China’s Hongqiao Group and corporate wrongdoing

From ToxicLeaks
Revision as of 20:43, 4 September 2017 by Dayue (Talk | contribs) (Hongqiao’s Weiqiao Textiles)

(diff) ← Older revision | Latest revision (diff) | Newer revision → (diff)

Company background[edit | edit source]

China Hongqiao Group Ltd is located in Shandong Province, south of Beijing along the Yellow Sea coast, and has been involved in the aluminium business since December 2002. The firm was originally launched in 1994 in the textile industry, shifted to aluminium, and began production capacity at a modest 156,000 tons; as of 2016, that number has exploded to more than 5 million tons.

The alumina and aluminium business has been under the control of Zhang Shiping, his family, and his partners; he serves as the founder, chairman and executive director. Other family members serve as the CEO, on the board of directors and senior management team. After restructuring several times in the interim, the Zhang family divided the businesses between two entities: Shandong Hongqiao and the Chuangye Group. In 2010, upon the advice of counsel, Hongqiao and Chuangye divested themselves of the assets that use bauxite to produce alumina to Gaoxin Aluminum & Power Co Ltd (Gaoxin).

In March 2011, Shandong Hongqiao went public and was listed on the Hong Kong Stock Exchange as China Hongqiao. Environmental liabilities including red mud, the toxic by-product of alumina production, were listed in the rationale for divesting the bauxite assets into the separate company.

However, in November 2016, the company’s shares briefly fell up to 4.3 percent on the news that China Hongqiao, Gaoxin and Zhang Shiping’s privately-held Weiqiao Pioneering all shared bank accounts, contact information and other data, which represents a disclosure failure. Allegations that the intertwined nature of the holdings allowed for inflated profit reports and quietly transferred funds are not new, and follow evidence of shared corporate leadership, but again were not directly proven.

Hongqiao issued a statement in December 2016, refuting the findings and insisting that the unknown authors of the report held short positions and stood to gain from the market impact of their exposé. The 18-page document makes environmental assertions that, for example, red mud does not pose a contamination risk to neighboring areas and is not kept in containment ponds, but it primarily focuses on the financials and seeks to clarify the relationships among corporate leaders and their entities.

In March 2017, Hongqiao called a halt to trading its shares on the Hong Kong stock exchange, as share value dropped by as much as 8 percent following a market research report claiming the company’s stock was worth only 40 percent of its current price. The report by Emerson Analytics, said the company has hidden 21.6 billion yuan (USD$3.14 billion) in costs through underreporting over the years and estimated that its profitability is less than half of its claims.

The report also calls attention to the connected parties under the control of Zhang Shiping and his associates – specifically, the electricity generating plants that supply power to China Hongqiao as “external” providers. Yet the Weiqiao and Gaoxin entities are so linked within their structure and corporate relationships that Chinese journalists and residents, among others, commonly refer to them as if they were one entity. That’s certainly akin to the conclusions of the Emerson analysts, whose data demonstrate that utility costs essentially are heavily subsidized through Zhang’s related businesses, resulting in the hidden costs and valuation inconsistences the report authors describe. It’s not the only scenario, though, in which Hongqiao’s accounting suggested shady internal deals.

The China Hongqiao corporate triangle[edit | edit source]

After the sale of Hongqiao’s bauxite-to-alumina business to Gaoxin, the latter agreed to sell alumina to the former at a 20 percent discount. The reasoning behind the highly favorable terms, according to Hongqiao, were their “long-term commitment, bulk purchase, self-pick-up arrangement and deposit.” In addition, Hongqiao made an advance payment of CN¥400 million to allow Gaoxin to maintain liquidity. However, the mathematics of the arrangement don’t make sense.

Assuming a price of CN¥2,500 per metric ton of alumina, and 13.2 million tons of alumina procured by Weiqiao in 2012-2014 from Gaoxin (according to data by rating agency Shanghai Brilliance), minus a twenty percent discount, it all comes down to roughly to CN¥4.1 billion in total. That’s way above the advance payment Hongqiao tendered to Gaoxin for alumina not to mention that these kinds of discounts are highly unlikely to happen in the business world.

In addition to the substantial discount at which Hongqiao said it was purchasing alumina from Gaoxin upon the latter’s spin-off, Hongqiao continued purchasing the aluminium precursor for an allegedly steeper discount going forward from there. In the years leading up to their questionable relationship with Gaoxin, Hongqiao was purchasing alumina from Chuangye Group at a slight discount – CN¥390 per metric ton in 2008, and CN¥288 in 2009. In the first nine months of post-spinoff 2010, Hongqiao said it obtained alumina from Gaoxin at a discount of CN¥736 per metric ton, or a 32 percent discount on average.

