Environmental evaluation reports in Guangzhou and the Pearl River Delta

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As a consequence of being the main pioneering area for the reforms and opening up policies of the People’s Republic of China and as well as the world’s factory hub for more than a decade, investments in Pearl River Delta are increasingly being more affected by pollution related problems. Environmental issues here, more than anywhere else in China, have drawn the close attention of the national and local governments. When setting up a factory in China, especially if you plan to locate it in the Pearl River Delta, we strongly suggest you to take into consideration the medium and long term environmental costs and related issues.

Local governments will consider environmental costs in three main areas. If your business involves pollution, even if only incidental, you will need to pay for a report by a qualified agent to obtain an environmental evaluation report. Consequently, based on the report you will need to install equipment expected to minimize the environmental impact of your production according to government requirements. And since environmental protection procedures take time – depending on your own manufacturing processes involved as well as the efficiency of governmental departments and qualified agents involved – you will need to wait till the whole procedure has been completed. This process is now a precondition to get a registration in most cities. Therefore, when setting up the factory, you should take the time needed for an environment related evaluation into consideration.

From our experience in the Pearl River Delta, we consider local governments’ practice regarding environmental issues as still unorganized and immature. Although they often insist on the submission of related documents from the beginning of the application process, they may also change their mind later on and reverse it as secondarily relevant. Paradoxically, what can seriously complicate investor’s plans is when the government informs you about environment evaluation requirements too late, sometimes even after they confirm the completeness of the documents. We would suggest investors always keep this in mind and prepare beforehand to avoid any delay in the middle of the application process.

One more bit of practical advice related to environmental issues and particularly related to location selection; since you will need to make some preparations when buying/leasing a factory site, for an environmental evaluation you will need a map of the surrounding area and the land / building related documents (e.g. property certificate, statement by the rural committee). We suggest that you get these documents before you sign the lease contract or at least get a formal promise from the landlord that they will provide them upon requirement.

Dezan Shira & Associates maintain an office in Guangzhou, advising foreign investors on legal administration, corporate establishment, due diligence and tax policy in the city. Please contact Rosario Di Maggio or visit the Guangzhou office website for more information.