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Is China’s New Environmental Protection Circular an Obstacle for New Projects?

February 22, 2007

By David J. Freeman and Dorothy Deng

Last year, in an effort to prevent the Chinese economy from overheating and to curb the rapid growth of fixed assets, the Chinese government imposed strict limits on the approval of new development projects. These measures included a policy issued by the State Council in June 2006, aimed at strengthening control of fixed assets investment and tightening the standards for approving new projects.

In response to the State Council’s new policy, China’s environmental protection watchdog, the State Environmental Protection Administration, issued the Circular Strengthening Environmental Protection Examination and Approval and Tightening Control of New Projects (No. Huan Ban Han 394) on July 6, 2006. The issuance of the Circular also indicates that China is on its way to ending its decades-old habits of pursuing economic growth at any cost.