Social and Environmental Impact of China’s Outward Investment (OI) Dr. Prof. ZHANG Jianping Director, Dept. of International Economic Cooperation Institute for International Economic Research ， NDRC

OUTLINE 1. Existing OI Regulations and Guidelines 2. Social and Environmental Impact 3. Roles of Key Stakeholders in Mitigating OI’s Social and Environmental Impact 4. Case Studies: Biodiversity conservation 5. Learning and Conclusions 6. Policy Implications

1.Existing OI Regulations and Guidelines  International Cooperation on Environmental Protection  China Ex-im Bank’s "Green Credit" Policy  Environmental Standard  Green rules for OI in process of study (MEP) (MOFCOM)

"Green Credit" Policy 1 feasibility study of environmental impacts 2. endorsement from host countries’ environmental administration. regular examination for project implementation 1.Environmental assessment 2.Revision of the measures and policies EXAMINATION PREVIEW REVIEW

Environmental Standard  Comply with host countries’ environmental laws and regulations  Abide by Chinese ones when they are stricter than local ones  Adopt the Equator Principles of the World Bank

2.Social and Environmental Impact A. Conflict of requirement for Local Staff Employment Strong desire to eliminate poverty, increase job opportunities, and improve local infrastructure Stipulation to limit the inflow of Chinese labor force –Russia (2007.1, Bar foreigners from retail ) –India ( reduce by 250,000 ) –Costa Rica: National Stadium

B. Social and Environmental Impact In 2010, a questionnaire survey was made concerning the impacts of Chinese Going Global strategy and investment on researchers and senior officials from Asia, Africa, Europe, North America, South America And Oceania. The poll aims to know the advantages and disadvantages of Chinese OI in host countries and its positive and negative impacts. The results are as followings

Graph 1. Assessment on CRS of Chinese overseas enterprises 51% of officials believe that Chinese enterprises take good social responsibilities. 37% of those believe their performance is ordinary. And only 9% of those believe that they perform badly.

Graph2 ： Whether Chinese investment makes negative social and environmental influence About 40% of people believe Chinese investment cause problems to social and environmental development. The main problem: ecological deterioration and environmental pollution. In the next place is the decrease of jobs and local enterprises’ development 是 39/97 NO YES Total number: 97

Graph 3 ： negative impact caused by Chinese investment on social development and environment Environmental pollution Ecological deterioration Reduced jobs Decreasing speed of local industries development Red column represents people who believe in negative impact and green column represents people who believe in the major problem caused by Chinese OI

3.Roles of Key Stakeholders in Mitigating OI’s Social and Environmental Impact---- NGOs and Media  2006 Sustainable Growth Equity Fund by the Bank of China  Social Responsibility Investment Fund by Industrial Fund Management ( postpone) Monitor, promoter and adviser of investment projects

Media “China environmental threat theory” “China economic threat theory” by foreign media

A part of Media Reports TopicSourceContent Special gifts from China to Cambodia Farmer Daily of China Pilot projects of methane and pig breeding Go Global strategy by Petro China: Win-win 3 “Do not” policies China and Africa: the new international order? Financial Times GB neocolonialism The San Francisco Chronicle Resources exploitation and environmental damage Hydropower dam threatens Cambodian Thailand dailyEnvironmental and ecological damage Corporate social responsibility---Chinese mode Financial Times blind eye to problems

Reflection Academic gap in environmental and social impacts of OI Foreign media focus on threat of Chinese Go Global strategy and environmental damage Little attention from Chinese media to corporate conduct of Chinese outbound investors More attention to environmental impacts can mitigate barriers of Chinese overseas investment

4. Case Studies 1. opium-replacement policy promote rubber cultivation in neighbor regions of Laos and Burma ( profit/ business- oriented) UNODC

2. British Columbia Province in Canada: Timber industry Mere focus on Timber More interest in fishing,wildlife, recreation and travelling and silvicultural systems

5 Learning and Conclusions The incentive should not only be for benefit, but also be to increase local employment and tax, boost local sustainable development, protect environment, community and traditional culture. China should attach importance to creating employment, enhancing local value-added level and protecting local environment and community. Improving the environment and social impact is the mutual efforts of China and host countries. Whether Chinese investment has made serious environment and social influence is a problem that Chinese government and enterprises should carefully research and improve.

6. Policy Implications 1. Standardize Chinese enterprises' outbound investing behaviors and maintain Chinese enterprises' international credibility and reputation Negotiate with recipient countries on deciding the percentage and number of local labor to be employed Obey local rules and related regulations of ecological and environmental protection

2.Combine expanding foreign aid and implement "Go Global" strategy, promoting social development and environmental protection Cooperation in business, politics, diplomacy, economy and other aspects Build infrastructure, hospitals and schools Build development zone

3.Make efforts to formulate new regulations and increase transparency Establish institution more transparent and more operative regulations Build measurable, reportable and controllable statistic and assessment system Make environmental protection guidelines for domestic companies

4. China need to study and formulate the related punishment rules Issue guidelines regarding green OI, aid and lending Establish multiple channels to get overseas feedback about China’s outward investment and trade Business office, economy office of China’s overseas embassies, China Council for Promotion of International Trade

5.Market Tools: Boosting environmental awareness and management capability within companies and NGO Enterprises China’s policy financial institutions Chinese and international NGOs

Dr. Prof. ZHANG Jianping