic of China.⁸ This law brought China's environmental protection work under the aegis of the infant legal system and laid the foundation for future environmental legislation. Although far too lengthy to be summarized in detail in this Article, the EPL essentially provides the general framework for allocating administrative responsibilities, identifies target areas for environmental protection and natural resources conservation work, specifies measures for the control of environmental pollution and other public hazards, and outlines legal liabilities for violations. The EPL is potentially applicable to all regulated entities, and thus should be consulted in conjunction with subsequent media-specific legislation. If a media-specific piece of environmental legislation does not address subject matter contained in the EPL, the relevant EPL provisions will apply by default.

Since 1979, five laws dealing with pollution control and eight laws dealing with natural resource conservation have been enacted by the NPC. Specifically, these are:

The Air Pollution Prevention and Control Law;⁹

The Environmental Noise Pollution Control Law;¹⁰

The Fisheries Law;¹¹

The Forestry Law;¹²

The Grasslands Law;¹³

The Land Administration Law;¹⁴

The Law on the Prevention of Environmental Pollution Caused by Solid Waste;¹⁵

The Marine Environmental Protection Law;¹⁶

The Mineral Resources Law;¹⁷

The Water and Soil Conservation Law;¹⁸

The Water Law;¹⁹

The Water Pollution Prevention and Control Law;²⁰ and

The Wildlife Protection Law.²¹

Environmental Regulations. At the next level of authority below the statutes are regulations issued by the State Council, which are generally more technical and specific. These are in fact "implementing legislation" setting forth legally binding requirements at a greater level of detail than is provided in the statutes themselves. The State Council has issued more than 20 regulations specifically addressing environmental protection and natural resource conservation since 1979. Examples include the Implementation Regulations for the Water Pollution Prevention and Control Law²² and the Provisional Regulations for Environmental Management in Economic Development Zones.²³

Environmental Rules, Methods, and Standards.²⁴ In addition to the system of regulations, at still a lower level of authority, are the rules, methods, and standards documents formulated by NEPA and other ministries or agencies under the State Council. Broadly speaking, rules are more administrative, whereas methods are more technical in nature. Standards documents generally provide numerical bases for compliance that must be used in reference to regulations, rules, and methods. Without accompanying legislation, standards documents do not have any independent legal meaning. Rules and methods, however, prescribe conduct for the regulated community and have independent legal relevance. The terms "rules" and "methods" are often used interchangeably in Chinese environmental legislation. Foreign investors in the United States may be accustomed to using the terms "rules" and "regulations" interchangeably, while in China, according to the Provisional Regulations on the Procedure for the Enactment of Administrative Regulations,²⁵ normative legal [27 ELR 10231] documents issued by the State Council ministries and agencies may not be designated "regulations." "Regulation" is a term reserved for the normative legal documents enacted by the State Council itself.

To date, more than 100 environmental rules and methods and 350 standards have been issued. Examples of rules, methods, and standards are the Management Methods for Environmental Impact Statements Pertaining to Construction Projects,²⁶ the Rule on Reporting of Environmental Monitoring,²⁷ and the Technical Standards for Groundwater.²⁸

E. Local Environmental Regulations, Rules, Methods, and Standards

At the local level, the people's congresses of provinces, autonomous regions, and special municipalities formulate local environmental protection regulations that must be based on national environmental statutes but can address the unique social and economic conditions of the localities.

Local EPBs, commissions, and sometimes offices are delegated the authority to enact rules, methods, and standards. NEPA's general standards for environmental protection, quality, and pollutant emissions, which apply nationwide and to particular regions, serve as guides to local environmental protection administrations. Localities are allowed to set emission standards for pollutants not covered by the national laws, as well as set more stringent standards for those pollutants already covered. Local standards must be forwarded to NEPA for review and publication in a national register.

The local legal systems are playing an increasingly important and positive role in protecting and improving environmental quality, as localities are bearing the brunt of some of the country's most severe environmental problems related to rapid development. These problems include increased contamination of agricultural water sources and noise pollution in urban areas. Along with increased legislative activity at the local level, however, has come more investor confusion regarding national-local environmental requirements. Officially, the national legislation limits the legislative acts of local authorities. Local governments are authorized under Chinese law to pass more stringent environmental standards but may not enact more lenient standards. In reality, investment goals of local governments and other pressures may result in great variations between local and national environmental regulatory requirements. Such discrepancies continue to hamper efforts of regulators and foreign investors. These problems will likely be part of the price of China's rapid development for some time to come. Nevertheless, heightened national government scrutiny of local-level implementation, of at least the minimum standards imposed by national laws, can be expected as China moves forward with policies that favor economic growth without resource degradation.

F. International Environmental Agreements

China is a party to over 27 multilateral instruments affecting environmental protection, such as the Vienna Convention for the Protection of the Ozone Layer,²⁹ the Montreal Protocol on Substances that Deplete the Ozone Layer,³⁰ the International Convention for the Prevention of Pollution From Ships,³¹ the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter,³² the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal,³³ and the Convention on International Trade in Endangered Species of Wild Fauna and Flora.³⁴ As a result of participation in the United Nations Conference on Environment and Development in Rio de Janeiro,³⁵ China signed the Conventions on Climate Change³⁶ and Biological Diversity.³⁷ According to Chinese treaty law, and as specifically provided for by the EPL,³⁸ if an international treaty regarding environmental protection signed or acceded to by the People's Republic of China contains provisons differing from those contained in national laws, the provisions of the international treaty shall apply, unless the provisions are ones as to which the People's Republic of China has announced reservations. As mentioned earlier, the NPC and the State Council have primary authority regarding accession and related policy concerning international environmental agreements. NEPA, as the highest-level environmental agency under the State Council, is authorized to accede to multilateral and bilateral environmental agreements on behalf of the People's Republic of China. For the most part, the impetus behind China's accession to these international instruments lies in the country's desire to become more fully integrated in the world community, and to avail itself of the global support—financial and otherwise—that can then be accessed for critical domestic environmental projects and policies.

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II. Overview of the Environmental Regulatory System

National environmental statutes, regulations, rules, methods, standards, local legislation, and international treaties to which China has acceded, form the body of the Chinese environmental regulatory regime. In the period following the Cultural Revolution of 1966-76, China experienced a burgeoning of legislation and regulatory organs directed at environmental protection. Much of the fundamental environmental legislation includes broad terminology that is difficult for the regulated community to decipher or follow in the way that environmental legislation guides regulated entities in the West. Nevertheless, as a result of legislative reforms begun in 1993, implementing regulations and standards tailored to the particular industrial pollution sources, pollutant loads, and regulatory capacities of localities are being drafted at an unprecedented rate. Although more law does not necessarily mean more enforcement in these early stages of regulatory development, the increase in media attention focused on environmental legislation and the availability of the legislation in State bookstores has had a profound effect on the Chinese populace. A two-fold increase in the amount of civil cases reaching the courts has occurred over the past decade. Environmental issues have been hot topics of debate in recent congressional meetings at both the national and local levels. Consequently, legislative proposals related to environmental protection are being reviewed with an exceptional level of attention by government authorities and citizens.

