China: can the ‘factory of the world’ clean up its act?

China’s role as “the factory of the world” has led to enormous environmental degradation within the country. Now it's at a crossroads. Will it seek to address the consequences of its growing consumption and production, or continue with business as usual?

Ships lay stranded in a dry reservoir in China.

This so-called ‘factory’ has fuelled the country’s growth; China’s GDP was around 7-8% in 2011. The world benefits, not only from Chinese products, but also from the water and energy consumed in the country to create them. Between 16 and 25% of China’s carbon dioxide emissions are generated in the production of goods for export, for example.

China’s environmental record to date, and its future, were discussed in a session at Fair Ideas, IIED’s recent conference in Rio, led by Jonathan Watts, the Guardian’s Asia Environment Correspondent.

The importance of transparency

Ma Jun – the renowned Chinese environmentalist and director of the Institute of Public and Environmental Affairs (IPE) – opened the discussion. He presented the pollution maps being developed at IPE which allow anyone in the world to discover the water and air quality of a given area in China, and to find sources of pollution. IPE also lists the environmental records of companies and brands in China. These tools are designed to promote “widespread participation [by consumers and civil society] in environmental governance.”

“In the global economy, there is a disconnect between the site of production and site of consumption,” said Ma Jun. “We believe we can use information to connect the dots.”  He argued that a lack of motivation is a major barrier to the implementation and enforcement of effective environmental policy in China, and that consumer demands will be an important force to drive change.

Consumers can act as powerful agents of change; having access to information can lead to consumers applying pressure on businesses to behave differently. But Ma Jun recognised the challenges of applying these transparency and reporting tools to Chinese State-Owned Enterprises (SOEs), and the unique challenges faced in China because of its top-down governance.

Growing trade between China and Brazil

China’s growing demand for natural resources – both for its own consumption and for re-export – is also having an impact in other parts of the world. Brazil is facing increasing sustainable development challenges due to its growing trade with China, said John Wilkinson, an Agricultural Development Professor at the Universidad Federal do Rio de Janeiro.

Brazil might export its cotton to China, for example, and then import its cotton shirts from China.

“China is the principle destiny for Brazilian exports. It is also a major recipient country from Chinese exports. Brazil is increasingly concentrating its exports and focussing its in-country efforts on primary products with only a first level of processing,” he said. This has led to a “downgrading” for the Brazilian economy.

Feeding the enormous Chinese demand for raw materials and products has also led to environmental degradation in Brazil. Wilkinson discussed the huge environmental and social changes, such as deforestation, taking place to clear land to grow soya to meet growing Chinese demand. In fact, Brazil is now on the verge of supplanting the United States as the world's leading exporter of soybeans. And it’s been predicted that 70 - 90%  of Brazilian soy will be exported to China by 2020 – mainly from the state of Mato Grosso.

North-south to south-south trade and investment

There are clearly challenges associated with the growing scale of South-South trade and investment. Focussing efforts and attention on these flows, rather than the more traditional north-south flows, will be vital to make progress towards sustainable development.

This was a subject Bill Vorley, a Principal Researcher at IIED, went on to discuss. He asked to what degree ‘sustainability’ standards and codes are being applied to South-South trade and investment, and questioned whether the tools – like certification – currently being used for North-South trade are appropriate for, and seen as legitimate by, southern players.

Vorley presented some preliminary findings, which show that national Chinese codes and standards are growing in relevance and use like ChinaGAP, China’s “green banking guidelines,” and its timber certification scheme, the Chinese National Forest Certification (CNFC) programme to be introduced in state-owned forests in China by 2015.

Some of these standards are also ‘harmonised’ with well-known international standards, such as the ChinaGAP, which is equivalent to GLOBAL GAP, a set of voluntary standards for the certification of agricultural products around the world. This means that a cucumber that is ChinaGAP certified can also be sold into markets that require GLOBAL GAP certification.

Indeed, the Chinese government’s “going global” strategy explicitly recognises the importance of meeting international standards. Sustainability reporting is also growing in China. At least 60 major Chinese companies now use the international Global Reporting Initiative guidelines.

While these standards may be applied to Chinese domestic production to what extent will they, or equivalent standards, be applied to imports, asked John Wilkinson, so that other overseas companies are meeting the same standards?

It’s not just private enterprises that need further scrutiny. Chinese state-owned enterprises (SOEs) are big investors in natural resource extraction, such as timber, minerals and agribusiness in Latin America. In 2010, 93% of Chinese investment in Brazil was from Chinese Central State Owned Enterprises.

These SOEs don’t face the same pressures for accountability as private enterprises who have shareholders and investors asking questions about how and where they’re investing and are often not subjected to the same national and international standards developed for private companies and their investors. Vorley stressed the importance of understanding the dominant role these SOEs are playing.

South-south trade should aim to include the smallest players. Any standards that are developed in China and for South-South trade should be developed carefully so they don’t inadvertently act as a market barrier and exclude small-and medium-sized enterprises and small-scale farmers.  

As Ma Jun has shown, transparency and information will be key to applying pressure on businesses to adopt more environmentally sustainable practises. And NGOs and research institutes have a vital role to play in improving people’s access to information. “At least now when the government makes a decision that affects the people, they now have the right to know and engage”, said Ma Jun. “We are moving forward.”

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