Approximately 1,000 manufacturing firms in Beijing will close by 2020.

By Paul A. Davies and R. Andrew Westgate

China’s anti-pollution efforts have intensified in the Beijing-Tianjin-Hebei region, which is known for its problems with smog. In fact, Premier Li Keqiang has identified Beijing and Hebei as key areas in the “war against pollution.”

The Beijing-Tianjin-Hebei region has been a priority area for the Chinese government for several years. In 2014, the government launched plans to improve coordination throughout the Beijing-Tianjin-Hebei region to streamline production capacity and reduce pollution.

Beijing has already shut down nearly 2,500 “ordinary” manufacturers and denied nearly 20,000 manufacturing firms’ registration applications. Most recently, the Beijing municipal government has announced that as part of its efforts to reduce air pollution, approximately 1,000 manufacturing firms in Beijing will shut down by 2020.

The government also plans to improve transport links in Hebei, which is part of China’s industrial heartland, and to enhance the region’s welfare and education standards to attract investors. However, the growing emphasis on manufacturing firms moving to Hebei could be met with resistance, as the manufacturing industry is already significantly developed in the province and new players may not be readily welcomed.

Officials have suggested that those firms that have moved out of Beijing and into neighboring Hebei should use the proceeds from selling their facilities to invest in higher-quality technology that is more environmentally friendly.

Potential investors in and companies with industrial activities based in the Beijing-Tianjin-Hebei region should be aware of these developments.

This blog was prepared with the assistance of Olivia Featherstone in the London office of Latham & Watkins.