Even so, it is obvious that certain environmental media and protection issues have yet to receive the attention of legislators and the relevant drafting committees. This is in part a result of the complexity of issues that must be addressed, such as solid- and hazardous-waste management in a country with the waste-production capacity of one-fifth of the world's population. It is also a result of the weighty mandate of the drafting committees, which are charged with the creation or amendment of a comprehensive set of statutes, regulations, rules, methods, and standards to keep pace with China's breakneck economic development. Before legislative reform in 1993, it usually took several years to adequately draft one amendment to an environmental law. Moreover, even though the 1993 legislative reforms expedited the drafting process, a substantial amount of time is required to draft legislation for environmental issues that are entirely new to the body of existing national statutes, such as radioactive pollution prevention. These regulatory gaps frustrate comprehensive management of environmental pollution and until the missing links are forged, environmental law and policy goals will be undermined.

Law drafting is also made more difficult by the fact that most of China's early environmental statutes were drafted to accommodate a planned economy. Currently, however, China is promoting a series of reforms aimed at introducing market-based mechanisms into statutes geared toward the formerly centralized economy. While these changes are welcome, they highlight the need for even more fundamental reforms that will require greater political and financial commitments from the government. The early stages of the legislative reform process have made critically evident the awesome task that lies before the law drafters. For example, many of the concepts that are to be introduced into the new generation of legislation, such as the "Polluter-Pays-Principle,"³⁹ cannot be readily adapted to government work units or dan wei. Applying such concepts to a state-owned entity has a dubious deterrent effect. In a sense, it is the functional equivalent of "slapping the right hand with the left hand."

The Chinese law drafters' goal of creating workable environmental law and policy is further thwarted by the enormity of the geographic area to be regulated. China is slightly larger than the United States but only has a fraction of the regulatory staff. For example, NEPA had 250 full-time staff in 1996.⁴⁰ The U.S. Environmental Protection Agency Headquarters, by comparison, currently has a staff of 5,655 permanent and temporary employees.⁴¹ Moreover, the concept of an advanced legal system that can work independently of central government directives is of relatively recent origin in China and enforcement of legislation is still sporadic in many areas. Traditional aversions to the use of law to contest authority will not be easily overcome. Enforcement power is also fragmented among many administrative entities with often conflicting environmental protection and development goals. Much of China's recent legislative activity has been directed toward these serious issues so that plans for comprehensive management of environmental pollution and natural resources degradation can be acted on and realized.

III. China's Environmental Legislative Reforms

A. China's General Regulatory Approach

To facilitate the transition to a more market-based economic system and enhance investor confidence, China is giving priority to the development of a legal and policy framework that demonstrates a commitment to the establishment of effective environmental protection laws and policies that function in a market economy. The country is now undergoing the laborious process of revising earlier statutes and regulations that do not adequately reflect social and economic realities.

Intense legislative activity in the area of environmental protection during the past decade has helped build a critical consensus at the top levels of the Chinese legislature that there is a need for environmental laws and policies that will not only protect public health and welfare, but will also preserve the country's resource base in favor of development patterns that are environmentally sustainable. As reflected in the Priority Programme for China's Agenda 21, organized in 1994 to implement the country's commitment to the United Nations Conference on Environment and Development, the NPC formally declared that preference will be given to the development of a comprehensive set of environmental laws and policies that can actually be implemented, enforced, and complied with as opposed to noble-sounding but hollow "statute book laws." As a result, China is trying to accelerate the pace of the environmental legislation and policymaking process, while recognizing [27 ELR 10233] the need for a concurrent increase in implementation capacity.

Although not yet a required component of the legislative drafting process, the views of foreign specialists are increasingly being sought by the Chinese government. Many of China's law drafting initiatives involve participation by foreign lawyers, scientists, or other experts. This participation is often realized through the support of international institutions, such as the United Nations and multilateral development banks. Although this is by no means an official method for input into China's legislative process, it represents a greater realization by China that it is not legislating in a vacuum, and that any laws it passes may have profound effects on the international community and its own development success.

B. Legislative Procedure Reform (See Diagram 2)

In order to spur the pace and efficacy of legislative drafting activities, China is undertaking massive procedural reforms. Before 1993, legislative drafts were prepared by different governmental ministries and agencies under the State Council, such as the Ministry of Chemical Industry and NEPA. The drafts would then be reviewed by the State Council's Bureau of Legislative Affairs, which would in turn, consult other governmental ministries and agencies depending on the subject matter of the proposed legislation. After approval by the State Council, the legislative draft would be submitted to the NPC for consultation and, potentially, passage into law.

The drawback of this legislative practice is that each government ministry or agency often attempted to assure that its own interests were reflected in the draft law. Thus, protracted negotiations frequently delayed the passage of legislation. Under this procedure, it was common for a piece of legislation to take several years to go from the governmental ministries or agencies charged with drafting the law to the NPC for final consultation.

In 1993, a more streamlined legislative procedure was introduced to provide a route by which primary drafting, consultation, and supervisory authority for certain areas of law would be accorded to special committees of the NPC. These committees would then prepare legislative drafts for review by the Standing Committee, thereby bypassing repetitive and time-consuming consultations with each and every subsidiary ministry and agency. In the NPC, there are presently eight such committees. Each committee has the power to draft or revise new legislation employing the technical expertise of specialists appointed as its members. Legislative drafts provided by the committees can be directly submitted to the Standing Committee of the NPC for approval and passage into law. Nevertheless, although thespecial committees can directly submit legislation to the Standing Committee during the drafting process, it is still common practice to obtain comments and suggestions from relevant government ministries, general companies, and agencies. Thus, while drafting responsibilities are concentrated within the committees, indirect involvement of ministry and agency representatives is still necessary to build sufficient consensus for passage and sound implementation of the legislation in question. The overall effect of the input of these committees, however, is that greater deference is accorded to the legislation drafted by the highly specialized committee members, and a relatively faster track for the passage of legislation is established.

The committee with responsibility for legislation related to the environment was established in April 1993, and appropriately named "The Environmental Protection Committee" (EPC). The Committee was renamed "The Environmental Protection and Natural Resources Conservation Committee" in April of 1994, to better reflect the breadth of its tasks, although it is still commonly referred to as the EPC. The Committee is charged with the following responsibilities:

Providing legislative proposals on environmental protection and natural resources conservation (EPNRC) to the Standing Committee of the NPC;

Preparing draft revisions of existing EPNRC laws to the Standing Committee of the NPC;

Reviewing legislative proposals from the State Council on EPNRC;

Reviewing regulations from local congresses regarding EPNRC;

Providing comments to other special committees of the NPC on their legislative proposals impacting on or related to EPNRC; and

Supervising the implementation of EPNRC legislation by national government ministries and local government counterparts.

Thus far, the work of the new committee is quite promising. For example, the Law on the Prevention of Environmental Pollution Caused by Solid Waste was first proposed in 1988. The proposal then foundered in various ministry and agency drafting committees for seven years. In the summer of 1995, the draft law was submitted to the Environmental Protection and Natural Resources Protection Committee, was passed on October 30, 1995, and came into effect as of April 1, 1996.

C. Environmental Legislative Plan

Based on the grave need for environmental legislation that is better adapted to China's emerging market economy, and in light of the environmental media and related issues that are yet to be addressed by the current regulatory regime, the Environmental Protection and Natural Resources Conservation Committee submitted a Five-Year Legislative Plan to the NPC in 1993. The Plan was approved shortly thereafter.

