Resource Recycling State-Owned Enterprise Established in China, Mocked as "Super Scrap Recycling Station"

A photo of an electronic waste recycling center in Brooklyn, New York. (Photo: Annan/Dajiyuan)

[October 21, 2024] The Chinese government recently invested billions to establish its first state-owned enterprise dedicated to resource recycling, which has been described as a "super scrap recycling station." At the same time, the authorities emphasized promoting the development of a unified national market. Experts believe that the creation of this giant enterprise may be part of the CCP's worst-case planning, preparing for an internal recycling system in the event of complete decoupling from the global economy.

China's Giant Resource Recycling SOE: Experts Skeptical of Effectiveness

China Recycling Group Co., Ltd. (hereinafter referred to as China Recycling Group) was officially established on October 18 in Tianjin. This company is China's first state-owned enterprise (SOE) specializing in resource recycling, with a registered capital of 10 billion yuan (RMB) and headquartered in the Sino-Singapore Tianjin Eco-city. It will focus on resource recycling across several major categories of recycled materials.

The first Party Secretary and Chairman of China Recycling Group is Liu Yu, and Zhu Jianchun serves as the Deputy Party Secretary and General Manager. Liu Yu previously served as Chairman of Luneng Group and China Green Development Investment Group, while Zhu Jianchun was formerly the General Manager of Baowu Group's Environmental Resources Technology Co., Ltd.

The company’s equity structure shows that the State-owned Assets Supervision and Administration Commission (SASAC), China Baowu Steel Group, China Petrochemical Corporation (Sinopec), and China Resources Group each hold 20% equity, while China Aluminum Corporation (Chinalco) and China Minmetals Corporation each hold 10%.

The concept of resource recycling refers to the recovery, processing, and reuse of useful materials from waste, with electronic waste receiving particular attention. Chinese state media claim that China Recycling Group will provide comprehensive solutions, integrating warehousing, processing, distribution, trade-in services, and the establishment of industry standards.

China is currently facing a surge in the need to dispose of retired electric vehicles, wind turbines, and photovoltaic equipment. Additionally, Zhao Chenxin, deputy director of the National Development and Reform Commission, recently disclosed that large-scale equipment updates and trade-in programs for consumer goods will generate a large amount of waste that needs to be processed through recycling. According to CCTV, China Recycling Group is expected to handle 260 million tons of scrap steel annually, helping reduce the country’s reliance on iron ore imports.

Dai Zhiyan, an associate researcher at the International Economics Division of the Taiwan-based Chung-Hua Institution for Economic Research, told Epoch Times that recycling, especially for materials used in batteries, is a global trend. However, China's massive electric vehicle battery recycling presents a serious challenge. "First, these batteries are much larger than household ones, and second, if they are not handled properly after vehicles are decommissioned, they can easily cause pollution or explosions."

Chinese state media cited statistics from the China Association of Resource Recycling, projecting that the resource recycling industry could surpass 4 trillion yuan in output value this year. By 2025, this figure is expected to reach 5 trillion yuan. The largest solid waste management company in the world, Waste Management Inc. of the U.S., currently has a market capitalization exceeding $89.9 billion, and its market value has been steadily rising for the past decade.

Dai Zhiyan added that China still lags behind Western countries in this sector. He noted that such industries are generally geared toward environmental protection and may not directly boost the domestic economy; in fact, they could even present economic obstacles.

He cited Japan’s Kitakyushu as an example, where a facility specializes in recycling scrap materials such as fluorescent light tubes. Traditionally, these tubes are crushed, and their components separated and remelted to create new tubes. However, Japanese technology takes a different approach, disassembling the faulty circuits or lighting elements without breaking the glass and using new components to restore the lamps.

"The entire process leaves the glass intact, which is impressive. However, due to the lack of economies of scale, the cost of a recycled tube is about the same as a new one," he explained.

