New government figures suggest that exports to China are running at 200,000 tonnes of plastic rubbish and 500,000 tonnes of paper and cardboard a year - a huge increase on just three years ago.

Much of the plastic sent to China is packaging but a Guardian investigation has found that agents for Chinese companies are now buying up and exporting thousands of tonnes of unwashed bottles, containers, and other household waste.

"China is buying up everything it can. It is sucking in material from all over the world and it doesn't give two noodles what it takes," said one plastics recycler who asked not to be identified. "I know of 300 firms, mostly in China, offering to buy my plastics. I have three or four companies cold-calling me every day from China requesting material. They have very cheap labour to sort the material but the shame is that it is being done there and not here. They don't care about the quality, or the contamination. No one checks what is sent or what arrives."

The British plastics industry admits that the global trade is starving some local recycling initiatives of materials and putting established firms out of business or at risk. According to UK plastic recyclers, agents for Chinese companies are offering £120 a tonne for mixed plastic bottles, far more than British companies can pay. "The industry here can only support £50 a tonne. We believe that 10-15,000 tonnes of old bottles are going to China. Yet only about 25,000 tonnes were collected last year", said Stephen Chase of Chase Plastics.

"The Chinese put me out of business," said Edward Clack, a plastics recycler who invested in two recycling plants in Britain. "Everyone has lost supplies to China. The local market is being starved of materials. Hundreds of brokers are buying up the plastic and shipping it out. It's cheaper to send a container to China than to Scotland."

China drives the global waste trade, importing more than 3m tonnes of waste plastic and 15m tonnes of paper and board a year. But the trade is being driven equally by tough EU legislation forcing local authorities and businesses to recycle more. Landfill charges are rising steeply, making it relatively cheaper to send the waste abroad. Meanwhile, major companies have moved in, offering to collect and dispose of large quantities.

The trade is made possible by the vast numbers of shipping containers arriving in Britain with Chinese exports. One of Britain's largest freight forwarding companies confirmed that the return waste trade to China is accelerating rapidly.

"We are shipping a phenomenal amount of waste, maybe 15,000 tonnes a week to China," said a spokesman for Warrant freight forwarders of Liverpool. The current price for sending a standard 26-tonne container of waste plastic to China, he said, is about £500.

The Tanjin Songzi Import and Export Trade company based in the huge port of Tianjin Xingang is typical of the growing trade. "We are specilize [sic] in import the scrap plastic bottle, waste plastic, waste paper. Europe origin. Please show me your offer," says its advertisement on an international plastics exchange website brimming with traders wanting the raw material for the Chinese industrial revolution.

Most Chinese plastic waste importers want pictures of what they are buying, but some are are not fussy. "We buy all types, such as the mineral water bottles, pure water bottles and plastic bottles of other drink. Any specifications will be fine. If you can supply, please email," says Mr Lee of a Shanghai company on the same site.

Western plastic companies are setting up in China, but some of the poorest people are employed to sort and recycle the plastic. "Plastic is now one of the biggest industries in Guangdong province, but much of the work is being done by migrant labour earning a pittance," said Martin Baker, of Greenpeace China.

"I would say that Britain is dumping its rubbish in the name of recycling. It is not responsible recycling that is being done. It is reprocessing, but the methods being used are still mostly rudimentary. There are some good factories, but on the whole it is small scale, done in backstreets with little environmental standards. People are burning plastic, sorting it by hand, the water gets polluted and it goes back into the rivers," he said.

UK supermarket chains, some of the largest generators of plastic packaging waste in Britain, are all getting their recycling done in China, said a spokesman for Sainsbury's. "We send 5,000 tonnes of plastic there a year. We used to send it to a firm in Nottinghamshire, but it has closed down," he said. "We looked for others in Britain but no one could match the Chinese option for quantity or price. We would love to see it being recycled here, but it's not possible at present."

But Ian Bowles, a spokesman for Asda, said he did not know where the company's plastic recycling was being done. "UK companies pick it up. As far as we know it's being reprocessed here. It could be that excess quantities are going abroad." Other retailers known to be generating large quantities of plastic waste, including Tesco, did not respond to questions about where their recycling was being done.

No detailed studies have been done of the environmental costs of shipping vast quantities of waste from Britain to China, but environment groups and MPs were yesterday shocked at the scale of the trade. "Exporting lightweight packaging waste to China makes little sense environmentally," said Liberal Democrat MP Sue Doughty. "It is a failure of the UK recycling market which allows the UK to export plastic for recycling. We have no control over environmental standards in China. Instead of solving the problem we are exporting it. Much more needs to be done to stimulate the markets in the UK so that waste is handled as close as possible to the point of generation."

Clare Wilton, wastes spokeswoman for Friends of the Earth, said: "People will be shocked that some of the newspapers and empty drinks bottles they put out for recycling can end up in China. It's an environmental disgrace. "The solution is to expand the UK's own recycling industry. This would be good for the environment, create local jobs and help Britain become a leader in green technology."

Sending plastic bottles to China is "barmy", said Mike Croxford, manager of Newport Wastesavers, which collects 50 tonnes a month of plastic from 50,000 homes in south Wales. "We should be dealing with the stuff here, but the reality now is that most plastic in Britain is going abroad. I don't think the public knows where some of it goes. If they knew it was going right round the world, they might not encourage it."

But other recyclers said it was better to send rubbish to China to be recycled than to put it in landfill in Britain. Andrew Simmons of the Peterborough-based waste charity Recoup buys millions of plastic bottles from UK councils, bales them up, and sells them to a reprocessor who then sells them on to Europe or, increasingly, to China. He rejected claims that Britain was dumping its rubbish on China and said that the environmental cost of sending bottles thousands of miles was negligible compared with making "virgin" plastic bottles from oil.

China is increasingly aware that countries are exporting their pollution to them and have imposed strict laws governing what can be exported. Large amounts of German household waste have been found and all waste exports from Japan have recently been halted after electronic and contaminated household waste was found. However, the Chinese authorities, plagued by corruption, are unable to check the contents of all the waste containers that arrive in Chinese ports every year.

British plastic bottles are mostly sent to Hong Kong where they are sorted and "flaked" before being sent to factories on the mainland. "One type of plastic bottle goes on to make soft furnishings and clothes, another is made into pellets which are sold back to European manufacturers to make things like plastic bags," said Mr Simmons.

This insatiable demand for the world's rubbish, he said, has actually boosted the British market for plastic recyclers, raising the price and making it far more worthwhile for councils to collect and not dump it in landfill. Partly because of this, more than half of all British local authorities now offer plastic recycling.

More and more British plastic is likely to go to China, said Tim Frier of Valpac, whose subsidiary, Valiant, collects waste from more than 5,000 businesses in Britain, including supermarkets, pubs and clubs, and sends up to 15,000 tonnes of plastic to China a year. Valpac has just opened an office in China.

"We will be sending more there. But they have strict rules. The problem was that a lot of waste going to China was contaminated, and not being sorted properly. There were concerns about British waste, too," he said.

The government insists that companies have export licences but few if any checks are made in British ports. The Environment Agency admits that it is unable to check what is being exported.

"There is a legitimate trade in waste exports for recovery involving materials such as paper, ferrous metals, plastics and card. These wastes are classed as 'green list' and are not subject to the same level of control as wastes classed as hazardous," said a spokesman.