There is growing evidence that China is now encouraging its companies as they invest in Africa and elsewhere to follow better environmental practices.
In 2013, China’s ministries of commerce and environmental protection issued voluntary guidelines for the first time 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. But if companies choose to ignore the guidelines, there is no penalty.
Chinese companies most reluctant to improve their environmental practices are small private ones and medium-sized ones affiliated with Chinese provincial and municipal administrations.
Chinese enterprises appear to be 15 to 20 years behind their Western counterparts when it comes to the adoption of modern social and environmental approaches to their outward foreign direct investment.
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. Most of this activity falls, however, in the category of illegal trade and not foreign direct investment.
There is a new concern that China will address its domestic industrial pollution by relocating some of its highest polluting facilities such as steel, cement, and tanneries to places like Africa.
In 2014, Hebei Iron and Steel announced that it is building a plant in South Africa capable of making 5 million tons annually. This is good for South African jobs, but potentially bad for the environment.
China has become a major investor in the leather industry in Ethiopia and owns numerous tanneries, which are well known for their pollution potential. Some of their practices have been criticized. Of course, Western companies also increasingly export high pollution manufacturing activities.
African environmental law and practice, to the extent you can generalize about 54 different countries, leave much to be desired. In most African countries, the environmental laws and standards are much lower than accepted international norms.
When evaluating the impact of Chinese foreign direct investment on the environment in Africa, it is important to put it in the context of global FDI entering Africa.
China provides a relatively modest amount of the global FDI that has gone to Africa so far. According to Chinese official figures, the cumulative FDI figure at the end of 2012 was just over $21 billion. The actual amount may be twice that figure. By comparison, however, at the end of 2012, American companies had cumulative FDI in Africa of more than $61 billion.
Like most global FDI in Africa, Chinese FDI is concentrated in sectors of the economy that are especially vulnerable to environmental concerns such as energy, mining, fishing, and forestry. Chinese companies have invested in mines that are sometimes located in ecologically fragile areas where there is a higher risk of environmental degradation. They also often generate greenhouse gases, solid and liquid waste, including hazardous products such as cyanide and mercury.
Chinese fishing vessels have been criticized for worsening food insecurity among Africans because they catch small species that are the main source of food and income for small-scale African fishermen.
China is the largest importer of Africa’s tropical wood. While much of this activity constitutes only trade, some of it involves FDI by Chinese logging and timber trading companies. Chinese companies have a tendency to violate local forestry laws together with African counterparts. 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 government of China is sensitive to criticism of its companies in the forestry sector. 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.