BEIJING (The Straits Times/ ANN) - On bad air days, factories are ordered by the government to cut or stop work but get no compensation for losses.
Mr Yi Jianxin closed his furniture factory in a southern suburb of Beijing almost a week earlier than he had planned for the Chinese New Year holidays this year.
It was not because business was slow. In fact, he had two orders worth more than 400,000 yuan (US$58,000) that had to completed before the new year.
But, like hundreds of other factories in the Chinese capital's suburbs, Mr Yi's factory had to stop production for four days last month after the air quality index (AQI) - a measure of pollutants in the air - was projected to exceed 200 for 48 hours, a very unhealthy level.
These factories are a mix of heavy industries as well as small and medium-sized enterprises in sectors such as food, furniture and textile.
With the authorities ordering such factories to stop work whenever air quality readings hit dismal levels, many factory owners complain of losses and question if such production halts are a long-term solution to air pollution.
"I had to call my customers to explain and send them photos of the (government) papers showing we had been asked to stop production," Yi told The Straits Times.
In another instance, when a red alert was issued at the end of last year, Yi had to give his 40 workers nearly a week off as his factory was among some 1,200 ordered by the Beijing government to shut or cut production for five days.
A red alert is issued when the AQI is forecast to exceed 500 for a day, 300 for two days in a row or 200 for four days.
"The government doesn't compensate us for any of this. And we'd be fined if we stay in operation. One of the factories here was fined 100,000 yuan for that," said Yi.
Factory owners told The Straits Times that inspectors, law enforcers and related officials make their checks daily, and sometimes show up as late as 9pm or 10pm to ensure that no one operates clandestinely.
Yi worries that business this year will be affected. "After all, it's a fact that I hadn't been able to fulfil the orders, and word will spread."
One customer, an insurance firm, had wanted the new chairs it ordered to be ready for its "back to work" ceremony on the eighth day of Chinese New Year, but this was no longer possible.
"They are planning to refurbish some 500 outlets in the new year, and will need new chairs for all of them. Now, they are likely to look for multiple suppliers, given that I couldn't deliver the goods on time," said Yi, whose factory has an annual turnover of 10 million yuan.
The Straits Times understands that exporters are more badly hit than those that sell their products locally, as foreign customers are less sympathetic to their problems.
"This is considered a natural disaster, and the whole of China is affected. So our customers can understand. But foreign customers don't accept smog as a reason for the delays," said one factory owner who did not wish to be named.
Yi feels that shutting factories during heavy smog days is not a long-term solution and hopes to get more help from the government to learn how his business can cut down on pollution and still continue to stay in business.
"Many of the factories have left (Beijing) to go to Hebei, or Henan and Shandong. But they have not changed the way they operate. It's merely moving the problem elsewhere. I really hope the government can tell me where the smog comes from, and if shutting us down actually helps... And more importantly, as a furniture maker, am I contributing to the smog?"
While a blanket ban on all factory activity is not the most optimal solution, analysts say shutting factories during heavy smog days is still the surest way to see results in the short run.
According to the Chinese Academy of Sciences, industrial pollution is responsible for 25 per cent of Beijing's PM2.5 - tiny particles harmful to human health. And coal burning, which is highly correlated to industrial activities, accounts for 18 per cent.
"There really aren't other ways to go about it. China still lacks the necessary basic infrastructure to manage the smog. That's why all it does is to close the factories when a bout of smog comes, and then let them reopen after the smog subsides," said Professor Nie Huihua, an economist at Renmin University.
Prof Nie added that the government will not be able to help all the factories with technology upgrading. What it can do is to raise the compliance standards.
"But the flip side is that some factories will find ways to sidestep compliance. And you will end up with proper factories suffering from higher compliance costs and wayward ones being more competitive because they flout the rules.
"So instead of incentives, the government should step up law enforcement to pressure the factories to restructure and transform."
Agreeing, Ma Jun of an environmental non-governmental organisation said it is "not quite possible" for the government to help firms "become green" directly.
"The government's role is to ensure the rule of law is strictly followed, and increase the cost of contravening the law," said the director of the Institute of Public and Environmental Affairs.
Only then will the companies change and upgrade themselves to be able to operate legally, he added.
Prof Nie noted that with a slowing economy, it is hard for the government to force the industries to upgrade or transform quickly.
"It's economic growth versus pollution. These factories contribute taxes and provide employment. But ultimately, we need to be able to tolerate the slower growth that comes with controlling the pollution."