China crimps commerce for Beijing Games

To the $40 billion China is spending on Olympic preparations, add another few hundred million in lost business.

Hosting the Games is usually a boon for commerce, or at least not a bust.

But in and around Beijing, hundreds of plants have been closed either to reduce pollution or because they use chemicals that officials fear could be used to attack the Games. Thousands more have cut production because traffic restrictions have made logistics a nightmare. Recent visa restrictions are preventing foreign buyers from visiting suppliers in China during the season when Christmas orders are normally lodged.

“Business is feeling like a sacrificial lamb on the altar of the Olympics and the security people,” says one foreign businessman.

Normally, over 5,000 tons of steel a day thunder out of the giant mill that looms over surrounding fields in this town 70 milessouth of Beijing. Today it is silent. For three months Xingang Corp., which owns the plant, is out of the steel business.

A few miles down the road, the Tian Li steel pipe factory is still open, but at half speed and only because its 250 employees make tent frames needed in the Sichuan earthquake zone. Its competitors in the area are all shuttered.

Not that many are complaining publicly. Neither local nor foreign businessmen want to appear critical of an event on which the government has staked so much of its prestige.

“The boss loses money, that’s all,” says Wang Jin Bao, logistics manager of a factory making steel frame in the industrial town of Dongxiang near here that has been closed for three months for exceeding pollution standards. “We have to support the Olympics.”

“There is disruption, and maybe it’s excessive, but we defer to the government” on the need for security, says James Zimmerman, chairman of the American Chamber of Commerce in Beijing. “We have not received any complaints from our members about inappropriate shutdowns.”

The government has not said how many businesses it has ordered to close.

In the capital itself, a major steel mill and a petrochemical factory are the most notable closures, along with all construction sites. Businessmen in this district say more than 200 firms have been shuttered. In the port city of Tianjin, 50 miles east of Beijing, authorities say a cement plant and 39 other factories are shut.

The government website said Thursday that a further 200 plants in regions around the capital would be closed if pollution levels were too high by Games time.

In the industrial zone at Langfang, home to many foreign firms, the authorities gave 88 companies handling dangerous chemicals 10 days notice to close last month, though they later relented on nearly half their orders in the face of protests by foreign companies, according to executives familiar with the situation.

None of the businesses closed by decree are thought to have been offered any compensation, and out-of-work laborers are getting a subsistence wage at best.

“I would think that since the factory is contributing to the Olympic Games with an economic loss, the government should give us some compensation, but I have not heard anything about it,” says Cai Wenbao, interim manager at Xingang’s steel mill. The mill is using its downtime to install new antipollution technology.

“Never once was compensation mentioned when foreign companies were being told to shut” in Langfang, adds Joerg Wuttke, president of the European Chamber of Commerce. “I am not hopeful for those companies that have stayed closed. I think they will be reminded that it is their patriotic duty to support the Olympic Games.”

Olympic-related security and pollution controls have combined to make life difficult in a number of ways for businesses within an 80-mile radius of the capital, even if they are still open.

Wang Yinquan, manager of the Tian Li plant, says he faces a typical cocktail of problems that “have definitely affected our business. We’ll certainly be losing money.”

First, he now has to apply weekly for a police permit to purchase and use oxygen and hydrochloric acid, two chemicals his plant needs that used to be subject to a monthly check. “I don’t know what the rules will be during the Olympics, or if they will even give permits,” he worries.

Second, Mr. Wang explains, “my customers cannot transport things into Beijing, so they are not buying so much.” To ensure security and clean air, no trucks without Beijing license plates are being allowed into the capital. Nor are Beijing-licensed trucks allowed unless they meet new emissions standards, which only 20 percent do.

And even they may drive in Beijing only between midnight and 6 a.m. every other night, complicating logistics enormously for any enterprise in the city.

Additionally, says Wang, the Dongxiang local government has warned all factories to be prepared for power cuts during the Olympics “because they need to guarantee electricity for the Games.”

Nationwide coal shortages, partly resulting from the closure of unsafe mines before and during the Olympics, mean that nearly half the power stations connected to the State Grid Corporation have coal stockpiles that will last less than seven days, the SGC warned this week.

Foreign businessmen say the most frustrating aspect of China’s Olympic preparations has been the sharply tightened rules on visas, which have made it increasingly difficult over the past three months for international executives to enter the country.

Over the past few years, foreign firms have profited from China’s Olympic preparations: The Bird’s Nest National Stadium, for example, was designed and built by European companies, and international pollution control technology firms have found a new market.

But in mid-July, the authorities in Shanghai and Beijing stopped issuing the “notification letters” needed for any business visa. “We suggest that foreigners postpone their applications until after mid-September,” the Shanghai Foreign Economic Relations and Trade Commission said on its website.

“This puts businessmen in the category of potential terrorists,” fumes Mr. Wuttke. “What kind of message does this send?”

With foreign procurement agents unable to come to China and place orders, especially for the high-volume holiday season, “this is dramatic for Chinese exporters,” says Wuttke.

“These regulations have an impact on real business and a more severe impact on China’s image.”

Tian Li’s Wang takes a rosier view of the situation. “We’ll take temporary losses, but in the long term this [Olympics] could benefit the whole country,” he says. “It could bring more business in the future.

“Anyway, it’s not a question of what we want,” he adds. “This is national business, it’s not a matter for one person. And even if we lose money it’s worth it: We won’t have this kind of event again for a long time.”