Chinese ECAs and environmental impacts

(ECA Watch, Paris, 19 December 2006) China continues to attract considerable attention in export credit circles. OECD ECAs regularly voice a concern that they are faced with the "disciplines" of the Arrangement, the Common Approaches and the Action Statement on Bribery, and feel increasingly less able to compete with Chinese ECAs (among others), whose costs they say are lower and procedures more flexible because they do not subscribe to these OECD negotiated policies.

High level representatives of several OECD ECAs have visited China this year to develop relations with Chinese ECAs Ex-Im Bank and Sinosure, with a view to both convince them to institute higher standards and thus level the ECA playing field, but also to determine the potential for joint ventures in support of OECD based corporations exporting from China. The latter is exemplified by a just announced US / China ExIm Bank joint credit agreement.

In this light, ECA Watch has learned that some OECD ECAs are reviewing their strategic national objectives to focus on resource acquisition, energy security, competitiveness and international financial stability, in addition to their traditional mandate of national employment generation through export promotion. This trend can be seen in discussions about new ECA "products" to support national "interests", i.e. corporations, in their exports from non-national production. These developments in OECD ECAs are interesting since they are very similar to activities which Western financial leaders have criticized with respect to China.

Some OECD ECAs are under pressure to support their national corporations' exports from China for example, particularly since a high percentage of Chinese exports consist of low wage and high environmental cost manufactured assembly of imported components back to OECD consumers. A recent Chinese study notes that "China is the major venue of resource consumption and pollution as well as the main victim in the current international economic and trade pattern.... For example, it has been alleged that China poses a threat to tropical forests by importing timber from Southeast Asian countries. But 70 per cent of the timber is made into furniture and exported to the United States and European Union countries." [Note the full text of this study is available online at the CCICED site.]

China both benefits and suffers from offshore MNC production in and exports from China. There are complex patterns and relationships emerging in this pattern of globalization, in which ECA finance is an important, sometimes key actor. The relationships between internal environmental protection in China, the development models pursued by OECD ECAs, China and other major Western financial institutions, the investments and technologies favoured or discouraged in this complex process of globalization, are evolving rapidly, sometimes without enough time or opportunity or access to information to study their implications and potential impacts.

Despite the scepticism of OECD ECAs, who themselves are having difficulty agreeing on higher environmental standards, China's Ex Im Bank has expressed a commitment to protection of the environment balanced with economic development. ECA Watch looks forward to greater dialogue and sharing with all parties on these issues in the coming year.