U.S. may file a complaint with WTO on China 'piracy'

By Mark Drajem and Li Yanping Bloomberg News
Published: April 6, 2007

WASHINGTON: The United States may file a complaint at the World Trade Organization as early as next week over what it calls China's piracy of copyrighted movies and books, according to four people briefed by the Bush administration.

Officials have prepared two cases, one saying China sets too high a value on pirated movie or music disks before prosecuting violators, and another objecting to restrictions on the sale of foreign books and movies in the country, they said. The people, three industry officials and one lawyer, spoke on condition they not be identified.

China's illegal copying of movies, music and software cost companies $2.2 billion in 2006 sales, according to an estimate by lobby groups representing Microsoft, Walt Disney, and Vivendi. The WTO complaints would be the first by the U.S. against China for breaching intellectual property rights, in a country where copying has extended to bags, golf clubs and even shampoo.

"The U.S. believes that now it's time to put more pressure" on China, five years after the country became a WTO member, a Standard Chartered economist, Stephen Green in Shanghai, said Friday. "The U.S. believes that China has clearly infringed rules that it agreed to play by," prompting the action.

China's 2006 trade surplus against the U.S. widened to a record $232.5 billion, prompting U.S. lawmakers to blame the yuan's value and China's piracy of patented goods for the gap.

In a letter to President George W. Bush in October, Nancy Pelosi, speaker of the U.S. House of Representatives, and other lawmakers said that "no country in the world has done more to undermine American intellectual property than China."

Sean Spicer, a spokesman for the U.S. trade representative's office in Washington, declined to comment.

U.S. complaints were imminent, the U.S. trade representative, Susan Schwab, said Feb. 22. "We're all going to run out of patience at some point, and that's going to be sooner rather than later," she said.

Last month, the Bush administration decided to levy duties on imports of coated paper from China to compensate for Chinese subsidies to exporters.

Under WTO procedures, the United States will formally ask for consultations with China when it files its complaints. Only after 60 days can it ask for an independent panel to adjudicate the dispute.

"China has continued to demonstrate little success in actually enforcing its laws and regulations in the face of the challenges created by widespread counterfeiting, piracy and other forms of infringement," the U.S. trade agency said in a report this past week. "One major factor is China's chronic underutilization of deterrent criminal remedies."

The U.S. plan may not escalate into a formal complaint, said Li Yushi, deputy director of the Chinese Commerce Ministry's research institute.

"This is just another turn of focus by the U.S. government in dealing with its widening trade deficit with China," Li said Friday in Beijing. "The administration understands that China has made efforts in IPR protection, as well as our limitations in enforcing the effort," he said, referring to intellectual property rights.

Pirated DVDs, including the Oscar-winning movie "The Departed," still sell for less than $1 on the streets of Chinese cities including Beijing and Shanghai.

"It's all about the economics of movies," said Liu Ping, who sells pirated DVDs including "The Departed" and "300" for as little as 5 yuan, or 65 cents, at the Wangfujing subway station in Beijing. "No one wants to pay 60 yuan for a movie when they can watch a DVD for 5 yuan."

A reason for piracy could be the limits placed on U.S. publishers and movie companies. Overseas publishers are only allowed to sell non-Chinese books, magazines and newspapers through five-star hotels while movie studios can only show a limited number of overseas films every year in China.

"IPR is critical to the U.S. because it is a tool by which it can control technology and industries around the world," said Guan Anping, managing partner of Beijing-based corporate law firm Anping & Partners. "It's a powerful tool to control nations like China, which are dependent on low-cost manufacturing."

The Bush administration may still adjust or delay the complaints to account for new announcements from China. Twice in the past year, the U.S. was poised to file a complaint only to delay at the last moment.***

Li Yanping reported from Beijing.

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China's appetite for meat feeds a Brazilian soybean boom

By Alexei Barrionuevo
Published: April 5, 2007

RONDONÓPOLIS, Brazil: For more than 2,000 years the Chinese have turned soybeans into tofu, a staple of the country's diet. But as its economy grows, so does the Chinese appetite for pork, poultry and beef, which require higher volumes of soybeans as animal feed.

Beset by scarce water supplies, China is turning to a trading partner 24,000 kilometers, or 15,000 miles, away - Brazil - to supply the protein-packed beans essential to create a meat-rich diet.

The Chinese scramble for natural resources is leading to a transformation of the world's grain trading. Vanishing cropland and diminishing water supplies are hampering the ability of China to feed itself, and the increasing U.S. use of farmland to produce biofuels like ethanol is pushing China to seek more of its agricultural staples from South America, where land is still inexpensive and plentiful.

"China is out there beating the bushes," said Robert Thompson, a professor at the University of Illinois who is a former director for agricultural and rural development at the World Bank. The goal is "to ensure they have access to long-term contracts for minerals and energy and food."

The link between Brazil and China is a profound shift in world agricultural trade. The biggest bilateral food trade once flowed between the United States, the world's largest food exporter, and Japan. But countries with vast arable land for expansion, particularly Brazil, are now racing to meet demand in China.

American farmers have started to move away from soybeans, planting far more corn for ethanol at the expense of other crops. But long after watching a U.S. soybean export embargo imposed by President Richard Nixon in the early 1970s help to spawn the Brazilian soybean industry, they are not giving up their leading role in the trade easily.

With a superior system for transporting grains to global markets, American farmers still enjoy many advantages over their competitors from Brazil and elsewhere in the developing world. Infrastructure and financing constraints in Brazil will keep the global competition to feed China in flux for years to come.