With a significant drop in overhead due to apparently fake procurement statistics, and free from the burden of dirty bauxite assets, Hongqiao’s bottom line exploded. In 2007, the firm listed a before-tax profit of CN¥1.4 billion; the next year Hongqiao’s profits dipped to CN¥383 million; in the year prior to Gaoxin’s spin-off, Hongqiao cleared CN¥774 million in pre-tax profits. Then, in the first three quarters after the spin-off, Hongqiao’s pre-tax profits were listed as CN¥4 billion – almost 14 times the pre-tax profits the firm reported for the first three quarters of 2009 (CN¥286 million). Hongqiao reported half again more pre-tax profits in the first nine months after Gaoxin’s spin-off than it did in the three previous years combined.

Now that Hongqiao was – at least on paper – free of the environmental liability of millions of tons of toxic red mud and making money hand over fist (again, mostly on paper), borrowing money became much, much easier. Prior to spin-off, the firm had a maximum unsecured debt to Chinese lenders of CN¥1.5 million. Nine months after the Gaoxin spin-off, Hongqiao’s debt quadrupled to CN¥4.3 million. Allegedly independent Gaoxin got into the leveraging spree as well. As of last month, Gaoxin showed an overall debt of CN¥8.04 billion.

The privately held Weiqiao[edit | edit source]

In the beginning of 2016, Zhang Shiping was CEO of Weiqiao Group and Board Chairman of China Hongqiao, now the world's largest aluminium producer after surpassing UC Rusal in 2015 and the publicly traded aluminium arm of Weiqiao. Zhang was awarded the title of the Top 10 economic figures in China. The Weiqiao Group has the largest cotton textile operation and china, and along with the aluminium company posted more than $45 billion in total revenue in 2015. The aluminium branch of Weiqiao Corporate has been an industrial powerhouse, despite the economic context of an aluminium industry contraction both in China and worldwide.

The “Weiqiao model”[edit | edit source]

The “Weiqiao model” describes an integrated approach pioneered by the company, which as a separate entity provides electricity to the alumina manufacturing operations. The model has been adopted by a number of other Chinese firms seeking the cost advantages of operating their own utilities. Weiqiao produces its own electricity for aluminium production, which is cheaper than China’s centralized electricity provision. This model has been a logical option in terms of cutting production costs, but as a private company it creates more pollution with less attention to regulation than state-owned Chinese companies do.

These utility plants are comparatively small, with less equipment controls, and in Shandong were shut down in 2015. Even Weiqiao Group itself has decommissioned some of its small electricity plants in the past few years. All told, in the past 5 years, a total of 70 million kwt of small electricity plants have closed, which will reduce up to 810 000 t per annum of coal consumption if replaced with power from the larger-scale centralized plants. The model is not likely to survive in a new carbon market, driven by China’s global climate agreements and stricter internal environmental policies.

Hongqiao’s Weiqiao Textiles[edit | edit source]

Weiqiao Textiles, headquartered in the Shandong city of Binzhou, has operated since 1989 and claims to be the largest cotton textile maker in the world, with some 160,000 employees generating 2,000 tons of yarn and 4 million meters of fabric each day. The company announced on August 13, 2017, that it would resume trading on the Hong Kong Stock Exchange (HKEX) following a lengthy suspension that began in March 2017. The suspension – as with a [" \l "1ce0475d6c24 similar halt to trading at China Hongqiao], which shares its leadership under wealthy billionaire Zhang Shiping and his family -- came ahead of a departure by auditing firm Ernst & Young. The auditor’s decision followed a report by Emerson Analytics alleging that China Hongqiao was hiding 21.6 billion yuan (USD$3.14 billion) in costs through underreporting over the years and estimated that its profitability is less than half of its claims. When Ernst & Young asked for an outside review of Weiqiao Textiles as well, the company refused, leading the auditing firm to resign.

The Hongqiao, Weiqiao and Gaoxin entities are so linked within structure and corporate relationships that Chinese journalists and residents, among others, commonly refer to them as if they were one entity. Zhang serves as a non-executive director for Weiqiao Textiles, while his two daughters serve as executive directors. Their report also lists Binzhou Municipal Binbei New Material Co., Ltd., a subsidiary controlled by Zhang, adding to a litany of suspicious relationships that have come to analysts’ attention.

