Written by: 10.25.15
China’s rapid economic development over the last three decades has led to significant environmental pollution and some poor policy choices. With more than 1.3 billion people, China has the world’s largest population and has been the biggest energy consumer since 2010. As the world’s largest producer and consumer of coal, China is also the highest emitter of carbon dioxide that contributes to global warming, although the United States remains the highest per capita emitter. China does understand, however belatedly, the seriousness of these challenges and is taking steps to address them.
A huge continent of 54 countries and several island nations, Africa has many climate and ecological zones; it is difficult to generalize about its environment. It now has 1.1 billion people and sub-Saharan Africa has the world’s most rapidly growing population. Africa is believed to be the continent most vulnerable to global climate change and the least able to adapt. Key environmental problems today in parts of the continent include deforestation, desertification, reduced soil productivity, pollution, and the depletion of fresh water sources. Africa has a history of periodic droughts, floods, and serious outbreaks of a wide variety of disease. While most African countries are paying more attention to environmental issues, the topic remains a relatively low policy priority.
Defining China’s Foreign Direct Investment
Chinese foreign direct investment (FDI) in Africa is often confused with its aid projects, commercial deals, and implementation of contracts for African governments and other organizations. Most of the large infrastructure projects built in Africa by Chinese state-owned companies fall in the category of commercial deals or winning of contracts. Most of the financing for these contracts and investments comes from African governments, Chinese companies, and institutions such as the Export-Import Bank of China
It is not always clear what Chinese activities qualify as FDI in accordance with commonly used definitions. China has an official definition of inward FDI, which is different than the one used by the Organization for Economic Cooperation and Development (OECD). China’s definition refers to investment in China by foreign enterprises and economic organizations or individuals to open solely foreign-funded enterprises. It also includes the running of Chinese-foreign equity joint ventures and participation in cooperative joint ventures or co-development of resources with any enterprises or economic organizations within China in the form of spot exchange, real object, or technology.
The OECD countries define FDI as having the goal of establishing a lasting interest by a resident enterprise in one economy (direct investor) in an enterprise that is resident in an economy other than that of the direct investor. This implies a long-term relationship between the direct investor and the direct investment enterprise and a significant degree of influence on the management of the enterprise. Direct or indirect ownership of 10 percent or more of the voting power of an enterprise resident in one economy by an investor resident in another economy constitutes such a relationship. China does not have an official definition for outward FDI.
Relative Concern about the Environment in Africa and China
It is useful to put the relative importance of environmental concerns in both Africa and China into perspective. Protection of the environment has never been a high priority for African governments. African leaders have traditionally been much more concerned about issues such as disease, poverty, civil conflict, ethnic violence, and religious extremism. While this remains the case, there is a growing awareness of the importance of good environmental practices and a concern that global warming will have especially negative implications for the continent.
A study by the Pew Research Center’s Global Attitudes Project surveyed five of the greatest dangers in the world: religious and ethnic hatred, inequality, AIDS and other diseases, nuclear weapons, and pollution and the environment. The 44-country survey included nine African countries. All but one of the nine African countries ranked pollution and the environment as the least important of the five concerns. The situation for China is different. China was also part of the 44-country study. Of the five dangers surveyed, pollution and the environment ranked in first place.
The Environment and Chinese Companies Investing Overseas
Environmental concerns were not a significant part of China’s dialogue with Africa until recently. China took a disengaged approach to the environmental practices of Chinese companies operating overseas. In 2006, Chinese and African leaders agreed to intensify cooperation in environmental protection, to share experiences, and to boost sustainable development. In 2009, Chinese and African officials agreed to use FDI to bolster economic growth and sustainable development but did not address environmental practices of Chinese companies in Africa.
Today, China is encouraging its companies as they invest in Africa and elsewhere to follow better environmental practices. Chinese companies are making more frequent use of environmental impact assessments, sometimes even drawing on the expertise of Western companies that specialize in these studies. This development is not surprising in view of the growing concern about environmental problems in China and a deeper understanding by the government that it is not in China’s interest to export its bad practices overseas.
In 2013, China’s Ministry of Commerce and the Ministry of Environmental Protection issued voluntary guidelines that encourage companies investing overseas to follow local environmental laws, assess the environmental risks of their projects, minimize the impact on local heritage, manage waste, comply with international standards, and draft plans for handling emergencies. An official in China’s Ministry of Environmental Protection commented that “no side will win if the environment is neglected, and we have many lessons in this regard.”
