Chinese Ministry of Environmental Protection: Chinese Enterprises Actively Safeguard the Environment in Overseas Investment

Certain infrastructure projects, such as hydropower stations, that are being built in other developing with Chinese aid have come under criticism from the western media and other organizations for allegedly “having environmental risks". Yet, a report from the Chinese Ministry of Environmental Protection says that that Chinese enterprises are taking active measures to protect the environments in overseas investment.

At a seminar entitled “Reform and Innovation of Environmental Economy Policies in the New Period” that was held in recent days, Ge Chazhong, director of the Integrated Department of the Environmental Planning Institute of MEP, publicized the report of Environmental Protection in China’s Overseas Investment and Assistance. The report said that attention should be given to the environmental problems that exist in China’s overseas investment and aid.

“Although the ‘China Environment Threat Theory' is a fantasy, reality, we need to conduct careful analysis on unavoidable problems in the process of economic development and globalization and take active measures to combat them. “said Ge.

The investigation showed that from 2002 to 2006, Chinese foreign direct investment from the non-finance category achieved an annual average growth rate of as high as 60%. By the end of 2006, over 5,000 domestic investment subjects had set up about 10,000 enterprises of foreign direct investment in 172 countries and regions across the world, the stock of foreign direct investment reaching USD 90.63 billion.

China's outward investment and aid is mainly focused in Africa and Southeast Asia. According to the aforementioned report, China’s outward investment primarily includes oilfields, the exploitation of other important resources, processing and assembly and labor-intensive building and service industry. Such industries are closely related to local environments. Therefore, if environmental management is not enhanced, certain environmental problems are very likely to emerge.

“The overwhelming majority of Chinese overseas enterprises do not have an environmental safety department or a commissioner in their in branch organization or project team.” The report also pointed out that China’s banking industry is lacks adequate consensus and practices in regard to environmental protection and environmental policy. External credit in the banking industry has developed rapidly, but few banks have integrated environmental problems into their credit management and risk management, leaving environmental risks out of the range of effective control.

The report also indicated that Chinese financial institutions lack relevant standards for the mining industry, forestry industry and other fields of engineering that affect environments. At present, only the China Development Bank has adopted independent financial standards for environmental protection. The Import and Export Bank of China has also formulated polices on environmental protection, but these have not been disclosed yet. Moreover, only the China Industrial Bank, Bank of Shanghai and the China Merchants Bank have signed fiscal institution statements regarding environmental protection and sustainable development prescribed by the United Nations Environment Program.

However, Chinese enterprises are continuously improving in terms of social responsibility and environmental protection. Chinese companies, such as China International Marine Containers Co., Ltd., Haier Group, and China Ocean Shipping Company, have accepted the Declaration of Business Leaders’ Cares for Climate, known as the UN global compact. They have integrated the reversal of global warming into their long-term competitive strategy. For its overseas programs, CNPC has promised that it will seek to prevent pollution in advance and uphold the “Three-No Principles”, namely, no approval, no commencement and no operation for projects not conforming to environmental requirements.

Also, the report states that Chinese enterprises are still short of standard guidelines for environmental protection in overseas investment. The report suggested that China should formulate a guide for environmental behavior in overseas investment and aid as soon as possible. Based on the lifecycle of projects, methods such as the assessment of environmental impact, environmental planning and community development should be adopted, and the concepts of environmental protection and the strategy of sustainable development should be embodied throughout the execution of the project. Thus, a mutually beneficial situation in outward investment and local environmental protection can be achieved.

With regard to the conduct of banks in overseas investment and aid, the report suggested that the government should work out a guideline for outward green credit to urge banks to give more weight to environmental issues when making financing decisions. Banks should actively integrate environmental factors into the decision-making process for outward credit. Also, China should allocate a special fund for green economic cooperation, and ease international pressure with environmental demonstration projects. (Source: China Business News)