A Chinese firm’s bid to buy the gas-guzzling Hummer car brand will be blocked on environmental grounds, according to Chinese state radio.

Sichuan Tengzhong Heavy Industrial Machinery emerged as the surprise buyer for the brand earlier this year.

But China National Radio said Hummer is at odds with the country’s planning agency’s attempts to decrease pollution from Chinese manufacturers. [BBC]

If the government blocks the purchase as a result of Tengzhong’s lack of expertise in the sector or because of environmental concerns, this says a lot about China’s industrial policy and regulatory approach.

In most vanilla market economies, the government will set various environmental standards, including auto emissions. China has adopted such standards and in fact recently upped the limits. Once those standards are in place, it is then up to private, or even State-owned enterprises, to decide whether or not the products they manufacture and sell will be profitable, taking all costs into account including emissions limits.

Seems like a sensible way to go here as well. Set tough but fair limits (the recent fiddling with the standard was arguably not tough, but that’s a subject for another day) and then let Tengzhong make a supid asset acquisition decision if they want to. If they can’t meet the standard or cannot make a reasonable profit, that’s their problem.

My opinion on the issue of “expertise” is similar. Let the risk fall on the company instead of having the government, which has questionable expertise itself in evaluating the experience of others, make a call.

I am reminded of some other laws and regulations where expertise of an investor or enterprise is evaluated. For the most part, as with everything else here, the requirements are highly formulistic. If your company has a certain number of PhDs on staff and you have a patent on something, you can call yourself an expert, or a high-tech company, etc. The folks who review whether a company has sufficient expertise often have no industry knowledge at all, but they are very good at counting PhDs and total staff and doing a bit of long division.

I’m a bit of a pinko at heart, so a little industrial policy is fine with me. But squashing a deal just because it doesn’t fit with the country’s attempt to redefine itself as “Green” seems like a strange way to use government oversight and approval authority.

A stronger set of emissions standards and tough enforcement would have ensured that even a China-built Hummer could fall in line with a robust environmental regulatory framework. Think of the headlines: “New Green China Tames the Hummer Beast” (or something like that, I’m not a PR guy).

For the realists and cynics: a very public rebuke of the Hummer deal by the government sends a strong environmental message out there quickly and easily, and no one has to worry about the tough economic choices inherent in raising emissions standards and strengthening enforcement.

The easy way is always the preferred choice.