Complex Connections: Ecological Impacts of Chinese Investment in Southeast Asia

As the world's factory, it should not be surprising that China has had to expand its search for raw resources well beyond its borders. Over the past few years China has become a major global investor into resource extraction industries—oil, gas, minerals, timber, and agricultural products. A major catalyst for this investment is China's Export-Import Bank lending, which reached $174.2 billion in 2009 alone, nearly four times what the World Bank lent in the same year. While much has been written about China's investments in Africa, Southeast Asia is also a major target for Chinese agribusiness, timber and mining investments. As a result, countries in Southeast Asia appears weak facing Chinese investors, giving agribusiness unprecedented economic concessions as large as 15 percent of their total land. Yet it is not only Asia, but the entire world ecological system that is influenced by China's role in the production chain.

This October 20th CEF meeting began with Xiaomei Tan of World Resources Institute who outlined the trends and players in China's overseas direct investment. Ms. Tan noted that the most dramatic increase in investments in recent years has been in the infrastructure sector, in which China ranks first among developing countries, and 5th among all countries. The decision-making process for investment in the Chinese government is somewhat convoluted, so Ms. Tan spent a good portion of her presentation demystifying the process. She highlighted the different requirements and avenues for state-owned entities and non state-owned entities, particularly in the agencies with which the enterprises deal directly in the application process for certification, to operate abroad.

She concluded by listing China's current environmental protection policies that related to overseas direct investment, and ways in which the international community can help China develop in this area. With a discernible tone of optimism, she focused on the Guidelines on Environmental Actions of Chinese Overseas which is being worked on jointly by the Ministry of Environmental Protection, the Ministry of Commerce and the State-owned Asset and Supervision Administration Commission (SASAC). Tan stated that "you all have to know the train and the decision-makers," whatever your purpose is in engaging with China, and World Resources Institute is committed to presenting analytical data to that end.

The data provided by WRI certainly indicated that the goal of the second panelist Suwanna Gauntlet from the Wildlife Alliance to reduce China's footprint in Cambodia would be a difficult one. Wildlife Alliance "is mostly about sustainable development, working with investors on how to reduce and minimize deforestation. We work with government and law enforcement to strengthen political will at all levels... and with communities to create viable alternatives to destructive livelihoods to slash and burn, illegal logging and wildlife trade," described Gauntlet. Currently Wildlife Alliance is most focused on the use of economic incentives in government and communities to keep the forests intact. She used the example of Chinese corporation Union Development buying several thousand hectares of coastline in Cambodia's Kekong Province, evicting families and relocating them to sites of bulldozed rainforest to illustrate China's ecological footprint in Cambodia.

In describing the hydro-power situation, she noted the importance of involving all communities, investors and government in environmental protection. "Cambodia's government is weak when it comes to Chinese investors," she stated. Vague contracts and unfulfilled promises to protect have led Wildlife Alliance to partner with local governments and convince officials that they must demand payment for protection of the watershed. The goal is to lead all of this into a national policy for Cambodia regarding hydropower.

Gauntlet's presentation also alluded to the environmental footprint of the Chinese workers brought in for construction by Chinese corporations. She indicated that Wildlife Alliance was doing everything possible to avoid having Chinese prisoners brought into Cambodia, and that one company had even agreed to strategically arrange what rocks and debris that was created from dynamiting on top of their construction tunnels so that the forest could recover, and mitigate the impact of increased sewage in the area.

Not only are these large dams a problem in the Cambodian watersheds; smaller dams constructed for agriculture in communities have cut off water supply to the town of Siem Reap and sickened the watershed. Economic land concessions from China do similar damaging work diverting water, as do all large plantations in Cambodia. Gauntlet did note a bright point in the fight to preserve Cambodia forests and watershed - lobbying has led to some small victories in preventing economic land concession grabs of almost 500,000 hectares. "The Cambodian government is committed, and can work with NGOs to improve their environmental footprint. But it is extremely difficult, and one must know how to work the system," concluded Gauntlet.

Keith Barney detailed further that "economic concessions" are governments leasing land to private companies, often large agribusinesses. As a result these companies often enjoy supernormal profits, and Chinese companies in Southeast Asia have the largest shares behind native companies, about 5-6% of the total land in Cambodia and 13% in Laos. Barney noted that in forest management China plays an increasing role in total wood imports, quadrupling this amount over the past decade. "The Chinese market is important too, not just investors," Barney noted. The supply chain for paper he described in China hosts production facilities that get pulp from tree plantations in Southeast Asia and distribute its products globally. Southeast Asia offers low-cost access, periphery areas of "degraded forest" for plantation investment, and low, flexible regulations all in areas convenient for geographical reasons.

Following his descriptions of this network and of local case studies in Laos, Barney concluded that "China is linked in complex ways to the ongoing plantation concession boom in Laos, Cambodia and in China itself." The rapid transformation of property rights in these rural areas often squeeze villager access to customary resources and require them to embark upon a rapid economic shift to wage labor from an agrarian lifestyle. "Can they do it?" Barney asked, and pointed to recent global and national actions that are targeting these large plantations. There are significant civil society efforts that are attempting to protect villager land rights, and prevent situations where it appears the companies themselves are in charge of zoning and limit the villagers' long-term access to land. It will be up to Southeast Asian governments to take a legitimate role in adjudicating the extent of land claims, and create trade-offs that benefit villagers and agribusiness. "What it comes down to is trying to implement best practices, like free, prior and informed consent for rural communities" stated Barney, by building in protections through communal and individual land rights. In the end, geopolitical issues concerning China may be at work - but this situation is just as much about states seeking to exert control over their internal peripheries.

Final speaker Rose Niu of World Wildlife Fund described her presentation as getting back to a broader, macro picture of this issue and China's global ecological footprint. Since 1970, humanity has been using more resources that the earth can regenerate each year, and not surprisingly, it is also beyond the global ecosystem's capacity to absorb all the waste that human produce. Though the average Chinese citizen has a relatively small ecological footprint (1/6th that of every American) for over 30 years China has also been experiencing an ecological deficit. In 2007, China used the equivalent of twice its available resources.

The highest levels of Chinese leadership launched China's "Go Global" program in order to access more resources, absorb production capacity, move up the global value chain and recover its ecological deficit. Ms. Niu noted that China has earned the nickname "workshop of the world," importing and exporting huge amounts of biomass products. "We believe, we must hope, that it is possible for China to leapfrog and not repeat the development mistakes of the past," said Ms. Niu. China must achieve sustainable development for the sake of the worldwide ecological system.

To aid in the project, WWF has launched the China for a Global Shift Initiative, with the goal of making China a major player in sustainable development. This is being accomplished through work with policymakers, the financial industry, green tech companies and the agencies that oversee China's trade and foreign investments. The Global Shift Initiative has found that the most effective campaign offers a real solution for a Chinese context, focusing on key sectors and finding champions within China.

China's economic footprint stretches worldwide, just one example of which is the export of 50 percent of Brazil's soya bean production to China. But Ms. Niu noted that it is often multinational corporations doing the business: "This is a global issue that needs global solutions." In their own work, the Global Shift Initiative has focused on specific leverage points, such as bottleneck in the production chain of 500 top companies that trade and process some of the most damaging commodities. This push has included asking them to sign agreements for sustainability practices, such as using only legally traded timber.

The Global Shift Initiative has achieved many things in only its first two years, including a publication done jointly with the CCICED that is being considered by high level officials at the NDRC, a financial forum on environment and sustainability, and translations of some Western best practices on sustainability.

Drafted by Lindsey Eckelmann.