But the longer-run trends are emerging. At the heart of the shift is the global competition for land to grow crops. Brazil, which farms about 70 million hectares, or 173 million acres, has room to double its available cropland to equal the scale of the United States, analysts say, even without clearing any more of the Amazon rain forest.

"All of a sudden you have a global market for land, a competition between several different products for the same amount of land," said Sérgio Barroso, president of the Brazil operations of Cargill, the world's biggest grain trader.

The Brazilian soybean industry is already losing hectares to sugar cane for ethanol production in some areas, he said, and is competing with corn, cotton and cattle for the same land.

"If you put it all together, between feed and food it is going to be a tremendous challenge," Barroso said.

Expectations ran high three years ago when President Hu Jintao of China visited South America and talked of a "strategic partnership" with President Luiz Inácio Lula da Silva of Brazil, predicting trade between the two countries would double to $20 billion. China pledged $10 billion in investments, mostly in infrastructure.

Brazilians have been disappointed in the follow-up, however. China has struggled with the Brazilian paper work and has waited for Brazilian rules on public-private investments before committing large amounts of capital to infrastructure projects.

"Very little has happened," said Pedro de Camargo Neto, a former official in the Brazilian Agriculture Ministry who is now an agribusiness consultant.

Still, China has continued its buying spree in Brazil. Last year, Brazil sent nearly 11 million tons of soybeans to China, up 50 percent from the previous year and nearly double the amount shipped in 2004. Early indications are that Brazil has produced yet another record crop and analysts expect that China will take most of the increase.

While the United States remains the largest producer of soybeans, last year Brazil passed it as the world's biggest exporter. U.S. soybean exports are expected to fall by 23 percent by the 2009-2010 crop year, according to the U.S. Agriculture Department.

For all the Brazilian gains, though, the surge in exports to China has created a sense of unease among many in Brazilian agriculture, who worry the growing relationship will accelerate a development model in which Brazil is too reliant on sales of raw natural resources rather than value-added goods.

"We are a little bit nervous," said Seneri Paludo, a trade analyst at AgRural, an agricultural consultancy in Cuiabá, the heart of the Brazilian soybean country. "This is happening too fast."

In some parts of Brazil, the challenge of supplying China is already showing signs of strain. The soybean boom in the past two years has not brought rewards for many farmers in Mato Grosso state in western Brazil which produces more than a third of the country's beans.

In Rondonópolis, in Mato Grosso, Rogério Salles watched recently as a handful of combines harvested the last soybeans on his 7,000-hectare farm.

"Just because we're producing a lot of beans here doesn't mean we're making money," he said.

A higher-valued Brazilian currency and a bottlenecked transport system are working against many Mato Grosso farmers like Salles. Most soybeans are trucked south more than 1,600 kilometers along two-lane highways full of potholes. At the export ports, some ships wait at sea for up to a month before finding docking space to load the beans.

"If major investments are not made in transport infrastructure, China cannot count on this region being a stable supplier to its market," Salles said. "There's a lot riding on this."

The Brazilian agricultural sector has been dominated by large investors who bought huge tracts of land at bargain prices, and by multinational grain traders - like Cargill of Minneapolis and Archer Daniels Midland of Decatur, Illinois - that have built storage, provided financing and lined up the overseas buyers.

Through his Maggi Group, Blairo Maggi, the governor of Mato Grosso, is the largest soybean grower in the world, and a major financier, with 160,000 hectares of his own under production.

"It has been all about a land grab in Brazil," said Daniel Basse, president of AgResource, an agricultural consultant.

As for many farmers in Mato Grosso, prosperity has been hard to come by lately. Growers in the state amassed $14.5 billion in debt in the past two years. Farmers say they can no longer afford storage space for their grains, forcing them to sell their crops as soon as they are harvested, rather than wait for higher prices. "You do all the work, you plant the right crops," Salles, the local farmer, said. "But even when you do everything right, you still lose."

The growers' desperation has allowed the major grain traders to tighten their grip. Brazilian farmers say they are paying up to 25 percent more for inputs like fertilizers provided by the traders, which are paid back with the crop.

"We are becoming slaves of the big trading companies," said Ricardo Tomczyk, another farmer in Rondonópolis.

José Luiz Glaser, Cargill general manager in Brazil for grains and oilseeds, said Cargill stopped financing several farmers in Mato Grosso last year after they failed to pay their bills.

Such abandoned farmers could soon find new Chinese benefactors, who are looking to make inroads in the clubby world of Brazilian agriculture, said Charles Tang, president of the Brazil-China Chamber of Commerce.

Brazilian farmers say they would welcome Chinese money. But they worry about the growing clout of China as a soybean buyer. Memories are still fresh of an incident in 2004, when China rejected several shipments of Brazilian soybeans, saying they were contaminated.

To try to counter the Chinese influence, Brazilian producers are working with U.S. growers to diversify their buyers. American soybean producers organized a joint trade mission with Mato Grosso farmers last December to India, another huge potential market.

As for China, its dream is to connect directly with Brazilian farmers, bypassing the multinational grain merchants. While Chinese companies have yet to make a major purchase of cropland in Brazil, they are looking to invest in improved facilities and upgrade the Brazilian rail system, which has not undergone significant improvement since the 1930s.

China began looking overseas for more soybean supplies in the mid-1990s when the scope of its land and water problems became clearer. In northern China, where soybeans traditionally have been grown, water tables are dropping at a rate of one to three meters, or three to 10 feet, a year, said Wu Aimin, a researcher with the China Groundwater Information Center in Beijing.

"It takes a thousand tons of water to produce one ton of grain," said Lester Brown, president of Earth Policy Institute, an environmental research and advocacy group. "So the most efficient way to import water is in the form of grain."***

Joshua Schneyer contributed reporting. David Barboza contributed from Shanghai.

