IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors. The Summary of Project Information (SPI) also provides details of where the ERS has been made available to the locally affected community. The SPI must be sent to World Bank InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors.

This is a category B project according to IFC’s Environmental and Social Review Procedure. Environmental, social, health and safety issues which may be associated with this type of project, and which were reviewed during appraisal, included: - site selection and acquisition; - emissions to air from manufacturing process, boiler and/or generator; - use, treatment and discharge standards of process and waste water; - resource consumption and recycling; - management of waste and hazardous materials; - environmental and health and safety management systems; - occupational health issues (e.g. indoor air quality, noise); - employee safety, emergency response and fire safety, training and benefits. The review of this project consisted of appraising technical and environmental/social information submitted by the project sponsor, discussions with a technical consultant who supported IFC on this project, and an on-site follow-up assessment by the Investment Team.

The sponsor has presented plans to address the above-noted issues and potential impacts to ensure that the proposed project will, upon implementation of the specific agreed measures, comply with the environmental and social requirements of the host country’s laws and regulations and the World Bank/IFC’s environment and social policies and environmental, health and safety guidelines. The information about how these issues and potential impacts will be addressed by the sponsor/project is summarized in the paragraphs that follow. - Site selection and acquisition The majority of Fangxin’s operations are located approximately 30 km from the city of Shanghai, on a 249,397m2 site that was acquired from the Fengxian District government. The company also operates a facility on a 45,967 m2 site in Shenzhen that was previously barren land, and an office in Hong Kong. Fangxin owns all of the buildings on its sites in Mainland China. For the site outside of Shanghai, part of the land was formerly farmland and it was acquired by the local government to create the Qixian Industrial Development Zone in 1994. Fangxin is one of 1,253 registered companies in the zone that covers 1 km2. The local Jinhui Town Government of Fengxian District provided RMB 8,000 per Chinese acre (1 Chinese acre is equivalent to 666.7 m2) in compensation to the Baiqu Village who owned the farmland. This compensation was distributed by the Baiqu Village to the farmers. The local Jinhui Town Government arranged jobs for farmers between the ages of 18 and 45 and their current average income is RMB 8000 which is approximately double their former farming-derived income. For people who were not employed in the zone, monthly compensation of RMB 330 per person is provided to woman over the age of 55 and to men over the age of 60 by the local government. Monthly compensation of RMB 290 per person is provided to woman between the ages of 45 and 55 and to men between the ages of 45 and 60. These figures exceed the former farming-derived income, the compensation is provided for life and it is increased based on the local consumer price index. - Emissions to air from manufacturing process, boiler and/or generator The power supply to the factories is primarily from the local electricity grid, supported by back-up diesel generators. The company does not have boiler plant. The company’s air emissions consist of a sulfuric acid mist discharged from the exhaust system serving the anodizing line, emitted in concentrations that are around one third of the Chinese standard but exceeding IFC’s requirements. This anodizing line system will be replaced as part of the Project. Fangxin will ensure that the replacement machinery is equipped with mist eliminators and/or scrubbers to reduce the concentration of sulfuric acid in the exhaust mist below 5 mg/Nm3. - Use, treatment and discharge standards of process and waste water The Project will use approximately 500 m3/day of water that is drawn from the local river. Procedures are in place to manage wastewater, waste gas and sludge disposal and the company has acquired a Shanghai City Contamination Discharge License. Fangxin has an existing wastewater treatment plant which involves a series of treatment tanks and both mechanical and active carbon filtration. The company’s wastewater discharge levels are below IFC/WB and local limits. The Project will include replacement of Fangxin’s existing anodizing line and its wastewater treatment plant with updated technology from Germany. This new equipment will reduce environmental impacts by reducing the generation of wastewater discharges and waste sludge. The company will specify the new WWTP to ensure that discharged effluent meets both local and IFC/WB standards. - Resource consumption and recycling Initiatives have been implemented to reduce resource use including: an auto-adjusting system for the plastics injection machine that reduces power consumption by approximately 30%; setting the air conditioner at 25 0 C or