The rubbish is piled high in Dongxiaokou. Mountains of plastic bottles, stacks of yellowing newspapers, cardboard and polystyrene, mounds of twisted metal and lines of glass bottles jostle for space in the yards that make up this village of scrap on the northern outskirts of Beijing. The debris stands as testimony to the recession that has gripped the mainland's recycling industry, the largest in the world, since the global financial crisis struck. Dongxiaokou is the first stop on a route that stretches south and east to the country's manufacturing hubs and then to every continent on the planet. Much of the recyclable waste collected from the streets of Beijing ends up here, where it is sorted and sold on by 700 families from Henan province who live and work among the detritus that modern life produces. Until last autumn, it was a place of relative prosperity. The high prices being paid for recyclable commodities were some compensation for the dirt and smell that permeates every part of Dongxiaokou. 'Beijingers don't do this work. They think it's too dirty,' says Wang Wenxiu, a 54-year-old grand-mother from Xinyang, in Henan. Wang has lived in Dongxiaokou with her extended family for 10 years. Home is a small yard guarded by thin dogs and dominated by piles of plastic bottles that tower over the basic, brick rooms in which 10 members of the family eat and sleep. Her daughter-in-law sits at the base of one of the piles stripping the labels from bottles, before hurling them into giant sacks. When they are full, other women in the family drag them across the yard to where male relatives crush the bottles in a primitive machine. They then load the compressed plastic onto trucks bound for recycling units in eastern China. From there, it makes its way south to the factories of Guangdong, where it ultimately ends up as the fibre polymers used in clothes that are sold around the world. Now, though, that chain is being stretched to breaking point by the impact of the economic slowdown. As overseas demand for Chinese goods has dropped, so too have the prices for recyclables. Last summer, the Wangs were making a profit of 400 yuan (HK$454) for every tonne of bottles they sold. Now, that has halved. 'It's very hard to make money now. Since the Olympics, the prices have kept dropping,' says Wang. 'We've had to take a loan from friends to keep going. I don't think business will get better this year. It's hopeless.' Like other families at Dongxiaokou, the Wangs have been left with huge, almost worthless stockpiles of recyclables. Every level of the recycling industry has been affected by the collapse in prices. Importing waste paper from North America and turning it into packaging made Zhang Yin, chief executive of Dongguan-based Nine Dragons Paper, the richest person on the mainland in 2006, with a fortune of 27 billion yuan. But since the financial crisis, Zhang has seen the value of shares in her company slump by almost 90 per cent. 'We've never been in this situation before. It's the worst time ever for the industry,' says Gao Yanli, the vice-general secretary of the China National Resources Recycling Association (CRRA), which handles communications between the government and the industry. 'Companies are calling us every day for advice. We're telling them not to buy any more waste and not to recycle what they have until demand picks up.' In the west's throw-away society, 'recycling' is a buzz word among people who feel guilty about the amount they consume - recycling rubbish is the easiest way to go green. But on the mainland, recycling is not about being environmentally conscious. It is an economic necessity as well as a livelihood for millions; the CRRA says that a few months ago, 15 million people worked in the industry. The downturn in the world economy means many of them are now without jobs. State media has reported that 80 per cent of the mainland's recycling units have closed in recent months. 'There are a lot of companies, especially in Guangdong, that have temporarily shut down because of the crisis,' says Gao. Those that are surviving are doing so by spending their cash reserves or by switching to working part-time with fewer employees. Chen Jinwei is at the bottom of the food chain, being one of an estimated 160,000 people in Beijing alone who roam the city on tricycle carts collecting anything that can be recycled and selling it in Dongxiaokou and other facilities. 'Before the Olympics, I could earn 2,000 yuan a month. Now, it's half that. I've been doing this for 11 years and I've never known things to be this bad,' he says. With so many jobs at stake at a time when tens of millions of people across China have already been laid off, raising the prospect of social unrest, the crisis has got the mainland's leaders worried. 'The recycling industry is very important to the Chinese economy. It's a big part of the chain that drives [gross domestic product] and it also saves a lot of energy,' says Gao. Last year, the global recycling industry was worth US$160 billion, according to the Bureau of International Recycling. Precise figures for the mainland's contribution are hard to come by but it is by far the world's largest recycler and the biggest importer of recyclables. Last year, the main-land recycled 46 million tonnes of paper, 15 mil-lion tonnes of plastics and more than 5 million tonnes of scrap metal. About 70 per cent of that waste came from overseas. The United States, for example, last year exported 11.6 million tonnes of recovered paper and cardboard to the mainland, up from 2.1 million tonnes in 2000, according to the American Forest and Paper Association. With prices falling, the market has begun to seize up. American and European dealers are finding that Asia is no longer accepting shipments. 'It's a huge, huge industry and it's really a great model for studying the global impact of the recession,' says Adam Minter, a journalist who writes about the metals trade in a blog called Shanghai Scrap and has been following the recycling industry since 2002. 