Meng Si
China Dialogue, September 20, 2010
As Chinese finance flows overseas, the country's green groups are also
expanding their horizons. Meng Si meets one home-grown organisation
promoting sustainable business across borders.
Chinese firms have radically stepped up their overseas investment activity
in recent years. But the environmental impact of that investment has
caused international controversy and China's own environmental NGOs are
starting to pay attention.
One such group is the Global Environmental Institute (GEI), a non-profit
outfit headquartered in Beijing that has a particular focus on the
environmental impact of Chinese finance abroad. Indeed, it is the first
Chinese environmental organisation to successfully run a project abroad
and, in 2009, set up an office in Laos.
In Laos and elsewhere, GEI would like to see Chinese companies strengthen
links with NGOs. "We suggest that when Chinese firms are undertaking
'compensatory work' [i.e. recompensing communities that lose out from
development, for example relocating local people to make way for a dam] as
part of overseas investments, they consider partnering with civil society
organisations rather than local government," said GEI project manager Ren
Peng.
At a seminar in July, attended by academics and government officials, GEI
introduced its work in this field and hosted a discussion about the
current state of Chinese investment abroad and areas of concern. The event
marked the launch of the organisation's new book, Environmental Policies
on China's Investment Overseas - the first to be openly published on the
topic in China - which includes two proposals for overseas investment
regulations that have been submitted to the government for consideration.
GEI focuses mainly on issues surrounding investment in hydropower
projects, such as impacts on fish migration, damage to vegetation and
provisions for local people whose livelihoods and homes are lost as a
result of such schemes.
In Laos, its work has centred on the Nam Ngum 5 hydropower project, which
is located on the upper reaches of the Nam Ngum River, 350 kilometres from
the capital Vientiane. It is a joint venture between Chinese engineering
and construction firm Sinohydro, which holds an 85% stake in the scheme,
and Electricite du Laos. Construction started in October 2008 and the
first turbine is due to start generating power in October 2011. The dam
will submerge some of the homes and most of the land of 57 farming
households, at the same time taking away the livelihoods of the people who
live there.
GEI is working on a community development plan to provide alternative
means of earning a living, such as community forestry or methane
generation - an effort that fits in with the organisation's broader aims
of finding new ways of supporting rural areas, promoting sustainable
development and diversifying local income sources.
Ren explained that GEI aims to help the Nam Ngum project operate in a more
responsible and sustainable manner, but not to undermine the whole scheme.
"We have made it clear [to the companies involved] that we're not there to
oppose them," he said. "We aren't looking at whether or not the project
itself is sustainable, as once something like that has started, it is
virtually impossible to halt."
Another aspect of GEI's work here is a China-Laos cooperative project on
sustainable land and natural-resources management. "There's a complete
lack of environmental legislation in Laos, and naturally companies
investing there tend to set low standards for themselves," said Ren. Since
December 2009, GEI has organised two seminars on ecological compensation
and land management, presenting best practice case studies from overseas.
The deputy prime minister of Laos, Asang Laoly, attended one of these
sessions.
According to Ren, companies investing in Laos usually pay compensation via
the local government. However, a lack of transparency common to many
developing nations leaves this method open to corruption - and the money
often fails to make it to the communities. Some Chinese firms also help to
build local infrastructure, such as schools and clinics. And while this
has its advantages, there are also challenges, such as finding teachers to
work in the school. Ren believes that NGOs can implement demonstration
projects as models to showcase effective methods of delivering
compensation.
Ren added that the problems associated with Chinese investment abroad are
caused primarily by small and medium sized private firms (SMEs): "State
owned firms are generally listed and need to publicise operational
details, so they are more restricted in what they can do." He told
chinadialogue that some private SMEs operating copper mines in Africa,
where there is a lack of oversight, use cash to open up mines when copper
prices are high, only to abandon the site when the prices fall. "It's like
money-laundering - quickly in, quickly out. And as they don't take out
loans, there is nothing the Chinese government can do."
Chinese SMEs are usually limited liability companies. As of 2008, ventures
by companies of this type accounted for 50.2% of China's total overseas
investment, and Ren thinks this figure will increase. Unlike listed
companies, these firms are not obliged to make certain information public,
nor do they have the same incentive as state-owned enterprises to present
a good image of China to the world. The only limits on their investments
are the Ministry of Commerce's annual audits and evaluations of overseas
investment - but these do not look specifically at environmental impact.
Speaking at the GEI book launch, Yang Chaofei, head of the Ministry of
Environmental Protection's Department of Policies, Laws and Regulations,
said that scarce resources and increasing labour costs at home were
inevitably driving Chinese firms abroad. Meanwhile, Zhang Lijun, who runs
the Asia department at the Ministry of Foreign Affairs, said that China
and India are set to become the world's main energy consumers and, while
overseas investment is important if China is to become a stronger nation,
the country will also be expected to act more and more responsibly.
According to GEI's new book, Chinese firms are actively buying up natural
resources around the world - including timber, mineral rights, oil and
natural gas. In 2006, mining accounted for 40.4% of total Chinese overseas
investment, with the majority going towards the extraction of oil, natural
gas and ferrous metals.
The book quotes 2008 figures from, among others, the Ministry of Commerce,
the National Bureau of Statistics and the State Administration of Foreign
Exchange, to point out that China's overseas investments are concentrated
in resource development and primary manufacturing. And, while investments
have been made in 174 nations, there is a heavy focus on Asia (77.9%) and
Latin America (6.6%). Just 9.8% of investment went to Africa in 2008, but
within the following year, that figure went up 2.5 times.
Zhang Lijun added: "Certain countries feel uneasy about China's rise, and
the behaviour of overseas investors potentially provides them with
something to use against us."
"International opinion is still mainly controlled by the west, and bias
does exist," said Ren. "Some locals can't even distinguish between
different Asian faces, and assume they're all Chinese. Hence China gets
the blame."
Ren believes that China does not promote itself adequately; it often does
plenty, but talks little. In many issues, China's own lack of openness is
the problem. Ren gives an exchange with International Rivers - an
international NGO working on rivers and dams - as an example. In September
2009, the organisation went to China to meet with Sinohydro subsidiary
Sinohydro International Engineering. At the meeting, the two parties found
that incomplete information had led to misunderstandings. Sinohydro was
not involved with all of the projects International Rivers believed it to
be. The NGO asked Sinohydro to double-check the list of purported
projects, and the record was corrected accordingly. Peter Bosshard, policy
director at International Rivers said: "I thought it was a good experience
and it actually created confidence between Sinohydro and us."
Ren believes that local NGOs should act as a bridge, helping organisations
and companies to share accurate information. Others are more cautious. Fu
Tao of China Development Brief, a publication that has long observed the
development of Chinese civil society,told chinadialogue that with limited
resources, energy, vision and opportunity, only a small number of
organisations can currently get involved in this area.
Nonetheless, as Chinese firms are becoming more active overseas, so are
China's environmental NGOs. In 2008, NGO Green Watershed and eight other
domestic organisations launched the Green Banking Innovation Awards in
order to encourage banks to consider environmental protection when
awarding loans for investment abroad. Another body, Minjian International,
has raised awareness of overseas investment in intellectual circles. Its
founder, the writer Chan Koon Chung, said in a letter to members that
"China is already a powerful nation (though it is not a superpower, I
think it is more powerful than mid-ranking powers) and it is time for
China's intellectuals to pay real attention to this."
Meng Si is managing editor in chinadialogue's Beijing office.
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