Why Have Our Appeals for Information Disclosure Been Ignored?

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Green Watershed was particularly interested in knowing which local banks might have financed the factory’s operations as part of their strategy of applying pressure on polluting factories through their creditors.  In an interesting follow up to this story, we were informed by a well-known Beijing-based environmental NGO that Green Watershed’s efforts may have had some effect.  In speaking with one of the companies involved in the chromium pollution, this NGO found the company was having difficulty getting bank loans.  When asked why, the company manager said it was because of an environmental organization that had been spreading negative information to the banks about the company’s environmental record.

An Arduous Process for NGOs Seeking Information Disclosure on Qujing’s Chromium Pollution

For more than ten years, a secret has remained hidden about Xinglong village, a remote village in Luliang county (Qujing city) in the province of Yunnan.   Xinglong is so remote that one can hardly find it on the map.  A recent news report disclosed hundreds of thousands of tons of highly toxic chromium residue in the Nan Pan River, source of Pearl River and a “cancer village” nearby with nearly thousands of affected households. The company behind it, the Yunnan Province Luliang Chemical Industry Co., Ltd. (hereinafter referred to as “Luliang Chemical”) had been preparing for a public listing with strong backing from banks, according to accounts.

With the growing number of environmental accidents in recent years, China’s government has piloted a green credit policy and a series of related measures to require banks to manage credit risks arising from environmental incidents. Measures have also been taken by several banks to implement the green credit, by refusing or reducing loans to polluting enterprises or projects.

In order to trace the profit motives behind the chromium pollution incident and assess how well the concerned Yunnan provincial departments have been implementing the central government’s green credit policy, the Green Watershed began a dialogue with numerous NGOs, banks and regulatory bodies and filed for information disclosure in accordance with the law.

After the pollution incident was revealed, the first action that Green Watershed took on August 29, 2011, was to jointly issue with 23 Chinese NGOs  An Open Letter from Environmental NGOs to 16 Listed Chinese Banks Regarding Luliang Chemical’s Chromium Pollution Incident, hoping to discover if the banks and their branch offices had financed Luliang Chemical and its two affiliates. However, at the time this article was written, the only replies received were from the Industrial Bank and the Shanghai Pudong Development Bank, stating they had no financing relationship with the aforementioned three companies.

The second action taken by Green Watershed was to file for information disclosure with the government’s financial regulators and environmental protection authorities. In accordance with the Government Information Disclosure Regulations and Comments on Regulations for the Implementation of Environmental Policies and Credit Risk Prevention (hereinafter referred to as “green credit” policy) and internal regulations of the relevant government departments of Yunnan province, Green Watershed in September and October of 2011 petitioned the Kunming branch of the People’s Bank of China, the Yunnan Banking Regulatory Commission, and the Yunnan Environmental Protection Bureau to request information be disclosed about the  banks that financed Luliang Chemical and the way in which authorities had handled and responded to the pollution incident.  A written acknowledgement of receipt was provided by the above three departments.While we were pleased to receive a positive response from all three government departments, the actual substance of their response was disappointing. Using different strategies, all three government departments declined our requests for citizens to exercise their right to information.

Strategy 1: Using “Commercial Secrets” as a Pretext

The Kunming branch of the People’s Bank of China refused to disclose information on the banks that had financed Luliang Chemical and the details of the loans, on the grounds of commercial confidentiality. It cited the following provision in Bank Loan Registration and Consultation Measures (Interim): “Article 22, information about loans and loan borrowers obtained through the bank loan registration and consultation system shall not be disclosed to a third party.” “Article 23 … the People’s Bank of China shall not disclose information about financial institutions and borrowers at will.”

Many challenges still remain for obtaining government information disclosure, and “trade secrets” have been the primary grounds for refusing information disclosure. Yet, much controversy surrounds the notion of “trade secrets” in academia as well as in judicial precedent. It is exactly because the term is rather vague and difficult to define that it is being used indiscriminately by various government departments as part of their “security” lexicon.

We found on the website of the Kunming branch of the People’s Bank of China a provision in the People’s Bank of China Kunming Branch Duties in Requests for Information Disclosure (interim) that states: “Article 20, the Kunming branch of the People’s Bank of China may not disclose the following information: (1) involving state secrets, trade secrets, matters or individual privacy. But with the consent of the party or if the Kunming branch deems that withholding the information involving trade secrets and individual privacy may have a significant impact on the public interest, it can disclose the information.”  It is apparent that the public interest should take precedent to the protection of “commercial secrets.” Even if “information on banks that finance polluting enterprises” is considered a “commercial secret,” it is apparent that the public interest should take precedence over the protection of commercial secrets if significant damage has already been inflicted on the environment and public safety and may pose yet a greater threat (like the Qujing chromium contamination). The government departments made a choice that reflects the trade-off they made between the public interest and commercial interests.

