Connect with us

East Asia

What China’s new guidelines on ‘green development’ mean for the Belt and Road

Published

on

Authors: Christoph Nedopil, Dimitri De Boer, Danting Fan, Yingzhi Tang*

The “Green development guidelines for overseas investment and cooperation”, issued jointly by the Ministry of Commerce (MOFCOM) and the Ministry of Ecology and Environment (MEE), encourages Chinese businesses to integrate green development throughout the overseas investment process. Where local standards are insufficient, they also suggest that companies should “follow international green rules and standards”. As such, they represent a step away from China’s traditional reliance on host country rules and could pave the way for the implementation of much higher standards in infrastructure projects under the Belt and Road Initiative (BRI). The guidelines call for strengthening engagement with host country environmental protection organisations. They also name non-fossil energy technologies as key areas for investment.

The guidelines are comprehensive, covering climate, biodiversity and pollution. Specifically, they stress the need to:

  • Adhere to the “green development concept” throughout the entire process of foreign direct investment and cooperation;
  • Encourage the practice of environmental impact assessments and due diligence in accordance with internationally accepted standards;
  • Apply high standards at the planning and design phase of infrastructure projects, and strengthen contact with host country governments, media, local people and environmental protection organisations; and
  • Support investment in solar, wind, nuclear and biomass energy and other forms of clean energy.

The document is a significant upgrade on MOFCOM’s 2013 “Guidelines for environmental protection in foreign investment and cooperation”. The emphases have shifted from a bare minimum of pollution control that meets host countries’ standards towards the promotion of a “green development concept” and encouragement of higher standards used in host countries where appropriate.

Across all three aspects of climate, pollution and biodiversity, the 2021 guidelines now include specific climate-positive measures (eg support overseas clean energy investment). Furthermore, Chinese enterprises are asked to “prevent adverse impacts on biodiversity” according to host country laws or international practices. In the 2013 version, such practices were only “encouraged” to basically satisfy local laws. The progress builds upon some of the policies issued in-between, such as the 2020 Climate Finance Guidance. Finally, the guidance also promotes controlling the discharge of waste gas, water, noise and solid waste, and enhancing the integrated reuse of waste. Thus it focusses on broader aspects of pollution control.

Why are the guidelines significant?

Firstly, the whole-lifecycle approach encouraged by the guidelines represents a more comprehensive way for companies to approach environmental responsibilities in their overseas projects. Secondly, and as already mentioned, the document clearly emphasises “international green rules and standards”, driving Chinese overseas investments to go beyond “host country rules”.

To support a whole lifecycle approach for green investment, the document specifies activities and responsibilities, particularly of enterprises doing projects overseas for different investment stages. In the project planning and evaluation phase, Chinese enterprises shall actively fulfil their environmental responsibilities, including complying with host countries’ laws and regulations, and promoting the coordinated development of the local economy and society. Chinese enterprises are encouraged to follow international common practices for the environmental impact assessment (EIA) and due diligence, and identify potential environmental risks before deciding on whether to make an investment overseas.

In the implementation phase, enterprises shall conduct ecological and environmental risk prevention measures and improve the capacity of ecological and environmental management. Chinese enterprises should follow the host countries’ rules and standards and take reasonable and necessary measures to reduce or mitigate adverse environmental impacts. They are asked to enhance their management systems to monitor environmental risks and accordingly have an “early-warning system” for environmental risks, and formulate contingency plans for environmental accidents and emergencies. They are encouraged to communicate more with host country governments, media, local communities and environmental NGOs while fulfilling environmental and social responsibilities.

Reporting and disclosure is also emphasised and Chinese enterprises are encouraged to comply with international requirements, including but not limited to the United Nations’ Framework Convention on Climate Change, Convention on Biological Diversity, 2030 Sustainable Development Goals, and the Green Investment Principle for BRI.

Besides projects and investments, the guidelines also cover trade, by requiring companies to speed up integration with the global green supply chain, to carry out green procurement and purchase environmentally friendly products and services. If implemented well, this could be a gamechanger for biodiversity, as the production of commodities such as soy and palm oil have been identified as a key driver of tropical deforestation.