The government-affiliated China Chamber of Commerce for Minerals, Metals and Chemicals Importers and Exporters announced in 2014 guidelines to regulate overseas mining investments and operations. They encourage Chinese companies that invest overseas to pay careful attention to labor issues, environmental protection, supply chain due diligence, and human rights concerns. While it is too soon to judge the impact of these guidelines, initial reactions have been positive.
Chinese state-owned and private companies are also demonstrating greater interest in protection of the environment. The United Nations Global Compact is a voluntary corporate responsibility initiative that commits businesses to align their operations and strategies with ten universally accepted principles in the areas of human rights, labor, environment, and anti-corruption. Principle Seven urges businesses to support a precautionary approach to environmental challenges. Principle Eight asks signatories to undertake initiatives to promote greater environmental responsibility such as self-regulation, fostering dialogue with employees and the public, and adopting appropriate codes of conduct. Principle Nine says businesses should encourage the development and diffusion of environmentally friendly technologies such as those that use materials more efficiently and cleanly.
More than 13,000 corporations and other stakeholders from about 170 countries have signed the Global Compact. As of 2015, 272 Chinese private and state-owned businesses, non-governmental organizations, and business associations were signatories. They include small, medium, and large companies; most are private but a number of the large state-owned companies with operations in Africa are also signatories. These member companies represent a modest percentage of the several thousand Chinese companies operating in Africa. It is also one thing to sign the Compact and another to implement its guidelines. In fact, little is required of signatories. Chinese companies, as is the case for companies in other countries, have demonstrated a mixed response to the Compact.
In 2012, the China Petroleum and Chemical Corporation (SINOPEC), which has been active in Africa, issued what was announced as the first white paper on environmental protection by a Chinese enterprise. SINOPEC committed to providing sufficient funds for environmental protection and agreed to adhere to clean production, to raise resource efficiency and develop green energy, and to improve emergency response systems aimed at preventing environmental risk. SINOPEC also underscored its commitment to the Global Compact.
Chinese companies most resistant to improved environmental practices in Africa are the small private companies and the medium-sized ones affiliated with Chinese provincial and municipal administrations. China’s largest companies are primarily owned by the central government. Together with state-owned banks, they control more than half of the revenue of China’s 500 largest companies. Companies owned by Chinese provinces control about a quarter of the revenue. These distinctions are important for a Western audience where the overwhelming majority of companies investing in Africa come from the private sector.
Chinese Environmental Practice and Law
A basic understanding of China’s environmental practice and law is necessary as Beijing’s domestic policies eventually tend to be reflected in its approach elsewhere, including Africa. There has been a recent focus in China on the need to confront environmental challenges. In 2008, China upgraded the State Environmental Protection Administration to the Ministry of Environmental Protection and placed it under the control of the State Council, which is the approximate equivalent to the American cabinet.
In 2012, the 18th National Congress of the Communist Party of China adopted “ecological civilization” as one of the five pillars driving policy. China’s National People’s Congress approved ten environmental laws and 30 resource protection laws. Local people’s congresses and governments adopted more than 700 local environmental rules and regulations and the departments of the State Council issued hundreds of environmental regulations. China’s first environmental non-governmental organization appeared in 1994. By the end of 2012, almost 8,000 environmental non-governmental organizations had registered with the Ministry of Civil Affairs.
The China Council for International Cooperation on Environment and Development is a high-level, advisory body authorized by the Chinese government. The Council argues that transformative change concerning environmental protection is underway in China although desired results will not be achieved until there are additional tools, capacity, and financing. So far, the emphasis has been on controlling basic air, water, and soil pollution. While progress is being made on some problems, new ones emerge such as wider ground water pollution and more complex air pollution.
Photo Credit: Chinese construction site, Ethiopia. (SarahTz/Flickr)
The National People’s Congress adopted in 1989 the comprehensive Environmental Protection Law of the People’s Republic of China. Article 1 states that the law is intended to protect and improve the environment by “preventing and controlling pollution and other public hazards, safeguarding human health, and facilitating the development of socialist modernization.” Article 2 defines environment broadly as “the total body of all natural elements and artificially transformed natural elements affecting human existence and development, which includes the atmosphere, water, seas, land, minerals, forests, grasslands, wildlife, natural and human remains, nature reserves, historic sites and scenic spots, and urban and rural areas.”