According to the Plan, approximately seven environment and natural resource protection statutes will be created or amended by 1998, and a total of 17 such statutes will be created or amended by the end of the century. The amended Air Pollution Prevention and Control Law,⁴² the Environmental Noise Pollution Control Law,⁴³ the Law on the Prevention of Environmental Pollution Caused by Solid Waste,⁴⁴ the amended Mineral Resources Law,⁴⁵ and the [27 ELR 10234] amended Water Pollution Prevention and Control Law,⁴⁶ which were originally included in the Plan, have already been passed by the NPC with the help of the Environmental Protection and Natural Resources Conservation Committee. At present, the following environmental statutes are still in the drafting stage, or before the NPC for consideration:

The Chemicals Management Law (planning process for initial drafting underway);

The Desertification Prevention Law (initial draft);

The Environmental Protection Law (amendment work underway);

The Fisheries Law (amendment);

The Flood Prevention Law (initial draft);

The Forestry Law (amendment);

The Grassland Law (amendment);

The Land Law (initial draft);

The Marine Environmental Protection Law (initial amendment work currently underway);

The Natural Resource Conservation Law (initial draft); and

The Radioactive Pollution Prevention and Control Law (planning process for initial drafting underway).

D. Considerations During the Amendment or Drafting Process

The members of the Environmental Protection and Natural Resources Conservation Committee have determined that administrative responsibilities, internationally accepted environmental protection principles, administrative controls, and economic incentives should be considered in the initial drafting process and amendment of environment and natural resource legislation. Accordingly, foreign investors may expect the following fundamental issues to be addressed in new or amended legislation:

Clarification of institutional responsibilities;

Establishment of basic, internationally accepted environmental protection principles such as the Polluter-Pays-Principle,⁴⁷ the Preventative Principle,⁴⁸ the Precautionary Principle,⁴⁹ and provisions requiring violators of China's environmental protection laws to restore polluted areas to their pre-degraded status;

Incorporation of legal administrative controls, such as permitting, registration, and reporting requirements, and deadlines for compliance; and

Enhancement or addition of economic incentives, such as effluent fees, discharge trading, and pollution taxes.

IV. Practical Concerns for Foreign Investors

A. Access to Laws and Related Environmental Information

Foreign investors often cite difficulties in accessing information on Chinese environmental laws and policies. Although laws are published with relative frequency and are made available in State bookstores, they are usually published in Chinese and great vigilance is required in order to ascertain the publication dates. Many electronic, looseleaf, and hardbound references are available, but few provide the timeliness, comprehensiveness, critical commentary, and reliability required by strategic planners and legal practitioners. No matter what the form of the reference, additional information is always needed to bridge the gap between the publication time and the current date, as well as between regulatory language and actual practice. Although regulatory transparency is increasing, the Chinese legal system is historically an authoritarian system that does not accommodate the need for information required by those attempting to gauge the efficacy of their foreign environmental compliance programs or the prudence of investment plans.

Investors are best advised to forward specific questions or information goals through professionals with local language expertise who also have a history of contacts within relevant government units. Local private practitioners do exist, and their numbers have been on the rise in recent years. In 1996, China adopted a new law that attempts to harmonize China's regulation of lawyers with international standards applicable to the legal profession.⁵⁰ China has also cut the ranks of government-sponsored law firms to encourage private practice. Significantly, Beijing's Bar Association, previously commanded by "people's lawyers" from State law firms, recently held elections that resulted in a governing council dominated by private practitioners. Nevertheless, experience among China's private practitioners in specific environmental compliance issues is still rare and difficult to identify. Frequently, because of the great demand for individuals with environmental experience, environmental specialists may wear many hats, at various times providing advice as a legal practitioner, academic, development bank consultant, or technical advisor.

Fortunately, work is being done to alleviate the difficulty of accessing information within the Chinese regulatory community. The Environmental Protection and Natural Resources Conservation Committee is developing an Internal Database Network to link all relevant government bodies for the transfer of environmental information. Support for this project will include funding from the Asian Development Bank. This database should enhance uniformity of information access and supervision of legislative and administrative actions at the national and local levels. Hopefully as a result, use of the network by regulators will enhance the uniformity of compliance-related information provided to the regulated community.

International institutions, such as the China Council for International Cooperation on Environment and Development (CCICED), formed in 1991, are also fostering the dissemination of information on Chinese environmental [27 ELR 10235] laws, policies, and plans. CCICED advises the Chinese government at a very senior level and is made up of approximately 50 Chinese and international members. It also promotes cooperation between China and the global community on environmental issues.⁵¹

Private-sector efforts at increasing information access, although generally not focused on environmental information, are also underway. For instance, Internet use in China is increasing. While members of the Central Government are wary of the potential abuses of this technology, some members of China's environmental regulatory regime use the Internet to facilitate their work.⁵²

Also noteworthy is the recent establishment within NEPA of the China Center for Environmental Management Systems. The function of the Center is to serve as an auditing and certifying entity for ISO 14001, the International Organization for Standardization's environmental management systems standard. The Center provides major information exchange services, such as compiling, translating, and distributing information on international environmental management system (EMS) standards and is developing extensive training programs for EMS auditors. Hence, it is likely that this office will fill a key information dissemination role in the future.

B. Enforcement

Broadly speaking, environmental protection agencies at the national and provincial levels, and EPBs at the local level, are authorized to determine on a case-by-case basis the enforcement or compliance measures that will apply in a given action. NEPA's responsibilities in this area are limited. NEPA implements national environmental policies, regulations, methods, rules, and technical standards pursuant to the authority granted by the State Council, and oversees local government implementation of regulatory compliance measures. Local EPBs, on the other hand, typically deal directly with the regulated community, and are required to enforce both the national and local environmental requirements. Each EPB may act independently, although they are subject to the supervision of superior-level agencies, such as NEPA, or its provincial counterparts. In the event that a superior-level agency is not satisfied with the decision made by the inferior-level agency, the superior-level agency may overturn the inferior-agency's decision, substitute its own decision, or remand to the inferior-level agency with a request for a rehearing on the issue. For each violation, environmental agencies are required to speak with "one voice" (i.e., under Chinese law, the various line agencies are not supposed to issue conflicting demands on the regulated community).

As a result of the historical development of China's legal system and the infant stage of the environmental regulatory regime, China maintains a complicated distribution of environmental enforcement power. Usually, decisions related to enforcement actions are made by environmental authorities at the national and local levels. Occasionally, these authorities will consider the comments of industrial ministries or general companies with administrative responsibility over the facilities concerned. The resulting decisionmaking delay frequently undermines the efficacy of enforcement actions, and is a primary reason behind the Environmental Protection and Natural Resources Conservation Committee's decision to clarify institutional responsibilities in new and revised legislation.

Other enforcement-related problems cited by Chinese officials include legislation-related difficulties such as vaguely drafted provisions allocating responsibility and liability; capacity-related difficulties such as personnel and financial limitations; culture- and development-related difficulties associated with varying concepts of ownership under the Socialist system and the populace's relatively low environmental awareness; and bureaucracy-related difficulties stemming from overly complex procedures and unwarranted interferences with investment projects.

Foreign investors frequently cite corruption as a factor that adds to regulatory confusion and frustrates uniform enforcement in rapidly developing countries such as China. Environmental legislators are well aware of the fact that greater regulation can also lead to increased opportunities for corruption. An increasing trend in corrupt activities was recently acknowledged by the Supreme People's Procuratorate, the highest legal supervisory organ in China.⁵³ The national government has adopted provisions, such as the Provisional Procedures on the Rotation of the Jobs of State Council Servants,⁵⁴ with the intent to deter corruption by requiring that senior officials who maintain the same job for five years or more rotate to new jobs. Law drafters are also considering what types of regulations may create more opportunities for bribery, and whether there are ways in which environmental legislation and administration can minimize these opportunities.