Beyond ‘host country rules’

Since China’s “going out” reform began in 1999, Chinese enterprises have been encouraged to comply with host country laws and regulations to obtain relevant local and Chinese permits and licences. However, the robustness of host countries’ regulatory environment and governance can vary. Due to the lack of incentives to comply with international laws, Chinese enterprises have often been criticised by NGOs and media for their environmental and social impacts on local ecosystems and communities. At the same time, the lack of environmental standard application has created financial risks for Chinese investors and tended to limit access to international financing sources, which usually come with higher environmental and social standards.

As mentioned, recognition of international standards began in the 2013 “Guidelines for environmental protection in foreign investment and cooperation”. This encouraged Chinese enterprises to “research and learn” from international organisations and multilateral financial institutions. In 2015, the National Development and Reform Commission and several ministries issued a “vision” for the BRI, which emphasized issues of green and low-carbon development, as well as biodiversity protection. Since then, much progress has been made in realising this vision. The 2017 annual policy recommendations from the China Council for International Cooperation on Environment and Development (CCICED) contained stronger language on greening the BRI, which received endorsement from President Xi Jinping. Since then, the BRI International Green Development Coalition has been established, and a series of special policy studies on greening the BRI were conducted in 2018, 2019 and 2020. In 2020, five ministries issued “Guidance on promoting investment and financing to address climate change”, which promotes the application of Chinese standards in overseas finance. The 2021 guidelines fully encourage the use of international best practice standards for environmental management of overseas investments.

The guidelines are congruent with many of the recommendations of the Green Development Guidance published by a group of international advisors and backed by various ministries, particularly the MEE in December 2020. This shows an increased willingness from the government to engage with non-government stakeholders in formulating overseas investment policies.

A greening BRI

The new guidelines are soft law, so can’t be enforced in court. They send a clear signal, however, especially to the state-owned enterprises (SOEs) that MOFCOM’s policies have steer over, including key BRI actors such as China Development Bank, China Export-Import Bank, and Sinosure, China’s export credit insurance agency. This policy gives a boost to their efforts to go green and helps to set their expectations that stricter measures are likely to follow.

Efforts to go green are playing out in the real world too. Last year saw more BRI investments in non-fossil than fossil fuel projects, and the first half of this year saw no new investments in overseas coal power projects, a first since the BRI began in 2013. China’s moves in Bangladesh to distance itself from remaining coal power projects and ICBC’s decision to pull out of the Sengwa coal power plant in Zimbabwe also demonstrate the trend. This shift away from climate-harming projects also makes economic sense, as electricity from new solar power is already up to five times cheaper than from new coal power. Nevertheless, the green shift and its speed should not be underappreciated: only a few years ago, international criticism of China’s overseas coal investments was ubiquitous – as were the financial risks. Take for example the Lamu coal plant in Kenya, which was suspended by a court ruling in 2019, following a challenge to its environmental impact assessment, or the Batang Toru hydropower dam in Indonesia, which incurred major delays following allegations that it would harm the habitat of a unique species of orangutan.

We expect such trends to continue, with China becoming more and more pro-active in greening its overseas investments. The new guidelines allude to “relevant environmental protection requirements on overseas projects”, the content of which are not yet clear. This suggests that further requirements on greening overseas investment are in the making. And in the runup to the Glasgow climate COP26, it is likely that China will announce further steps to make the BRI compatible with the Paris Agreement on climate change. 

***

Dimitri de Boer is chief representative in China of ClientEarth, a European environmental law group. He works with the Ministry of Environmental Protection, the Supreme People’s Court, and the Supreme People’s Procuratorate, to support their efforts to strengthen environmental governance and rule of law.

Danting Fan (范丹婷) is a legal researcher for ClientEarth Beijing Office with a focus on green finance. Prior to joining ClientEarth, she worked as a dispute resolution lawyer in China.

Yingzhi Tang(汤盈之)is a researcher at the Green BRI Center of the International Institute of Green Finance (IIGF) based in Beijing. Her research interests include climate- and nature-related financial risks.

From our partner China dialogue

Continue Reading
Comments

East Asia

Chinese Communist Party and the path of “high-quality development” at Guangdong Province

Avatar photo

Published

on

A night view of Shenzhen, Guangdong province, on March 10, 2018. (PHOTO / VCG)

During the meeting of “Huang Kunming”, Secretary of Guangdong Provincial Party Committee mentioned that it is significant for Guangdong embark on a path of high-quality development fit for its own situation. According to my highly understand of China’s high-quality development and analysis to the nature of the Chinese society and the polices of the Communist Party of China regarding the development is meaning (all-round building a strong modern socialist country) and all-round rejuvenation of the Chinese nation still need to rely on development.

