In the rolling hills alongside the Three Gorges reservoir, on a Tiananmen Square-sized plot of land, stands a sign marking the site of an “Integrated MDI Project” in the village of Baishi. On completion, this will be home to the world’s largest Methylene diphenyl diisocyanate plant and the villagers all know that German chemical giant BASF is on the way.
Media reports have reflected the strength of reaction to the choice of location, with some environmentalists calling it a “timebomb” at the head of the Three Gorges.
BASF’s project here in the municipality of Chongqing, central China, is just one example of the rush to invest in the region’s chemical industry. Chinese firms PetroChina and Sinosteel are also among the host of chemical giants setting up locally. It is anyone’s guess what the Yangtze River will look like in five years time.
Environmental issues have been a concern ever since the Three Gorges became a reservoir and remain so. Earlier this month, I travelled along its banks and witnessed the tension between job creation and environmental protection. The plentiful water resources here in the Yangtze hinterland are attracting a new wave of chemical-sector investment. But the smooth progress, or otherwise, of BASF’s plant will point the way for future development.
Clearing the way
BASF, headquartered in Ludwigshafen in Germany, manufactures products ranging from fertiliser to specialised plastics. In China, the firm already has factories in Shanghai, Nanjing, Guangzhou and Jilin. The Chongqing MDI plant aims to serve the market in western China.
MDI, or methylene diphenyl diisocyanate, is the raw material used to produce polyurethane (PU), which in turn is used to make everything from handbags to shoe soles. Guan Zhihua, president of BASF China, has said the Three Gorges location was chosen for proximity to sources of natural gas – needed to produce PU – as well as the prospects of sales to the growing construction and automobile sectors. And so the future of Baishi, a village close to the reservoir, has become inextricably linked to that of this multinational corporation.
Up until that point, Baishi, in Chongqing’s central district of Changshou, was just an ordinary village. Even now, you still see river birds flying over the fields. But those fields will soon be transformed into a factory belonging to a Fortune 500 firm. Villagers are already being relocated to make room; moved to the stretches of new buildings springing up alongside the Yangtze. A modern logistics network is under construction, with a Changshou Industrial Zone train station set to be built just behind the MDI plant. If only they were staying, say the villagers, they could take the train to Shanghai.
Former party branch secretary Hu Quanyou is perched on a wooden stool at the entrance to the village, chatting with the other villagers. “When it comes to development, the new is better than the old,” he says. “The capitalist countries never developed this fast, did they?”
Hu counts them off on his fingers. When BASF was clearing the land, eight production teams were moved. During the next phase of construction, another 13 went. Of the 1,300 original villagers, only 200 remain – and they and Hu will be leaving when the plant starts running. They don’t know what their new lives in the city will be like, but they long for the benefits the factory might bring. “Those places with factories – Shipan, Dukou – they’re rich,” says Hu. “The village head and party secretary all drive luxury cars.”
In fact, the jobs will not go to aging and unskilled villagers. Work in a modern factory is not easy to get. But even if most locals fail to find employment in the actual plant, the number of jobs that BASF will create in upstream and downstream industries should not be underestimated. A timetable worked out by BASF and the Chongqing government when ground was broken in 2007, anticipates production will start in 2012, creating a natural gas industrial group with target annual sales of 50 billion yuan (US$7.3 billion) and generating some 250,000 direct and indirect jobs.
The knock-on benefits will go even further. Taxi driver Li Xiaohong is making almost 10,000 yuan (US$1,460) a year in Changshou. He is not sure what he wants to see happen. The more plants there are, the more people travel between them, but he doesn’t like the idea of too many factories.
You sometimes get a whiff of something unpleasant in the air here. The expert locals can tell you if the smell is coming from the acetate factory or the biochemical plant and even which factories you can smell from which hills. Changshou has already become a chemical-industry city. Li says that whenever someone falls ill and the local hospital sends them to Chongqing for tests, the diagnosis is always cancer, or worse. This worries some, but others are unconcerned.