above to reduce power and water consumption; reuse of water from the cooling system; and maintenance of the unit weight per part at the lower limit while ensuring quality to minimize material consumption; and recycling of scrap. With the operation of the new anodizing line, additional reductions in water and chemical consumption will be achieved. The company also adopts prudent resource conservation principles to minimize the quantity of packaging material required. - Management of waste and hazardous materials Aluminum waste is pressed into aluminum blocks and sold to aluminum factories for reuse. Other wastes, including solid waste, WWTP sludges and hazardous wastes, are disposed of at municipal waste facilitates. - Environmental and health and safety management systems Fangxin has indicated that it implements systems to manage quality, environment, social and occupational health and safety issues. With regard to quality management, the company acquired ISO 9001 2000 in January 2003 and was re-approved in February 2004. It also plans to be certified to the more stringent TS16949 standard for automobile parts in October 2004. IFC will require that a health and safety audit be conducted, and that an environmental and health and safety management system be established that meets IFC’s Occupational Health and Safety Guidelines, ISO 14001 and OHSAS 18001. - Occupational health issues (e.g. indoor air quality, noise) The key health and safety hazards to workers arise from exposure to chemicals, powder and noise in the anodizing, polishing and punching workshops, respectively. The facilities are equipped with safety equipment, alarms and ventilation systems, and operators are required to wear protective safety masks, glasses, clothes, gloves and shoes. Chemicals are stored in a purpose-built warehouse and controlled by specific chemical storage, handling, usage and emergency procedures. As noted below, training on safe working practices is provided to workers to prevent/reduce occupational health risks. - Employee safety, emergency response and fire safety, training and benefits Fangxin has Fire Proofing and Safety Management Policies stipulating the company’s requirements in conformance with Chinese regulations and national construction standards. Safety measures are implemented on-site and inspections are periodically conducted of the fire proofing system, including dry runs, alarm testing and emergency drills. Fire exits, alarm systems, extinguishers, fire hydrants, water supply systems etc., are provided on-site to ensure the safety of employees. Damping devices and adequate ventilation systems are also in place. It was noted that the company’s lost time accident and lost time workday record could be reduced. Fangxin reports that typical accidents include scratches, pressure injuries and fractures, with the most serious accident involving a broken finger. The company is committed to improving its safety record and the Chairman has stated that the company’s policy is to reach the goal of zero lost time accidents. To achieve this goal, safety management, education and training have been strengthened from the top management to the site levels, information on safety practices has been distributed to workers and accidents are recorded. It was however noted during the appraisal that existing safety guards, could be improved, for example on the punch press equipment. IFC will require that safety guards be added to all machines as appropriate. As noted above, IFC will also require that an environmental and health and safety management system be established. Annual training is provided on safety, on-site protection and waste disposal operations, including industrial water and wastewater disposal. Routine health inspections for workers are undertaken and safety measures are adopted within the workplace in accordance with governmental occupational health and safety regulations. With regard to internal social issues, employees are provided with social insurance (e.g. pension, medical and maternity insurance, unemployment) in compliance with national labour and insurance standards. In accordance with national legislation, Fangxin provides a minimum salary of RMB 635/month for an 8hr shift and a maximum of 36hrs/month for overtime hours is allowed. The company recruits its workforce from the local community to the extent possible, providing basic training and education to prospective employees before they are incorporated into the formal workforce. Technical assistance is also provided to local suppliers to improve the quality of their services and they are required to also provide follow-up training to their workforces.

In addition to this ERS, the Environmental Action Plan outlines key areas which require action by Fangxin.

Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures.

IFC will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering: - the status of implementation of any measures contained in the Environmental and Social Action Plan; and - ongoing performance of project-specific environmental, health and safety and social activities as reflected in the results of periodic and quantitative sampling and measuring programs. Periodic site supervision visits will also be conducted.