China's 'going out' companies must tread the earth more lightly
Michelle Chan urges China's banking regulator to enforce green guidelines
In 2012, a Chinese-owned mining company, EcuaCorriente, signed a deal with the Ecuadorean government to develop a copper mine in one of the most biodiverse and beautiful places on earth. Located in Ecuador's misty highlands, the Mirador mine has since been the target of protests, lawsuits and resistance from communities and organisations concerned about the mine's impact on water, biodiversity and indigenous peoples.
El Mirador is just one example of a foreign direct investment that has attracted intense controversy - an unwelcome side effect of a Chinese foreign policy that has encouraged Chinese companies to go global.
The "Going Out" policy is largely geared towards ensuring that China secures access to the natural resources needed to fuel its continued economic growth. As a result, over the past decade, China has poured investments into nearly all corners of the earth, from Europe, Southeast Asia, North America, Latin America, to even Antarctica. Today, China exceeds the World Bank as a provider of finance for development projects around the world.
But while the Going Out policy may have spurred a boom in Chinese overseas investment, another Chinese policy - the "Green Credit Directive" - may have the power to make sure those investments are environmentally responsible. Released by Chinese banking regulators in 2012, it requires Chinese banks to consider environmental and social risks when lending to companies and projects, and to halt or suspend financing when major environmental hazards (such as pollution, safety, resettlement, and even climate change) go unmitigated.
In particular, the directive requires Chinese banks, in their overseas lending, to ensure that borrowers abide by international norms.
As such, the directive is one of the world's most progressive environmental banking regulations. In comparison, governments in the US and Europe have done virtually nothing to hold banks responsible for the environmental impact of their lending. Nor have these governments done much to address the overseas social and environmental impacts of their multinational corporations.