By John Ruwitch and David Stanway
SHANGHAI/BEIJING (Reuters) - It looked like another victory for the people when the Chinese city of Ningbo announced the suspension on Sunday of a petrochemical project after days of street protests by citizens concerned it would pollute their community.
It may turn out to be more complicated.
As China's increasingly affluent urban population battles back against the breakneck growth-at-all-costs model that has fuelled the economy for three decades, environmental activists say the apparently straightforward narrative that has played out several times in recent years - government backs down, citizens win - is simplistic.
A spokesman for the Ningbo government said in a statement on Sunday that there would be no further work done on the massive project, which includes a facility for the production of paraxylene (PX), a potentially harmful chemical used in making some plastics, pending further "scientific debate."
But a source in Ningbo closely linked to the project told Reuters that once the public furor dies down, China Petroleum and Chemical Corporation (Sinopec) will likely proceed with the $8.8 billion dollar expansion to the plant in Ningbo's Zhenhai district, including PX production.
Public worries could force the project owners to downplay or disguise the PX facility by renaming it as something like "affiliated PTA product capacity expansion," the source said speaking on condition of anonymity. PTA is a downstream product made using PX, and a key component in producing polyester.
The rationale for the government to beat a public retreat in Ningbo and other places like it is clear enough.
"Capitulating relatively quickly to the demands of the local populace seems a worthy trade-off when thinking about the potential for these large scale protests to spread and transform into something much larger," said Elizabeth Economy, a senior fellow at the Council on Foreign Relations and author of a book on China's environmental challenges.
"Of course, this is not a sustainable governance model, but it is clear that neither Beijing nor local officials know what to do."
The Ningbo protest came at a highly sensitive time for the government about two weeks before a once-a-decade leadership transition within the Communist Party.
SORT OF CANCELED
A quiet resumption of the Ningbo plan would hardly be unheard of.
"Previously, similar cases were reactivated without much scrutiny from the public. The public is much less organized, so when the crisis calms down it's difficult for them to monitor what's going on," said Li Bo, Secretary General of the NGO Friends of Nature in China.
In several cases, what appeared at the outset to be government capitulation turned into quiet compromise. In Dalian last August, demonstrators protested against a PX plant after a typhoon damaged the facility. The government agreed to move it, but months later the plant was still running.
Environmental activists told Reuters that according to the local government, the plant was being steadily wound down rather than shut completely, and would finally be closed and relocated to an outlying industrial park by 2013.
"They have said it is impossible to close immediately because of safety problems and because other petrochemical plants nearby are using the PX as a feedstock," said Tang Zailin, director of the Dalian Environmental Volunteers Association, a local NGO.
A large demonstration in Xiamen in 2007, also against a PX plant, is widely viewed as a watershed moment in urban China's growing environmental consciousness. The government cancelled the project, environmental groups hailed the move as a victory, and paraxylene became a symbolic target for activists everywhere.
While Xiamen turned out to be a triumph for the city's NIMBY (Not in My Backyard) movement, the resolution there has become a familiar one. The government over a year later decided to move the facility into someone else's backyard - in this case that of farmers in the neighboring municipality of Zhangzhou. Residents there protested sporadically, but to no effect.
RAISING COSTS, UNCERTAINTY
The rising tide of protests may be raising costs and uncertainty for some businesses - including foreign firms once attracted to China's lower costs and its willingness to cut through regulatory red tape.
In July, a violent demonstration broke out in the city of Qidong, just north of Shanghai, over a planned waste pipe at a Japanese-owned paper factory. It prompted the local government to capitulate and pledge to stop the project altogether.
Since then, however, the company, Oji Paper Co Ltd, has been left in the dark.
"We don't know what the status is. There is no information, and we can't even get a hold of local government public relations officials," said spokesman Yasushi Iizuka.
"We are operating on the premise that the pipeline will be built. There is no alternate plan."
The government of Qidong declined to comment when contacted by Reuters.
Companies, foreign and domestic, hope the government's now ad hoc and opaque regulatory processes will improve with time. More effective environmental regulation is a key pillar of the current five year plan.
But for now, analysts say, they must simply be more attentive to the possibility of environmental backlash to big investments. Duncan Innes-Ker, senior China analyst for the Economist Intelligence Unit, says the public's rising environmental awareness is forcing changes to the way companies handle large scale projects.
"In the past," said Innes-Ker, "you really had to manage local government officials, and once you'd managed that you pretty much were home and dry. Nowadays, you really have to manage the local population as well."
(Additional reporting by Chen Aizhu and Ben Blanchard in BEIJING and Mayumi Negishi in TOKYO; Editing by Bill Powell and Jonathan Thatcher)