Changshou is at the head of the reservoir. An enormous industrial park has already taken shape here, and it is only going to get bigger. Three huge projects are on the way: a Chongqing Iron and Steel Company plant with expected annual output of five million tonnes; BASF’s factory, which will produce 400,000 tonnes of MDI a year; and a PetroChina oil refinery, with an annual processing capacity of 10 million tonnes. The locals tell each other that even if all the other plants fail, those three alone will keep the local economy healthy.
Chongqing, a young municipality, is in the process of restructuring its industrial sector. Heavy-chemical plants are being moved out of the city to make room for automobile and electronic-components manufacturing – and the destination is Changshou’s new industrial zone.
Changshou has everything the chemical industry needs and BASF knew that when it chose the location. In the 1960s, the government decided to develop key industries in inland China in order to protect them from military attack in case of a war – and this was an important location for large chemical plants. The city is set to host a complete industrial chain. According to the zone’s managers, it will bring five different processes together. Infrastructure is also being put in place, such as the two bridges built over the Yangtze for Chongqing Iron and Steel’s 24 billion-yuan (US$3.5 billion) plant.
Changshou itself is a bustling city. At night, the central square – located at the city’s highest point – is lit up and filled with locals eating the local spicy chicken dish and visiting the department store, which is covered with illuminated property advertisements.
Protecting investment
Industry investment has boosted Changshou’s economy. But the other side of that coin – environmental dangers – cannot be ignored. BASF’s project in Baishi is one example of the risks being taken. This month the project won approval in principle from China’s Ministry of Environmental Protection. When the news broke, NGOs and environmentalists lined up to make their opposition clear.
Greenpeace scientists have pointed out that, while MDI can be stored easily and is not highly toxic, the raw and intermediate materials used in its production are extremely dangerous. The scheme’s publicly available environmental-impact assessment shows that the facility will be able to manufacture 400,000 tonnes of nitrobenzene and 300,000 tonnes of aniline annually. These are both highly toxic chemicals that are easily absorbed through the respiratory system. Long-term exposure can cause serious damage to the central nervous system. It was the release of nitrobenzene into the Songjiang River after an explosion at a PetroChina plant in Jilin in 2005 that forced downstream city Harbin to cut off water supplies for four days.
Given the sensitivity of the reservoir environment, Zhang Kai, head of pollution campaigns at Greenpeace, hopes that there will be a broader and fuller release of information before construction starts.
When I asked the Chongqing Environmental Protection Bureau about this, I was told that BASF’s design incorporated effective environmental-safety measures, with risk prevention systems at the workshop, facility and zone levels. Environmental risks would be controlled and the security of the reservoir’s environment assured, they said.
The bureau’s deputy chief engineer, Xu Yu, told me that Chongqing’s automated monitoring systems already cover more than 100 factories with potential environmental dangers and that, if BASF goes into production, it will be supervised in the same way.
But the sensitivity of the reservoir means that the sceptics’ doubts are getting plenty of attention – much more than the zone managers anticipated. Last year, local leaders were loudly publicising information on the project. But now they prefer to avoid the topic. “The local government had to fight to get the investment,” I was told, at both the Environmental Protection Bureau and the industrial zone. “As soon as things were stirred up on the internet, competing local governments started trying to grab it for themselves.”
BASF: not giving up
In fact, the MDI project is not yet a done deal. While BASF’s China arm told this newspaper that there is no chance that it will abandon the project, it did admit that the technical checks it has passed are only the first stage in the overall process. Next the project needs to be examined by the National Development and Reform Commission and so “The approval process for the BASF Chongqing MDI project is still underway.”
Like everywhere else, the global financial crisis has had an impact. BASF says it expects the worldwide MDI market to shrink in 2009, including in China. This has had an effect on the timetable and, while no details have been released, the planned date for the start of production may be pushed back until after 2012.
Responding to NGO and environmentalists’ doubts, BASF said it was aware of the importance of the Three Gorges area. The upper reaches of the Yangtze impact the water security of more than one 100 million people, and BASF has said it is committed to using the highest global standards in the construction and engineering of its chemical plant.
BASF also pointed out that this is not the first time the company has built a plant by a major river. A factory in Ludwigshafen, on the upper reaches of the Rhine – a major European river – has operated for 140 years without incident, and even has squirrels in the grounds. Similarly there is a BASF facility at Geismar in the United States, on the banks of the Mississippi.
