China Goes Circular: 6 Success Stories

By Nick Jeffries 16 May, 2019

Jeffries from the Ellen MacArthur Foundation showcases what makes China a leading circular economy

This article was originally published on Circulate News – Medium website on 16 July 2018. Click here to read the original publication titled “Circular economy in China: six examples”.

In the medieval period, practical technology from China such as the compass, gunpowder, papermaking, and printing travelled along the Silk Road to Europe. These important technologies would support the flourishing of European culture, exploration and state-building.

In the 16th and 17th century, knowledge flowed back to China in the form of insights and techniques from Europe’s ‘scientific revolution’, providing a set of mental tools, for example Euclidean geometry and the ‘scientific method’, that would help Chinese scholars understand the physical universe.

Later on, trains, electricity, internal combustion engines, the microprocessor and other fruits of European science and technology also travelled east, allowing China to modernise and ultimately become the industrial giant that it is now.

Today, the mature economies of Europe and China feel pressure from some common trends: rapid population growth, growing affluence and consumption, the expansion of degraded land, a dwindling stock of finite resources, high volumes of waste, and environmental and social externalities.

“An economy that relies on the continual extraction of finite minerals & the degradation of natural systems, by definition, cannot last”

Throughout Europe and China, people in business, government and academia have reached a similar conclusion: an economy that relies on the continual extraction of finite minerals and the degradation of natural systems, by definition, cannot last.

So is it time for a new era of ideas exchange, that supports the transition to a circular economy?

China and the circular economy

In the 1990s, Chinese scholars proposed a circular economy as a new model to help China make better use of resources and energy. Since then, the model has become an integral part of the national economic strategy, and has been built upon throughout the last three Five Year Plans. The adoption of the Circular Economy Promotion Law in 2008 marked China out as a frontrunner in circular economy legislation.

The adoption of the Circular Economy Promotion Law in 2008 marked China out as a frontrunner in circular economy legislation

Early efforts to implement the circular economy revolved around the transformation of industrial parks, by creating ‘symbiotic relationships’ in which the waste from one process is used as input for another.

Today, there are four main components to China’s circular economy strategy:

• Circular production — to embed reduce, reuse and recycling into whole production processes
• Circular systems of industry, agriculture and services — to follow the principle of optimising industrial processes, greatly supporting circular production
• Growth of recycling industry — to recycle and reuse urban waste streams, focusing on remanufacture and renewable energy
• Green consumption (‘circular values’) — to guide citizens towards smart, healthy and safe consumption.

The following case studies of Chinese companies and initiatives demonstrate each of these four priority areas. They also reflect the new economic reality in China: the transformation from manufacturing giant into the world’s largest consumer market.

Guangzhou Huadu

The market potential for remanufacturing, as opposed to manufacturing, the 16 million cars, fridges, computers and TVs that go out of warranty each year in China, is estimated at USD 30 billion. Furthermore, using Renault’s Choisy-le-Roi remanufacturing plant near to Paris as a reference point, the potential resource savings are significant — 80% less energy, 88% less water, 92% less chemicals and 70% less waste production.

Guangzhou Huadu Worldwide Transmission is a Southern Chinese remanufacturing company that provides services around gearboxes and other automotive transmission systems. Guangzhou Huadu owns a number of repair and service centres that produce 35,000 remanufactured units each year. The main driver for success has been the development of an ecosystem that allows for the smooth collection and distribution of parts, key partners include 21 auto companies and the large 4S automotive spare part franchise.

Guangzhou Huadu owns a number of repair & service centres that produce 35,000 remanufactured units each year

Huadu’s technicians typically go through thousands of hours of training to give them the skills to undertake the complicated repairs. The remanufactured products are insured by Pingan, one of China’s largest insurance companies.

At the state level, the National Development and Reform Commission (NDRC), responsible for the planning and coordination of the circular economy in China, oversees a scheme called ‘Trade Old for Remanufactured’, along with other ministries. Customers get a 10% discount if the trade in their old equipment for remanufactured items; and the Ministry of Industry and Information Technology (MIIT) support in other ways including administering an official remanufacturing certification scheme and publishing an annual seven-volume catalogue of official certified parts.

