Environmental Policy & China OFDI

1. Environmental Policy &China OFDI Peng Ren Global Environmental Institute pengren@geichina.org

2. Outline • Profile of China outward FDI • Overview of Integrated Policy Package (IPPs) program • Looking ahead – Future Trends

3. Outline • Profile of China outward FDI • Overview of Integrated Policy Package (IPPs) program • Looking ahead – Future Trends

4. Profile - Global context Figure: Global FDI Outflow top 20 （Billons of dollar） Source: UNCTAD

5. Profile - Facts and Trends China’s FDI Outflow 1990-2008 (100 millions of dollars) Source: MOFCOM

6. Profile - 2009 and beyond • 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）

7. Profile - Mining Business Services Finance Wholesale & Retail Trades Mining Transport Manufacturing Agriculture, Forestry, Husbandry & Fishery Figure: Distribution of China OFDI in 2008 (100 million USD) Source:MOFCOM

8. Profile – Investment Entities SOEs play a dominant role in China’s OFDI, account for more than 80% collective Private shareholding Limited co. SOEs Source； MOFCOM （2008）

9. Outline • Profile of China outward FDI • Overview of Integrated Policy Package (IPPs) program • Looking ahead – Future Trends

10. IPPs - Overview • “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

11. IPPs – Fundamental Qs • 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?

12. IPPs – GEI’s Response

13. Integrated Policy Package：Guidelines on Environmental Conduct by Chinese Overseas Enterprises EIA，PES CSR，CCA， REDD Overseas MEP MOC MFA CBRC Banks Environmental Policies Chinese Government Chinese Enterprises All overseas enterprises Local Government GEI NGO （e.g. Laos，Cambodia and other SE Asian and African countries）

14. IPPs – Implementation • 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-…

15. 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

16. IPPs - Implementation • 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)

17. 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.

18. IPPs - Challenges • 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.

19. Outine • Profile of China outward FDI • Overview of Integrated Policy Package (IPPs) program • Looking ahead

20. Final Words • 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)

21. 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

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