A European Union (EU)'s directive on Waste Electrical and
Electronic Equipment (WEEE), which officially took effect on August
13, raised Chinese manufacturers' production costs and squeezed
profit margins. But another directive on Restriction of Hazardous
Substances in Electrical and Electronic Equipment (RoHS), due to
take effect as of July 1, 2006, is viewed as a more severe threat
to the survival of Chinese goods, and companies, in the EU
market.
According to the General Administration of Quality Supervision,
Inspection and Quarantine, the two directives affect eight
categories of Chinese products, including big and small electrical
appliances, IT products, electric tools, electric toys, lighting,
home electronic equipment and vending machines. US$56 billion worth
of exports are expected to be directly impacted.
Zhejiang,
a southeast China province with flourishing electronic businesses
and an export-oriented economy, is likely to be most affected by
the new directive. Statistics show that the province exported
US$21.71 billion worth of electronic products and machinery in
2004, and with exports to Europe worth about US$6.17 billion.
A few multinationals knew of the possibility of a new directive
beforehand, and started pressing their upstream suppliers in
Zhejiang for the right materials early. Earlier this year, Sony
Inc. ran a check on its over 4,000 Chinese suppliers and dropped
those that didn't meet their requirements. Panasonic, Omron and
Foxconn also tightened their supervision of suppliers.
The RoHS requires that for products sold in the EU market, the
weight of cadmium in a product should be no more than 0.01 percent
of its total; lead, hydrargyrum, hexavalent chromium,
polybrominated biphenyl (PBB) and polybrominated diphenyl ether
(PBDE) counts should each be no more than 0.1 percent.
"An ordinary electronics product usually contains many
components and is made of a combination of materials, so it is hard
for Chinese enterprises to replace all these materials in the short
term in order to have their products totally accord with EU
standards," Shen Guoqiang, general manager of a local electronics
company, told the 21st Century Business Herald on August
15.
Shen's company has put together a special team to tackle the
problem. The company has so far managed to find substitute
materials that meet the RoHS requirements and has set up an
environment-friendly production procedure, Shen said.
Other Zhejiang companies are doing the same even if it means
raising their production costs.
Local authorities are also doing their part to help domestic
manufacturers tackle the issue.
On July 20, the local inspection and quarantine bureau of
Ningbo, an important port city in Zhejiang, and NEC Factory
Engineering agreed to work together on an international analysis
center. The center will test the environment protection
performances of electronics and machinery and provide technical
support to local exporters.
Meanwhile, dozens of low-voltage electronics manufacturers have
also decided to cooperate and deal with the situation as a
team.
The cooperation between small to medium-sized enterprises (SMEs)
will benefit both themselves and the whole industry.
Moreover, officials with the provincial bureau of quality and
technical supervision have warned that the US and Japan, another
major market for Chinese products, might follow suit on the
standards.
"The whole industrial chain is likely to be shuffled," warned an
official with the Zhejiang Provincial Economic and Trade
Commission. It is hard to qualify the EU's standards without the
joint efforts of manufacturers, parts suppliers and raw material
producers, the official added.
He also reiterated that Chinese manufacturers might be kicked
out of the EU market if the matter isn't properly handled.
(China.org.cn by Tang Fuchun August 19, 2005)