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Grooming China's future leaders

Apr 4, 2007
SUN WUKONG
By Wu Zhong, China Editor

HONG KONG - Shortly after the conclusion of the annual session of the National People's Congress (NPC) in mid-March, the Chinese Communist Party (CCP) has begun a new round of reshuffling its provincial leaders as a preparation for the convention of its 17th National Congress this autumn.

So far this year, the CCP has announced the appointment of new party secretaries for two provincial-level municipalities and four provinces. They are the municipalities of Shanghai and Tianjin and the provinces of Shandong, Zhejiang, Shaanxi and Qinghai. With the appointment of new party chiefs, these six provinces will soon have their new party committees.

According to the reshuffle plan, all of the 31 mainland provinces will have new party committees and new party secretaries by end of June. All new provincial party secretaries will automatically become deputies to the 17th Party Congress and candidates for the new Central Committee.

By the end of last year, 14 provinces had completed the reshuffle. The remaining 17 provinces, including the above-said six, will need to complete the reshuffle in the second quarter. New party secretaries for 11 of the remaining 17 provinces have yet to be announced.

Of the six newly appointed provincial party chiefs, three are in their 50s and therefore could be regarded as the "fifth generation" cadres who may move up the official hierarchy in future. And it is almost certain that the new party secretaries of Shanghai and Tianjin, Xi Jinping and Zhang Gaoli, will become members of the new Politburo in the 17th Party Congress, following the adopted practice.

The most eye-catching is the appointment of Xi Jinping, 54, as the party secretary of Shanghai municipality, which has surprised many political watchers inside and outside the country. Before obtaining his the new job, Xi was the party chief of Zhenjiang province.

In late September, the CCP leadership removed Shanghai party chief Chen Liangyu on corruption charges and appointed Shanghai Mayor Hang Zhen, 52, as acting party secretary. But Hang was in that post only for half a year, and Xi's appointment dashed Hang's hope to sit in the new Politburo. This is a rare case in which the acting party chief was not formally appointed to the post.

Given his age, Hang used to be thought to have a bright political future. The latest decision of the CCP power center therefore has sparked speculation that Hang might also be implicated in Chen's corruption case. But analysts in Beijing say Hang could never have had a chance because the power center has always wanted someone from outside Shanghai to take the post after Chen's removal in the hope of shaking up the power base of the so-called Shanghai Clique.

Xi's new appointment came as a big surprise partly because he had never been predicted as a candidate for the job by pundits of Chinese politics. Instead, several others, particularly Liu Yandong, director of the CCP's Central Department of United Front Work and vice chairwoman of the Chinese People's Political Consultative Conference (CPPCC), had been short-listed.

In fact, a Shanghai deputy to the CPPCC said during the annual sessions of the NPC and CPPCC in the first half of March, "There was no sign about Xi's Shanghai appointment." Even Xi himself, after taking his new office, said he was informed of his new appointment "on very short notice".

And given the importance of Shanghai, it had been expected that President Hu Jintao would have appointed one of his so-called tuanpai, or faction of the Chinese Communist Youth League (CYL), to take over the job.

Xi has never worked as a CYL official. Instead he started his political career as a county party official in Hebei province. Just about the only thing in Xi's life that could be related to Hu is the fact that they both graduated from the privileged Tsinghua University, majoring in engineering.

In fact, Xi could be regarded as a princeling, or offspring of senior party officials. His father Xi Zhongxun was a communist veteran who was purged by Mao Zedong in the late 1950s but made his comeback after Mao's death in 1976. Xi is also well known because his wife Peng Liyuan is a popular singer.

Because of his background, Xi is widely considered a protege of Vice President Zeng Qinghong, who is regarded as leader of the princelings. Thus Xi's new appointment is seen by overseas China watchers as a victory of Zeng over Hu.

For instance, Poon Siu-tao wrote on the Chinese version of Asia Times Online: "It seems that Hu cannot yet completely dominate the reshuffle of senior officials ... It becomes increasingly obvious that Zeng Qinghong has gotten off Jiang Zemin's leash to go his own way ... and Zeng has replaced Jiang to become the most powerful challenger to the CYL faction." In Poon's view, in addition to Xi, Zhang Gaoli and the new Zhejiang provincial party chief Zhao Hongzhu are also Zeng's proteges.

Analysts in Beijing say that indeed the latest reshuffle could be seen as a result of a compromise among factions within the party. But politics is an art of compromise. And Hu now is the supreme leader instead of only heading one faction. As such, he must carefully seek a power balance rather than cater to the interests of one faction alone.

In the previous reshuffles, tuanpai officials have taken over several provinces. For example, Li Keqing is Liaoning provincial party chief. Li Yuanchao is Jiangsu provincial party secretary. Wang Yang is party secretary of Chongqing municipality. Zhou Qiang is governor of Hunan province. "It would have been rather odd had all provincial posts be taken by the CYL faction," an analyst said.

From another perspective, it could be said that Hu and Zeng have formed a cooperative partnership. As reported earlier, Zeng is now in charge of the organization and personnel affairs for the 17th Party Congress. It would be hard to believe that he got the job without Hu's consent.

Some say Xi was chosen because he has been known for always toeing the power center's line. For instance, when the central government launched its macroeconomic-control policy two years ago, Chen Liangyu took a defiant attitude. But Xi, as Zhenjiang
party chief, warned his subordinates, "To comply with the macro-control policy in appearance but oppose it in heart is an unhealthy trend and evil practice."

