China's overseas environmental problems cause domestic concern

By CSC Staff.

Western countries have recently charged that some of the hydroelectric power stations China has built in other developing countries, either for investment or as economic aid, are presenting “environmental risks.” In a recent report the Chinese government has admitted that some of China’s overseas projects were causing environmental problems, and is appealing to Chinese firms to protect the environment of their overseas investment destinations.

The Chinese Academy for Environmental Planning (CAEP) recently released an investigative report titled Environmental Protection in China’s Overseas Investment and Aid, which says environmental problems do exist in China’s overseas investment and aid, and are worthy of attention.

China’s overseas investment and aid focuses mostly on exploitation of oil fields and other resources, processing and manufacturing industries and labor-intensive construction and service areas in Africa and Southeast Asia. These industries are generally closely connected to the local land, habitat and living conditions and projects without a reinforcing environmental management can easily cause damage.

Between 2002 and 2006, China’s overseas non-financial direct investment grew by 60% annually. By the end of 2006, 5,000 Chinese enterprises had set up nearly 10,000 directly invested companies and invested $90.63 billion in 172 countries.

The report said most Chinese enterprises that carry on business overseas have not established special environmental protection divisions or appointed environmental specialists in their overseas branches or project groups. The report said China’s banking industry also lacks environmental concern and policies. While the banks’ overseas credit business is developing rapidly, they seldom take environmental problems into account in their credit and risk management, so environmental risks are not being effectively controlled.

Most Chinese financial institutions have set no standards for mining or forestry projects or others that may bring adverse environmental effects. At present, only China Development Bank has independent environmental financial standards. The Import-Export Bank of China has also formulated an environmental policy, but it has yet to be released to the public. And only the Bank of Shanghai and China Merchants Bank have signed a declaration on environmental protection and sustainable development with the United Nations Environment Program.

Chinese companies are making some improvements in social responsibility and environmental protection. Chinese companies, including China International Marine Containers (Group), Ltd., China Ocean Shipping (Group) Company and Haier, have accepted Caring For Climate: The Business Leadership Platform, a statement by the business leaders of the UN global compact, and promised to make stopping global warming a part of their long-term strategy.

China National Petroleum Corporation, parent company of PetroChina, also promised it would stick to environmental requirements in its overseas projects.

But Chinese enterprises still lack the guidelines and regulation for an overall environmental policy for their overseas investments.

The CAEP report suggests the government should formulate and issue environmental guidance for overseas investment and aid as soon as possible, to protect local environments while investing overseas.

As China’s banking industry raises money for overseas investment and aid of Chinese companies, the report suggests the government should formulate and release “green” credits and urge banks to better consider environmental factors when granting loans for companies’ overseas investment. Meanwhile, the country also needs to establish special fund for “green” economic cooperation, and relieve international pressure by constructing “green” projects.

Source: ChinaStakes.com (10/9/2008).