Weiqiao Textiles announced that HKEX trading had resumed while releasing its 2016 annual report, a document that frames in glowing terms the continued growth and success of China’s largest cotton textile producer. It also boasts a 13.4 percent growth in revenue despite what it referred to as “various adverse factors.” It also details Weiqiao Group’s 2016 operational split into four wholly owned subsidiaries, three of which are related to textile production (Shantong Hongjie Textile Technology Co. Ltd., Shantong Hongru Textile Technology Co. Ltd., Shantong Minghong Textile Technology Co. Ltd.) and the fourth, Zuoping County Huineng Thermal Power Co. Ltd., which controls the Weiqiao power assets. The entities join six other Weiqiao-affiliated businesses. The annual report includes revenues for power production the company says grew by 49.6 percent, and details Weiqiao plans to pursue more coal supply channels.

The report also highlights what many already know, because it lists some details about the connected parties under the control of Zhang and his associates – among them, electricity generating plants that supply power to China Hongqiao as “external” providers and are so common they are often referred to as the “Weiqiao model,” adopted by a number of Chinese firms seeking the cost advantages of having their own utility plants. The electricity is cheaper but carbon-intensive, and Shandong has shut down the polluting plants in the past, but they also serve as a convenient shield for accounting sleight of hand.

When China Hongqiao called a halt to trading its shares on the HKEX, its share value had dropped by as much as 8 percent following the Emerson Analytics report claiming its stock was worth only 40 percent of its current price. The Emerson data demonstrated that utility costs were heavily subsidized through Zhang’s related businesses, resulting in the hidden costs and valuation inconsistencies the report authors describe. That report exposed Hongqiao’s accounting tricks, but the Zhang-related internal deals continue – as is the case with Weiqiao. It was the target of a second Emerson report in August 2017.

Emerson Analytics scrutinized the 2016 annual report and the Weiqiao audit by Shine Wing, the firm that replaced Ernst & Young after the latter resigned. Emerson red-flagged disparities in “cash flow” reports that were never disclosed or approved by shareholders. Emerson questions whether the cash actually exists, citing an "advance to immediate holding company" worth Rmb4.8bn in 2016, or as much as 42 percent of its self-proclaimed year-end cash and bank balances. Weiqiao Textile says the money came from its own bank facilities, but Emerson says that what’s really happening is mismanagement by Zhang – as was the case at Hongqiao – that essentially means Weiqiao functions as an ATM for the controlling shareholder. The Weiqiao Textile cash and bank balances have been exaggerated for years.

“The recently announced 2016 results not only raise serious governance issues but cast doubts on the existence of its allegedly huge pile of cash and bank balances, and by extension, the whole integrity of its financial statements,” Emerson Analytics said. The company named both China Hongqiao and Weiqiao Textile as frauds with no regulatory oversight, and said the Stock Exchange of Hong Kong “has ignored its duty in safeguarding the integrity of the Hong Kong financial markets.”

Emerson called on Hong Kong’s Securities and Futures Commission to take all necessary regulatory action against both companies, and to hold their senior executives responsible instead of accepting “any absurd excuse” that Zhang, Weiqiao Textile or China Hongqiao offer simply to keep trading in motion.

Coal consumption and CO2 emissions[edit | edit source]

As of 2016, about 80 percent (24.4 million tons) of all Chinese aluminum is produced while violating national atmospheric emissions standards for aluminum smelting. The 62 smelters in violation all release between 10.3 mg/m3 and 31 mg/m3 of particulate matter, which is capable of causing atmospheric haze and serious health problems due to inhalation. These plants exceed emissions limits for fluoride and acidic sulfur dioxide, among other hazardous. However, the main violators of SO2 emission standards are smelters’ captive power plants – those similar to the Weiqiao facility. While many Chinese alumina operations are implicated, the industry giant Hongqiao contributes 4,750 thousand metric tons per year. They contribute nearly 20 percent of the 24,361 thousand metric tons of aluminium smelting capacity, alongside 10,065 MW of installed power generating capacity, that runs in violation of China’s emission laws.

Carbon is even worse. Hongqiao Group’s captive power plant at Weiqiao puts out 15.55 metric tons of CO2 per metric ton of aluminium it produces. Factring in the extra pollution coming from indirect sources (such as the the grid power plants and the alumina production), the Weiqiao smelter is the most polluting plant in China. Hongqiao Group emits more than 100 000 kt of CO2 per year, with a “Weiqiao Model that is more energy intensive, dirtier and more polluting.

