China: An Olympic Loss for Industry

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And while it typically uses trucks to distribute the 40,000-plus Elantras, Sonatas, and Accents it produces every month, it's considering a shift to rail transport instead.

Steelmaker Shougang was singled out by officials early. In February 2005, China's State Council decided to reduce Shougang's Beijing steel production by half before the Olym-pics. So three years ago, Shougang began shutting down its Beijing coke and combustion ovens, and by last year it had reduced production in the city by 50%, to 4 million tons. This summer, Shougang plans to produce just 200,000 tons of steel a month at its Beijing mill—less than a third of its capacity—and the plant will be decommissioned by 2010. The company has built a new facility in the city of Tangshan, 140 miles east of Beijing, but it won't start operating until October. "Cutting Shougang off is crucial to improving air quality in Beijing even after the Olympics," says Wu Zhenghua, a researcher at the Beijing Meteorological Bureau. The company, he says, accounts for 40% of total industrial particulate emissions in Beijing.

TRAFFIC TRICKS

The restrictions could take a serious economic toll on some companies. Beijing Jingneng Thermal Power, an electricity generator, was ordered to reduce emissions by 30% before the Olympics, and since 2005 it has spent $44 million on desulfurization and nitrogen oxide scrubbers. Now the company is worried that during the Games, city officials will decide to bring electricity in from distant power plants and order Jingneng to limit production at its four coal-fired facilities during what is usually its peak season. "If we need to restrict power production by a lot during the Olympics, this will obviously have an impact on our profits," says Yang Xiaohui, secretary of the board of directors at Jingneng. "We hope that even if our power plants cannot run at full capacity, they can run most of the time."

Beijing residents are preparing to cope with the driving restrictions. Although new subway and bus lines have been added, traffic may still be slow because the city has blocked off some lanes for use only by athletes and VIPs. The odd-even regulations are intended to relieve the bottlenecks, but some drivers are finding ways to stay behind the wheel. When 27-year-old ad executive Roy Guo bought a second car—an SUV from domestic automaker Chery—he made sure its plate ended with an odd number to complement the even-numbered Volkswagen Jetta he already owns. Friends who can't afford a second car, meanwhile, are carpooling. "Lots of people are planning to share their vehicles," Guo says. "They'll drive one person's car on the odd day and the other's on the even day."

With Frederik Balfour in Hong Kong