In any case, the new appointment ensures that Xi becomes a member of the new Politburo in the 17th Party Congress, filling the vacancy left by the disgraced Chen. But as the newly appointed Shanghai party secretary, Xi is unlikely to be promoted to the Politburo Standing Committee in the autumn, because membership is a full-time post based in Beijing that normally cannot be concurrently taken by a regional party chief. However, given his youth, Xi is likely to move further up in the party hierarchy in the 18th Party Congress in 2012.

Zhang Gaoli, 61, was appointed party secretary of Tianjin, replacing Zhang Lichang. As such, Zhang Gaoli is likely to replace Zhang Lichang as a Politburo member in the 17th Party Congress. However, because of his age, this will perhaps be the zenith of his political career.

Zhang Lichang, 68, was removed to take another post in Beijing. Before his new appointment, Zhang Gaoli was party secretary of Shandong province. Before he was promoted to the Shandong post in 2001, Zhang Gaoli worked in Shenzhen as mayor and party chief for four years and was reputed as a clean, open-minded and pragmatic leader.

It is well known that Zhang Lichang could never get along with Tianjin Mayor Dai Xianglong, the former governor of the People's Bank of China, which somehow held back the city's development. The power center eyes development of Tianjin's Bohai New Area as a new pivot, like Shenzhen in the 1980s and Shanghai's Pudong in the 1990s, to lead the country's economic development. It is obvious that Beijing hopes with his experience in Shenzhen, Zhang Gaoli could cooperate with Dai to accomplish the task.

Li Jianguo, 61, was appointed party secretary of Shandong province, replacing Zhang Gaoli. Given his age, Li Jianguo will likely retire after he finishes his term in Shandong.

Li, a Shandong native, started his political career in Tianjin, where he had worked for more than two decades, with his last post as Tianjin's deputy party secretary, until 1997, when he was removed to become party chief of Shaanxi province. As such, he is regarded as a protege of Li Ruihuan, who retired as the fourth-ranked party leader in late 2002. Tianjin was Li Ruihuan's power base, where he worked as mayor and party chief in 1980s.

Zhao Hongzhu, 60, was named party secretary of Zhejiang province. He too, given his age, may have to retire after completing the five-year term in this office. In this reshuffle, Zhao is the only official working at the CCP power center to be appointed to head a province.

Zhao started his political career as a People's Liberation Army officer, and then he worked at various local party posts in Inner Mongolia. In 1997 he was promoted as deputy secretary general of the Central Commission for Disciplinary Inspection, the party's top anti-graft watchdog. In 2000 he was appointed a deputy head of the party's Central Organization Department, where he had stayed until this new appointment.

Zeng Qinghong was the head of the Central Organization Department from 1999 to 2002. And even after 2002, one of Zeng's portfolios as a member of the Politburo Standing Committee was to oversee the Central Organization Department. Because of this, Zhao is also said to be a protege of Zeng.

Zhejiang and Shandong are two of the most economically important provinces in China. Hence Li Jianguo and Zhao Hongzhu will be often in the limelight in the next years.

Zhao Leji, 50, was appointed party secretary of Shaanxi province. He started his political career in Qinghai province. In 2000, he was named to head Qinghai province, becoming the youngest provincial governor in China. Five years later, he became Qinghai party secretary, again the youngest provincial party chief in the country. Youth is Zhao Leji's greatest advantage. If nothing goes wrong, he could be one of the future leaders of China.

Qiang Wei, 54, replaced Zho Leji as party secretary of Qinghai. After brief service in the military, Qiang began to work in a chemical factory in Beijing. In 1984 he became party secretary of the factory and started his political career. From 1987-90 he was the secretary of the CYL's Beijing municipal committee. In this sense, Qiang Wei could be said to come from the CYL faction, though he might not be so close to Hu Jintao, who was the secretary of the CYL's central committee from 1982-85. Before his new appointment, Qiang was deputy party chief of Beijing overseeing law enforcement.

Qinghai is a an economic backwater. However, it is a known practice of the CCP to send promising cadres to remote regions to demonstrate their capabilities in working through hardships and difficulties. Both Hu Jintao and Premier Wen Jiabao started their careers in Gansu, another poor province in northwestern China. Hu himself was even once sent to work in Guizhou province and Tibet. Therefore, given his age, Qiang could also have a bright future.

At present, as provincial party chiefs, Li Jianguo, Zhao Hongzhu, Zhao Leji and Qing Wei will surely be elected as members of the new Central Committee in the 17th Party Congress, though they are unlikely to become Politburo members like Xi Jinping and Zhang Gaoli.***

(Copyright 2007 Asia Times Online Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)

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China's rise inevitable - Kissinger

By Li Xing (chinadaily.com.cn)
Updated: 2007-04-03 14:51

The United States and China should cooperate to face up a host of issues that challenge the world today, Dr Henry A. Kissinger, former US secretary of state, told the 800-plus scholars and students Tuesday, April 3, in Beijing.

"Our future depends on (Sino-US) cooperation, and that's why I am so committed to friendship between our two countries," he said in a keynote speech at the Graduate School of the Chinese Academy of Sciences, drawing warm applause and laughter.

During his speech, Kissinger, who made his first visit to China in 1971 on a secret trip that broke the ice frozen for some 20 years, couldn't help but share his amazement about the changes that have taken place in China.

"China has developed in a manner that none of us could have imagined 35 years ago," he said. "China has grown with the dedication of its people by its own effort."

Following the traditional concept that shaped the international system for the past three centuries, people believed that conflicts were inevitable when "the center of gravity moves from one region to another" and when another country suddenly becomes "very powerful", he said.

