For many years China was the world’s dumpsite, importing plastic waste from developed countries, including the EU and the US, and processing it at home. In 2017, an import ban enforced by the Chinese government turned the global plastic waste industry upside down, bringing China’s total imported plastic waste down from 7.3 million tons in 2016 to almost zero in 2017. The ban left those countries which had been depending so much on China no choice but to either turn their ships full of plastic waste around, or to send their waste to other developing countries, such as Vietnam, Malaysia, Thailand and Indonesia.
A variety of rules focusing on waste management are now being implemented in China, including strict waste sorting rules in Shanghai. While most people agree that these rules are generally aligned with the government’s sustainability agenda, behind the policy shift is a goal bigger than just protecting the environment.
According to “Trash Woes: Unpacking China’s Waste Plastics Ban – Implications for Business”, a report published by the not-for-profit research organization The Conference Board, “Made in China 2025 (MiC 2025) is China’s official, overarching initiative to upgrade its industrial sector and become a world leader in high-end manufacturing. Launched in 2015, its aim is to move China’s domestic industry into the high-tech, clean, and resource-efficient segments of the global manufacturing value chain.
One important component of the MiC 2025 strategy focuses on improving the quality of domestic industrial materials production, including the upgrade of plastics manufacturing and processing industries. The latest plastics industry development plan outlines the key components of this upgrade, one of which is focused on improving recycling and utilization levels of domestic waste plastics.”
Anke Schrader, the co-author of the report and Senior Researcher at The Conference Board in Beijing, spoke to CDB on the sidelines of the 2020 CRO Global Summit in Shanghai, to share her views on how the plastic waste import ban and waste sorting rules may help China achieve their industry upgrading ambitions, and how the recycling industry is adapting to the changes since the ban.
Anke Schrader, Senior Researcher at The Conference Board (Photo: CRO Global Summit)
Besides environmental concerns, what are the reasons China implemented the plastic waste import ban in 2017?
In the past, recycling plastic material was a means for China to get cheap access to resources. But when we look at the virgin and secondary plastic material market in China and the imports of those materials over time, we clearly see that China has become less and less reliant on imports and much more focused on domestic production. So, from a purely economic viewpoint, there was not as much incentive anymore to import waste, especially in light of the challenges that persisted with trying to maintain import standards.
Ensuring and maintaining import standards was challenging even after regulations were tightened, and despite efforts to coordinate enforcement across different state organizations. Problems with sub-par quality imports persisted.
Another important aspect to this is that China is battling its own home-grown waste problem. Because of growing domestic consumption, the amount of waste that’s being created here in China is also growing quickly, and it’s not only plastic but a lot of other solid waste material as well.
China has traditionally dumped a large share of this waste in landfills. This is obviously not a long-term solution, and the government is well aware of that. Instead, China is aiming to build a comprehensive and efficient domestic waste management infrastructure.
Could you briefly explain to us the recycling industry in China and how they have been affected by the ban?
Information about the domestic recycling industry is thus far very limited in China. I think we may see that changing going forward. But for now, there is not a lot of reliable data out there on the size or efficiency of the sector, such as the total number of operating companies, their business scope and activities, their recycling capacity, performance and efficiency levels. This makes it difficult to assess where the industry currently stands.
My understanding is that businesses that recycle domestic solid waste and businesses that were focused on imported waste were largely separate. It seems that a lot of the more advanced and professionally run recycling businesses were the ones utilizing imported waste. A lot of the businesses that focus on utilizing domestic waste are small-scale businesses or family-run, generally less professionally operated and with more issues regarding maintaining environmental and safety standards.
Following the import restrictions, many of the Chinese companies that had previously processed imported waste relocated to other Asian markets. But that strategy has proven difficult for many businesses because those Asian markets are also starting to implement their own restrictions and bans.
Rather than having them relocate to other Asian markets, I think the idea was that Chinese recycling businesses that had previously focused on imports should shift to recycling domestic waste. I don’t think it is as yet clear if this “conversion” is being successful.
One of the key things that the Chinese government wants to do is to remove the small-scale, inefficient parts of the sector, and shift to clusters of large companies and value chains. Given this long-term plan we will probably see a lot of small businesses being pushed out of the market.
Are there any plans in place to help the industry shift from the old business model or upgrade its infrastructure?
There are several central government plans in place, some of them focus on recycling systems and processes, some of them focus on specific materials, and some of them are more broadly about overall waste management. All of them are very clearly aimed at drastically transforming the existing industry structure, trying to push it from lower to higher value-added, very similar to what we are seeing in other Chinese industrial plans. The long-term goal is for the recycling industry to become fully standardized, technologically advanced, environmentally friendly, and internationally competitive. But massive investments, and importantly, clear policy incentives and rigorous oversight will be needed to achieve this. I think it’s certain that we will see significant investment flowing into recycling innovation and technology over the coming years. How effectively that investment will be utilized remains to be seen.
