XUANHUA, China Aug 15 (Reuters) - A grimy town in a pretty plain, Xuanhua boasts a steel mill, several concrete plants, and one of the biggest power plants serving Beijing, all of which contribute to a pall of yellowish smog over the town.
Yet Xuanhua is a key district for environmental monitoring, in line with Beijing's orders to improve air quality during the Olympic Games. Visibly polluted, its incremental steps could nonetheless mean progress for China in the long term.
Air quality in Beijing has improved since factory and car restrictions came into effect in July, despite muggy, overcast weather that cheated China of the blue skies it sought.
"We have done a lot of work on cutting down emissions and saving energy. Hebei's effort in cutting down emissions and saving energy has contributed a lot to improving Beijing's air quality," said an official with the Xuanhua propaganda department, who declined to give details or his name.
Xuanhua boasts a gleaming government building and a new five-star hotel and its steel mill is building new housing for workers. It guards the approaches to Beijing from Hebei province, and smoke from its plants can easily drift to the capital.
The steel mill itself exudes a sharp sulphur smell, and the town is shrouded in dust and greasy smoke.
Nonetheless, the small measures taken by towns like Xuanhua could add up to an improvement in China's air quality over time, as the worst offenders are weeded out and the slightly better performers invest in better equipment.
Xuanhua has shut at least one concrete plant during the Olympics, permanently closed the worst facilities at its steel plant, and allowed a dingy ceramics factory to go bankrupt.
"There's a huge amount happening on the environmental front related to China's sense of what it means to be a developed nation, and part of being developed is to have a pleasant and healthy environment," said Deborah Seligsohn, of World Resources Institute. She pointed to better pollution mapping and stricter monitoring of emissions that will last long after the Games.
"That intertwines with the Olympics because part of the point of the Olympics is to show 'we've made it'."
It remains an open question how much of the better air -- and accompanying economic slowdown, thanks to shut factories and severe transport disruptions -- will last after the Olympics end and the tourists go home.
"On the surface, the shutdowns were for the Olympics. Governments told polluting steel mills that if they shut voluntarily now, they would be allowed to reopen later," said analyst Henry Liu, of Macquarie Research.
"But under this superficial reason, there is a deeper economic root cause. The biggest problem is transportation, because everything has slowed down, but also costs of production are going up, margins are disappearing and cash is tight."
Mindful of the local economy, many provinces and towns tried to minimize closures if firms could show they met minimal standards. At the same time, unexpected transport and power limitations have forced plants further away to shut temporarily.
Data from the National Bureau of Statistics clearly showed an Olympics-related dent in steel, coal and iron ore output, but much of that can be attributed to strict controls on mining explosives and poor margins for small and inefficient plants.
"The Olympics has not been a very normal period, so data from July are not representative of what economic performance will be in the fourth quarter," said Judy Zhu, analyst at Standard Chartered Bank in Shanghai.
Still, greater awareness of pollution and the role of cars and factories, mean there will be longer-term benefits even after many of the factories reopen and the smog returns, Seligsohn said.
"People are now aware of the need for a pollution strategy and that's a positive development."
(Additional reporting by Rujun Shen; Editing by Nick Macfie)