GemChina

While reuse, remanufacturing, and repair are central to the circular economy, when products have a short use period or can no longer be kept in service, it can make sense to recycle the materials.

GEM Co. Ltd, a Shenzhen based company, is a market leader in the area of material recycling in China and was recognised as a finalist in the prestigious Circulars Awards 2018. GEM recycles materials from a number of industrial sectors including electronics, automobiles, batteries and wastewater.

By 2020 the Chinese govt plans to roll out 5mn additional electric vehicles…

…to support this, GEM china have achieved the highest rate of battery re-utilisation

The most pioneering of their activities is in the area of battery recycling, a sector of great strategic importance to China due to the growth of electric and plug-in hybrid vehicles. Electric vehicles are key component China’s plans for a smart and clean mobility system, as a way of relieving congestion and the high levels of air pollution in China’s growing cities. Shenzhen’s public buses are already fully electrified; by 2020 the Chinese government plans to roll out 5 million additional electric vehicles, including the electrification of Beijing’s entire fleet of 70,000 taxis. To support this, GEM china have achieved the highest rate of battery re-utilisation, processing more than 10% of all used batteries, extracting nickel and cobalt to create chemicals that can be used to manufacture new batteries, from brands like Samsung and Ecopro.

In 2016, the company processed 3mn tons of resources that would otherwise have been wasted

China is still by far the world’s largest consumer of raw materials. In 2015 its factories and industries accounted for about 50% of steel, copper, nickel and aluminium demand. To protect against supply and cost fluctuations requires a shift to a circular use of materials, an approach which GEM Co Ltd have adopted for almost two decades. In 2016, the company processed 3 million tons of resources that would otherwise have been wasted, saving energy equivalent to 14 million barrels of fossil fuel.

JD reuse platform

According to a 2017 Bain and Co survey, Chinese consumers account for purchasing 32% of worldwide luxury items. This category is characterised by high cost and quality, but also high turnover, on account of changing fashions and rapid technology advances.

China is seeing the emergence of marketplaces that specialise in second hand luxury items, a market estimated at USD125bn in 2017

For customers that want the newest gadget but may not be able to afford a new item, China is seeing the emergence of marketplaces that specialise in second hand luxury items, a market that has been estimated at USD125bn in 2017.

Although online marketplaces for secondhand products have been around for many years, the scaling up of these platforms has been hindered because of uncertainty in the quality of the products being traded. A company called Jingdong (JD) hopes to overcome these trust issues by incorporating a number of features that instil customer confidence and create a seamless resale/purchase experience.

JD plans to invest USD150bn in the next three years to develop their reuse platform, with the immediate focus on high-end smartphones. To provide their ‘premium quality guarantee’, they have partnered with Aihuishou, an experienced player in the digital product recycling market.

The technology partner checks each phone that comes in, undertakes technical and cosmetic repairs, and awards a quality classification. The guarantee is underpinned by a seven-day refund if the customer is not satisfied. JD e-commerce is already a huge player in the online retail world, so the reuse platform also benefits from rapid and frictionless logistics.

Customers benefit as they are incentivised to take care of their smartphones

There are direct benefits from platforms such as Jingdong, for example material resource savings as products are kept in use for longer. But also customers benefit as they are incentivised to take care of their smartphones, to maximise the size of the cashback contribution for their next upgrade.

There are also indirect benefits. According to the US luxury resale platform The Real Real, its customers are favouring more durable brands in the primary market, knowing that they will be able to get a better resale price. This can have a knock on effect on the brands, encouraging them to shift away from flimsy, throwaway manufacturing, instead prioritising quality and durability.

Mobike

Bike sharing did not start in China, but the version that Mobike offers has many uniquely Chinese characteristics, that have earned it the label as one of the ‘four great new inventions’ of modern China.

