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Sustainable Development of Chinese Enterprises Overseas
By admin October 14, 2016

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According to the Organization for Economic Cooperation and Development (OECD) official definition, Foreign Direct Investment (FDI) is known as a “cross-border investment by a resident in one economy with the objective of obtaining a lasting interest in an enterprise resident in another economy.” Ongoing debates surrounding the impacts of FDI on sustainable development, as they pertain to developing countries, have long been a concern, especially when environmental and social standards are lowered to attract larger FDI flow.

 

In 2015, China became a net exporter of capital, as its outbound direct investment (ODI) exceeded inbound FDI for the first time. With an 18 percent increase in 2015, the total flow of ODI reached USD $145.7 billion, compared to a total of USD $135.6 billion in FDI. As China’s ODI flow displays strong and continuous growth in recent years, the Chinese enterprises overseas have gained more attention from the world, in terms of both their own performances and their roles in the socio-economic and sustainable development in host countries.

 

Released jointly by the UNDP in China, the Chinese Academy of International Trade and Economic Cooperation (CAITEC), and the Research Center of the State-owned Assets Supervision and Administration Commissions (SASAC), the 2015 Report on the Sustainable Development of Chinese Enterprises Overseas shows that “going global” Chinese enterprises have become a contributing part of the balanced social-economic development in host countries to some extent, which has also honored their commitments to sustainable development. However, challenges come with opportunities given the fact that their capacity and level of sustainable development remain to be enhanced.

 

A recent literature review on the sustainability impacts of Chinese ODI published by the IISD also finds that “Chinese companies operating overseas may ignore social and environmental impacts due to competitiveness and profitability.” Particularly, investments in sectors such as construction, agricultural and mining have raised certain social and environmental concerns. For example, in 2011 Myanmar’s government suspended the controversial hydroelectric project financed and led by a state-owned Chinese company due to severe public pressure, mainly the social and environmental concerns about biodiversity conservation and migrant resettlement among local communities.

 

To address the broad domestic and international concerns, governmental guidance has proven to be crucial, according to the 2015 report.  Many enterprises have increased awareness of sustainability as a result of a series of policies and guidelines from the Chinese government to help those enterprises integrate into local communities. In 2013, the Ministry of Commerce and Ministry of Environmental Protection jointly released the “Guidelines on Environmental Protection in Overseas Investment and Cooperation,” with a specific focus on environmental impacts. From the companies’ perspective, political and regulatory environments and labor issues are also considered as their highest operational risks.

 

Just as the Great Wall was not built in a day, Chinese ODI expansion will require continuous, responsive and sustainable efforts from Chinese enterprise overseas, to ultimately achieve the win-win outcomes for both China and those host countries.

 

For more information:

 

China ODI surpassed FDI for the first time in 2015

 

Sustainability Impacts of Chinese Outward Direct Investment: A review of the literature

 

UNDP: Engaging with Chinese Companies for Sustainable Development Overseas

 

Environmental and Social Impacts of Chinese Investment Overseas

 

Myanmar Backs Down, Suspending Dam Project

 

Guidelines on Environmental Protection in Overseas Investment and Cooperation


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