'Prior to the crash, the biggest volume of exports from the US and the EU to China was recyclables.' Before the global economy collapsed, recycling was one of the fastest-growing and most profitable industries on the mainland. Between 2003 and last year, the market for recyclables enjoyed an unprecedented bull run. With factories in the Pearl and Yangtze river deltas churning out cheap goods for the booming export market, the facilities consumed as much plastic, glass, paper and metal as they could get their hands on. Small-time operations mushroomed, joining the 100,000 private companies such as Nine Dragons Paper, as well as the recycling plants of the state sector. According to the CRRA, there were 200,000 places similar to Dongxiaokou scattered across the mainland before the slowdown, as well as millions of individuals supplying them on a freelance basis. 'People went into a frenzy because, with the price of scrap always going up, the industry was such a good bet,' says Minter. 'They could buy a container load of scrap metal, paper or plastic from the US or Europe and by the time it reached China, it would be worth more than what they paid for it. You could not lose money if you were a Chinese scrap dealer.' Prices for scrap steel tripled in the 18 months before the Olympics, reaching a peak of US$900 a tonne in July last year. Like all bull markets, though, it had to end. With rumours that the government would restrict the import of recyclables after the Olympics, dealers began stockpiling vast quantities of scrap. Many already had huge reserves built during five years of rising prices. But, as US consumer demand dived from mid-September, so too did demand - and prices - for recyclable commodities. Steel and paper fell by more than 50 per cent in six weeks, the time it takes for a container to be shipped from the US to China. The effect has destroyed confidence among dealers. 'It's too risky for companies to import metal from the US now because the price can go down before it gets here,' says Ma Hongchang, the vice-deputy director of the China Non-Ferrous Metals Industry Association Recycling Branch. Paper too is no longer wanted by the dealers. At Gao Ming's yard in Dongxiaokou, tarpaulins cover huge stacks of newspapers. 'The prices are so low it's hardly worth collecting now,' he says. Instead, the 24-year-old from Zhoukou, in Henan, spends his days loading cardboard onto trucks destined for recycling units in Shandong province. 'There are still many containers full of waste sitting at the port in Hong Kong,' says Wang Yonggang, of the CRRA. 'It's hard to say when they'll be picked up.' According to the association, a tonne of copper scrap now sells for US$3,000, down from more than US$8,000 in 2007. Tin sells for US$5 a pound, down from US$300. Paper has sagged as much as 80 per cent. Demand for cardboard, which is made into packaging, is higher than for newspapers but prices have dropped dramatically. 'Last year, we could get 1,450 yuan per tonne. Now, we get 600 yuan. We pay the local collectors 570 yuan for each tonne, so our profit is just 30 yuan,' says Gao. 'The situation is tough now. I worry, especially for my parents back home. I used to send them 1,000 yuan a month. It's a lot less than that this year.' The effect of the drop in prices is being felt around the world. Britain sends one-third of the paper collected by its councils to China to be recycled, as well as 600,000 tonnes of plastic, according to the Britain-based Waste and Resource Action Programme. Most of it ends up in Guangdong. But, with the mainland currently not buying paper, the councils are having to pay for storage of the gathering stockpiles. In the US, rubbish is piling up at docks and municipal landfills are being overwhelmed as disposal companies discover they can no longer ship America's waste to the mainland. 'Everyone has become so dependent on exporting recyclables, especially paper, to China that it's now a real problem deciding what to do with it,' says Minter. 'People don't know where to send the paper, so it's just being stored in warehouses. Now, people are even talking about sending perfectly good recyclable stuff to the landfill sites.' The consequences may be a complete reverse in the economies of recycling. 'The producers may have to start paying for the material to be recycled, rather than being paid for it,' says Peter Seggie, the recovered-paper sector manager of Britain's Confederation of Paper Industries. There are already signs that Beijing wants to see the industry shift away from recycling so much overseas waste. 'We're going to encourage companies to focus more on domestic waste. We do need imports for the industry to survive but companies shouldn't rely solely on imports. It's the companies that only recycle foreign waste that are suffering the most,' says Gao Yanli. Focusing on recycling domestic scrap is just one of the government's plans to boost the industry. Beijing has pumped 300 million yuan in subsidies into the recycling sector since the crisis began and has offered compensation to those private and state-owned companies that are prepared to restructure themselves in a bid to become more efficient. 'A lot of companies would be trapped and face a very tough situation if it wasn't for the government helping,' says Gao. 'Since January, the world's biggest buyer of recyclables, especially scrap metal, has been the Chinese government,' says Minter. 'In Yunnan province, they're building up stockpiles of non-ferrous metals like aluminium, copper and lead and that's had an effect on the market. The government's main concern is employment but it's also a strategic reserve for when the prices go up again.' That, though, depends on events that are taking place a long way from the recycling heartlands of Guangdong, Jiangsu, Shandong and Zhejiang provinces. It is what happens to the US economy and to those in Europe during the next few months that will decide the fate of the industry. 'US consumers need to start buying again and then the industry will pick up. It's down to consumers to start buying stuff which contains recyclables,' says Minter. Exports fell to their lowest level in a decade in the first two months of the year. Now, the CRRA expects the industry to start recovering in the second half of the year. Whether that will be soon enough for the Wang family to avoid plunging further into debt is doubtful. But the Wangs, like many other people in the industry, have no choice but to hang on. 'There are too many people in Henan and not enough land,' says Wang. 'We couldn't even grow enough food to support us on the land we have. We can't go back.'