He said he believed in China's rise. "The rise of China is inevitable, and there is nothing we could do about it," he said. "There is nothing we could do to prevent it or should do to prevent."

What Kissinger projected is cooperation. "Cooperation is essential," he said.

Only by cooperation, can countries in the world, the US and China included, be able to deal with the climate change, environmental problems, economic globalization, nuclear proliferation or other security issues, which challenge the humanity.***

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Oil firms told to boost offshore production

By Wang Yu (China Daily)
Updated: 2007-04-03 07:03

The country should look increasingly offshore to shore up dwindling onshore production, oil companies were told on Monday, April 2.

"The current offshore oil and gas exploration and production should focus on the Bohai Bay basin and the Pearl River estuary as the top priority," Pan Jiping, a senior researcher with the Ministry of Land and Resources, said at China Offshore Summit 2007.

"As for deep-sea exploration, the firms should invest more in blocks in the northern part of the South China Sea," Pan said.

More than 80 percent of China's proven offshore oil reserves are located in the Bohai Bay basin, and the country needs to beef up exploration in the Pearl River estuary, the South China Sea and the southern Yellow Sea, he said.

The southern Yellow Sea is the only offshore area where no major oil and gas reserves have been discovered so more efforts should be made there, Pan emphasized.

The ministry is expected to publish an appraisal of China's overall offshore fossil fuel reserves soon, giving more detailed guidelines to oil companies.

"We are also considering reforming the current project review and approval format to give more opportunities to international players. We may adopt more international practices, such as bidding, to allocate mining rights," Pan stressed.

He called on Chinese offshore companies to develop technologies for deep-sea oil and gas exploration.

Han Xuegong, a senior consultant with China National Petroleum Company (CNPC), the country's largest oil and gas producer, noted that given soaring energy demand and the decreasing production in oil fields located in the eastern part of the country, it is natural for national conglomerates to make more efforts offshore.

"It is true that developing offshore reserves involves higher risks and requires more investment and technical expertise. But given the current global oil prices, it is absolutely worth the risk.

"That is mainly why CNPC and China National Offshore Oil Corp (CNOOC) are marching offshore," Han said.

Both CNPC and China's top offshore oil company CNOOC announced yesterday that they are developing deep-water drilling platforms with a 3,000-meter extraction capacity.

Zhang Weiping, deputy chief economist of CNOOC, said that 70 percent of oil reserves in the South China Sea are in deep water, which require deep-sea drilling capacity.***

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British waste adds to environmental crisis across China

Jonathan Watts in Mai
Saturday March 31, 2007
The Guardian

British high street waste is fouling streams and ditches in China despite promises of an environmental crackdown by both governments.

Mai village in Guangdong province, southern China, suffers from a Made-in-Britain eyesore: Tesco and Argos plastic bags choke the waterways, snag on tree branches and contribute to a rotting stench during floods and hot weather. There is even a green and white Help The Aged carrier bag printed with a slogan proclaiming the charity's fight against "poverty, isolation and neglect".

It is a side-effect of globalisation. Many of these products were manufactured in China, shipped to the UK for use and sent 5,000 miles back for disposal.

China exported £12.6bn worth of manufactured goods to the UK last year and received an estimated 1.9m tonnes of rubbish in return. Under EU regulations member countries are not allowed to dump garbage overseas, but are permitted to send sorted waste for recycling.

Environmentalists say this is irresponsible because much of the recycling is carried out in poorly-regulated communities, where health risks and pollution worries are a low priority.

Guangdong is scattered with scavenging centres. In Guiyu and Qingyuan small family-run businesses chop up and melt down toxic plastics and metals from discarded computers, printers and mobile phones. In Nanhai and Shunde factories deal with mounds of plastic bags and bottles. About 20% of the waste comes from overseas according to local sources.

A series of exposés in the domestic and foreign media prompted the government to crackdown on the business earlier this year. Guangdong's provincial government banned unlicensed businesses and individuals from importing plastic waste and suspended operations at factories that failed to meet environmental standards.

Last month factories in the most notorious district, the Lianjiao area of Nanhai, were shut down. But most firms simply relocated.

Two hours drive away a new recycling centre is under construction in Shijing village, which is now littered with scrapheaps. The dealers said they would no longer touch foreign waste.

In nearby Shenzhen and Shunde businessmen were still reprocessing carrier bags and other UK waste from the UK. "It can be done as long as the plastic is well enough packaged to get through customs," said the owner of one factory.

At "plastic street" in Mai village, dozens of small plastic recycling firms line the road. Most of the work is done by migrant workers who are paid about £50 a month.

Thousands of plastic carrier bags were being blown into ditches and waterways, creating an eyesore and a bad smell. Students at the local school said the stench came into their classrooms and got worse when the fetid stream floods.

The sanitary department of Shunde township said it was unaware of the mess in Mai village.

"We have a project to clean up villages in this area but we haven't got round to Mai yet," said a spokesman. The provincial government declined to comment.

Britain supports the recycling business. "It allows for a more sustainable use of world resources, but it should be carried out under strict environmental controls," said the UK consulate in Guangzhou. When told of the impact on Mai village it said individual companies should take more responsibility.

Greenpeace believes that wealthier countries should deal with their waste problems at home, rather than exporting them to developing countries, which have to pay the environmental costs.