Enforcement of environmental legislation has traditionally suffered from the problems mentioned in Part II. Presently, China is trying to link its legislative reform programs with new enforcement initiatives that will allow the implementation of new environmental laws to be bolstered with new levels of compliance. Since 1993, supervisory programs have been initiated in which oversight groups are designated to assess local compliance records. For example, the Committee on Environmental Protection and Natural Resources Conservation and the State Council must now send delegations to the provinces, municipalities, and autonomous regions to review the compliance records of local industries and residents. The results of these reviews are then compiled in a report and sent to the Committee and relevant central government authorities, such as the Ministry of Chemical Industry or the Forestry Ministry. Failure to comply with stipulated standards can result in the issuance of an enforcement order. Naturally, this protracted [27 ELR 10236] procedure results in sporadic enforcement. Moreover, localities targeted by the supervisory programs are usually forewarned.

In spite of these new initiatives, an investigation by NEPA indicates that about one-third of the environmental technology used in China are operated "inefficiently" (operated during inspections and shut down at other times), one-third are simply not operating (shut down by the operators of facilities because of views that the technology resulted in cost overruns and other inefficiencies), and one-third are operated within the standards proscribed by relevant legislation. The problem of forewarned inspections has been partially overcome through faster, "surprise" visits from the local EPBs. Nevertheless, variations in enforcement practice continue to vary from locality to locality. China is currently aware, however, of the need for improved enforcement methods and is working on means by which to support these methods with constant and consistent environmental monitoring.

C. Enforcement Burden Reduction and Compliance Techniques

Generally, the administrative aspects of China's newer environmental regulations, such as the permitting and approvals related to environmental impact assessments (EIAs), are enforced more stringently. This reflects an increasing emphasis on preventative procedural controls for activities with potential for adverse environmental impacts, as opposed to remedial measures that are often more technical and costly. China often combines impact assessment requirements with other compliance techniques. These techniques include permits, taxes, bans, warnings, fines, compliance orders, inspections, suspension or cessation of operations orders, and environmental technology requirements. To combat the potentially overwhelming enforcement demands placed on environmental protection authorities by the country's burgeoning environmental degradation, China is introducing these and other creative environmental law compliance and enforcement techniques to its pollution prevention legislation. Among the measures contained in newly promulgated, amended, or draft environmental legislation are incentives for waste-material recycling, such as government tax reductions for enterprises that practice waste reutilization, subsidies for coal-washing facilities and the use of green technologies, restrictions on sulphur-dioxide emissions at new power stations, and promotions for the use of unleaded gas. The use of cessation of operation orders, an enforcement measure with severe economic consequences, has been used to combat severe pollution at the local level. For example, all plants in the Huai River Basin that were identified as creating severe water pollution were ordered to cease operations. Additionally, all small-scale paper mills in Henan Province were ordered to cease operations by mid-1996. It is unlikely that foreign investors with highly developed environmental compliance programs will warrant such severe sanctions. Nevertheless, as many foreign investors maintain enterprises that integrate with local operations, it is important to review a facility's past environmental compliance record, as well as its current operations.

D. Environmental Crimes

The spread of severe small-scale rural industry pollution in China and the problems associated with managing countless numbers of backyard polluters may be the reason for China's recent use of extreme measures under the Criminal Law,⁵⁵ such as the death penalty. Currently, there are three violations that couldincur a death sentence if the breach of law was deemed sufficiently serious. These are: (1) the intentional or negligent discharge of toxic pollutants into the environment; (2) the import of wastes from abroad without proper authorization; and (3) the illegal hunting, sale, or smuggling of rare and endangered species and related products.

In addition, a section on environmental crimes is included in the new amendment to the Criminal Law, resulting in the ability to impose severe sentences on those guilty of serious pollution of the environment.⁵⁶ Presently, environmental authorities and academics are advocating the enactment of a specific resolution on severe environmental crimes, targeting acute pollution of the environment and the destruction of natural resources, to be enacted following the passage of the amended Criminal Law. It is likely that the NPC will agree to act on such a resolution. Additionally, a judicial interpretation on the application of the death sentence to the illegal import and export of wastes was recently issued by the Supreme People's Court as a result of the recent controversy surrounding the import of hazardous wastes into China.⁵⁷ It provides that persons who import, without authorization, over 200 tons of general wastes or over 100 tons of hazardous wastes, may be sentenced to death.

E. Citizen-Suit and Comment Provisions

Citizen suits to seek remediation of environmental pollution or damages therefrom are provided for in the Chinese environmental regulatory system. An example of this is Chapter I, Article 6 of the EPL which reads: "all units and individuals shall have the obligation to protect the environment and shall have the right to report on or file charges against units or individuals that cause pollution or damage to the environment." The draft amendment to the EPL retains this provision and will provide needed details as to the statute of limitations, burden of proof, and availability of injunctions and damages.

China appears to be committed to preserving and enhancing citizen involvement vis-a-vis activities that may impact the environment. For example, the recently amended Water Pollution Prevention and Control Law⁵⁸ provides for the consideration of public comments related to construction, reconstruction, or demolition projects that will impact water quality. Interestingly, China's EIA regulations currently contain no provisions for public commentary. Thus, the addition of this provision to the Water Pollution Prevention [27 ELR 10237] and Control Law is noteworthy and may be the harbinger of similar reforms to the EIA regulations and other environmental legislation.

It is important to note that citizen suits in China bear little resemblance to those in the United States. The nongovernmental environmental advocacy community in China is virtually nonexistent. The establishment of indigenous nongovernmental environmental organizations has been authorized by the government in the past, although the organizations' goals do not include locking horns with the government on environmental issues. Environmental and legal awareness in China, as compared to the awareness of enforcement-oriented societies such as the United States and Canada, is still at a nascent stage. As a result, very few cases exist in which citizens sue companies or regulatory agencies for damages stemming from environmental violations. It is more common for a citizen to write a letter or make a telephone call to a local environmental bureau complaining about a particular instance of environmental pollution. It is safe to say that in recent years such complaints have been increasing.

F. Judicial Review of Administrative Decisions

The Administrative Litigation Law⁵⁹ delegates to the regulated community the right to sue administrative agencies to protect their legal rights. According to NEPA statistics, in 1994, out of 228 cases entertained by Chinese courts, the environmental agencies prevailed in 212. A great deal of deference is given by the courts to administrative agency decisions, and only certain administrative activities are subject to judicial review. Binding rulings by environmental agencies and activities in which environmental agencies have been delegated the right to make a final judgment are not reviewable by the courts. Administrative acts or omissions, other than those specifically identified by law, that are subject to judicial review include: (1) administrative penalties for environmental infractions; (2) denials of permits or licenses related to activities with environmental impacts; (3) nonfeasance with regard to administrative duties; and (4) refusing to authorize a regulated entity to perform environmental protection activities.⁶⁰

When a court determines that a particular environmental agency's decision is reviewable, it can revoke the agency's decision and request a rehearing and a new decision, or require that the agency take a certain action within a specified period of time. Typically, the courts only review whether the agency properly performed its authorized functions rather than the legitimacy of the administrative activity itself. The courts, nevertheless, may supplant an agency decision with their own where they find that the administrative activities in question substantially lacked fairness.⁶¹ Administrative agencies can also resort to judicial means to enforce administrative decisions if the violator neither appeals to a superior-level administrative agency for review of the decision, nor files suit against the agency within the legally prescribed period.

