Chinese Export Credits and International Environmental Impacts

(ECA Watch, Paris, 30 Oct. 2006) OECD ECAs have frequently pointed to lax Chinese export credit standards as a reason to not tighten their own lending criteria in order to remain competitive. Increased attention is being paid to China's external environmental impact as well as to serious environmental problems in China.

Paul Wolfowitz, president of the World Bank, has sharply criticised China and its banks for ignoring human rights and environmental standards when lending to developing countries in Africa. Mr Wolfowitz said big Chinese banks ignored the so-called “Equator Principles”, a voluntary code of conduct pledging that projects financed by private bank lending met certain social and environmental standards.

High level representatives of several OECD ECAs have visited China recently 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.

As noted in our July 2006 What's New, the U.S. Export Import Bank has begun to include analyses of emerging market ECAs, such as China's in its annual competitiveness reports.

China's Exim Bank has very quickly become one of the most important financiers of dams internationally. The controversial Three Gorges Dam has just come onstream and China's support for the Merowe Dam in Sudan has caused concern amongst international environmental and human rights groups.

Chatham House, a UK organization which promotes debate and research on political, business, security and other key issues in the international arena, recently published a report on "Environmental Civil Society and Governance in China". Within China, civil society organizations concerned with the environment are growing rapidly, with approaches both "radical" and "timid" or "professional" and "amateurish". Ideological and political factors also complicate the role of CSOs in China, with sympathetic officials and media receiving both support and criticisms from Party officials in their relations with CSOs.

Further complicating this issue are the micro and macro economics of Chinese banks, foreign exchange flows and significant trade imbalances, as well as China's search for raw materials to maintain it's phenomenal economic growth.

The question of China's use of export credit in its development plans and the environmental implications and impacts of projects supported by Chinese ECAs is an important one. A much more thorough study of who is doing what in the field of China's international economy and its environmental impacts is overdue if external actors are to support environment improvements in China, which can only come from within.