Campaign to Curb Smog

Oriental Outlook
March 20

During the sessions of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC) in March, environmental protection ranked high on the agenda in both government work reports and the proposals of NPC deputies and CPPCC members.

During the two-session period, Chinese President Xi Jinping asked for the PM 2.5 data of cities located in the Pearl River Delta when he attended a meeting of the Guangdong Province Delegation. Premier Li Keqiang also vowed in his government work report that the government will spare no efforts in curbing pollution.

Smog that has exasperated half of all Chinese cities, including the capital Beijing, in recent years has made environmental protection a political priority in China. Meanwhile, the Chinese Government has begun to change their ways of thinking on reducing environmental pollution. A number of heavy polluting and low energy efficient coal power plants across the country have been closed, and air quality has been made subject to an assessment standard for local governments. A regional coordination mechanism is to be set up.

However, the key to the environmental protection campaign is to share economic interests equally as well as distribute responsibility impartially to local governments. For example, Beijing cannot get rid of smog without the help of neighboring cities and provinces. For economic reasons, some local governments are not willing to shut down polluted plants that make major contributions to local GDP. Therefore, the battle on environmental pollution needs an effective mechanism as well as a strict legal framework.

Oil Monopolies Open for Private Capital

Caixin
March 17

China launched the reform and restructuring of its state-owned oil industry in 1998. At that time, the entire oil business shared by three big state-owned enterprises: SINOPEC, CNPC and CNOOC. But the three oil giants did not advance market competition as much as policy makers had anticipated over the following years. Instead, China's oil industry and market are under a monopoly led by the big three. Now, the Central Government has moved to boost the reform of the industry.

In February, SINOPEC announced that it would attract investment from the private sector in a bid to build a mixed-ownership over the company. Around 30 percent of shares of SINOPEC's sales business—estimated to be over 100 billion yuan ($16.16 billion)—will be sold. Meanwhile, CNPC also announced it would sell 49 percent of shares of its oil prospecting business to private capital.

The sales business of SINOPEC is recognized as a quality asset by the market. Among the 90,000 gas stations across China, SINOPEC owns one third of them. It is a stable profit source for the company. Many market observers are optimistic about the deal. In addition, a number of capital buyers have made contact with SINOPEC over the trade.

However, reforming the oil giants is not an easy process. These companies are faced with many problems. Management is one. They have to make adjustment in line with a new structure of shareholders. Selling business means employees could be laid off, and so how to deal with this problem is unclear.

Medicine Reform

Beijing Youth Daily
March 24

It has been reported that quite a lot of cheap basic medicines have been disappearing from drugstores in provinces such as Hunan and Anhui. Once the cheap medicines are removed from shelves, consumers have to buy substitutes, which tend to be much more expensive than the original medicine, adding to patients' economic burdens.

However, pharmaceutical companies also have their reasons to stop producing cheap medicines. Cheap medicines mean small profit margins or even no profits at all, which is a blow to manufacturers' enthusiasm. In the past, pharmaceutical enterprises tended to rename the old medicine, get them registered and sell at a higher price. Later, due to stricter medicine supervision and regulation, this game can no longer be sustained. In some cases, pharmaceutical manufacturers have totally stopped the production of established inexpensive drugs, replacing them with newly-developed yet much more expensive substitutes.

Medicines listed on the state's catalogue of national basic drugs are nowadays hard to locate. In 2009, the Central Government issued a document, explicitly pointing out that a basic medicine production and supply security system was required in order to reduce the cost of production and satisfy the public's demand for basic drugs.

However, the frequent disappearance of cheap drugs implies that loopholes in the basic medicine production and supply security system are being exploited. The biggest reason for this bottleneck is a lack of financial inputs into the production of basic medicine. Pharmaceutical companies that can't receive basic subsidies find it economically impossible to continue to produce cheap drugs.

Given the deep-rooted difficulties plaguing pharmaceutical companies, it's easy to see why so many cheap drugs are disappearing. To ensure reasonable profits for the production of basic drugs is necessary for the smooth supply of cheap medicine to the consumer, and this is something the government needs to take into immediate account.