Out with the old, in with the new

Companies determined to upgrade machinery, cut environmental damage

A chocolate factory in Nantong, Jiangsu province. Chinese manufacturers are upgrading their equipment to gain an edge in competition and reduce energy consumption. [Ding Xiaochun / For China Daily]

The old-fashioned machines in the factory of Jinbiao Woolen and Textile Mills Co Ltd in an under developed county in southern Jiangsu province whir and grind all day, churning out reams and reams of cheap cloth to supply the many garment makers in the region.

Workers toil in the heat and noise inside the grim workshop that conjures up images of Dickensian conditions and William Blake's "dark, satanic mills". A middle-aged mechanic in sweat-stained undershirt and shorts walks from machine to machine listening for any unusual groans from the aging gears and belts that can presage troubles.

Although China has experiencing rapid economic growth during recent years, it is still falling behind in terms of productivity.

While Japanese textile workers are busy pressing buttons on computerized machines and increasing production by leaps and bounds, some of their Chinese counterparts are sweating in workshops without air-conditioning, using the sort of machines that disappeared from Japanese factories some 20 years ago.

It is a gap that the Chinese government intends to close.

On July 19, an executive meeting of the State Council approved an action plan to conserve energy and reduce emissions during the 12th Five-Year Plan (2011-2015). The gist of the plan is to save energy by eliminating inefficient methods and establishing advanced production facilities.

The robust growth of environmental-protection companies is the most convincing proof of society's support for the government's policy. Stocks of five listed companies in the industry rose by more than 5 percent on the day the work plan was approved, led by Zhejiang Fuchunjiang Environmental Thermoelectric Co Ltd - which specializes in the generation of electricity and heat steam through waste products.

By contrast, the Shanghai Stock Exchange Composite Index fell 0.7 percent to 2796.98 points on the same day.

About a week before the work plan was approved, the Ministry of Industry and Information Technology (MIIT) came up with a list of production lines and facilities that must be withdrawn from service by the end of the year. The list covers some 2,255 companies from 18 industries, with the focus on eliminating backward production facilities in heavy industries such as iron and steel, as well as cement production.

Jiangsu and Zhejiang, two eastern coastal provinces, have been leading in terms of Chinese economic growth in recent years. But that fact doesn't necessarily indicate that they have no outdated factories and production methods. As China's two major textile manufacturing areas, their focus will be mainly on eliminating old-fashioned machinery and methods.

Among the 66 production facilities that need to be eliminated in Jiangsu, seven relate to the textile industry, while in Zhejiang 17 of 74 outmoded factories are textile companies.

Although the government is resolute, some local companies are turning a blind eye to the MIIT list.

Jiangsu Jinbiao Woolen Textiles, based in Jintan, southern Jiangsu province, must eliminate some 50 machines according to the list - that's equal to annual production of more than 10 million meters of woolen textiles. However, two weeks after the list was released, the company said it was unaware of the MIIT requirements.

"The company is running smoothly. None of the machines you have mentioned is being replaced," says Mao Xiaozhong, a sales manager for the company.

That attitude may be confined to small companies, though. Their larger counterparts are much more likely to introduce the sophisticated machinery that will help boost productivity.

Starting from scratch in 1998, Ling Lanfang is now chairman of Silk Road Holdings Group Co Ltd, a leading manufacturer of Chinese silk, which is based in northern Zhejiang's Huzhou city and has annual sales of 1.8 billion yuan.

Ling's motto is "I will still buy new machines even if I have to sell my underwear", and may well be the secret of his success.

"It means that the new machines weigh way more than my self-esteem," he laughed.

Although China is the biggest textile manufacturer globally, its textile industry, as Ling sees it, still faces two failings. The first is low productivity and the second, the exhaustion of resources.

Silk Road has managed to improve the machines already in service, and increased annual productivity to 4 tons for each worker, compared with the company's previous capacity of 850 kilograms and overtaking the single annual ton made by its Japanese counterparts.

