Environmental Policy &China OFDI

Peng RenGlobal Environmental Institute

pengren@geichina.org

Profile of China outward FDI

Overview of Integrated Policy Package (IPPs) program

Looking ahead – Future Trends

Outline

Profile of China outward FDI

Overview of Integrated Policy Package (IPPs) program

Looking ahead – Future Trends

Outline

Profile - Global context

Source: UNCTAD

Figure: Global FDI Outflow top 20 （ Billons of dollar ）

Profile - Facts and Trends19

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

08

0

100

200

300

400

500

600

9 10 40 43 20 20 21 26 27 19 1069

2728.555122.7

211.6265.1

559.1

Source: MOFCOM

China’s FDI Outflow 1990-2008 (100 millions of dollars)

China’s OFDI outflow amounted to 56.53 billions of dollars, expanded 1.1% in 2009 compared to that of 2008; despite the economic downturn

China’s OFDI is expected to break through USD 100 billions and capital stock USD500b by 2013 in the calculation of the average annual growth rate of China’s OFDI in the past 10 years (Source: China Industrial Overseas Development and Planning Association ）

Profile - 2009 and beyond

Profile - MiningWholesale & Retail Trades

Business Services

Mining

Finance

Agriculture, Forestry, Husbandry & Fishery

Figure: Distribution of China OFDI in 2008 (100 million USD)Source: MOFCOM

Transport

Manufacturing

Profile – Investment Entities

SOEs

Source ； MOFCOM （ 2008 ）

Limited co.

shareholding

collectivePrivat

e

SOEs play a dominant role in China’s OFDI, account for more than 80%

Profile of China outward FDI

Overview of Integrated Policy Package (IPPs) program

Looking ahead – Future Trends

Outline

“Go Abroad” Policy in 2000◦ to encourage Chinese enterprises to invest overseas, ◦ But, lack of monitoring social & environmental risks,

fall out of scope of Chinese policy

“Being a country with a strong sense of responsibility” bears two aspects:

China should must actively fulfill commitments it has made and agreements it has signed, such as the UN Biodiversity Pledge

China should also take an active role in protecting ecosystems of local and global importance

IPPs - Overview

◦ How can China move forward with “Go Abroad” while make overseas investment more environmentally sound?

◦ How can China avoid, or at least minimize, the risks in terms of financial, political, and the personal safety of overseas staff?

◦ What can be done to ensure that overseas Chinese enterprises in the host countries in ways that will have favorable impact on S & E and provide multiple benefits to all the stakeholders?

IPPs – Fundamental Qs

Enterprises-SOEs

Pilot to put the guidelines in practice

Host Government

Information and education

Government

Guidelines to improve the E & S impact

IPPs – GEI’s Response

Integrated Policy Package：Guidelines on Environmental Conduct by Chinese Overseas Enterprises

Chinese Government

GEILocal

Government

Chinese Enterprises

Environmental Policies

NGO

All overseas enterprises

OverseasMEPMOCMFACBRCBanks

EIA ， PESCSR ， CCA，REDD

（ e.g. Laos， Cambodia and other SE Asian and African countries ）

Initiated in 2005, under the auspice of Blue Moon Fund, partners including government agencies, State-owned Enterprises, host country government, academia and NGOs etc.

◦ Phase I Forestry Guideline (2005-2007)◦ Phase II Environmental Guideline (2007-2010)◦ Phase III Piloting 2010-…

IPPs – Implementation

IPPs - Implementation Phase I Forestry Guideline

2005-2007◦ Guidelines on Sustainable

Overseas Silviculture for Chinese Enterprises

◦ Joint released by SFA and MOC

◦ The second Guideline on Sustainable Management for Chinese forestry enterprises was jointly released by SFA & MOC

Phase II Environmental Guideline 2007-2010◦ A report of Environmental Policy for

China’s Overseas Investment was published in 2010

◦ A draft Environmental Guideline on Chinese Overseas Investment

◦ Partners: the Environmental Planning Institute at MEP & the University of International Business and Economics (UIBE)

IPPs - Implementation

Phase III Piloting 2010-…

◦ To select pilot companies to undergo trainings on the guidelines and put them into practice

Case I: A timber company in Cambodia Case II: A hydro power company in Laos Case III: …a mining company?

Environmental issues ranging from waste rock, tailing disposal, land disturbance, dust and noise, to water use and pollution.

IPPs – Implementation

Voluntary rather than binding guidelines

Release of Guidelines◦ International financial downturn ◦ Coordination between concerned government agencies

Enterprises leaders’ awareness in balancing development and conservation, education of guidelines within the enterprises is key to creating a corporate culture of sustainability among leaders.

IPPs - Challenges

Profile of China outward FDI

Overview of Integrated Policy Package (IPPs) program

Looking ahead

Outine

This is the beginning of China’s Outward investment expansion and the trends will continue in years to come

China’s resource need is real and will continue to grow over the long run

It is expected that a greater number of Chinese mining company will go abroad, a more cautious and sound environmental approaches to overseas investment should be in place

The State-owned Assets Supervision Administration Commission (SASAC) should take the lead for supervising & regulating environmental behavior of SOEs operating overseas(one-ballot veto overseas)

Final Words

China Exim Bank - “Guidelines for Environmental and Social Impact Assessment of the China Exim Bank Loan Project”, Financial institutions can have a significant impact on improving environmental behavior of overseas investment

MOFCOM – “Guidelines for Overseas Investment by countries and regions”

More are expected to come

Final Words

Thank you!  REN Peng Global Environmental InstituteCell: 136 0107 8953Tel: 86-10-67083192 ext. 212Fax: 86-10-67083193http://www.geichina.org