BASF takes pride in its awards for corporate social responsibility. Yet the company’s Shanghai plant features on the pollution map run by the Beijing-based Institute of Public and Environmental Affairs. An explosion at one of its plants in Cincinnati, in the US state of Ohio, once left two dead and many more injured.
In contrast to its practice in other countries, BASF has not publicised information on the release of pollutants from its 15 wholly-owned and joint-venture plants in China – an omission that has led to accusations of “double standards” from Greenpeace.
In response to these criticisms, BASF this week said that its global operation publishes environmental information in its annual reports. But in China, things are done slightly differently. In accordance with local law, the information is instead submitted regularly to local environmental authorities.
Risking the environment
The risks posed by the plant itself will not be the only factor to determine whether or not approval is granted. The peculiar sensitivity of the area will also play a role. The Three Gorges reservoir – 600 kilometres long, 1,100 metres wide and downstream from a huge metropolis – is itself unique and so there is no prior example of a large chemical plant being built in this kind of location.
“Building this kind of facility here, even if it is up to standard, is bound to increase the dangers to the environment,” says Chen Jin, deputy head at the Yangtze Commission’s Yangtze Science Academy.
There is already research showing that the water’s ability to clean itself has been greatly reduced since the Three Gorges Dam was built. In the past, around half of all biodegradable pollutants flowing downstream from Chongqing had broken up by the time they reached Changshou. Now, just one tenth have done so. This means pollutants could accumulate in the reservoir over the long term.
Chen specialises in environmental protection in water projects. He explains that the ability of the reservoir to withstand environmental threats varies according to the season. From April to October, the water level is kept low in case it is necessary to prevent flooding in the lower reaches of the river. During this period, the water level is kept stable and it functions more or less as a natural river. Low levels of pollutants can be diluted. But when the dry season starts in November, the water level is raised to 175 metres in order to provide water for electricity generation. At this point, the reservoir struggles to break down or eliminate any pollutants.
Zhou Qingxing, head of Chongqing University’s Institute of Public Management, once concluded an article by writing that the biggest problems facing the city, full of aging industry, were the hazards posed by manufacturing plants and water pollution around the reservoir.
Chongqing was once China’s only large industrialised city with natural gas wells, and so the chemical industry took root here. Its local origins go as far back as pre-1949 days, with another spurt of growth occurring in the 1960s as a result of the relocation of the military enterprises, many of which have since been converted for civil purposes. Sinopec Sichuan Vinylon Works is one of the more successful examples of this process. A dedicated bus line runs to the factory run every hour from Chongqing’s long-distance coach station, and the queues are long.
The employment gap
There is another, more complex reason behind the efforts to attract BASF and similar firms to the region. The lack of industry in the Three Gorges area is becoming more of a problem every day.
Attempts by the former State Environmental Protection Administration (now the Ministry of Environmental Protection) to prevent water pollution in the Three Gorges saw paper, leather, fertiliser and dye plants with annual sales of less than five million yuan (US$732,000) closed, along with any small breweries and distilleries emitting high levels of pollutants.
“Actually there was no need for us to go and close them – they were going to end up underwater anyway,” says Xu Yu of Chongqing’s Environmental Protection Bureau, who has long been in charge of environmental monitoring in the area. As the small factories were located along the riverside, most of them were submerged as the reservoir filled, he explains.
The factory closures might have eased some of the environmental pressures, but they worsened unemployment. Since hearings were held on the Three Gorges Dam, cities on the banks have been stuck in limbo, for years forbidden from making any investment.
Wanzhou, halfway along the Gorges, hosts more relocated people than any other city. In the 10 years it will take to fill the reservoir, 200,000 people will resettle here. But the local economy has no jobs for them and the main form of employment for many of the young is work as motorcycle taxi drivers.
Wanzhou has electronics shops, McDonalds and several four-star hotels. But there aren’t many factories or mines, and that makes it hard for the locals to find work – and even harder for the new arrivals. Some of the windows in one apartment complex designated for the relocated are covered with ragged cloth. “The poorest of us don’t even get three meals a day,” says one.