In Dai Zhiyan’s view, it will be difficult to convince consumers in China’s current economic climate to pay the same price for a refurbished product they perceive as second-hand. From an economic perspective, this type of recycling may not be able to replace existing manufacturers' capabilities and could even become a hindrance to the so-called internal circulation economy.

Dai Zhiyan, associate researcher at the Chung-Hua Institution for Economic Research, pointed out that establishing a "super enterprise" for resource recycling may take three to five years to show significant results, based on experiences from other countries. He stated, "These policies face great challenges in addressing China's current severe economic issues and may not progress as quickly or smoothly as anticipated."

Yao-Yuan Yeh, professor of international studies at the University of St. Thomas, believes that the high-profile establishment of this giant state-owned resource recycling company could also serve to divert attention from China’s current economic difficulties, signaling a shift towards developing another industry. However, this industry will take a long time to produce results, and for the immediate economic crisis, it might not provide timely relief.

Dubbed "Super Scrap Recycling Station"

This new state-owned enterprise has been nicknamed a "super scrap recycling station" by Chinese netizens.

Dai Zhiyan explained that in countries like the U.S. and Australia, there are mandates for companies to include at least 2% of recycled oil in motor oil products, ensuring that performance remains on par with non-recycled products. However, in China, the focus seems to be more on simply recycling and reusing materials as a support for industries, rather than improving technology or developing regulations to facilitate broader adoption of recycled products.

Dai added that without improving regulations, technology, and downstream acceptance from small businesses or international markets, this initiative could easily become just a massive recycling facility. Furthermore, projects like this may also face environmental challenges and potential community opposition.

Sun Guoxiang, associate professor at Nanhua University in Taiwan, emphasized that while companies in Western countries, such as Waste Management in the U.S., have become global leaders in solid waste processing with advanced technology and operational experience, China's entry into this field is relatively late. The country still faces significant gaps in technological innovation, industry standards, and market-based operations.

Yeh commented that while China is investing heavily in resource recycling, the returns are uncertain. For example, recycling electric vehicle batteries is still an unsolved technical challenge globally. China's massive investment in this area might be a gamble for the future.

Preparing for Decoupling from the World?

On October 18, Chinese Premier Li Qiang presided over a State Council meeting, emphasizing the need to push forward the development of a unified national market alongside implementing incremental policies to remove barriers and bottlenecks hindering economic circulation, ensuring the free flow of goods, resources, and factors on a larger scale.

Recently, Xi Jinping has made inspection visits to Fujian and Anhui, where he reiterated that advanced technology cannot be obtained through negotiation and must be independently developed. Analysts suggest that Beijing may be preparing for a scenario where, following the U.S. elections, pressure on China increases due to global geopolitical shifts.

Sun Guoxiang explained that the speeches by Xi and Li reflect concerns over external technological and resource blockades. Thus, promoting large-scale resource recycling may also be part of China's long-term strategy to cope with global upheavals.

Dai Zhiyan pointed out that based on the shareholder composition of China Recycling Group, which includes companies like Baowu Steel and Sinopec—both traditionally involved in selling chemical and metal raw materials—it seems that the company’s mission may extend beyond mere market-based recycling. He suggests that this structure might also reflect concerns over future geopolitical competition, indicating a potential strategy to stockpile strategic resources in preparation for sudden shifts in the international landscape.

He explained, "In the future, China may face scenarios such as war or economic sanctions that could disrupt access to critical raw materials. The concept of a circular economy and resource recycling could be motivated by the need to ensure national defense resources. Building such a system could be part of a broader strategy to prepare for potential escalations in foreign relations or international conflicts."

Yao-Yuan Yeh also mentioned that the Chinese Communist Party (CCP) is concerned about the possibility of the trade war escalating, which could lead to a scenario where China is cut off from the rest of the world. In such a situation, China might find itself unable to access certain critical resources. Therefore, the CCP is starting to preserve its domestic supply chains by focusing on recycling existing resources. Yeh stated, "This line of thinking is possible and could be seen as a preemptive move to establish an internal circulation system. However, whether this situation will eventually materialize remains uncertain."

Editor: Li Muen