"If we can stop the waste trade I am sure it will lead to more sustainable development around the world," said Kevin May, toxics campaign manager at Greenpeace's office in Beijing.***

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Waste land

China makes most of our plastic carriers - it also recycles them when we toss them away. Crazy? It's become a fashionable thing to worry about - and there's a new It bag to prove it. Jonathan Watts in Mai and Jess Cartner-Morley in London report

Jonathan Watts and Jess Cartner-Morley
Saturday March 31, 2007
The Guardian

Five thousand miles from the nearest UK high street, a blue and white Tesco carrier bag flutters like a flag in the breeze. It is snagged on a twig above a Chinese stream that's choked with rubbish from around the world. Argos and Wal-Mart logos are visible in the fetid water and along banks that are strewn with plastic bags. There is even a green and white Help The Aged carrier with a UK website address on it.

Here in Mai, a village in Guangdong Province, southern China, a community of recyclers ekes out a living from items considered so worthless in the west that they are given away free and quickly discarded. Carrier bags and bottles are shipped here from London, Rotterdam, Hong Kong and cities within China for chopping, melting and remoulding into pellets. Like many jobs outsourced to China, it's dirty, smelly, labour-intensive and poorly paid.

There is so much rubbish to be recycled that parts of the village look like a dump. "The river is foul - we can smell it from our classrooms," says Wang Yanxia, a student at a local middle school. "When it rains, the water floods on to the path and the stench is everywhere." Villagers may not have heard of Tesco, but the British high street giant has an all too visible presence. One factory has even decorated its front gates with huge plastic banners advertising a Tesco mobile phone offer.

If China is the end of the line for the plastic bag, it is also the beginning. Most of the carrier bags used in Britain are made in Chinese factories just a few hours' drive from Mai. From there, they travel halfway around the world, are dished out to British shoppers - and then at least some of them find their way back.

The 10,000-mile odyssey between manufacturing and dumping is the story of our age, part economic miracle, part environmental tragedy. In the space of just 20 years, the fishing village of Shenzhen, in the south of China close to Hong Kong, has become an industrial powerhouse with a population of more than eight million and a container port that handles more cargo than anywhere in the world other than Hong Kong, Singapore and Shanghai. This is where most of the planet's toys and shoes are made, where Apple outsources much of the production of its iPods, where Wal-Mart fills its shelves. And, naturally, it is also the place that makes billions of the plastic bags that briefly contain all these consumer goods.

Shenzhen Delux Arts Plastics is a typical manufacturer, paying its workers about £60 a month to churn out 25,000 plastic carriers every day, a fifth of which go to Europe, some to Next in the UK. It is a simple, three-part process. Bags full of plastic pellets are fed into an induction pipe, melted together at a temperature of 180C and then stretched and wound on to rolls the width of the desired bag. Next, the rolls are fed through a series of cylinder printing presses, each adding a different colour, until the logo and lettering are complete. Finally, an army of workers on the second floor carries out the more labour-intensive process of melting handles on to the bags, checking quality and packing. From start to finish, it takes just five minutes to make a bag.

The production cost for each bag is less than four pence, most of which goes on machinery maintenance, management and materials. The primary ingredient is polyfabric polypropylene or other types of plastic, all of them petroleum based and imported directly from Saudi Arabia or from refineries in Singapore and Japan. The industry has a significant carbon footprint. By one estimate, the US alone requires 12 million barrels of oil for the 100 billion bags its consumers use annually.

For factory manager Andy Lue, the main concern is that the cost of plastic is rising along with the surge in oil prices. "Our customers would complain if we tried to pass on the extra cost of the materials," he says. The factory's main competitive advantage is labour, which accounts for less than a 10th of the production costs of a plastic bag. Wages in Shenzhen are low, and more than three-quarters of the population are migrants, many of them living in huge company dormitories far from their homes and families, and working in dirty, dangerous conditions.

Over at the Delux Arts Plastics factory, pay and working conditions are above average for Shenzhen. The manager will not permit us to talk to employees, but we are introduced to "group leader" Chen Ping, a migrant from Guangxi Province, who tells us that the situation has improved enormously since she started working and living in the factory 11 years ago. "The managers realise they must let us eat and sleep better if they want us to work harder."

Chen earns more than double the average factory salary, but her life is far from easy. Because she is a migrant, her two children will have to return to their home town to go to school, which means she will see them for only a few days each year, at spring festival. But she expresses no sense of grievance, even though the consumers who use her Next bags can easily pay more for a single shirt than she earns in a month. "I don't think it is unfair. We make these bags to be used. They have their own value."

In Britain, plastic bags have long been a cause of irritation, partly due to their visibility. In gutters and branches, the useless, ugly flutter of discarded, brightly coloured plastic taunts us with human fecklessness. They pose problems for wildlife, they block drains. And 17 billion plastic bags a year are handed out to British shoppers.

What has made them, suddenly, a very hot issue is the launch of another kind of bag - an item that has already become the status bag of 2007. This is not the reissued Chanel quilt-and-chain classic, the 2.55. It is not even the YSL Downtown, with its modish zips and snap fastenings. And - here's the thing - it costs £5.

There is nothing inherently remarkable about Anya Hindmarch's I'm Not A Plastic Bag. It is a simple, rope-handled, sturdy cotton shopping bag, albeit one that's rather beautifully designed, as you would expect from the British Accessory Designer of the Year. What is significant, however, is the reaction to it at every stage, from the sketchbook to the checkout. There have already been queues at the Mayfair store Dover Street Market, when a few preview bags went on sale.

At around the same time, the British Retail Consortium has announced a voluntary initiative to reduce the environmental impact of carrier bags by 25% by the end of next year, through the use of alternative materials to make lighter-weight bags, by encouraging reuse, offering and promoting "bags for life", always asking customers whether they require a bag at all and providing bag recycling points. In other words: reduce, reuse, recycle.

