Appliance recyclers face doom without trade-in scheme

(Ecns.cn) -- Chinese companies that recycle discarded home appliances and electronic goods have been experiencing great difficulties since the nation's "cash for clunkers" program expired at the end of last year, reports the Southern Weekly.

About three years ago, many companies actively responded to a government policy allowing residents of both rural and urban areas to enjoy a 10 percent subsidy if they traded in their old appliances for new ones. The plan was designed to address the increasing number of outdated appliances in need of recycling.

However, since then no system has been established to support home appliance recycling companies, and with the expiration of the policy, some have even been forced to close their businesses.

From one million to zero

On April 27, 2012, a recycling factory called Huaxin Green Spring Environmental Protection Development Co., Ltd (Huaxin Environmental) had been quiet for nearly a month and its processing lines, which previously had operated at full capacity, only started up occasionally, according to the Southern Weekly.

Wang Jianming, general manager of Huaxin Environmental, worries about the future of the company, which has finished recycling all the discarded home appliances in stock and has nothing else to do.

Three years ago, the company doubled its number of processing line workers and increased its annual recycling capacity from 200,000 home appliances to 1.2 million in an effort to seize the development opportunity before the launch of the government's trade-in scheme, reveals Wang.

The company had a stable supply of more than one million random appliances between late 2009 and 2011, which proved that previous efforts were quite necessary, yet all of a sudden the supply dropped to zero, Wang says.

Under normal circumstances a government policy should have continuity, but now many recycling companies can hardly make ends meet, notes Wu Jianzhang, a person in charge of a recycling company under Sichuan Changhong Electronics Group Corp.

Wan Chunhui, an official at the China Household Electric Appliances Association, says there are currently 105 registered dismantling enterprises for home appliances in China, but most of them are struggling to survive. Some have even shifted their dominant businesses to other fields.

New hope?

According to statistics from the National Development and Reform Commission, the top economic planner, the quantity of China's discarded home appliances has risen about 20 percent annually in recent years. It is expected that more than 160 million home appliances will be discarded every year by the end of the 12th Five Year Plan (2011-2015).

So if the recycling companies shut down, where will all those appliances go?

According to an insider, during the period the trade-in policy was in place, sales departments transferred discarded home appliances to recycling companies, who would then distribute them to various dismantling enterprises.

But now that many recycling companies have shut down, a large proportion of the appliances inevitably go to small dismantling workshops that are not equipped with qualified recycling technology, according to China Environment News.

This is a very serious problem, because it means that tens of millions of old appliances cannot be handled properly, which leads to a waste of materials and increased pollution.

Yet there is also good news. Last week it was confirmed that a fifth version of a draft detailing the establishment of a management fund for the home appliance recycling industry had been sent to the State Council.

It's like "a bottle of oxygen" when you are about to choke, says Yuan Jie, marketing manager of Huaxin Environmental, who hopes the fund will provide momentum for the recycling industry.

War for funds

Although the fund has created new hope for recyclers and dismantling enterprises, they still face much pressure since most home appliance enterprises are unwilling to contribute much to the fund, says the Southern Weekly.

There have been a number of battles over the issue of funding, according an insider, who says that the collection standard for a television set was reduced from 15 yuan (US$2.4) to 14 yuan (US$2.2) and later to 13 yuan (US$2) under pressure from home appliance companies, but the latest information puts the figure at 20 yuan (US$3.2).

Xu Dongsheng, deputy secretary-general of the China Household Electric Appliances Association, says the introduction of the fund will affect the profit margins of the whole home appliance industry.

Under such conditions, some home appliance enterprises will try to step into the dismantling business to lower costs, but the Ministry of Environmental Protection may not approve, because the combination of production, selling and recycling will arouse suspicion, he adds.

In China, a small dismantling workshop offers 50 to 100 yuan (US$7.9 to US$15.9) to a customer for a discarded television. But in Japan, such a customer must pay the recycling and dismantling fees in order to discard a television; otherwise, he or she will face fines.

The government should attach greater importance to the problem and roll out more regulations, as the existing Environmental Pollution Prevention and Control Law of Solid Wastes are not sufficient.