The pollution regulations are nearly impossible to enforce on a day-to-day basis (too many people, too many polluters), so the government has to pick its pollution-related battles carefully.
The article touched on the issue of enforcement, and I think that's a very large part of the problem.
The Man-creature and I have both spent a decent amount of time working for environmental consultancies in Australia. Even there, where pollution is reasonably well controlled, there simply aren't enough inspectors to get around to every site in the country. So unless you do something really spectacular, like poisoning the water supply, blowing up the Great Barrier Reef, or giving a bunch of orphans leukaemia, there's a good chance you're not going to get caught. From I understand about the US system, things aren't any better here.
Trying to manage the problem in China would be insane.
Then there's the issue of getting people to actually audit things properly. Even with the best intentions, a lot of auditors just plain suck at their jobs. From what I understand from people I know who have done business in China, it is not uncommon for inspectors to be sent home with um... a very nice gift bag*, and a the facility to receive a favourable report.
* It's not a bribe. It's a gift. The fact that the auditor also happened to overlook some fairly glaring compliance issues in your factory, including the fact that a few of the employees have limbs falling off, is purely a coincidence.