May 21, 2019 08:06 PM

In Depth: Xiangshui Chemical Factory’s Recipe for Disaster (Part 2)

Editor’s note: A devastating chemical blast in eastern China’s Jiangsu province killed dozens of people on March 21. Weeks later, local communities and businesses are struggling to pick up the pieces while the authorities push to relocate the area’s chemical industry.

In the second of this two-part series, we look at how the industry was once considered the solution to the region’s economic woes — even as it took its toll on the environment and local communities. To read part one, click here.

At the start of the 21st century, Xiangshui county’s economy lagged behind its neighbors. According to Yancheng’s records, the Xiangshui government’s revenue in 2000 was the lowest among all the city’s counties. It earned 91.17 million yuan ($13.2 million) in total that year and was nearly 50 million yuan behind the city’s second-lowest earner.

Something had to be done, Xiangshui officials thought.

On March 8, 2002, the county government held a conference where they mobilized 10,000 representatives to go out into the rest of the country to seek potential investors. The county designated that year as “the year of project breakthroughs,” and launched a series of preferential policies for investors.

The official attitude was that, “as long as the project chooses Xiangshui, anything can be negotiated, and any conditions can be responded to,” according to the Xiangshui Yearbook of 2000-2003.

Chenjiagang Chemical Industry Park — which would later be renamed Xiangshui Ecological Chemical Park — officially opened in June 2002. By the end of 2002, 23 businesses had agreed to set up facilities in the park, investing a total of 878 million yuan.

Other local governments in the area also launched similar projects. In the city of Lianyungang, which borders Yancheng, the Lianyungang Chemical Industry Park and the Yanwei Waterfront Industrial Area were built in 2003 and 2005, respectively.

In 2007, the area around the mouth of the Guanhe River — home to all three industrial parks — was presented with a major opportunity. Pollutants caused an outbreak of toxic blue-green algae in southern Jiangsu’s Taihu Lake, which led local governments in the area to shut down tens of thousands of smaller chemical businesses in a cleanup effort. This prompted many companies to move north to the Guanhe River mouth area, according to Li Bin (pseudonym), the manager of one of the businesses in Xiangshui’s chemical park, told Caixin.

The business also moved into Xiangshui Park at that time. Li said the business had been attracted by the relatively low cost of land there, compared to southern Jiangsu, as well as the proximity of its existing facilities elsewhere in the province.


By 2017, Xiangshui’s chemical park was bringing in annual revenue of 495 million yuan, accounting for one-fifth of the county government’s income. Although the county remains at the bottom of Yancheng’s government revenue rankings, other indicators demonstrate the rapid growth Xiangshui has experienced — its industrial power consumption grew by 24.5% in the first ten months of 2018 compared to the same period in 2017.

But this growth would come at a terrible cost.

Widespread deceit

Most of the chemical businesses which moved to northern Jiangsu from the south in recent years produce dyes, pesticides and the raw materials used in pharmaceuticals, some of which are sold to European and American companies. These also happen to be some of the chemical products that cause the most pollution during the manufacturing process.

Officially, factories were supposed to use specialized equipment to treat and dispose of solid waste. They were also required to submit environmental impact assessment reports that stated their estimated waste production, and were subject to random inspections.

In reality, however, there were widespread violations of waste disposal regulations and factories were often tipped off in advance about inspections, sources told Caixin.

“For fouler-smelling types of work, if the inspection was due to happen the next day, they would definitely stop work by 6 a.m. Checks from the municipal level or higher mean a direct and total stop to work. Work only resumes when the factory is able to confirm that the inspectors have left Xiangshui,” said Feng Zheng (pseudonym), who has worked in the chemical industry for over 30 years and managed a chemical business in Xiangshui since 2011.


A sign in Xiangshui touts the region's status as a "hot area for investors" and a "paradise for emerging businesses" on April 22, 2019. Photo: Yang Rui/Caixin

In April 2018, state broadcaster CCTV aired a program on illegal liquid waste disposal in the area that revealed to national viewers hidden pipes directing waste into the Guanhe River, prompting a months-long attempt by local governments to clean up the area’s businesses.

“I can confirm that there isn’t a single factory without a secret pipe,” Feng said. “Each factory has a dedicated worker responsible for liquid waste. Usually, there are more than two secret pipes in each factory, used at different times depending on the situation. The pipes end in different directions.”

Workers at Jiangsu Tianjiayi Chemicals, the factory at the epicenter of the recent explosion, often dumped colorless liquid waste into nearby drains, and then lifted the sluices when the river’s tide ebbed, Caixin learned.

Several sources told Caixin that as oversight over pollution tightened in the past two years, businesses have developed more ways to conceal the illegal disposal of liquid waste.