Foreign investors should note that the courtroom is the last resort for regulators, the regulated community, and the public-at-large when seeking redress for environmental transgressions or relief from administrative action. The most outspoken victims of pollution, usually individual farmers and urban residents, will file complaints to force polluters to redress harm through remediation or compensation of losses. Resort to the court system is seen in China as a decidedly adversarial approach to a problem that usually signals the end of a relationship, and is therefore not the best course of action for parties that wish to continue a business alliance. The fact that judicial decisions in environmental cases are now frequently reported by the Chinese media adds a dimension of public exposure to disputes that foreign investors should consider before resorting to the courts. Foreign investors may wish to use mediation or arbitration to resolve disputes where possible. The decision to seek out-of-court settlement, however, should be balanced with the realization that administrative arbitration is not binding on the parties. In short, many Chinese view contractual relationships as evolving, and not static. A stable business or regulator-regulatee relationship may be best achieved through continuous communication and negotiation. This often requires great patience, even in the face of stockholder trepidation over the stability and predictability of the Chinese market and the underlying legal system.

G. Liability for Historical Contamination of Land

Historical contamination of land, a major problem that looms over China's development successes, is a target of the draft amendment to the EPL. An environmental protection fund will likely be established and used for remediation of contaminated sites. Additionally, while China does not yet contemplate Superfund-like liability in relation to toxic-waste remediation, various liability and compensation plans are currently being discussed in government and academic circles. There are currently no provisions in environmental laws or regulations that specifically address environmental due diligence or historical contamination. Nonetheless, in addition to endorsing a wider use of pollutant fees and taxes to help curb environmental degradation, the Chinese government recently announced that it will adopt a policy of requiring that polluters restore degraded property to its pre-degradation status. How this policy will impact foreign-investor liability for historical contamination of land is yet unknown. Where a foreign company contemplates a merger with a local Chinese enterprise, however, the foreign company should refer to Article 184 of China's Company Law⁶² for guidance. This Article provides that "the claims and debts of the parties to a [corporate] merger shall be succeeded to by the absorbing company or the newly established company when the companies are merged." In this case, many Chinese regulators and academics opine that historical contamination falls within the category of "debts." Thus, if foreign investors wish to purchase land for construction projects, they are best advised to conduct environmental audits to define the liabilities associated with the land. Moreover, if foreign investors wish to purchase land for construction projects that may affect or diminish land used for agricultural purposes, they are subject to a [27 ELR 10238] new requirement that they post a bond or reclamation fee, which will be used to finance a national land-reclamation program.⁶³

H. Availability of Waste-Disposal Facilities

The lack of waste-disposal facilities is a problem that daunts many foreign investors with operations in China. In a recent conversation with the authors, Qu Ge-ping, Chairman of the Environmental Protection and Natural Resources Conservation Committee of the NPC, noted that the lack of proper solid- and hazardous-waste treatment facilities was considered critical to China's environmental protection and development efforts. In 1994 alone, the Chinese government estimated that approximately 820 million tons of solid waste were generated domestically, an amount that does not include waste produced by locally based, state-owned industries.

Although officials from the local government are actively promoting international joint ventures to construct and operate waste-treatment and disposal facilities, few, if any, facilities exist that roughly meet western environmental protection standards. Two major projects for the treatment and incineration or disposal of household waste, however, are planned for Heshan Town and Donghu Village in the Xiamen area in Southeast China. Other facilities in the vicinity of Xiamen are under construction and will reportedly be available starting in various years from 1996 to 2010. These facilities will reportedly only be authorized to receive waste for 3-10 years, depending on the particular capacities and usage rates.

In spite of the overall lack of waste-disposal facilities, China requires, in the new Law on the Prevention of Environmental Pollution Caused by Solid Waste, that measures be taken for the "safe disposal" of waste. The foreign-investment community is therefore often forced to employ what disposal resources exist in the vicinity of their facilities or grapple with the complexities associated with transporting waste across provincial or international borders for burial or destruction at "better" waste sites. If a foreign investor is contemplating the siting of a facility in China, waste-disposal concerns should obviously be paramount among the many considerations. In conducting siting investigations, it will be important to monitor the progress of facility-construction projects such as those mentioned in Xiamen and the new Pilot Hazardous Industrial Waste Disposal and Landfill Project in Shenyang, the capital of Liaoning Province in Northeast China.

I. Basic Environmental Requirements for Foreign Investment Projects

Companies contemplating or acting on investment plans in China are urged to keep in constant contact with the relevant ministries and/or general companies governing the industrial activity. In addition, investors should maintain contact with NEPA, the Trade Ministry, the local planning commission bureau, and the EPB, as these bodies govern the activities of all companies that are acting on investment projects in China.

In some cases, it will be unclear as to the particular industrial ministry or general company that has jurisdiction over the contemplated or ongoing investment project. In fact, it is not uncommon for administrative authority to attach to the ministry or general company that provides authorization for the initial investment. Therefore it is important to clarify administrative jurisdiction by consulting with local Chinese authorities before commencing construction plans. Although two (or more) ministries or general companies may seem to regulate the same products or resources, no two actually cover the same plants or facilities. In such cases, it is always advisable to seek the advice of those who are intimately familiar with the national and local regulatory and administrative framework, who can communicate in Chinese with the authorities involved to help overcome ambiguities, jurisdictional disputes, and regulatory vagueness that can frustrate investment decisions and wreak havoc on project schedules.

Under Chinese environmental law, foreign-investment projects are required to comply with national and local environmental laws and regulations. For example, Chinese law stipulates that contracts related to the management of foreign-owned construction projects shall not contain provisions that contravene Chinese national or local environmental protection laws.⁶⁴ These provisions normally reinforce China's overall desire to have foreign-owned operations maintain compliance programs that respect China's own regulatory requirements. Based on the "letter of the law," Chinese environmental requirements are to be applied equally to domestic and foreign-owned operations with provision for site-specific differences in treatment based on the location of the particular project (e.g., in an industrial zone or in proximity to designated wildlife protection or residential areas). Nevertheless, local enforcement practices may vary the application of the law with respect to domestic and foreign-owned operations, or even between foreign operations owned by different companies. This is a problem that is acknowledged by Chinese environmental officials and warrants increased scrutiny from national regulators.

General industrial or service-oriented investments that may result in the discharge of pollutants should look to media-specific statutes as a starting point for determining potential regulatory obligations and liabilities. As mentioned earlier, most important is the EPL, as provisions of this statute potentially apply to all instances of environmental pollution. For example, Article 13 of the EPL provides the basis for requiring EIAs to be conducted for certain projects. Nevertheless, it is also prudent to focus on local environmental regulatory practices and regulations, as local regulations or standards may include more—but not less—stringent provisions than the national counterparts. Environmental protection, state planning, and industrial bureaus with local control over a foreign facility will provide a much more realistic view of the state of compliance and enforcement in the area. Although a review of relevant statutes is important, at this transitional stage in environmental law implementation and enforcement, it is critical to also monitor official practice with regard to legislation as opposed to merely reviewing legislation as it appears "on the books." The views of local officials, as [27 ELR 10239] mentioned earlier, may vary from those expressed at the national level. It is thus important to solicit the views of national-level officials involved in the project approval and environmental compliance process. Foreign-investment projects are almost always monitored at the national level. This is because of the widely acknowledged fact that local regulators may be overly sensitive to the need to attract outside investment, a situation that is also cited in support of federal oversight of state regulatory activities in the United States.