 With the continuous development of the Chinese economy and the deepening of reforms, China put forward a new expression of “high-quality development” for the first time at the 19th National Congress of the Communist Party of China in 2017, which indicates that China’s economy has moved from a stage of rapid growth to a stage of high-quality development.

 Changing China’s economic development strategy is an inevitable choice in line with the law of development and the demands of its development. Now, China is seeking to change its previous development pattern of relying on a large number of factors of production to focus more on quality and efficiency.  It has begun to adhere to the implementation of the new development philosophy that emphasizes innovative, coordinated, green and open development for all, and to build a new development pattern that relies on domestic trade and promotes integration between domestic and foreign trade to enable the Chinese society to complete the building of a strong modern socialist country in an all-round way, Chinese side should stick to advancing high-quality development as the top priority, as President Comrade “Xi Jinping” stressed in the report.

 High-quality development mainly depends on the economy’s vitality, innovation and competitiveness.  In order to improve these capabilities, China is accelerating the implementation of the innovation-driven development strategy, intensifying its efforts to achieve a high level of self-reliance in scientific and technological research, mobilizing forces and focusing on solving intractable problems in original and pioneering science and technology research to achieve breakthroughs in some crucial and pivotal technologies, which are guided by these strategies, China has achieved good results in manned space industry, lunar and Mars sounding, deep-sea and land exploration, supercomputers, satellite navigation, quantum information, electro-nuclear technologies, large-scale passenger aircraft, medicine, biopharmaceuticals and other fields over the past years, and joined the ranks of innovative countries in the world.

 Green development is an important symbol of the transition of China’s economy from the stage of rapid growth to the stage of high-quality development. In recent years, China has pushed the green transition to a development mode, implemented the comprehensive rationalization strategy, developed green and low-carbon industries, and advocated green consumption.

  The bright future of China’s economy stems from more flexible and high-quality development. In 2021, China calmly responded to changes in the world as well as the COVID-19 epidemic, took new steps to build a new development pattern, achieve new results in high-quality development, and achieve a good start for the 14th Five-Year Plan. China has maintained a leading position in the world in economic development and in epidemic prevention and control, accelerated the growth of national strategic scientific and technological forces, improved the flexibility of the industrial chain, continued to deepen supply-side structural reforms, and made solid progress in the green transformation of the low-carbon economy and prosperity subscriber.

  Here, with the strong leadership of the Communist Party of China, the significant advantages of the socialist system with Chinese characteristics, the technological foundation accumulated since reform and opening up, the extremely large market advantage and domestic demand potential, and with huge human capital and human resources, the Chinese economy will continue to grow steadily on the path of high-quality development, enabling China to contribute in achieving a steady and stable progress in the recovery of the global economy.

Continue Reading

East Asia

China’s Deflating Population: The Economic Marvel in Eclipse?

Avatar photo

Published

on

So China’s population shrank last year. I admit my first instinct was … well, isn’t this a good thing? I mean, during the entire 1960s and 1970s, global discourse misted around how the world population kept growing beyond the finite resources of this world. And how food scarcity and poverty would create a social depression. China, with a population of roughly 1.4 billion people, was specifically a focal point of population reduction strategies. After the widespread catastrophe of the Great Leap Forward, a debilitating social program orchestrated by Mao Zedong in the late 50s, China’s population was on the up and up in the following decade, to the point that the infamous ‘One-Child Policy’ was introduced in the late 70s to inhibit the burden of a growing population – and concomitant poverty. Since then, however, China has dynamically transformed into an economic powerhouse – a factory floor for global manufacturing. And here lies the answer to this population conundrum: Shrinking population in China is a problem now!

According to the data released by the Chinese government last week, China’s population contracted by circa 850,000 people in 2022; with 9.56 million births against 10.41 million deaths, it was the first time in more than half a century that deaths outnumbered births in China. The initial thought would be to blame it on the pandemic. But that would be a blinkered assumption without gauging the stunted birth rate. It was the sixth consecutive year that the number of births fell, down from 10.6 million in 2021, according to the National Bureau of Statistics. Many demographers and statisticians warned for years about a population decline on the cards, albeit much later in this decade. This presage was why the government reposed its one-child policy in 2016 and extended the limit to three children in 2021. Local governments offered tax rebates and outright cash handouts to couples having children. The source of anxiety was partly social and partly economic – or maybe socioeconomic is the correct juxtaposition.

