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The Janus-faced foreign investors in China
Greenpeace says investors in China must act responsibly before we all pay the price.
Being the biggest emerging market in the world it is little surprise that another year of double-digit economic growth is being reported in China. New figures show China’s gross domestic product (GDP) rose to 11.9% in the year to the second quarter of 2007, a record high since the mid-1990s.
Inflation jumped to 4.4% in June 2007, up from 3.4% in May. Underpinning this dramatic growth is the country’s trade surplus. Being the world’s biggest ‘factory’ and one of its largest export countries, China has provided cheap goods to US and European consumers in exchange for a foreign reserve over one trillion US dollars. The result, however, has also been a disastrous mis-pricing of the environmental cost. The export trade has brought China terrible environmental destruction and social degradation. The latest testimony is Chinese carbon dioxide emissions. A study by the Netherlands Environmental Assessment Agency, showed China produced 6,200m tonnes of carbon dioxide pollution in 2006, eclipsing the US, which emitted 5,800m tonnes over the year. The report showed that developed countries had exported a significant portion of their manufacturing competency, and related pollution, to China. A recent World Bank report found that 16 of the world’s 20 most polluted cities were in China.
A draft version of another World Bank report put the total economic cost of cleaning up air and water pollution at around $100 billion a year, or 5.8% of China’s GDP.
China’s double-digit growth since 1990 has been abetted by huge levels of foreign investment. According to the United Nations Conference on Trade and Development, foreign direct investment into China jumped by $60billion in 2006 alone. Despite warnings by economists of an overheating economy, investors are still seeking opportunities. The risk is that they undermine social and environmental progress in their quest for profit.
Statistics by the Chinese State Environment Protection Agency (SEPA) signal a worsening environment. To curb widespread pollution, the agency is imposing sanctions on lax provincial governments and polluting industries. SEPA has said it will also resort to monetary tools such as introducing “green loans” and other economic incentives to boost environmental and social awareness. Policies on green tax, insurance and securities, under discussion with the China Banking Regulatory Commission, are in the pipeline. In addition, SEPA and the People’s Bank of China have embarked on the development of a credit database to log the environmental records of companies operating in China.
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