Even leading companies such as Silk Road are still dependent on these machines, which dated back to the 1990s. However, Silk Road will soon wave goodbye to the noisy and non-computerized machines by the end of the year and new technologically advanced machines will take their place.

"We bought the machines for 5,000 yuan each some 20 years ago. We will only be able to sell them for 3,000 yuan each at the most. However, the new computerized machines will cost us 500,000 yuan each," says Ling.

"It is a lot of money, but it's worth the investment. With the new machines, the productivity of each worker will be increased 20-fold annually, because each employee will take charge of a greater number of machines, which can run at faster speeds. Meanwhile, the quality of the products will also be improved. Employees will also work in a more comfortable environment with less humming and buzzing," he says.

"But it is a great challenge for small companies. Higher productivity requires greater stocks of raw materials. If the company stocks more materials worth some 1 million yuan, it will shoulder an extra risk of some 20 million yuan," adds Ling.

But the risk is worth taking, especially for Chinese companies wishing to compete in the domestic market.

"Actually, the requirements given by the MIIT are quite low. If one had to score 60 out of 100 to get a pass in an exam, most of the production facilities we are being required to eliminate would only score 20 seriously," says Ling.

It's natural that companies in the less-developed areas of the country will require more time to keep up with the pace of those in developed areas. But leading companies should shoulder more responsibility by addressing the second problem that the textile industry faces - the waste of natural and human resources, he says.

"The biggest problem facing textile companies is water pollution. The waste textile companies discharge will lead to eutrophication (a process whereby bodies of water gain a glut of nutrients that stimulate excessive plant growth) nurturing all kinds of algae," says Ling.

"Therefore, our company spent a period of one year and invested some 7 million yuan in building our own sewage disposal system, which is capable of purifying coal-black waste into tap water," he says proudly.

Other industrialists in Zhejiang are also putting a brave face on the issue. Gao Tianle, chairman of the Tengen Group, a leading Wenzhou, Zhejiang province-based industrial electronics company, told the Zhejiang Weekly newspaper that the group will definitely shoulder the responsibility for environmental protection.

"Our group will not produce anything that will cause any possible harm to the environment," Gao says.

"To remain profitable while becoming more eco-friendly, we will need to invest more in research and development."

Sun Shaoding, chairman of Zhejiang Fu Kang Group, says that saving energy is good for factory owners. "As a private company, we have to be responsible for all the expenses and profits on our own and we will eliminate production lines that are inefficient and wasteful."

Fu Kang, which was established in 1995, has been a leader in the region's packaging industry for years, winning many national prizes for quality. The majority of the machinery in the group's factories is imported from Germany, Japan and Canada, Sun says.

"Basically, packaging companies produce very limited environmental pollution," Sun says. To further reduce any damage, "we have recently introduced water-based ink for printing". Water-based ink is considered more environmentally friendly than the chemical-based paint the company used in the past. "We will review every step in the production process to ensure that we emit as little pollution as possible."

Wenzhou's local government has produced a list of companies that are low in efficiency and high in pollution. Companies, including producers of leather goods whose annual production is less than 200,000 units, will be closed this year.

"We are not on the list and we will be fine," says Yu Jian, deputy general manager of Wenzhou San Marco Shoes Co Ltd.

The nine-year-old company owns one of the better-known shoe brands in the domestic market and has annual sales of more than 100 million yuan has been following the even-stricter standards of the European Union (EU), its biggest market.

"The production lines in our company can meet all the national standards of environmental protection in terms of sewage disposal and gas emissions," Yu says. After complaints filed by the EU about residual benzene found in the company's shoes, the company started using a new benzene-free glue. "It was no big deal."

China is aiming high. In the 12th Five-Year Plan, the national government is resolute in upgrading the country from a being "big manufacturer" to a "competent manufacturer".

With more than 40 years of experience in the industry, Ling says the two problems facing Chinese manufacturing across the board: "We do not know for whom we are working and we cannot work for ourselves."

"The Chinese used to enjoy some advantages in human resources, land and the environment. But now, all these advantages are waning.