China is a rising economic power, the world’s second-largest economy, and the strongest contender to dethrone American supremacy. But in listing all the superlatives, we sometimes forget that China is still a developing economy. Despite its phenomenal evolution from endemic poverty, its average population still earns less than the average earnings in advanced economies. And the shrinking population is a two-pronged issue that could constrict China, like other leading developing economies, into a middle-income trap.

Just by simple inference, we can judge that a declining population is also an aging population. Impressive modernity in China’s healthcare system has led to an increase in life expectancy. Meanwhile, a decades-long hiatus in birth-conducive policies and changed mores of young Chinese couples, often antipathetic to having children altogether, have led to a sharp decline in births. A combination of these factors has invited a conspicuous outcome: Shrinkage in China’s working-age population. In fact, China’s working-age population has been in decline since 2015; according to a government spokesman, it could fall to roughly 700 million (approximately 23%) by 2050. This factor would be particularly problematic for China, which has long been a competitive labor market for manufacturing heavyweights like Apple and Microsoft. But moreover, a bulging elderly population amidst falling tax receipts would pose a challenge to government finances, especially given the comparably underdeveloped social safety net programs in China. Therefore, either taxes ought to be raised sharply or state pensions to old-age dependents would hit the skids – a spartan policy dilemma either way.

We can draw apt comparisons from Japan – the world’s third largest economy – which has notoriously suffered from a lopsided aging population and accompanying anemic economic growth since the asset bubble burst of the 1990s. I mean, China’s real estate market does look like a financial crisis just waiting to happen. But post-boom Japan has tried virtually every bizarre economic strategy – from negative interest rates to yield curve control – yet has failed to spark demand-led inflation. Strangely, however, China has sustained its bustling economy on prohibitive rates of investment rather than consumer demand, which has remained relatively lukewarm due to policymakers’ reluctance to pass the complete scope of economic growth to households. Nonetheless, a contracting labor force would perhaps accelerate the exodus of manufacturing from China unless the government finds alternatives to sustain China’s unrivaled productivity levels.

We could blame China’s ‘zero Covid’ policy for strangling economic growth. It is no surprise that China’s economy grew by a modest 3% in 2022, its slowest rate in nearly four decades, barring 2020. Intermittent lockdowns and pedantic mass testing regimes cast a pall over economic activities. And higher interest rates imposed by the Federal Reserve and other central banks have dampened global demand and diluted appetite for Chinese imports. According to government officials, year-on-year Chinese exports fell by 9.9% in December. While an economic turnaround is widely expected later this year, a falling working-age population; a skyward old-age dependency ratio; and the ongoing trade tussle with the United States could cost China many more decades to supersede the American edge. However, China has been an iridescent success story, an economic miracle of sorts. And therefore, if the Chinese Communist Party (CCP) could somehow prioritize economy over national security; social reforms over governmental control; and collaboration over confrontation, I reckon China can again defy the odds and achieve its dream.

Continue Reading

East Asia

Nepal-China Relations and Belt and Road Initiative

Published

on

Image source: xinhua

China appears to be more “functional” in Nepal recently. A new administration led by leader Pushpa Kamal Dahal has acted on the same pitch initially also. The Rasuwagadhi border crossing, which had been blocked for three years, has been reopened for two-way trade, and the much-anticipated Gyorong-Kathmandu train project’s final survey has also begun as of January 1, 2023. The second phase of the 10-lane ring road project from Kalanki to Chabhil is anticipated to start soon as well. All these accumulatively demonstrate the current nature of friendship between them and the profound Belt and Road Initiative is the key rostrum for the current complexion of the relationship between them. Hence, the trends are indicating a greater form of cooperation even in the regional domain as well.

