Off the Books: Informal Recycling in China

Resting at the forefront of nearly any discussion relating to the future of China’s rapidly developing economy is its rising urban population, with over 1 billion residents living in China’s cities by 2030. Since China has already established itself as the world’s largest waste-generator, rising levels of output due to increasing levels of affluence, consumption, and population stimulate many questions about the informal sector’s future role within China’s urban waste stream. High market prices can boost incentives for informal recycling, leading to some of the highest global efficiency rates in recyclable collection, while also benefitting many individuals’ livelihood through employment.

Chinese waste collectors rely on informal recycling for livelihood.
Informal recycling has become a fundamental component of many Chinese collectors’ income and livelihood. Photo Credit: Grainne Quinlan

However, as the system changes and develops, will this informal aspect of the waste stream remain, or will large public and private companies edge out the informal recycling sector entirely?

The Informal Recycling Sector

The power of the informal recycling sector is a unique aspect of the Chinese waste stream. “Self-employed” individuals capitalize on the available financial incentives by collecting waste, which is then sent further down the waste channel for processing by larger players. Within China, there are an estimated 3.3 – 5.6 million low-income waste collectors working in the industry and nearly 200,000 in Shanghai alone. These collectors account for 17% – 35% of all municipal recycling activities in urban China, dominating the field. A short 5-minute walk around Shanghai puts the extent of this ecosystem into perspective, revealing collectors of paper, card, plastic, and polystyrene waste. These individual actors find great enough incentives to enter the market and further drive economic activity, driven by a direct market mechanism.

Challenges

Not environmentally sustainable

China’s current waste management practice fuels environmental degradation. The industry’s current sectorial structure and inherently informal nature creates an atmosphere for minimal government regulation because global standards do not handle or monitor a majority of the waste stream. Even when handled by official channels, an absence of a proper sorting process has resulted in landfills containing roughly 85 percent of China’s 7 billion tons of trash.

Not socially sustainable

Behind agriculture, the recycling industry employs the second most people in China, so its livelihood is critical for the workforce. Current regulatory trends and capital investments push small players out of the industry to pave the way for large recycling firms to operate. Increasing pressure for atomization and updated sorting techniques make it that much more difficult for small businesses to compete. Without proper monitoring, the rural population will continue to struggle with the adverse effects of the social inequalities in China’s waste management procedures.

Not economically sustainable

Because waste collection is an economic activity within China, any fluctuation of scrap prices would cause the entire collection process to shift accordingly. If the price skyrocketed, additional collectors would enter the market for their share of economic expansion. If the price crashed, informal collection would halt. Demand-based collection is arguably the most pressing issue when analyzing China’s waste management system.

Chinese waste collector uses bicycle-pulled cart to aid his efforts in informal recycling.
Hand-drawn and bicycle-pulled carts allow Chinese waste collectors to gather and haul larger items for informal recycling. Photo Credit: Adam Williams

Opportunity

China’s large appetite for natural resources, combined with appropriate infrastructure, investment, and research, could allow China to capitalize on its current waste-as-a-resource model, presenting the opportunity to create a more formal, circular economy. The reuse of existing materials in the consumption cycle reduces the need for foreign raw materials, and the sheer supply of workers already available under the current informal structure could be retained as the critical labor source.

Over the next few weeks we will further break down China’s waste management system and examine the industry’s informal nature. Through our research, we strive to map out the current system, understand the Chinese waste stream, the individuals working within it, and provide our insight where available.


This article was researched and written by Hayes Westlake, Research Analyst at Collective Responsibility.

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2 Responses to Off the Books: Informal Recycling in China

  1. Glad to see this. However, I think you’re making a fundamental mistake in suggesting that low commodity prices favor big rather than small recyclers. In fact, historically speaking price dips in commodities have resulted in the elimination of large players, with their bigger overheads. It’s the small, nimble players that always persist.

    • Thanks for your comment.

      First, this is an issue that we plan to spend more time understanding (and reporting on) in the upcoming weeks, as there are a few “China” dynamics that we see making it difficult for small and medium players in certain areas of the industry (i.e. e-waste).

      Second, while we will be interviewing informal recyclers in the coming weeks to understand what is currently going on in the market, in past conversations, we’ve found that members of this group would often leverage their nimbleness to move away from low/no margin items. This trend is in line with your comment, but it is also a “loss” of market for the smaller players, while larger players may leverage their cash positions and stockpile.

      Hope all is well, and any thoughts you have on the above would be great!

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