The rapid expansion of Mobike can be attributed to the need for an urban mobility solution that could fix congestion & air pollution

Mobike launched in April 2016, and within a year its customers had cycled over 5.6bn kilometres. Starting in its hometown of Shanghai the company has expanded into 160 cities including Santiago, Chile and Manchester, UK. The rapid expansion of Mobike can be attributed to social and environmental factors, notably the need for an urban mobility solution that addresses the congestion and air pollution that affects many Chinese cities.

However the key drivers that have allowed Mobike to scale outside of China and what makes it very different from European bike-sharing schemes lies in its development and application of technology, including 28 individual patents.

The most obvious distinction is the dockless parking feature, enabled by GPS tracker technology, so that customers can park in places more convenient to them and can locate bikes using their smartphone. Bikes are hired by scanning a QR code, which identifies the customer, unlocks the bike and charges through one of many mobile payment apps.

A social credit scheme tracks the habits of the customer, rewarding and penalising good or bad usage patterns. Internet of things technology monitors the condition of the bike, telling the company when components need to be repaired or maintained. This also feeds into Mobike’s big data platform to help predict demand, providing advice to commuters, integrating with other public transport systems and incentivising customers to pick up remotely parked bikes.

By 2017, most of the smaller bike rental players had folded & now two co’s control 90% of the market

Chinese bike-sharing has experienced a frenzied growth in the last decade, reaching a peak in 2015 when over 60 companies operated around the country. The evidence of oversupply could be seen scattered in striking photos of mountains of bikes scattered over the city’s sidewalks and parks. By 2017, most of the smaller bike rental players had folded and now two companies control 90% of the market.

It is hoped that now that the bubble has burst and the rusting bikes are being removed, the remaining players grow in a more sensible way, supported by policy. If this happens, bike sharing companies like Mobike can continue to play a major role in easing congestion and improving quality of life in cities, not only in China but around the world.

Y Closet

Clothes are an everyday necessity, and for many an important aspect of self-expression. The habits of city working and socialising demand a greater variety and number of clothes, and retailers have responded by offering cheaper clothes offered in constantly changing styles.

The result is ever expanding-wardrobes found in homes around the world. Between 2000–2015, global clothing sales doubled from 50 to 100bn units, while at the same time utilisation rates, the number of times an item is worn in its lifetime, have fallen on average by 36%. More clothes are being purchased, and they are being discarded earlier.

On top of this, the way clothes are made and used today is extremely wasteful and polluting. Each second, a truckload of clothes is landfilled, representing USD460bn of discarded value annually, as well as a huge loss of material, energy and water resources.

Y Closet customers pay a monthly subscription to access up to 30 individual items from a catalogue of >150,000 different garments

A Beijing based startup called Y Closet offers an alternative business model for clothes, that addresses both increasing demand as well as the more disposable (‘fast fashion’) habits, particularly in the fast growing office, party and dating wear segment. Y Closet customers pay a monthly subscription of USD75, for this fee they can access up to 30 individual items selected from a catalogue of more than 150,000 different garments.

Y Closet’s business model relies on technology and strategic partnerships. Mobile technology links the clothes company to e-Commerce platforms such as Alibaba, thus reducing friction on transactions. Payments are streamlined through existing Alipay accounts, which can also be used to apply loyalty discounts or other benefits.

Strategic relationships have also been vital, for instance with fashion brands like Kenzo and Acne studios, as well as commercial laundromats. Not everyone is sold on the idea of wearing other people’s clothes, but clearly new approaches are needed. Even if a small proportion of China’s huge and growing office worker population adopts such a model, it could have a positive economic and environmental impact.

Suzhou organic waste policy

Food and other organic waste makes up to 55% of municipal solid waste in Chinese cities, and presents a significant challenge. Of course, the priority should be to avoid waste being produced in the first place, but a proportion is always unavoidable. Current approaches to deal with the problem, like incineration or landfilling, loses valuable nutrients, requires land and generates greenhouse gas emissions.