Meanwhile, China and Nepal have inked a six-point agreement to strengthen bilateral collaboration and exchanges on governance, legislation, and supervisory practices, in line with Beijing’s Belt and Road Initiative (BRI). On September 12, 2022, in Kathmandu’s federal parliament building, Agni Prasad Sapkota, Speaker of the Parliament, and Li Zhanshu, Chairman of the Standing Committee of the Chinese National People’s Congress, signed the agreement. According to the agreement, the nations would exchange information about each other’s legislative, oversight, and governance activities. Five years after BRI’s founding, on May 12, 2017, Nepal formally joined the process. Nine projects – the upgrading of the Rasuwagadhi-Kathmandu road, the construction of the Kimathanka-Hile road, the construction of the road from Dipayal to the Chinese border, the Tokha-Bidur Road, the Galchhi-Rasuwagadhi-Kerung400kv transmission line, the Kerung-Kathmandu rail, the 762MW Tamor Hydroelectricity Project, the 426MW Phuket Karnali were on the to do list. However, more than any other nation, China invested US$188 million in Nepal during the 2020–21 fiscal year. During KP Sharma Oli’s visit to Beijing in 2016, Nepal and China also ratified a transit transport agreement for commerce with other parties.

However, amidst the current global tension and the changing rapport of international politics, China remains as a key investor in Nepal. Besides, the recent activities from the Nepal administration showed a shift in policy domain from the previous regime which in some cases was rigid to Chinese projects. Meanwhile, the BRI becomes more eminent in the strategic, political and economic domain of the status quo. Against such backdrop, the next sections will discuss current trends of the BRI in Nepal.

Nine Projects: Token of Continuation of the Initiative

Nepal put forward nine potential projects to be undertaken under the BRI at the beginning of 2019. These included setting up a technical institution in Nepal, building new highways, tunnels, and hydroelectricity dams, as well as conducting a feasibility assessment for a trans-Himalayan railway that would connect Jilong/Keyrung, a Chinese port of entry, with Kathmandu. This enhanced the significance of the project which will direct to more prosperous China- Nepal relations.

Nepal, the “Pillar”

Hou Yanqi, the Chinese ambassador to Nepal, stated in April 2022 that Nepal was one of the BRI’s most significant pillars and that projects were still moving forward despite the “speed of pragmatic collaboration” slowing down because of the coronavirus pandemic and Nepal’s changing political climate.

Transit Through China: Better Connectivity and Trade

Kathmandu protocol agreement with Beijing, Nepal will import and export goods from a third country through China through Tianjin, Shenzhen, Lianyungang and Zhanjiang seaports and land ports of Lanzhou, Lhasa and Shigatse. They will also get the facility of transporting goods through six dedicated transit points of the two countries. It will boost the trade for improved connectivity.

Extended Cooperation in Domains Except for BRI

In addition to the BRI projects, China is currently making significant investments in Nepal’s infrastructure, including ring road expansion, dry ports at the border crossings of Larcha and Syabrubesi, the establishment of China Study Centers, a new international airport in Pokhara, and optical fiber cable connectivity from Kathmandu to the Chinese border.

Energy Exploration: New Domain of Cooperation

China is also looking into the prospect of discovering gas and oil deposits in Nepal and is building a border river crossing at Hilsa, Humla. It will open a new domain of cooperation based on mutual interest.

Poverty Reduction and Generating Newer Income Sources

Currently, roughly six Chinese airlines offer regular flights to Nepal. Nepal has the fastest-growing Chinese tourist industry. Nepal granted China access to choose 16 Himalayan regions that border China to develop as part of a program to fight poverty.

Security: Bringing Peace

Joint military drills between China and Nepal are also a new development in security cooperation. It will bring peace in the region since the image of Nepal is very clean.

Increased Diplomatic Connectivity

The BRI appears to be one of the three priority pillars for the Chinese government’s organizing principles of foreign policy, along with the Global Development Initiatives and the Global Security Initiatives, in terms of developing successful international relations rather than just an economic endeavor. It will bring a fresh start in the diplomatic domain of both countries and the future prospects of ties in the diplomatic arena can be discussed robustly.

No More Landlockedness

Under BRI and the Trans-Himalayan Multi-dimensional Connectivity Network, which will transform Nepal from a landlocked country to a land-linked one, there are multiple road, sea, and corridor networks throughout the world. It will boost the relationship to a great extent while there will be a surge in the arena of export and import.