In 2016, Hongqiao’s nameplate capacity was 5.2 million metric tons per annum. As the firm continues to use antiquated and dirty coal-fired energy, they will pump 114.4 million metric tons of CO2 into the atmosphere ever year. After announced capacity increases kick in, the amount of CO2 Hongqiao will pollute the air with will rise to 132 million metric tons per year.

The most important question facing Zhang Shiping is how to maintain the company’s low electricity price and high profit while at the same time turning to greener production methods.

Alumina and red mud[edit | edit source]

Toxic red mud shown is a highly alkaline substance full of oxidized iron, silica, unleached residual aluminum, and titanium oxide derived from the Bayer Process used in aluminium production. About 1 ton of alumina yield in the process creates 1.5 tons of red mud to be stored, often in ponds or lagoons. In the event of a containment breach, which could be caused from something as common as climate-related flooding, the toxic substance can spread over a large area.

As for 2016, China produced over 40 million tons of red mud per year and stored a total of 200 million tons of nationwide. In 2012, Hongqiao announced that it would be building facilities for producing alumina using coal ash instead in the Zouping Binzhou Beihai Development Zone.

However, satellite imagery indicates that the facilities at Binzhou use bauxite, not coal ash – which is a substantially more expensive method. The images clearly indicate the presence of red mud, the toxic by-product of alumina production using bauxite.

Furthermore, a 2016 report by a specialized production safety company in Shandong indicated that red mud tailing ponds in Binzhou are nearly full and it advised the management company to enlarge the pond. Worth noting, the abovementioned report acknowledges that while the pond is a Gaoxin project, Gaoxin itself belongs to Weiqiao Pioneering.

Shandong is a significant region for Chinese agriculture, and any accidental release of Hongqiao’s red mud would rival a catastrophic alumina sludge spill in Hungary in 2010. The amount of red mud currently stored at Binzhou isn’t known at the present time, but it is comparable and growing. So is the potential economic impact, and agricultural and health damage by any release of the toxic mud.

Yet Hongqiao increased output by 40 percent in 2015, and last year announced that it would expand capacity even more: Up to six million metric tons per annum, or 16 percent, by the end of the year.

Yet when the previously mentioned IPO was issued in 2011, it was clear that spinning off Gaoxin will protect Hongqiao and its investors from liability for red mud consequences – and that Gaoxin’s deep discounts for alumina also transfer profits to Hongqiao. What remains unclear is who will be held accountable when the inevitable containment wall failure or flood occurs and spills toxic red mud.

Water resources[edit | edit source]

China’s water resources are facing a greater threat that ever before and China’s government has responded with stricter regulations. Hongqiao Group also has a reputation for damaging water resources, quite apart from the massive consumption required for its aluminium industry facilities.

Largely due to the consumption of about half the world’s coal, China is the world’s largest source of carbon emissions, and the air quality of many of its major cities fails miserably to meet international health standards. Yet water and soil pollution are equally severe, and ground water contamination is a significant risk in and around the facilities at Hongqiao and other aluminium companies.

In 2016, multiple media reports told local residents’ stories that tap water in the area is hazardous to drink, that they have to rely on bottled water and that growing fruits and vegetables in this formerly rural land is too dangerous.

Hongqiao and China’s regulatory environment[edit | edit source]

Since 2015, the People’s Republic of China has placed stricter controls on aluminium producers, based on several objectives: strengthen the flagging market, be driven by innovation, promote an orderly development of the industry, balance supply and demand, and do all of the above in an environmentally-friendly manner.

Yet the violation of environmental standards clearly arises out of a failure to enforce those same standards. Chinese air pollution laws dictate that a plant that is in violation will be asked to fix the problem, limit it, or suspend production altogether while paying a fine of up to one million yuan. If the violation is serious enough, authorities can put the violator out of business. Tampering with equipment put into place to monitor emissions standards could lead to a fine of between 20 and 200 thousand yuan.

The Chinese Ministry of Environmental Protection (MEP) may list smelters in violation of government standards, but no meaningful action is taken against them. A similar problem exists with permits. According to sources, Hongqiao Group hasn’t obtained official approval for any of the 2,200 thousand metric tons of capacity it has built since 2013.