Article 6 says that “all units and individuals shall have the obligation to protect the environment and shall have the right to report on or file charges against units or individuals that cause pollution or damage the environment.” While Article 9 gives the State Council responsibility for establishing national standards for environmental quality, Article 16 assigns responsibility to the local people’s governments to take measures to improve the quality of the environment for areas under their jurisdiction. According to Article 35, violators of the law shall “be warned or fined by the competent department of environmental protection administration or another department invested by law with power to conduct environmental supervision and management for” a specified list of infractions.
As China’s environmental challenges have become more serious, there has been growing interest in the use of the court system to deal with polluters. Traditional environmental litigation includes tort cases that seek compensation for harm caused by environmental pollution and “administrative failure to act” cases brought by local citizens against polluters, property developers, and others. The rights of individuals and other bodies to take environmental complaints to court are contained in Article 6 of the Environmental Protection Law cited above and Article 124 of the General Principles of Civil Law, which states that “any person who pollutes the environment and causes damage to others in violation of state provisions for environmental protection and the prevention of pollution shall bear civil liability in accordance with the law.”
The primary criminal law provision in the event of “major environmental pollution accidents” has historically been Article 338 of the Chinese Criminal Law, which allows for a maximum criminal sentence of seven years. In egregious cases involving fires, explosions, and the breaching of dikes, Article 115 allows for life imprisonment or even the death sentence.
There is increasing support to establish an environmental public interest litigation system, which allows any citizen, social organization, and state organ to bring a lawsuit in a state judicial organ for the sake of the public interest. A related recent development, especially since 2007, has been the rapid growth of environmental courts in China following a pollution crisis in parts of the country. More than 130 environmental courts developed between 2007 and 2013. They include environmental divisions within Intermediate People’s Court and environmental divisions or separate tribunals at the basic court level. They also include environmental panels and environmental courts, which usually allow judges to work onsite at agency offices. China’s move into environmental public interest litigation and the creation of environmental courts has been a significant legal and judicial development.
One study of the environmental courts suggests that economic growth in China has trumped environmental concerns. The courts demonstrate responsiveness to environmental concerns while sometimes aiding or at least not obstructing economic development and social stability by local officials. One expert concluded that “China’s environmental courts are not a step toward judicial empowerment, as they might appear at first glance, but an effort to shore up state capacity through an institution designed to coordinate and act as a backstop for government agencies.” The courts are part of a broader effort to encourage environmental protection as a policy priority. Judges do not necessarily see neutrality as part of their job. The courts also fit into a tradition of socialist courts as consciousness-raising institutions and serve to support social control.
In 2015, China began to implement its updated 1989 Environmental Protection Law (EPL), which suggests that China has become more serious about improving environmental quality. The most significant additions and provisions to the EPL include (1) more serious consequences for violating China’s environmental laws, (2) expanding the scope of projects subjected to environmental impact assessments, and (3) allowing nongovernmental organizations to take legal action against polluters in the public interest. Article 58 allows nongovernmental organizations to file claims in the People’s Court if they (1) are registered with the civil affairs department at or above the municipal level and (2) have been focused on environment-related public interest activities for five consecutive years or more. Only about 300 nongovernmental organizations meet both of these requirements.
China’s environmental legislation is strong on paper, but its implementation tends to be weak. Much depends on the efforts of local governments, which have considerable autonomy, and other state agencies. Policies implemented at the provincial and municipal level are often determined by apathy and lack of oversight. Some large state-owned companies have adopted a series of rigorous environmental protection standards. At the same time, Chinese enterprises still appear to be 15-20 years behind their Western counterparts when it comes to the adoption of modern social and environmental approaches to their outward FDI. China has made steady progress on environmental legislation but still has an unsatisfactory enforcement system. In particular, there are inadequate sanctions for those who damage the environment and too few incentives for those who protect it.
