Chinese overseas investments are rapidly increasing (see our comparison graph). As of 2011, China’s outward foreign direct investments (OFDI) spread across 132 countries and regions and topped $60 billion USD annually, ranking ninth globally according to U.N. Conference on Trade and Development statistics. A significant amount of this increasing OFDI goes to the energy and resources sectors—much of it in Asia, Africa, and Latin America. In both 2009 and 2010, the Export-Import Bank of China and the China Development Bank together lent more than the World Bank did to developing countries.
There are five key challenges in directing China’s overseas investments to more sustainable pathways:
- Limited data and transparency on Chinese overseas investments flows
- Poor governance systems in host countries, for example in some least-developed countries in Africa. Weak governance systems fail to protect communities and the environment from potential harm
- Limited sustainability standards and guidelines in Chinese institutions, whether government, state-owned enterprises, or small- and medium-sized companies
- Where sustainability standards are present, enforcement is often weak
- Lack of coherence between international investment/trade treaties and environmental agreements. From an international legal perspective, this subject is a grey area
We are currently trusted by a wide range of stakeholders including government, industry, financial institutions, and civil society organizations (CSOs) in China for our independence and evidence-based research. In the future, we will leverage our track record of impartial data analysis and recommendations to create further impact on creating more robust regulation of Chinese overseas investments.
This goal will be accomplished by working with government, regulators, and industry to identify need areas and offering our knowledge and expertise to make stronger policies. We will work with these stakeholders through both direct engagement strategies as well as “outsider strategies” to create incentives and pressure for change. We will convene government, industry (companies and financial institutions), and CSOs at annual meetings of the China Council for International Cooperation on Environment and Development, the annual Global Environmental Governance conference, and other conferences/workshops.
Our strategy in China revolves around addressing these challenges by working closely with the Ministry of Environmental Protection (MEP) through our partner, the China Council for International Cooperation on Environment and Development, engaging with state-owned enterprises like CNOOC (a Chinese oil and gas state owned enterprise) to understand, evaluate, and improve sustainability standards, and tracking overseas investment flows into unsustainable sectors. We will apply our past experiences in working with both public and private financing institutions on evaluating environmental and social risk to inform key legislation and introduce standards. Our current strategy in China is an “insider” and “partner” approach, but in 1-2 years as our work with the GCF phases out, we will scale-up our China work by expanding our engagement to include private financing institutions, civil society, and other actors who play a key role in influencing Chinese overseas investments.