China’s regulatory environment, though, is changing fast, and Hongqiao Group – along with its related entities – may find more scrutiny and enforcement. In October 2016, it was announced that Hongqiao was in violation of environmental regulations at more than half of its properties. Local authorities in Shandong demanded that production involving a combined annual capacity of 3.6 million tons cease, accounting for nearly 70 percent of the company’s massive production volume.

Penalties were handed down for “failure to obtain environmental protection approvals before building and operating the facilities,” and the firm also was told to stop construction of a new smelting plant because Hongqiao failed to seek new environmental impact assessment approvals. Failing to secure environmental approvals also meant a halt to construction of a 4,800 megawatt power plant, and the shutdown a 1,320 MW power-and-heat co-generation plant and an alumina refinery.

Issues with Weiqiao[edit | edit source]

Things aren’t much better with Weiqiao, and the company will face steep challenges in a stricter regulatory environment. In 2012, the pollution problem in the city of Weiqiao, where Weiqiao Group’s headquarters are located, Chinese media revealed that in many cases, Weiqiao’s production plants had been built prior to the government’s permission.

Their safety record also is questionable. In August 2007, 14 workers died and another 59 were hospitalized when molten aluminium at a temperature of 900 Celsius exploded from its container.

China’s government has paid attention to Weiqiao’s pollution problems, issuing fines at the electricity plant in 2014. The next year in People’s Daily, China’s largest official newspaper, the firm was exposed for building its dirty electricity plants without compliance with environmental standards. Residents around Weiqiao’s aluminium plants have complained the pollution is getting worse, but that is likely to come to an abrupt end as corporate practices are forced to align with sustainability goals.

Hongqiao’s neglect of worker safety[edit | edit source]

Working environment with thick dust and poor lighting conditions
Worker with substandard quality of work clothes
For all the red flags raised over Hongqiao’s environmental violations and the financial deals that make the corporate sleight of hand shell game possible with its Weiqiao operations, less attention has been paid to the plight of Chinese workers and their employment conditions at the aluminium smelters.

In part, that’s because China has historically placed less of a premium on worker safety than many other countries do. Some 70,000 Chinese workers died on the job in 2015 in work-related accidents; by comparison, there were less than 5,000 in the United States, which has a comparably ranked manufacturing sector despite the vastly smaller general population.  At nearly 200 occupational deaths per day, Chinese workers die at a rate about 12 times higher than most industrialized nations.

The chemical leaks, collapses and explosions are often the result – directly or indirectly – of corruption, lax regulation and enforcement, and an unsafe environment within the workplaces themselves. That appears to be the case at the Hongqiao aluminium smelter at Binzhou, as documented in images posted on Chinese social media platform Weibo by a former employee. The series of images reveals shocking and unsafe practices at the aluminium smelter, posted with a poignant message drawn from a decades-old song meant to honor the Hongqiao workers’ sacrifices to make a better life for the parents and children.

Anode replacement takes place with serious violations
Worker with an “unimaginable” broken helmet shield

In one image, the air is thick with dust well beyond workplace standards, which suggests that fluoride and sulfur dioxide emissions surpass safety levels and cast doubt on whether the fume exhaust fans are operational. In the same view, it’s clear that poor lighting conditions are too dark for safe work in the potroom where the electrolysis process takes place. “Potroom asthma” is a common respiratory condition for aluminium smelter workers, and appropriate personal protective gear is required.

Yet in a second posted image, it’s clear that the worker’s respirator won’t protect against the visible emissions.

A third image shows an “unimaginable” broken helmet shield. Equally visible in the images are the substandard quality of work clothes – in more than one example, they appear dirty and worn – and the absence of gloves. Another image shows that while the Binzhou facility does have anode replacement in place, the technology it uses is outdated and the electrolye temperature is too high. This means that pot sealing is subpar, resulting in supplimentary emmissions of dust and waste inside the facility.

A worker using his leg and foot to create an axis tilt

A different image shows a worker using his leg and foot to create an axis tilt during a smelter phase called anode effect quenching, conducted at heats approaching 1,000 C. This photo tells two stories: One, the process is not automated and therefore suggests low Hongqiao investment in technologies to improve worker safety, either due to neglect, because profitability matters more, or even because the company’s financial health is as overstated as the workers’ own.

Two, it is one in a series of photos that demonstrate the low production culture at the facility, where raw materials appear in haphazard unsafe piles on the smelter floor. The images present a Hongqiao with a culture of professionalism and safety sorely lacking and far behind that of the rest of the world.

