China’s Recycling Industry Rebounds from its Contraction in 2014 and 2015thucice
After years of rapid growth, China’s recycling industry contracted in 2014 and 2015, largely as a result to falling commodity prices and a slowing economy. Revenue from recycled steel, glass, plastics and boats had fallen by 17 – 47%. One of the only exceptions was scrap vehicles, with an increase of 80% from the previous year. Research by the Ministry of Commerce covered 10 major waste streams (non-ferrous metals, paper, tyres, e-waste, textiles, etc. in addition to the above), and found that overall revenue from all streams was down 20% from 2014 to 2015 to 514 billion RMB. The sudden halt in growth after experience from years prior created significant overcapacity in the industry, leading to the closure of 7000 enterprises and lay off of close to 3 million employees.
A report by the Ministry of Commerce (中国再生资源回收行业发展报告2017) shows that the industry in 2016 fared slightly better. Interestingly, revenue from scrap vehicles dropped (-11%), while that for composite revenues for the 10 waste streams increased an average of 15% to 590 billion RMB, compared to levels in 2015.
The increase correlates with global prices for recyclable goods (Figure), which also rebounded in 2016. More important than prices, however, several other factors have contributed to renewed confidence in the industry, including 1) strong government support, 2) expanding the business case for recycling, and 3) integration with new and emerging technologies (internet+ and internet of things).
The Chinese government has pushed circular economy principles and practices officially since 2008 when promotional legislation was passed. However, recent efforts have intensified. Since 2013, 103 pilot cities have been selected to develop advanced recycling practices, where the government has invested and provided support for new recycling technologies. Recent policies, including in the 13th Five-Year plan (Table) and the Made in China 2025 industrial policy, have whole sections on circular economy promotion. Further, developments in standards and regulations have put more pressure on enterprises to adopt better resource efficiency and recycling practices. Strong governmental support is expected to continue over the next decade as the central government strives to meet targets for recycling rates and resource productivity.
|Waste resource value added*||RMB / tonne||5994||6893||15%|
|Waste recycling rate*||%||47.6||54.6||7 % (points)|
|Energy value added||RMB / tce||14028||16511||17.7%|
|Water value added||RMB / m3||97.6||126.8||29.9%|
|Land use value added||1000 RMB / Ha||1546||2004||29.6%|
|Waste straw recycling rate||%||80.1||85||4.9% (points)|
|Industrial solid waste recycling rate||%||65||73||8% (points)|
|Industrial water recycling rate₮||%||89||91||2% (points)|
|Renewable resources recycling rate||%||78||82||4% (points)|
|Urban food waste recycling rate||%||10||20||10% (points)|
|Urban water recycling rate||%||－||20||－|
|Recycling industry output||Billion RMB||1800||3000||67%|
* Applies to specific waste types (as indicated in 13th five-year plan documentation)
₮ Applicable depending on industrial capacity
A major part of the government’s initiative has been to improve the business case for recycling, and they have laid the groundwork for such. This has led an increase in Public-Private Partnerships (PPP) across all environmental projects, including recycling ones. A glance at published materials by environmental news agencies in China (E20水网固废网, 固废观察, etc.) suggests that these may be the new preferred business models. In late 2016, the Chinese government also passed legislation on extended producer responsibility, which includes 20 actionable items ranging from improvements to monitoring and enforcement, to recycling plans for specific waste streams. The legislation was developed under the premises “government led” and “market driven”, and includes in it a healthy mix of both incentivizing and regulatory measures that should help level the playing field by discouraging waste production and encouraging industry leaders to develop recycling systems.
Emergences in information technologies have also played a critical role in the development of recycling. Mobile and internet platforms have popped up across the country to help connect and facilitate buyers and sellers of waste. Platforms are also being developed at the industrial level to track material and energy flows. In industrial parks particularly, this has been helpful to identify useful waste streams from one enterprise as inputs to another. One anaerobic treatment company uses internet of things to track their food waste supply chain, account for the quantities produced by each of their suppliers, and ensure that their load does not end up in the illegal recycling sector (transformed to gutter oil) along the transport to the digestion plant. Such platforms have really helped to expand the market for recycled goods, and fills a major need in collection, which has traditionally been one of the biggest bottlenecks in the industry.
2016 was positive for the recycling industry, but it still faces challenges. A year removed, and commodity prices still are still relatively weak, making it more difficult for recyclers around the globe. The changes made, however, indicate a greater level of robustness in the industry. If it is able to continue these structural improvements, there is every reason to believe that it will meet its targets and almost double in size by 2020.