Chinese Companies Moving into the World Market… Responsibly?

Activists protesting against Chinese-backed Myitsone dam in Myanmar in 2011.

Memo #228

By Cristelle Maurin and Pichamon Yeophantong

-cristelle.maurin [at] gmail.com  and pichamon.yeophantong [at] univ.ox.ac.uk

Two decades after it began opening up to the world, China devised the “Going Out” strategy in the late 1990s to encourage Chinese companies to operate on a global scale. China’s outbound direct investment (ODI) has surged, reaching a staggering total of US$68 billion in 2010—over five percent of global FDI flows. Chinese ODI has targeted all sectors of the world economy, with a marked presence in the resource and infrastructure sectors, and in developing regions like Africa and Southeast Asia where bilateral and multilateral partnerships with the People’s Republic are deepening.

After only a decade of participation in the global economy, Chinese companies are now confronted with an evolving set of international norms demanding greater corporate responsibility. This is a hard test for Chinese firms considering their previous isolation from the international system. Pressure has also been growing within the PRC’s own political institutions, as the Chinese leadership becomes more conscious of the detrimental effects that poor corporate behaviour can have on investment performance as well as state interests. As Cheng Siwei, then vice-chairman of the National People’s Congress Standing Committee, noted in 2007, “Even in developing countries, foreign companies that turn a blind eye to their social responsibilities will be kicked out of the market”.

China’s positive stance towards international best practices has become evident in the policy approach of the Chinese government. Among the most notable initiatives are the “Guidelines for Environmental Protection in Foreign Investment and Cooperation”, released by the Ministry of Commerce and the Ministry of Environmental Protection in February 2013 and based on recommendations by the Global Environmental Institute, a prominent Chinese NGO. Reaffirming China’s acceptance of international standards on corporate social and environmental responsibility, these Guidelines provide new leverage for civil society organizations around the world to hold Chinese enterprises accountable for their conduct overseas.

Signalling a policy shift within the Chinese domestic political arena, these developments are equally significant for what they say about broader global trends on corporate social responsibility. Internal change within China reflects growing pressure in international investment to integrate sustainable development objectives and balance the rights and obligations of states and investors.

Activists protesting against Chinese-backed Myitsone dam in Myanmar in 2011.

Cristelle Maurin is an Associate at the Centre for Chinese Studies, University of Stellenbosch, South Africa.

Pichamon Yeophantong is an Oxford-Princeton Global Leaders Fellow based in the Global Economic Governance Programme, University College, Oxford.

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Links:

‘Going Global Responsibly? China’s Strategies Towards “Sustainable” Overseas Investment’, Pacific Affairs 86, no. 2, June 2913, By Cristelle Maurin and Pichamon Yeophantong.

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