In addition to the EPL, the Management Methods for Environmental Protection in Construction Projects,⁶⁵ and the Management Procedures for Environmental Protection in Construction Projects,⁶⁶ are arguably the most important legal documents for companies building facilities in China. These documents incorporate the important components of the EIA regulations.

In brief, under the provisions of the above-mentioned documents, representatives of all construction, technological renovation, and regional development projects must submit an environmental impact statement (EIS) for projects contemplating major environmental impacts or an environmental impact form (EIF) for projects contemplating minor or no environmental impacts, to the competent authorities. This is significant in that the EIS contains the results of the lengthy EIA and the EIF contains a short-form declaration of the investor that constitutes the basis for decisions by the competent authorities. If the investor is unsure of whether its potential environmental impacts are sufficiently large to warrant an environmental statement, the investor should consult with the competent authorities involved in the EIA process before proceeding.

The assessments required to complete the EIS are conducted by an institute certified to perform the requisite studies. A list of certified institutes is available from NEPA in Beijing. Foreign investors are allowed to choose the institute that will perform the EIS. Nevertheless, they are advised to consider the recommendations of the local EPBs in this regard. A foreign investor may also wish to retain its own consultant to perform an "independent" EIS to ensure consistency with its own corporate environmental assessment requirements.

As stipulated in the Management Procedures for Environmental Protection in Construction Projects, NEPA will generally be responsible for the examination and approval of the EIS or the EIF process for "mega projects" representing investments larger than 200 million Ren Min Bi (RMB) (approximately 24 million in U.S. dollars). Such projects must also be approved by the State Planning Commission, or indirectly through the endorsement of a project proposal submitted to the State Council by the State Planning Commission. NEPA also retains primary examination and approval authority for (a) projects that cross provincial, autonomous zone, and special municipality (Beijing, Chongqing, Shanghai, and Tianjin) boundaries; (b) projects with "special characteristics" (e.g., nuclear facilities and sensitive government operations); and (c) projects in which the environmental impacts are disputed by provincial environmental protection authorities.

Local EPBs are authorized to approve EIAs for projects representing investments of less than 200 million RMB. NEPA should still be consulted where foreign investments are concerned, however, in order to ensure that the facility is in compliance with national environmental provisions. The fluctuating nature of Chinese environmental law, and the potentially vague provisions in the major EIA legal documents, necessitate constant communication between the regulated entity and the regulators.

All construction projects are also required to comply with the "Three Synchronizations Policy,"⁶⁷ under which pollution-control facilities associated with the project must be designed, installed, and operated in conjunction with the design, construction, and operation of the project as a whole. Essentially, the EIS for a construction project contemplating large environmental impacts must describe the pollution that is likely to result and assess the exact nature of the potential impacts on the surrounding environment, as well as stipulate possible preventative or curative measures. Additionally, the EIS must, after initial examination by authorities with administrative jurisdiction over the project, be submitted by specified procedure to the competent department of environmental protection for approval. The State Planning Commission or its local counterpart will not provide the necessary ratification of the design plan for the construction project until the EIS is approved.

The timing for the EIA review process and application of the Three Synchronizations Policy to construction projects varies from about 3 days to 1 month in the case of an EIF, and 2 months to 3 1/2 years or more in the case of an EIS. The information that may be required of foreign investors by authorities responsible for the EIAs is summarized in items 1-6:

1. General Information.

name, location, and nature of the construction project and information related to the size of the investment;

product mix and main technical purpose;

quantity of major materials to be used, including fuel and water resources;

types of wastes (including waste water, waste gas, solid waste, dust, radioactive waste, etc.), discharge amount and patterns, indices of noise and vibration;

plans, facilities, and major technical processes for recycling, comprehensively utilizing wastes and treating pollutants; and future development plans of the project.

2. Specific Environmental Information.

geographic location of the project;

conditions of topography, land formations, soil, geology, hydrology, and meteorology at the construction site;

mineral deposits, forest and grassland cover, aquaculture, flora and fauna, as well as agriculture;

natural resources, scenic and/or tourist areas, historical sites, hot springs, sanitariums, and important [27 ELR 10240] political and cultural constructions;

distribution of residential areas, population density, health conditions of residents, epidemic diseases, etc.;

environmental quality of air, surface water and groundwater;

transportation and traffic conditions; and

data on environmental pollution and damage caused by other social and economic activities in the area.

3. Analysis and Prediction of Short-Term and Long-Term Impacts of Construction Projects on the Surrounding Area.

data regarding potential impacts on the geology, hydrology, and meteorology of the surrounding area, as well as measures to prevent or mitigate the impacts;

data regarding potential impacts on nature reserves, scenic and/or tourist areas, historical sites, and sanitariums in the surrounding area, as well as measures to prevent or mitigate the impacts;

data regarding potential pollution discharge quantities and the extent or degree of their impact on the quality of air, water, and soil in the surrounding residential areas;

data regarding the potential noise, vibration, and electromagnetic wave impacts on nearby residential areas, as well as measures to prevent or mitigate the impacts;

data regarding required afforestation to mitigate the impacts of the construction, including the planting of trees (including tree belts) and grasses; and

estimate of the cost of environmental protection facilities.

4. Proposals Concerning Environmental Monitoring Systems, Including the Construction of Monitoring Stations, Monitoring Organizations, Staffing and Equipment, and Related Items.

5. Economic Profit and Loss Analysis Regarding Potential Environmental Impacts Resulting From the Construction Project.

6. Concluding Remarks Regarding the Construction Project's Overall Impact on Environmental Quality.

Foreign investors should submit the completed EIS or EIF for review through the local EPB and the relevant local industrial ministry bureau. Final project approval lies with the local bureau of the State Planning Commission. Thus, investors should involve this entity in the assessment process from the beginning. As mentioned earlier, enforcement of EIA requirements is receiving greater scrutiny from the Chinese government. Rejection of an EIS or an EIF will likely result in a request for improvements in the proposed facility's environmental protection technology and related measures. Such an action on the part of Chinese authorities can result in serious delays of construction projects.

Conclusion

China is a country of paradoxes. A brief tour of modern China presents the traveler with antiquities against a backdrop of modern skyscrapers and cranes, thousands of years of history but relatively little experience in dealing with the international community, and a policy of opening to the outside world, but remaining inscrutable on many subjects. The fluctuating state of China's environmental regulatory regime also presents the foreign-investment community with many paradoxes. During this period of great changes, the environmental regulatory system can appear both simple and complex, or lenient and severe, to those observing it from afar, and especially to those working "in the trenches" at facilities in China. For example, although in many cases local officials may seem anxious to attract investment regardless of environmental consequences, strengthened environmental policies have led cities, such as Yentai City in Shandong Province, to reject many foreign-investment projects that were deemed pollution intensive. Nevertheless, when the rapid changes are observed with the goal of identifying trends, many of the environmental initiatives currently underway provide strong indicators of the future course of China's environmental requirements. To ignore these indicators given the fact that China's future ability to sustain itself depends on the establishment of an effective and comprehensive environmental regulatory regime is folly.