Yet in a Hongqiao securities document dating to 2012, the company says it is subject to China’s legal  standards for health and safety measures, and the company regularly reviews occupational health and safety compliance. Facilities must pass work safety inspections, employees must be provided with safety education and equipment that meets both national and local standards. Yet from the July 2016 evidence provided by the workers from inside the facility, that does not appear to be the case.

Acting and former staff in Weiqiao plants also complain that the company tends to fire workers after several years of work in hazardous production environment so as to avoid possible medical liabilities stemming from occupational diseases.

Binzhou Weiqiao Aluminum Smelter Explosion[edit | edit source]

Binzhou Zouping Weiqiao plant after the explosion

On August 19th, 2007 at 8: 10 pm, an accident occurred in the Shandong province, Binzhou city, Zouping county at the Weiqiao’s aluminium casting plant. The aluminium spill led to a major explosion, killing 16 people, injuring 59 people (13 people were seriously injured), and causing an estimated 6.65 million RMB in direct economic losses – at least according to the official figures released by the State Administration of Work Safety.  The investigation information was classified, with only the conclusions being revealed to the public.  As reported by an anonymous source, the death toll was actually 45, 69 were injured and 21 were reported missing.  

The scene of the incident

The notice stated that this 4.2 million RMB aluminium casting plant was built in October 2006 using an uncertified design. The liquid aluminium used in the plant was not transported according to official guidelines. As the investigation revealed, there was a massive amount of 900 degrees Celsius liquid aluminium spilled from the melting furnace into a cooling water reservoir, building up steam before finally causing an explosion. The roof of the plant was immediately blown off, the window panes were smashed, the walls cracked and other fragile parts of the architecture were broken into pieces. The eight-meter-tall, single-story smelter was 45 meters long and 27 meters wide. The strong airflow also threatened approximately 82 people in the two nearby smelters.  Local authorities blamed the accident on workers, accusing them of breaking safety rules. However, parts of the plant’s process and safety rules did not go through the audit procedure and Weiqiao’s contingency plan did not meet the regulatory requirements.  

At the hospital

Xinhua reporters visited the two local hospitals in Zouping (The Zouping People’s Hospital and the Zouping county Hospital of Traditional Chinese Medicine) where injured people were sent, but were not allowed to enter the emergency wards.   

The final report into the accident, concluded by the central government concluded that a missing part of the furnace was the direct cause. What’s more, major defects were found in the design of the cooling water reservoir, which could store excessive cooling water. The production lines were not properly engineered, blocking the necessary escape routes during emergency evacuations.

There are also reports that the company mistreats its employees, not fully observing PRC labor legislation. People complain that they are forced to work additional shifts without proper compensation and without medical insurance, and that Weiqiao minimizes the cost of employment by cutting obligatory payments to social security funds.

Binzhou City Ash Field[edit | edit source]

Year 2008: green fields
Year 2013: plant constructed
On April 19th, 2017, Weiqiao made an appearance on Binzhou City’s Environment Information Website, in a list of problems resolved following complaints filed by locals. Number 16 on that list featured a telephone complaint from a resident of the Binzhou Economic Development Zone, which reported that piles of coal ashes appeared in the place where the Liangjiayao plant stood before closing down a few years before. Without proper storage, ash and dust cause serious air pollution and are dangerous to the health of individuals exposed to it. According to the complaint, that ash cloud had already covered four or five nearby villages, leaving residents afraid of even venturing outside their houses.
Year 2017: plant closed, coal ash disposal area

The investigation of Binzhou City Environmental Protection Bureau confirmed the complaint and uncovered the fact that Weiqiao had actually outsourced the transport and disposal of coal ashes to a third party, Jianglong Deng. Instead of properly disposing of the industrial waste, Deng chose instead to dump it in the 40 acres big site formerly occupied by the Liangjiayao plant. Conveniently, this plot of land was located just 20km from Weiqiao’s nearest smelter.

As expected, Binzhou environmental inspectors were unable to find any dust control facilities at the scene, and confirmed that extensive environmental damage had already been inflicted on the environment. Which is why the municipal government of the Binzhou Economic Development Zone forced all parties to work together on a plan to remedy the situation. Weiqao and its contractors were told to immediately stop any industrial solid waste disposal. Both Weiqao and Deng were held responsible for cleaning up the premises and re-cultivate the territory, by April 17th the necessary clean-up works were finished.

See also[edit | edit source]