Shortages of raw material for recyclers is driving prices up and sending suppliers to the black market.
The village streets are empty and quiet in the afternoon sun. Bales of polyethylene film and bundles of plastic jerrycans piled in courtyards are evidence of how residents normally earn their living – recycling. But times are hard.
"Six months ago, all these streets were busy," says Sun Kangning, the young manager of his family firm, HSY Plastic and Silicone. "But now there are no goods in the market, and a lot of small factories have closed down."
It's especially harmful when it is recycled in one of the primitive family-owned workshops in this village in Shandong Province, on China's east coast.
Here, safety equipment is unknown and pollution controls are nonexistent. The water and chemicals used to cleanse the plastic run directly into a river.
Strict application of the rules at China's ports means, for example, that polyethylene film, used for polytunnels on California's vegetable farms, can no longer be recycled here when it is visibly contaminated with dirt or moisture.
Customs officials are inspecting; if they eye something that is not a recyclable, they refuse the whole container.
Laizhou's entrepreneurs used to wash, melt, extrude, and chop such polyethylene into pellets that could be remelted and turned back into film. But now there is not enough raw material for Laizhou's recyclers, its price is going up, and it is only for sale at night, under cover of darkness, when the government's environmental inspectors are not around to ask to see recycling licenses, which hardly anyone here has.
Since the crackdown began in February, Mr. Sun's family has branched out into new businesses, such as auto parts manufacturing and hog raising.
He still trades in plastic scrap, and rents out a courtyard piled with mountains of foreign plastic soda bottles to a small operator who processes them into ground-up scraps that will be sold to a fibermaking factory.
But Sun is gloomy about his prospects. "I think [the government restrictions] will last a long time," he says. "I don't think our sort of business has much of a future because of the damage we do to the environment. It's time to get into another line of work."