More and more local governments are handing over the used PET bottles to exporters, and an industry executive said, "If things go on at this rate, the domestic recycling system will collapse."

Osaka-based Teijin Fibers Ltd., a textile producer, began operating the world's first recycling plant for chemically dissolving used bottles and recycling them into new bottles in April 2002 with an investment of some 10 billion yen.

In fiscal 2004, the plant turned out about 2 billion 500-milliliter bottles.

But the company failed in a bid for used bottles called by the Japan Containers and Packaging Recycling Association and could not secure a sufficient amount for this fiscal year.

It was forced to suspend operations of the chemical dissolution facility, and at present, only produces bottles from new materials.

PET Rebirth Co., a recycling company in Kawasaki, west of Tokyo, only managed to obtain 10 percent of its target for used bottles and has applied for protection under the Civil Rehabilitation law.

"A successful bid has become difficult as the volume of bottles local governments are handing over to exporters to China is increasing, while the volume of used bottles going to regular routes through the association is decreasing," said Yoshio Fukuda, director at the materials polymerization business department of Teijin Fibers.

According to the Council for PET Bottle Recycling, created by beverage producers, 239,000 tons of bottles were recovered by local governments in 2004, and 47,000 tons of them were exported.

It predicts that exports in 2006 will reach 120,000 tons, 40 percent of the recovered amount.

A municipal government official said, "It is more profitable to export bottles to China and other countries than to hand them over to Japanese recycling companies via the regular routes. What can be sold is sold to help the severe fiscal situation."

China's PET bottle production is expected to reach 4 million tons in 2009, more than two times the current output.

In two or three years, this output will likely be able to cover the country's domestic demand for used bottles for recycling into various materials, such as fabric for filling stuffed animals. Then, exports from Japan may become unnecessary.

Recycling in China presents another problem -- environmental pollution. Chinese plants are letting water from the recycling process flow into rivers without purifying it.

"To prevent environmental pollution overseas, used bottles should basically be disposed of domestically, and the state should urge local governments to hand them over to recycling enterprises via regular routes," a council official said.