Today, many factories in China are being asked to relocate further out as environmental laws in China, amongst other things, come increasingly into force.
The central government has recently issued policies calling for the relocation of entire classes of companies away from the outskirts or industrial sections of major cities due to safety hazards and environmental concerns.
For example, on March 1, 2021, the Law on Protection of the Yangtze River was passed at the Standing Committee session of the National People’s Congress.
According to this Law, the relevant regions in the Yangtze River basin shall establish cooperation mechanisms in the formulation of local regulations and governmental rules, preparation of plans, supervision and law enforcement, and other aspects to coordinate the advancement of ecological and environmental protection in the Yangtze River basin.
The local people’s governments at or above the county level in the Yangtze River area shall take measures to accelerate the relocation and improvement of the hazardous chemical production enterprises in the Yangtze River area.
The Law on Protection of the Yangtze River defines government responsibilities, extensively covering areas such as river basin planning; green development strategies; resource development, utilization, and conservation; pollution prevention and control; environmental restoration; and financial input for environmental protection such as ecological compensation.
The Law clearly imposes bans on (i) the construction and expansion of chemical parks and chemical projects within 1 km of the shoreline of the Yangtze River’s mainstream and tributaries; and (ii) the construction, renovation, and expansion of tailings ponds within 3 km of the shoreline of the Yangtze River’s mainstream and 1 km of the shoreline of the major tributaries, except for the purpose of improving safety and protecting the environment.
Following this Law, local authorities have notified factories in the Yangtze River Basin to begin efforts to close down and relocate their chemical production facilities.
Generously, the local authorities have promised economic compensation to factory owners in consideration of the expenses resulting from moving out of the existing facilities.
The compensation price for non-residential houses shall be determined according to the market evaluation price pursuant to relevant laws and regulations, which include the Regulation on the Expropriation of Buildings on State-owned Land and Compensation and the local rules for house expropriation and compensation evaluation on state-owned land.
The factors which affect the compensation price of relocation will include location, purpose of the building, building structure, old and new components, acreage, floor area, and land use right of the expropriated facilities. The value of indoor and outdoor decoration of the expropriated facilities, the relocation expenses of machinery, equipment, and materials, the compensation for the loss of production and business suspension, inventories, and moving costs shall be determined by the parties to the expropriation/relocation through negotiation. If no agreement can be reached through negotiation, an evaluation institution can be entrusted to determine the value, and eventual court proceedings should be initiated.
Despite the limited scope of compensation prescribed under the above-mentioned laws and regulations, some other factors affecting the compensation relevant to the relocation can also be negotiable with the local government since the expansion of the scope of compensation is not prohibited by Chinese Law. Therefore, the compensation standard for relocation is not uniform and may vary case by case.
Our lawyers are now working with the clients to assist in relocating the factories to a new location, as well as in discussions with the local government to ensure the client obtains the most favorable compensation possible in the circumstances.