Friends of the Earth are quick to point out that, in the context of the scale of the environmental issues with which we are faced, plastic bags, which account for only 0.3% of the domestic waste stream, are not their top priority. Even so, the average person in the UK accepts, on average, five plastic bags a week. The decision as to whether to take a bag is almost a daily one. The supermarket checkout has become, therefore, a frontline of the battle for the environment, even more so because, unlike recycling or composting of domestic waste, it is a decision we take in public, and so reflects not only personal beliefs but what we see to be public norms.

It is for this reason that Decline Plastic Bags Wherever Possible is the first action suggested in the book Change The World For A Fiver. "Declining plastic bags is totemic of lots of things," says Eugenie Harvey, co-founder of the global social-change movement We Are What We Do, which produced the book. "It's the most visible aspect of a whole set of behaviour around shopping: do you buy environmentally friendly washing powder; do you buy locally produced food?"

Trevor Datson, spokesman for Tesco, calls the "Do you need a bag?" moment at the checkout "a constant conversation between us and the customer. I was in the Sandhurst store yesterday and my colleague on the checkout remarked to me how many more people remember to bring in their own bags these days."

Hindmarch's bag may help. She has a knack for reading the zeitgeist, as illustrated by the phenomenal success of her Be A Bag range, whereby family photos could be made into smart handbags, a concept that in the six years since it was launched has been copied all over the world. The low price of the I'm Not A Plastic Bag - a fiver - was absolutely essential to the project, Hindmarch says. "And so was the point of sale, which had to be the supermarket checkout."

Hindmarch is, however, a businesswoman, and as such knew that too many £5 Anya Hindmarch bags on the market would damage her upmarket brand. (To put the price in perspective, the Elrod, one of the key Anya Hindmarch leather handbag styles for this summer, sells for around £500.) Production therefore had to be limited, and so the bag had to be made in China if the figures were going to add up. "That was not ideal, of course," Hindmarch concedes, "but we have been careful about carbon-offsetting the project. Our aim was for the project to break even. None of the retailers involved in the project is making any money from it."

A limited number of bags are currently on sale via Hindmarch's website, and from April 11, the remaining 20,000 bags will go on sale in Sainsbury's.

The purpose of the Hindmarch bag is, says the designer, "to cast a spotlight on the issue. Just to plant an idea in people's heads that will make them think before automatically reaching for a bag."

Finding a complete solution to the plastic bag problem is extremely complicated. All the supermarkets profess commitment to the issue, but all have different policies. Tesco produces all-degradable bags and operates a clubcard scheme to reward people for reusing bags, on the principle that "incentive is better than coercion, because if people do something resentfully, they are not making such a deep-seated change".

Waitrose emphasises the "bag for life" scheme, which they were the first retailer to introduce 10 years ago. The Co-op's bags are degradable; Sainsbury's are made of one-third recycled material. The opening of the country's first organic supermarket, Whole Foods Market in Kensington, in June, may further accelerate the process of change - the store, like its Fresh & Wild predecessors, will refund customers 5p for not taking a bag.

Friends of the Earth, however, would like to see a government tax on all plastic bags. Degradable and biodegradable bags are "not an environmentally friendly option", they say, and "will lead to the public becoming increasingly confused as to what they are supposed to do with them. Degradable plastic bags usually can't be recycled with normal plastic bags, and people may think they can put degradable bags into their compost bins, which they can't." Degradable bags are still made from plastic, so placing demands on oil resources. They contain a metal additive to make them degrade and tend to require sunlight to break down. If biodegradable bags end up in landfill, they will eventually produce methane, a powerful greenhouse gas.

Paper bags are no better, say Friends of the Earth, because they have less capacity for being reused, and require more energy and resources in manufacture and transport than plastic alternatives. Bags made from recycled plastics, which are then reused or recycled, are considered by many a better option, but recycling points for bags are as yet not widely accessible.

In any case, all too often, a promise by municipal government to recycle simply means sending the rubbish to China. In trade terms, it makes an odd kind of sense. Historically, British merchants have always found it easy to fill their ships with goods on the route from China, but all too often they have been stuck with empty cargo holds in the opposite direction. This trade gap is the main reason why English gunboats forced opium on China in the 19th century. Today, however, the answer is not drugs, but garbage.

China exports almost £12.6 billion-worth of manufactured goods and other products to the UK each year. In return, the UK sends back 1.9 million tonnes of rubbish, for the simple reason that it's cheaper than dumping it at a UK landfill site. Because the ships are almost empty on their way back to China, the cargo costs are tiny - it's cheaper to send a container of waste from London to Shenzhen than it is to truck it to Manchester.

Under EU law, waste cannot be dumped abroad, but shipments for recycling are permitted. This means business for Guangdong Province, which is scattered with Steptoe and Son communities. There are the e-waste centres of Guiyu and Qingyuan, where families make a living from chopping up and melting down toxic plastics and metals from discarded computers, printers and mobile phones. Below them on the waste chain are the recyclers of plastic bags and bottles in Shunde and Heshan.

Until recently, the most notorious of these was in Nanhai, a town just outside Guangzhou, where the streets were once piled high with rubbish and the streams thick with trash and pollution. Last month, however, after a series of embarrassing reports in the British media, the government was shamed into shutting down the entire area and banning imports of foreign garbage. Today, the streets of Nanhai are swept clean and the small recycling sheds are shuttered up. For many locals, however, this sudden concern about the environment is a financial disaster. "We were ordered to close last month because some foreign rubbish contained toxins," says Ding Chunming, who used to process bottles and bags. "It's a terrible blow because we only started this business last year. We get no compensation. All we can do is wait and hope the government allows us to restart business."