To emphasize China's earnestness in forging such a regime, Qu Ge-ping, Chairman of the Environmental Protection and Natural Resources Conservation Committee, recently provided the following advice to foreign investors with operations in China:

Foreign companies have essentially two options when establishing facilities in China. They may comply with Chinese environmental requirements, or their own [foreign] environmental requirements. If they decide to adopt the Chinese environmental requirements, this is fine. They should, however, be aware that these requirements will be changing, and that the cost of revamping compliance programs to reflect these changes will be great because of the intensity of reforms planned for the environmental regulatory area. Foreign companies may also transplant their own [foreign] environmental compliance programs to their China-based facilities. This will ensure that most of the operations will comply with Chinese environmental law. Nevertheless, foreign companies should still monitor Chinese environmental regulatory requirements. The pace of China's reforms is so great, that even if only a portion of the reforms are realized, it will not be long before China's system adopts many of the characteristics of the regulatory regimes in the United States and other developed countries.⁶⁸

[27 ELR 10241]

[SEE DIAGRAM 1 IN ORIGINAL]

[27 ELR 10242]

[SEE DIAGRAM 2 IN ORIGINAL]

1. See XIANFA [Constitution] arts. 58, 62, 64, 67, 89, 100, 116 (People's Republic of China) (1982, as amended, 1988, 1993).

2. [Min Fa Tong Ze] (adopted Apr. 12, 1986, effective Jan. 1, 1987).

3. Id. art. 67, § 3.

4. The State Council is the highest administrative organ of the People's Republic of China and the executive body of the NPC. Its functions and powers are listed in Article 89 of the Constitution, and include the power to adopt administrative measures, enact administrative rules and regulations, issue decisions in accordance with the Constitution and other laws, submit legislative proposals to the NPC or its Standing Committee, and to oversee the work of the ministries and commissions. The State Council is composed of the Premier, the Vice-Premiers, the States Councillors, the Ministers in Charge of Commissions, the Auditor-General, and the Secretary General. It includes a special office in charge of legal issues—the Bureau of Legislative Affairs. The Bureau prepares the State Council's annual legislation drafting plan.

5. "General companies" are entities unique to China that are delegated administrative powers with regard to the investment community. These powers are similar to those held by China's industrial ministries. At the present time, the functions of industrial ministries and general companies are essentially the same. Broadly speaking, what are now general companies were once industrial ministries. In an attempt to promote a sense of decentralization, the government has transferred the responsibilities of several industrial ministries to general companies. Presently, however, the decentralization is merely superficial and a complicated bureaucracy remains intact. Nevertheless, the Chinese government has initiated these changes as part of a general plan for gradual reform of the governmental structure. The long-term result of this plan may be the withdrawal of administrative powers from general companies. An example of such a transfer of responsibilities is the recent dissolution of the Ministry of Electric Power. A national power corporation assumed the ministry's enterprise functions, while the government responsibilities were split between the State Planning Commission and the State Economic and Trade Commission. Regulatory responsibilities for the electric power sector were assumed by the China Federation of Power Enterprises.

6. These include:

The Aerospace Industry General Company;

The Agriculture Ministry;

The Chemical Industry Ministry;

The Coal Ministry (including both the Coal Ministry and the National Coal Industry Company);

The Construction Ministry;

The Forestry Ministry;

The Geology and Mineral Resources Ministry (jurisdiction includes mining and mineral water, but excludes coal);

The Light Industry Federation (jurisdiction includes paper and many consumer products);

The Machinery Ministry;

The Marine Petroleum General Company;

The Metallurgy Ministry (jurisdiction includes steel);

The National Power Corporation and China Federation of Power Enterprises (assuming enterprise and regulatory responsibility held by disbanded Ministry of Electric Power);

The Nuclear Industry General Company;

The Petrochemicals General Company;

The Petroleum Products and Natural Gas Company;

The Precious Metals General Company;

The Posts and Telecommunications Ministry;

The Rail Ministry;

The Textiles Industry Federation;

The Transportation Ministry;

The Water Resources Ministry; and

Other ministries and general companies unique to China that impose environmental compliance regulations on foreign entities, such as the Trade Ministry and the State Planning Commission.

7. Although statutes such as the Food Hygiene Law [Shi Pin Wei Sheng Fa] (adopted Nov. 19, 1982, effective July 1, 1983) are within the purview of environmental and health and safety legislation, the authors have limited the scope of this Article to environmental and natural resources protection issues. Within Chinese jurisprudence, health and safety legislation relates to the "indoor" environment, while environmental legislation relates to the "outdoor" environment. Thus, the two are separately considered in the Chinese legal system.

8. [Huan Jing Bao Hu Fa] (adopted in principle and promulgated for trial implementation on Sept. 13, 1979, abrogated by implementation of the Environmental Protection Law of 1989, effective Dec. 26, 1989). "For trial implementation" is a phrase appended to legislation that is viewed as "experimental" at the time of passage and is still subject to revision. The terms "provisional" and "interim" are also used and carry the same meaning. Generally, the duration of the period of trial implementation is not identified within the statute, and ends only when the legislation for trial implementation is revised.

9. [Da Qi Wu Ran Fang Zhi Fa] (adopted Sept. 5, 1987, effective June 1, 1988, amended Aug. 29, 1995).

10. [Huan Jing Zao Sheng Wu Ran Kong Zhi Fa] (adopted Oct. 29, 1996, effective Mar. 1, 1997).

11. [Yu Ye Fa] (adopted Jan. 20, 1986, effective July 1, 1986).

12. [Sen Lin Fa] (adopted Sept. 20, 1984, effective Jan. 1, 1985).

13. [Cao Yuan Fa] (adopted June 18, 1985, effective Oct. 1, 1985).

14. [Tu Di Guan Li Fa] (adopted June 25, 1986, effective Jan. 1, 1987).

15. [Gu Ti Fei Wu Wu Ran Huan Jing Fang Zhi Fa] (adopted Oct. 30, 1995, effective Apr. 1, 1996).

16. [Hai Yang Huan Jing Bao Hu Fa] (adopted Aug. 23, 1982, effective Mar. 1, 1983).

17. [Kuang Chan Zi Yuan Fa] (adopted Mar. 19, 1986, effective Oct. 1, 1986, amended Aug. 29, 1996).

18. [Shui Tu Bao Chi Fa] (adopted June 29, 1991, effective June 29, 1991).

19. [Shui Fa] (adopted Jan. 21, 1988, effective July 1, 1988).

20. [Shui Wu Ran Fang Zhi Fa] (adopted May 11, 1984, effective Nov. 1, 1984, amended May 15, 1996).

21. [Ye Sheng Dong Wu Bao Hu Fa] (adopted Nov. 8, 1988, effective Mar. 1, 1989).

22. [Shui Wu Ran Fang Zhi Fa Shi Shi Xi] (adopted July 7, 1989, effective Sept. 1, 1989).

23. [Dui Wai Jing Ji Kai Fang Di Qu Huan Jing Guan Li Zhan Xing Gui Ding] (adopted Mar. 4, 1986, effective Mar. 15, 1986).