Strategy 2: “Passing the Buck”

The Qujing chromium contamination was considered a major environmental pollution incident by the Yunnan Provincial Banking Regulatory Commission. Their position was that they do not have primary responsibility for reporting information about how the incident was handled. Rather, they said, the Environmental Protection authorities should be contacted for the relevant information.

Although the Qujing chromium pollution should be considered environmental pollution, we had requested the disclosure of information pertaining to the “Yunnan Provincial Banking Regulatory Commission’s handling of the Qujing chromium pollution, response and implementation measures.” In 2007, the Ministry of Environmental Protection, the People’s Bank of China and the China Banking Regulatory Commission jointly issued a document on green credit policy that expressly stated:

“Environmental Protection bureaus at all levels, the People’s Bank of China, banking regulators, and financial institutions should put the implementation of environmental policies and regulations at the top of their agenda, strengthen collaboration and linkages between environmental and financial regulatory authorities, in order to promote credit safety through environmental supervision, in order to support environmental protection through strict credit management,  increase the economic constraints on and supervision of enterprise environmental violations, and change the current high cost of environmental compliance and low cost of flouting environmental regulations for businesses. All levels of the banking regulatory commission shall urge commercial banks to consider whether companies abide by environmental regulations as part of the credit review, and practice strict scrutiny and management; have commercial banks implement environmental policies and regulations and cooperate with environmental protection bureaus in enforcement and control the credit risk of polluting enterprises, bringing this into the scope of supervision and inspection; carrying out investigations and determining the underlying factors of bad loans resulting from corporate environmental problems.”

In this document, there are also a series of regulations on commercial bank credit controls on polluting enterprises. Financial regulatory authorities also bear responsibility for supervising commercial banks. In accordance with our understanding of this policy, given the close relationship between the financial support provided by banks and industries engaged in pollution, financial regulators and the Environmental Protection departments can and should play their distinct roles. The information disclosure request we made with the Yunnan Province Banking Supervisory Commission was regarding whether “financial regulatory authorities” acted in accordance with the “green credit” policy to carry out its “financial supervision duties,” “to support environmental protection through strict credit management.” Clearly, the department with primary responsibility for this information should be the financial regulatory authority—the Yunnan Province Banking Regulatory Bureau; however, they put the ball in the Environmental Protection bureau’s court.

Strategy 3: Technical Difficulties

In 2009, the Ministry of Environmental Protection and the People’s Bank of China jointly issued the Notice on Further Improvement of Information Sharing for the Full Implementation of the Green Credit Policy (hereafter referred to as “green credit information sharing” provisions), clearly stipulating the responsibilities of sharing information on environmental pollution by the Environmental Protection bureau and the financial regulator. Prior to this, the People’s Bank of China and the State Environmental Protection Administration (SEPA) [now the Ministry of Environmental Protection (MEP] already had similar regulations in place: Notice on Information Sharing about Corporate Environmental Issues (2006) and Notice on Regulating the People’s Bank of China’s Credit System and Providing Information about Corporate Environmental Violations (2008). The above documents all request Environmental Protection departments to provide information on corporate environmental violations to the People’s Bank of China’s information collection system.

However, judging from the replies made by the Yunnan Provincial Environmental Protection Bureau and the People’s Bank of China Kunming branch, this sharing is far from being implemented in practice. Although the reason given by the environmental protection authorities was “limited network technology,” a number of years have passed since the aforementioned documents were first introduced.  How can establishing a network be so difficult? Moreover, with such a major environmental incident like the Qujing chromium pollution that has been a cause for alarm for central authorities, information sharing should be handled as a special case in this particular instance. Yet government departments still use “undeveloped network technology” as an excuse to kick the ball into someone else’s court, which is truly regrettable.

In addition, the above three documents require the Environmental Protection department to provide information on corporate environmental violations to the People’s Bank of China; however, no mention is made of whether the People’s Bank of China should disclose information about the loans of polluting enterprises. It is very difficult for this kind of one-way transmission of information to bring about effective cooperation between Environmental Protection departments and financial institutions in implementing green financial policies.

The river has turned black and toxic from chromium residue. Cancer has ended the sounds of laughter of one family after another. The Nanpan River pollution incident has drawn everyone’s attention. Regrettably, under the pretext of “commercial secrets,” “passing the buck,” and “limited network technology,” citizens still do not possess the right to know more about the chromium pollution incident. When the environment and public safety have been compromised, will the government consider the public, long-term interests of society, and respond to public events and reasonable demands from civil society?  This is the real test of a ruler’s heart and wisdom.

In Brief

In this important first-hand testimonial, Yu Xiaogang and Chen Yu of the well-known Yunnan-based environmental NGO, Green Watershed, detail how their appeals for information to be disclosed about a chemical factory involved in chromium pollution were systematically brushed aside by local authorities
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