Regulations require the amount of liquid waste expected according to a factory’s environmental impact assessment to be similar to the amount present in the factory’s liquid waste treatment facility during an inspection — but if liquid waste is being secretly disposed of in unauthorized ways rather than treated in the facility, factories must find some way to make up for the shortfall. “The industry practice is to top up the liquid waste with water intended for firefighting,” Feng said, echoing Tianjiayi employees’ descriptions of how they had prepared their liquid waste storage area for an expected inspection on March 21 — the day of the blast.

To make matters worse, there doesn’t seem to be a clear agreement between work safety and environment bureaus about which government department is responsible for regulating hazardous chemical waste.


Buildings lie in ruins at the epicenter of the explosion in Xiangshui Ecological Chemical Park. Photo: Liang Yingfei/Caixin

One work safety official who had inspected Xiangshui’s chemical park multiple times told Caixin that they did not conduct internal inspections of solid waste storehouses because they were considered “environmental protection facilities, which are the responsibility of the environmental protection department.”

But, on April 12, China’s environment ministry signaled in a letter that it did not consider environmental bureaus to be the “competent departments” tasked with overseeing particular industries, and that it considered the safe operation of environmental protection facilities an issue of workplace safety.

An official investigation into the causes of the March 21 explosion, which killed at least 78 people and injured hundreds, is still under way, but it’s suspected that the blast took place after a fire in one of Tianjiayi’s solid chemical waste storehouses.


Two weeks after the explosion, Yanfu People’s Daily, the official newspaper of the Yancheng Communist Party Committee, reported that local officials had decided to completely shut down what remains of the Xiangshui Ecological Chemical Park. The news was followed by an announcement that the province planned to speed up the relocation of smaller chemical companies away from densely populated urban areas, as well as the Yangtze River.

Yancheng itself has yet to issue any official documents demanding the closure of the park, which is home to at least five listed chemical companies.

Closure would be a significant blow for the many businesses that have upgraded their equipment in recent months, Feng told Caixin.

But some business owners are also ready to leave the industry, Li said. “Who is willing to shoulder such great responsibility? Some people died in the accident. Others will spend the rest of their lives in prison. The responsibility is too great,” he said.

In fact, Xiangshui-based businesses had already begun considering moving their operations to China’s west, where costs are lower, even before the explosion. A number of officials from chemical industry parks in northern Jiangsu told Caixin last year that companies were planning to move to autonomous regions like Ningxia and Inner Mongolia.

“If these businesses stay in Jiangsu and continue to expand their investment, it will be difficult for them to survive and develop, because the production costs are no longer at the same level as Inner Mongolia and other places,” Li Bin said. According to him, after the Xiangshui explosion, industrial parks from Shandong and Gansu provinces began putting up advertisements near the Xiangshui industrial park.

Some businesses currently operating in Lianyungang Chemical Industry Park have praised the authorities in China’s west for their quick approval of projects, Cheng Jian, an official at the park, said. "All formalities can be completed within one month. The cost of electricity, water and solid waste treatment is equal to half of our cost here."

But some people who spoke to Caixin were concerned that a chemical industry exodus from northern Jiangsu would only shift the problems of pollution and poor safety standards elsewhere, rather than solving them.

Inner Mongolia’s hazardous waste disposal practices are problematic, one manager of a Xiangshui-based factory told Caixin. “It seems to me that they’re draining liquid waste into the desert. The park there is spacious and empty, and there are no people living around it.”

“The parks in these areas are still in the primary stage, and with incomplete supporting infrastructure for safety and environmental protection,” one investor familiar with northern Jiangsu said.

An altered community

While businesses look to relocate, Chenjiagang’s residents are also facing a tough decision — whether to leave their homes or continue to live on polluted land.

Older residents of Chenjiagang, the town where the Xiangshui chemical park is located, remember when the town used to be known as “North Jiangsu’s Little Shanghai.” In the 1970s, Chenjiagang was the richest town in Xiangshui, home to a state-owned salt production facility, a wharf and a thriving fishing community.

When work began on the chemical parks, the many construction vehicles passing through the town damaged its roads and made it difficult to walk in bad weather. Locals used to catch shrimp in the river, but the water is now polluted and the shrimp are gone, they said.

At the same time, many local households became dependent on the newly arrived chemical businesses for income. Zheng Jiming (pseudonym), a welder, used to earn 7,000 yuan ($1,012) a month working at Tianjiayi. The explosion left him with a scar stretching from his forehead to the back of his head, an eye injury and staples in his skull.

Several Tianjiayi workers said they had yet to receive their wages from February and March. Meanwhile, Jiangsu Weier Chemical and Yancheng Hongyan Chemical, two other companies operating in Xiangshui’s chemical park, have announced that they are shutting down their facilities in the park and dismissing all local employees.

Zheng was given 6,600 yuan in compensation after he was discharged from the hospital. “My eye is recovering slowly,” Zheng said. “I don’t know when it will get better. I’m worried that I’ll no longer be able to go out and work to earn money in the future.”

Contact reporter Teng Jing Xuan (

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