African Environmental Practice and Law
With 54 countries in Africa, it is impossible except at the most basic level to generalize about African environmental practice and law. The 1963 Charter of the Organization of African Unity contained no reference to environmental protection. The African Convention of Nature and Natural Resources adopted in 1968 in Algiers was the first Africa-wide effort to deal with environmental issues. In 1985, African governments established the African Ministerial Conference on the Environment to promote regional cooperation in addressing environmental concerns. This Conference is now the main policy-making forum for discussing Africa’s environmental problems. In 2003, the African Union replaced the Organization of African Unity and adopted the comprehensive Revised African Convention on the Conservation of Nature and Natural Resources. It makes a strong commitment to poverty reduction and socio-economic development. Once it comes into force, it will replace the 1968 Algiers Convention for those African states that ratified it.
The 2003 Revised Convention will be an improvement only if its provisions are adequately financed, effective institutional mechanisms are put in place, and there is a strong non-compliance mechanism. The African Court of Justice and Human Rights, which will have jurisdiction over matters concerning the Convention, has not yet been ratified. So far, only eight countries have ratified the Revised Convention; it will not enter into force until it has been ratified by 15 African countries. This fact and the subsequent lack of discussion about the Revised Convention in African Union meetings suggest a continuing lack of priority that African governments give to environmental protection. African leaders understand the link between natural resources and economic development. They must now demonstrate that protection of the environment is not a competing interest for scarce financial resources, but a complementary one.
The approach of individual African countries towards protection of the environment varies enormously. Some countries have impressive legislation in place while others are lagging behind. Even in the case of countries with a relatively strong commitment to the environment and reasonably good legislation, however, there are serious shortfalls in funding and human capacity to implement programs to protect the environment.
In 1997, Ethiopia approved its first comprehensive environmental policy and subsequently put in place strategies and laws designed to support sustainable development. Ethiopia has implemented a wide range of legal, policy, and institutional frameworks on the environment, water, forests, climate change, and biodiversity. Ethiopia has also signed a number of international environmental agreements. While Ethiopia takes environmental issues more seriously than most African countries, there continue to be problems because of inadequate implementation and enforcement. Pollution monitoring, reporting, and verification of abatement measures have been weak. The key constraint is lack of human capacity.
Mali has relatively well developed environmental legislation and was in the process of establishing a political and institutional framework for improving the environment and dealing with climate change. In 2010, it established the National Agency for Environmental and Sustainable Development, which had responsibility for implementation of environmental policy and integrating responses across the bureaucracy. Mali has a strategy for a green economy and climate change. A coup and government crisis in 2012 resulted in a 90 percent reduction in the budget of the environmental department of the Ministry of Environment and Sanitation. There is also a low regard for environmental legislation and weak human capacity in the government for improving the environment. Progress is dependent on international financing, better legal frameworks, and strengthened human capacity.
Zambia’s body of environmental law is contained in more than 33 pieces of legislation; it is fragmented with responsibilities assigned to at least ten line ministries. The 1997 Environmental Impact Assessment regulations require assessments for all investments that have a major impact on the environment and require adequate environmental mitigation measures. The Ministry of Tourism, Environment, and Natural Resources and the Environmental Council of Zambia have a comprehensive environmental mandate. In practice, however, environmental management is largely dependent on the interest and competence of line ministries, which do not give it a priority. The environmental institutions are not strongly linked to development planning, finance, and sector institutions, and are politically weak and lack human capacity. They also face severe funding constraints; environmental issues are heavily dependent on international funding. As a result, Zambia largely fails to manage sustainably its environment and natural resources.
Most African states have weak bureaucracies. While their environmental laws are sometimes impressive, implementation is usually lacking. In most African countries, the environmental laws and standards are much lower than accepted international norms. African governments have signed large numbers of treaties and agreements but have largely failed to articulate coherent solutions to their environmental problems. Because of the weakness of African institutions to monitor and enforce environmental protection measures, it will be primarily up to individual Chinese companies to assume responsibility for sound environmental practices.
Chinese FDI and Economic Sector Impacts
As is the case for most FDI in Africa, Chinese investment is concentrated in sectors of the economy that are especially vulnerable to environmental concerns. While major Western companies developed most of Africa’s oil and gas resources and continue to be the most important players, Chinese companies have joined the sector. Oil companies from China, the West, and elsewhere have been criticized for their environmental practices.