Policymakers around the world are starting to realise that effective management of organic material begins with a change in mindset. While untreated biowaste can be a hazard; if sorted and treated separately, it can benefit the economy and the environment. The Chinese government has recognised the importance of dealing with urban organic waste and is playing an active role in developing better, more circular solutions.

The city’s municipality has mandated all restaurants send food waste to a nominated processor in order to secure their operating licence

The city of Suzhou is an example of a highly successful waste collection and processing program. The city’s municipality has mandated all restaurants send food waste to a nominated processor, Jiangsu Clean Environmental Technology, in order to secure their operating licence for the following year. Through this mandate, the city not only increased collection rates significantly, but also solved the issue of inconsistent feedstock flows to Jiangsu’s processing equipment, that include biogas plants, biofuel conversion and composting.

There are many challenges to implementation, including competition with illegal gutter oil producers. But the benefits include cost savings and new revenue generation, leading Jiangsu to the file over 20 separate waste valorisation patents. The company is using food waste to grow insect protein, which can then be sold at USD 1200/ton to aquaculture and other facilities. The revenue streams have allowed Jiangsu Jiejing to be less dependent on government subsidies, which has made it a leader in the field.

In the book Decoding China, Diego Gilardoni argues that Chinese culture is oriented to the longer term. He believes that this reduces the risk of rushing into decisions without considering the wider context, and provides a clearer perspective on the future.

What’s more, it has been said that while the Western mind focuses on ‘things’, the Chinese mind focuses on the ‘relations between things’. Gilardoni argues that in the Western tradition, people tend to analyse the parts separately, while the Chinese mindset tends towards systems thinking, in not separating the parts from the whole. After all, the whole is not made of the mere sum of the parts, but of the relationships between them.

As well as an exchange of innovation and enterprise, perhaps it is this systems thinking and patience that will be the most valuable assets to share and develop, as we shift towards a global circular economy.

Further Reading

• Treading Water: Corporate Responses To Rising Water Challenges – From setting water targets to engaging value chains, companies are improving key aspects of water management but incremental action is no longer enough. CDP’s James Lott brings us key findings from their latest report
• I Want You To Panic – As we edge closer to a climate crisis, Thanos from Avengers Endgame doesn’t seem so crazy anymore. Hear what China Water Risk’s Woody Chan has to say for his generation & children everywhere
• Inside The World’s First Museum Of Climate Change In HK – It is the world’s first museum of climate change but what does it really do? Take a brief tour with its director Cecilia Lam and explore its four key initiatives from education activities to an action monitor
• Empowering Youth To Face Climate Change – Youths face great barriers to land a job or start their own initiatives in the field of climate change but Youth Climate Leaders is aiming to change that. Find out more from their Cassia Moraes & Fernanda Matsuoka
• No Planet B: HK’s School Strike For Climate Action – As the strike wound down we caught up with one of the speakers, South Island School’s Adele Lo, to find out her views on climate change and inaction in Hong Kong. Could she be our Greta Thunberg?

• Circular Economy: From Theory To Action – As we move outside the ‘safe operating space of our planetary boundaries’, Ellen MacArthur Foundation’s Nick Jeffries explores what is a circular economy & implications for water
• 85 Voices: Insights From Chinese Textile Manufacturers – Hear from China’s textile manufacturers on their challenges and what help they need to transition to a clean and circular model. This is an opportunity for the global fashion industry. China Water Risk’s Dawn McGregor shares key takeaways from our new survey report
• Fashion’s New Cycle – With 12,000 garments entering landfills every hour, the USD3 trillion fashion industry is ripe for a disruptive overhaul. FINCH Designs’s co-founder Heather Kaye shares how this Chinese brand is doing this through their swimwear made from recycled PET
• China’s Economy: Linear to Circular – After Germany and Japan, China is the third country globally that has enacted polices to move towards a circular economy. China Water Risk’s Thieriot on how and why China needs to make this transition. Which industries are affected, what is the role of industrial parks?