24. Although a detailed discussion of the nomenclature and normative relevance of Chinese legal documents is beyond the scope of this Article, the authors note that documents with designations such as orders, directions, decisions, resolutions, notices, and circulars may also be issued by State Council departments and local people's congresses. Significantly, however, these documents do not necessarily establish legal norms for the regulated community. For this reason, the authors have limited their discussion to the main legal norm-setting documents: statutes, regulations, rules, methods, and standards.

25. [Xing Zheng Fa Gui Zhi Ding Cheng Xu Zan Xing Tiao Li] (adopted Apr. 21, 1987, effective Apr. 21, 1987).

26. [Jian She Xiang Mu Huan Jing Guan Li Ban Fa] (adopted Mar. 26, 1986, effective Mar. 26, 1986) (governing the management of the environmental impact statement process).

27. [Huan Jing Jian Ce Bao Gao Zhi Du] (adopted Feb. 21, 1991, effective Feb. 21, 1991) (regulating the means by which local environmental monitoring stations submit reports to NEPA).

28. [Di Xia Shui Zhi Liang Biao Jun] (GB/T 14848-93) (setting technical standards for groundwater quality).

29. Vienna Convention for the Protection of the Ozone Layer, opened for signature Mar. 22, 1985, T.I.A.S. No. 11097, 26 I.L.M. 1516 (entered into force Sept. 22, 1988).

30. Montreal Protocol on Substances That Deplete the Ozone Layer, opened for signature Sept. 16, 1987, 26 I.L.M. 1541 (entered into force Jan. 1, 1989), ELR STAT. TREATIES 50333.

31. International Convention for the Prevention of Pollution From Ships, Nov. 2, 1973, 12 I.L.M. 1319.

32. Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, opened for signature Dec. 29, 1972, 26 U.S.T. 2403, 1046 U.N.T.S. 120 (entered into force Aug. 30, 1975).

33. Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, opened for signature Mar. 22, 1989, 28 I.L.M. 657 (entered into force May 5, 1992).

34. Convention on International Trade in Endangered Species of Wild Fauna and Flora, opened for signature Mar. 3, 1973, 27 U.S.T. 1087, 993 U.N.T.S. 243 (entered into force July 1, 1975), ELR STAT. TREATIES 50319.

35. See Rio Declaration on Environment and Development, U.N. Doc. A/CONF/151/26 (Vol. I) (1992), 31 I.L.M. 974 (adopted on June 14, 1994).

36. United Nations Framework Convention on Climate Change, opened for signature May 9, 1992, 31 I.L.M. 848 (1992) (entered into force Mar. 21, 1994), ELR STAT. TREATIES 50343.

37. United Nations Framework Convention on Biological Diversity, opened for signature June 5, 1992, 31 I.L.M. 818 (entered into force Dec. 29, 1993).

38. [Huan Jing Bao Hu Fa], chap. VI, art. 6 (adopted in principle and promulgated for trial implementation on Sept. 13, 1979, abrogated by implementation of the Environmental Protection Law of 1989, effective Dec. 26, 1989).

39. The Polluter-Pays-Principle requires that the costs of pollution prevention be borne by the polluter.

40. The total number of NEPA staff is currently limited, per order of the State Council, to 261.

41. Telephone Interview with Paulette Everson, Information Management Specialist, U.S. Environmental Protection Agency, Office of Administration and Resources Management (Mar. 3, 1997).

42. [Da Qi Wu Ran Fang Zhi Fa] (adopted Sept. 5, 1987, effective June 1, 1988, amended Aug. 29, 1995).

43. [Huan Jing Zao Sheng Wu Ran Kong Zhi Fa] (adopted Oct. 29, 1996, effective Mar. 1, 1997).

44. [Gu Ti Fei Wu Ran Huan Jing Fang Zhi Fa] (adopted Oct. 30, 1995, effective Apr. 1, 1996).

45. [Kuang Chan Zi Yuan Fa] (adopted Mar. 19, 1986, effective Oct. 1, 1986, amended Aug. 29, 1996).

46. [Shui Wu Ran Fang Zhi Fa] (adopted May 11, 1984, effective Nov. 1, 1984, amended May 15, 1996).

47. See supra note 39.

48. According to the Preventative Principle, regulated entities should try to avoid environmental harms instead of combat the effects thereof. The principle requires, among other things, that the environmental impacts of projects be considered as early as possible in the planning process.

49. Generally, the Precautionary Principle requires that action be taken, even in the face of scientific uncertainty, to control or reduce potential environmental degradation.

50. [Lu Shi Fa] (adopted May 15, 1996, effective Jan. 1, 1997).

51. CCICED has a site on the Internet, at the following address: http://iisd1.ca/trade/cciced/cciced.htm#intro.

52. See Simon Fluendy, Pandora's Box: Asian Regimes Struggle to Keep a Lid on the Net, FAR E. ECON. REV., Sept. 26, 1996, at 71.

53. In China, the procuratorate (or procuracy) essentially serves the following four functions: (1) to approve arrests made by public security authorities, review cases to make decisions on whether to prosecute, and to conduct the actual prosecution; (2) to conduct investigations into 22 kinds of criminal cases and receive complaints and accusations from citizens in response thereto; (3) to supervise the work of the courts in criminal cases (and in civil cases though the procuratorate is not party to the litigation); and (4) to supervise the activities of public security and prison authorities.

54. [Guo Jia Gong Wu Yuan Zhi Wei Lun Huan Zan Xing Ban Fa] (adopted July 31, 1996, effective July 31, 1996).

55. [Xing Fa] (adopted July 1, 1979, effective Jan. 1, 1980, amended Mar. 14, 1997).

56. Id.

57. See, e.g., U.S. Businessman Sentenced to 10 Years for Illegal Waste Imports, Say Officials, Daily Env't Rep. (BNA) Jan. 15, 1997, at A-4.

58. [Shui Wu Ran Fang Zhi Fa], art. 13, para. 4 (adopted May 11, 1984, effective Nov. 1, 1984, amended May 15, 1996).

59. [Xing Zheng Su Song Fa] (adopted Apr. 4, 1989, effective Oct. 1, 1990).

60. See HUAN JING ZHI FA DA QUAN [COMPLETE VOLUME ON ENVIRONMENTAL IMPLEMENTATION IN CHINA] 235-47 (Zhang Kunmin ed., 1993).

61. See The Environmental Protection Law of 1989, arts. 43, 44.

62. [Gong Si Fa] (adopted Dec. 29, 1993, effective July 1, 1994).

63. See Regulations on Land Reclamation [Tu Di Fu Ken Gui Ding] (issued by the State Council, 1988).

64. See Management Procedures for Environmental Protection in Construction Projects [Jian She Xiang Mu Huan Jing Bao Hu Guan Li Cheng Xu], art. 4 (issued by NEPA June 1990).

65. [Jian She Xiang Mu Huan Jing Bao Hu Guan Li Ban Fa] (jointly issued by the Environmental Protection Commission under the State Council, the State Planning Commission, and the State Economic Commission for Construction Projects, Mar. 26, 1986).

66. [Jian She Xiang Mu Huan Jing Bao Hu Guan Li Cheng Xu] (issued by NEPA June 1990).

67. See The Environmental Protection Law of 1989, art. 26 (requiring that pollution control technology at a construction project must be (1) designed, (2) built, and (3) commissioned together with the principal part of the project).

68. Conversation with authors.

27 ELR 10228 | Environmental Law Reporter | copyright © 1997 | All rights reserved