But the industry has learned how to bypass laws and regulations. Many Nanhai refugees simply moved their scrapheaps to a new location. Two hours' drive away, we found a new recycling centre under construction in Shijing village. The concrete is still wet on the floor and many of the sheds are only half complete, but the task of buying, selling and sorting rubbish is already in full flow. The operation is remarkably specialised. There are sections just for discarded hotel welcome mats, the bases of revolving chairs, black buckets and the lids of shampoo bottles.

A local businesswoman, who gave her name only as Ms Liang, was terrified that another critical news report would force her to relocate again. "We have only just got here from Nanhai," she says. "I have never dealt with foreign waste. I can't do it now and I won't do it in the future."

But for others the trade in foreign waste is too lucrative to disappear quickly. We were approached by a scrap dealer who asked if we had any rubbish to sell. He was after PVC, but he put us in touch with a factory in Shenzhen that said it could deal with carrier bags despite the ban. "It can be done as long as the plastic is well enough packaged to get through customs," says the owner. "You should ship them to Hong Kong and we will deal with them from there. If the bags are sorted by colour, we can pay you as much as $100 a tonne."

Farther away from the media spotlight and the scrutiny of environment officials, many factories are still reprocessing British carrier bags and other rubbish despite the government's ban. Another hour's drive away is Shunde, where European trash is baled up on the roadside. Much of it is from the UK - Tesco milk cartons, Walkers crisp packets, Snickers wrappers and empty packets of Bisto gravy and Persil powder - but there are also bales containing the packaging for Dutch confectionery and Italian nappies.

The village of Mai is close by. Running through the community is a street of recycling firms, outside each of which stands a blackboard detailing the type, colour and quality of the plastic they deal in. Some are no bigger than a shed in which migrant workers sift by hand through hundreds of thousands of tiny plastic pellets, picking out discoloured flecks and bits of fluff.

Mai Weibo buys semi-processed bags for 9,000 yuan a tonne (around £600) and, after painstakingly cleaning up the contents, sells the plastic on for 10,500 yuan - "We don't make much of a profit." The recycled plastic is not of sufficiently high quality to be used a second time for UK bags, so instead much of it is turned into red, white and blue plastic sheets, which are used for building site coverings and holdalls.

Many locals believe the pollution is ruining their health. A local doctor says the village suffers from an unusually high incidence of respiratory diseases. "Perhaps it was the pollution or perhaps it was because everyone smokes cigarettes," he says. "This is a sensitive topic. Of course we want a garden-like environment, but people here have to make a living."

Others say they have other priorities. "I don't care about the environment," says one migrant labourer. "I only want to make money. If your stomach isn't full, how can you worry about health?"

Everyone condemns as an eyesore the ditches full of carrier bags, but nobody seems to take responsibility for clearing up the mess. In fact, the main concern of local businessmen and government officials is to avoid scrutiny. "The government has banned imported waste because of the media attention," says one local factory manager, whose warehouse includes giant baskets full of rubbish from the UK. "The Nanhai recycling business has been shut down. This area doesn't want to suffer the same fate because it would hurt the government's income."

Britain's stance is also equivocal: dumping waste overseas is forbidden, but sending it to another country for recycling is acceptable. When told of the foul conditions at Mai, an official at the UK consulate in Guangzhou says that individual companies have to take action. "It is the responsibility of producers to make sure that waste is dealt with properly at all stages of the chain."

Foreign governments have started to take action specifically on plastic carriers, some going much further than Britain's retailers and their aim for a voluntary 25% reduction in bag use by 2008. Ireland, for example, introduced a 15p "plastax" on carrier bags way back in 2002, which has subsequently led to a 90% reduction in use. Australia has launched a "Say No To Carrier Bags" campaign. In Taiwan and Hong Kong, the government has obliged supermarkets to charge for bags at least two days a week. Italy is promoting the use of biodegradable bags. In France, reusable plastic bags - which are heavier, easier to recycle and less likely to blow away - now account for more than half of the ¤770m market.

Inevitably, however, even those eco-bags are made in Shenzhen. The main producer is the Richall Group, which must be one of the world's fastest-growing companies. Launched in 2003 with starting capital of just £1,000, last year it recorded sales of more than £3m, and this year that figure is expected to triple, thanks to business from Sainsbury's, Unilever, Disney, Budweiser and Nestlé, all of whom are looking towards reusable bags. Richall's president, Liu Tianyan, says attitudes are changing but, more importantly, so are materials. "We're never going to get rid of plastic bags completely, because in some cases, such as food wrappings, there is no good substitute. But in the case of shopping bags, I believe the flimsy plastic can be completely replaced."

Not everyone thinks that would be a good thing. Peter Woodall, communications manager for the Carrier Bag Consortium, says, "It's important to forget the emotion and look at the science. We are not filling our landfill with plastic bags. That is simply a myth. When real science is taken into account, the best environmental choice is plastic. Life-cycle analysis shows that if you use a conventional bag four times and then recycle it, that is better than using a 'bag for life'."

Environmental campaigners, meanwhile, believe the only solution is to make rich countries deal with their waste locally. "That's the only way to make the whole community feel the impact," says Kevin May at Greenpeace's office in Beijing. "If you can easily dump waste overseas, then there is no motive for having a waste-reduction programme at home. The argument that developing nations need recycled resources from wealthy nations is only partly true. The environmental costs are too high. Just look at the filthy water and polluted air of China. If we can stop the waste trade, I am sure it will lead to more sustainable development around the world."

The apparent intractability of the plastic bag problem is all the more remarkable considering that our dependency on them is a recent phenomenon. Polythene was not even invented until the 30s, and plastic bags did not become common in supermarkets until the 70s. The idea that we can't live without them is a very modern one.***

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