Following Shanghai, many big cities including Beijing will be implementing waste-sorting rules soon. How would the implementation of waste-sorting help reshape the whole industry?
The simple fact that Chinese households now have to collect and sort their garbage obviously has a huge impact on the industry, because it means municipalities have to create a whole new infrastructure that wasn’t there before. From sorting to collection, transportation and processing, all of that needs to be newly implemented or done in a different way than it was in the past. So clearly the impact on individuals, businesses, and communities will be significant.
The total recyclable waste collected in China is expected to increase drastically after the implementation of waste-sorting rules. Will the recycling industry be able to respond to the change in such a short period of time? Will it become a disruption to the industry?
Not only does it take time to build the physical infrastructure needed, but systems and processes need to be implemented as well, so yes, I am sure there will be many disruptions and inefficiencies, especially in the early days. There is, inevitably, going to be a steep learning curve based on trial and error, and many challenges and inefficiencies to be worked out that aren’t even foreseeable right now.
The recycling rate for Shanghai has already increased multiple times since the implementation of the waste-sorting rules in 2019. But in terms of the local industry’s ability to process and utilize this waste efficiently, there are still numerous questions: do they have enough businesses to pick this up or are current facilities overwhelmed? What’s the quality of the stuff that arrives at the gate? Are facilities actually able to process the waste in a safe, clean, and profitable way? There are certain regions within China where recycling businesses are concentrated, so those areas may be less affected by new household recycling rules. But in areas where they didn’t previously have a lot of infrastructure and the local government isn’t spending enough time and resources early on to plan, I am sure there are going to be significant challenges.
What kind of businesses will grow from the plastic waste import ban and waste-sorting rules? For example as mentioned in your report, Chinese investors are now building plastic waste processing facilities in the US in order to meet China’s import standards.
There are many different opportunities. If we take the US for example, some of the Chinese businesses that previously processed waste in China are basically taking their business to the source of the waste. Instead of working with the waste importer, they relocate to the US and work with municipalities or the company that delivers the waste. They process on site in the US and upgrade the material there, then re-sell it within the US or export to other countries. Similar business opportunities obviously exist for US companies.
In China, as I said earlier, as more recyclable material gets collected, we should see huge investments across all segments of the recycling value chain, not only to ensure that the material is being processed, but to support making the industry efficient, clean, and commercially viable. This will include not only households, but also industrial waste.
It is also going to be interesting to see how changing company strategies will play into this. Many large consumer goods companies now have publicly committed to very aggressive targets about using recycled materials in their products and packaging, and for that you actually need the resources. If twenty or thirty very large consumer goods companies decide that they want to have a high share of their plastic material coming from recycled sources, then you need a lot of recycled plastic material to make that happen.
When more and more cities in China start segregating waste, will it be possible for China in the future to export part of their recyclable waste to other countries?
That’s a very interesting question. I hope not. China is currently exporting less than 1% of their plastic waste to other countries. Exporting is not part of the equation for China right now, they are processing almost everything at home.
If you think about the idea of moving towards a more circular model of material use in general, and I believe we can all agree that that’s a good idea, it makes sense to move away from waste export towards localized solutions. Given the reality of how different quality and environmental standards are across the world, sending your waste abroad is very problematic. And I don’t see that will change in the near future.
If China would start exporting a large or increasing amount of their waste it would essentially be repeating the mistakes of the past. They would likely be exporting to markets with less stringent environmental standards and that would further create environmental problems in those countries. That’s not a scenario that sounds very appealing to me.
I think China is more likely to solve this problem domestically by trying to turn their recycling industry into a productive and profitable industry. I do, however, think China is keen to develop recycling as a new green growth market where it can dominate world production, similar to what it did with the solar panel industry.
What are your thoughts on the trends of the recycling industry and how everything will develop in the next ten years?
I think over the coming years China will definitely make household recycling mandatory across the country, at least within cities and major municipalities.
There are already plans in place to do so. China is quite strategic about the way they are planning this, initially picking a small number of trial cities, and from there rolling it out more broadly. Of course, as I said earlier, we are inevitably going to see inefficiencies and challenges with implementation along the way.
Also, as we discussed earlier, if things go as planned, we should see a huge surge in investment over the coming years. That’s basically an inevitable consequence of forcing households to start sorting and collecting waste.
Another, closely related issue will also get keen attention, and that is how to shift towards more sustainable consumption patterns that actually reduce the amount of waste generated. Within the sustainability community, there is fierce debate over whether recycling isn’t ultimately preventing people from changing their waste-generation behaviour. But in developing countries, per capita consumption is going to increase for the foreseeable future, not decrease. China’s zero waste cities pilot scheme, in many ways, is trying to combine recycling with reduction schemes. It will be very interesting to see the outcome of these pilots.