Regional Connectivity

The extension of the Qingzang railway from Tibet to Nepal and the border with India is among the most significant BRI projects. Three routes are being considered for this railway. The first would connect Shigatse to Kathmandu via Kerung and continue on to Pokhara and Lumbini before reaching the Indian border. The second would run from Shigatse to the Burang border and connect Humla and Darchula districts in Nepal with Pithoragdh, Uttarakhand, while the third would link Shigatse to the Yandong border of Sikkim, India.

As China and India have no trade disputes with one another, India would gain from this project as well after trading through this route. In comparison to other industrialized parts of the world, South Asia could see an increase in commerce and investment if this project is carried out on a win-win basis between China and Nepal.

Challenges

Additionally, loans are typically provided on commercial terms through the Silk Road Fund and the Asian Infrastructure Investment Bank (AIIB), both of which are led by China (SRF). Due to project site clearance delays and the nation’s political instability, along with its comparatively short repayment time, Nepal’s big projects have raised concerns that they may not get off the ground.

Besides, three primary issues with China are of particular concern to the Nepalese government. First, instead of commercial loans, the nation favors grants and lenient loans from China. Second, it wants the interest rate and repayment period to be comparable to those of multilateral funding organizations like the Asian Development Bank and the World Bank. Thirdly, it thinks that bid competitions ought to be allowed for the BRI projects. But the Chinese authorities are not responding on the same page.

The Inception of a Recommenced Cooperation

Pradeep Gawali, Foreign Minister in the KP Sharma Oli’s government, said that from the perspective of Nepal, the BRI projects were the way to be connected to the trans-Himalayan multipurpose connectivity network. Nepal had been able to select the nine projects included in the BRI with great success. However, Chinese authority said on December 26 that it looks forward to cooperating with the new government to advance projects under the ambitious Belt and Road Initiative, a day after the Maoist party chairman Pushpa Kamal Dahal alias Prachanda was named as Nepal’s new prime minister (BRI). China aims to develop initiatives under the Belt and Road collaboration, according to Mao Ning, the official spokesperson for the Chinese foreign ministry, who congratulated Prachanda on his appointment. Beijing claims that as a longtime ally and neighbor of Nepal, China cherishes Nepali relations very highly. China is prepared to collaborate with the new Nepalese administration to broaden and deepen friendly relations and cooperation on all fronts, pursue high-quality Belt and Road cooperation, strategic cooperative alliance marked by enduring friendship for growth and prosperity new impetus, and bring more benefits to peoples from both sides.

Hence, it is evident that China’s policy toward Nepal is generally stable and uncomplicated, and the two countries’ bilateral relations have been cordial and shaped by Nepal’s strategy of balancing the divergent impact of China and its southern neighbor. Through BRI projects, Nepal could gain better connectivity relations with its northern neighbors, but in order to do so, Nepal must enhance its negotiations with China.

Continue Reading

Publications

Latest

Middle East28 mins ago

Israelis and Palestinians do what they do best, but for the wrong reasons

Prime Minister Binyamin Netanyahu has put Israel’s closest allies and some of his key partners on the spot. So has...

Health & Wellness3 hours ago

Mushrooms emerge from the shadows in pesticide-free production push

By Ali Jones Mention La Rioja in northern Spain and most people will picture majestic sun-drenched vineyards nestled in the...

Middle East5 hours ago

Sisi’s visit to Armenia and Azerbaijan to join the Eurasian Union and BRICS

President El-Sisi’s visit to India, followed by Armenia and Azerbaijan, came as an affirmation from the Egyptian side and its...

Middle East6 hours ago

West sees Iran in a new way

The Wall Street Journal reported from Tehran that “a lethal crackdown and an ailing economy have quieted anti-government street demonstrations...

World News8 hours ago

Sergey Lavrov: ‘If you want peace, always be ready to defend yourself’

Russian Foreign Minister Sergey Lavrov gave an exclusive interview to Sputnik on Thursday, February 2. The conversation took place at...

World News9 hours ago

More Americans believe US provides ‘too much support’ to Ukraine

A growing portion of Americans think that the U.S. is giving too much support to Ukraine, as the Biden administration...

International Law11 hours ago

Will COPUOS five-year mission produce a new “international governance instrument” for outer space resources?

Introduction During its 2022 session, the Legal Subcommittee (LSC) of the United Nation’s Committee on the Peaceful Uses of Outer...

Trending