Yang Yeyou is one of the many to have been thrown into poverty. A former village head, he opted to come to Wanzhou as he thought it would be easier for his children to find a good job. But things do not look good. There are few vacancies and the young are forced to become street hawkers or take odd jobs. “It doesn’t bring in enough to eat,” says 66-year-old Yang, shaking his head. He has had to take on cleaning work and use the 180 yuan (US$26.40) he earns a month to supplement the family income.
And so the prospect of jobs, direct or not, with firms such as BASF would be welcome. Wanzhou folk say that they envy Changshou – it has lots of factories, a better economy and richer people.
Preferential policies
Wanzhou has also been earmarked to host one of the three major industrial parks planned for Chongqing, this one using rock salt as the basis for a salt industry. There aren’t many large-scale plants actually in production here and the area zoned for industry has only scattered factories among the fields. But large companies have already cleared sites here. When the reservoir is full, Wanzhou will become a deep-water port and high-speed road and rail links to Yichang are under construction. Convenient logistics makes industrial development easier. Chongqing’s three industrial zones – Changshou, Fuling and Wanzhou – are all in the Three Gorges area.
At the end of last year, Chongqing’s environmental authorities held a seminar on environmental protection and development for the chemical and petrochemical sectors. The experts in attendance all agreed that the west of China, and particularly the Three Gorges area, needed faster economic growth and backed the expansion of these sectors, with the proviso that it was high-level development, and toxic and harmful pollutants were controlled. This was seen as providing a rationale for the development of Chongqing’s chemical and petrochemical industries, and paving the way for approval of the BASF and refinery projects.
Recent years have seen a loosening of policy on chemical-industry investment in the area. Chongqing regulations on prevention of water pollution, issued in 2002, forbade the building of projects which would cause, or risked causing, major pollution. Those already built were to be referred to local government for relocation or upgrade by the environmental authorities. But the document did not specify which industries constituted a risk, and it is clear that the authorities do not consider BASF and similar projects to be affected.
Eye-catching adverts in the Changshou industrial zone list the advantages for potential investors: preferential polices for investment in a national development zone, in the west of China, in the Three Gorges area and in Changshou. Wanzhou’s Longdu zone prominently displays similar information.
But will the Three Gorges paralyse development, or catalyse it?
It is worth noting that recent years have seen a wave of chemical-industry investment in the middle and upper reaches of the Yangtze, with heavy chemical plants laying the foundation for a shift of investment-led development from the coastal areas inland. The water-rich Yangtze has led to a land rush by chemical giants. PetroChina plans to follow an 800,000-tonne ethylene plant and 10 million-tonne refinery in Pengzhou with another 10 million-tonne refinery in Chongqing.
This new situation will test the environmental security of the reservoir as it fills. “The Three Gorges should be a key area for water protection, with investment in large chemical plants banned,” says Chen Jin. But the situation here is special: Chongqing sacrificed a lot for the Three Gorges Dam and the economic development drive is coming into conflict with the environment.
The Yangtze River Commission has just completed a research project on the development of an emergency-response system for the area, which covers management of the reservoir and aims to reduce environmental risk. The plans will be discussed with the Three Gorges Committee and the Office of State Flood Control before confirmation.
But the weathervane MDI project is still under consideration. According to an informed source, the Ministry of Environmental Protection paid another secret visit to the area at the same time as this report was being researched in order to refine the emissions standards and conditions for BASF’s scheme.
The water level in the reservoir rises in February as snow and ice upstream melts. The water runs clear and, while water-treatment plants in cities on the banks of the Three Gorges are still under construction, the impression is that water quality here is better than in many other Chinese rivers.
But there are still lurking dangers at the world’s largest reservoir. A Changshou ferryman points out the plastic barrels lined up against the wall of his building. The water from the middle of the river is still good to drink, he says – but not if the factories dump in the water: “Then we can’t drink it.”
Yang Chuanmin is a reporter at Southern Metropolis Daily and winner of the “In-Depth Reporting” prize in the China Environmental Press Awards, jointly organised by chinadialogue, The Guardian and Tencent.
This article was first published by Southern Metropolis Daily on February 22, 2009.
Homepage image from the Ministry of Environmental Protection, China