Chinese companies have also invested heavily in mining projects throughout much of Africa. Because these projects usually require large initial investments in technology, equipment, and infrastructure, China’s state-owned companies tend to dominate in this sector. The mines are sometimes located in ecologically fragile areas where there is a higher risk of environmental degradation. They also generate greenhouse gases, solid and liquid waste, including hazardous products such as cyanide and mercury. Chinese companies often negotiate mining concessions without competitive bidding and in the absence of environmental assessments. African governments contribute to the problem by not insisting on environmental impact statements and not enforcing existing environmental regulations. In recent years, Chinese companies have given more attention to mitigating harmful environmental impacts.
China is the largest importer of Africa’s tropical wood, receiving more than three-quarters of its timber exports, most of it in the form of raw logs until African governments began to prohibit this practice. While most of this activity constitutes trade, some of it involves FDI by Chinese logging and timber trading companies. Poor forest governance in Africa has resulted in serious unsustainable or illegal harvesting. This has led to the loss of biodiversity and the abuse of forest communities’ rights.
Chinese companies have a tendency to violate local forest practice laws together with African counterparts and even some European companies. The illegal practices include abuse of permits and concession licenses, bribery, operating without management plans, under-reporting export volume, smuggling raw logs, and harvesting and transporting undesignated species. The greatest threat to the environment is the unsustainability of Africa’s hardwood timber if these practices by both Chinese and non-Chinese companies continue. African government officials were often complicit in the illegal activities.
The government of China is sensitive to the criticism its companies have encountered in the forestry sector and has made progress in countering illegal logging. In 2009, the State Forestry Administration and Ministry of Commerce issued voluntary guidelines which encourage Chinese companies to manage, utilize, and protect overseas forests in order to play a positive role in sustainable development of global forest resources.
The environmental issue for which China has attracted the most criticism is the importation of products taken from African endangered species, especially elephant ivory and rhino horn. China is the world’s largest importer of illegal ivory. The poaching of African elephants has reached the point that it threatens the long-term viability of the species. While most of this activity falls in the category of illegal trade involving African suppliers and Chinese merchants living in both Africa and China, some of it has indirect links to Chinese FDI.
Chinese environmental law, policy, lending institutions, and companies investing in Africa are playing catchup. China’s Export Import Bank adopted voluntary environmental guidelines in 2004 and made them public in 2007. They state that projects that are harmful to the environment or do not obtain environmental approval will not be funded. If there are unacceptable environmental impacts during project implementation, the Export Import Bank requires immediate remedial action or will discontinue financial support.
The government of China has become more sensitive to criticism of overseas investment by Chinese companies and has made a concerted effort to improve environmental guidelines and encourage their implementation. It also encourages Chinese companies to apply Chinese laws and standards in their overseas operations. Large state-owned companies have generally been more responsive than medium and small companies, especially those in the private sector. So far, all of the guidelines that apply to Chinese companies operating overseas are voluntary. Unless China makes them mandatory and attaches penalties to infractions, they will not likely change the behavior of many companies.
It is important to acknowledge the difficulty of enforcing environmental guidelines on Chinese companies operating in Africa, especially when the press in China and many African countries is carefully controlled by the government and environmental advocacy organizations are weak. One area where Chinese companies have consistently performed poorly, although some are improving, is a relative lack of transparency in the handling of sensitive environmental issues. The United States has had considerable success, for example, in stemming bribery overseas by enforcing the Foreign Corrupt Practices Act of 1977. China could develop similar legislation for environmental standards.
Many African countries attach a low priority to environmental protection, have understaffed environmental bureaucracies, and have even worse records for countering corruption than does China. Numerous African officials are also reluctant to call out Chinese companies that engage in unacceptable environmental practices because they do not want to jeopardize Chinese investment or good relations with the government of China. This situation does not provide an incentive for companies that are focused on making a quick profit to engage in responsible but more expensive environmental practices, especially where there are many African nationals who are prepared to accept the lower standards. It will often be up to the Chinese company to take the initiative.
In the final analysis, it is in the interest of both China and the African countries to pursue sound environmental practices and sustainable development. In addition, Africa’s development partners, including the United States, could improve the environmental situation by building the human capacity in African countries to monitor and regulate the environment.
Article Disclaimer: This article was published at International Policy Digest and was retrieved on 10/28/2015 and posted here at INDESEEM for educational and information purposes only. The views, opinions and thoughts expressed in this article remains those of the author. Please cite the original and this source accordingly.