How does 2020 bode for China’s overseas investment? A Chinese lawyer’s take

Zhang Jingjing previews legal challenges awaiting a few controversial projects and welcomes a groundbreaking move by China’s Supreme Court

The last year of the 2010s was certainly eventful from the perspective of China’s Going Global strategy. Beijing held the 2nd Belt and Road Forum in early 2019 as both a celebration and a moment of reckoning, as China’s signature global development program was questioned by some host countries on its financial sustainability and from the international environmental community on its green merits. A correction of course (the publication of a Debt Sustainability Framework and the creation of a green coalition) was presented at the forum as a response to international concerns. But the rest of the year still saw major controversies erupt in different parts of the world. These surrounded, for example, a power plant in Kenya, a resource–infrastructure swap deal in Ghana, and a river dredging project deep in the Amazon forest.

Zhang Jingjing started practicing law in the late 1990s, helping Chinese pollution victims win cases against polluters. She is one of the few Chinese lawyers in the overseas investment scene who stands side by side with affected communities. Based out of the University of Maryland Law School, over the past few years her nascent legal initiative, the Transnational Environmental Accountability Project, has been involved in a number of legal battles centering on China-related overseas projects. In one of those cases, her amicus curiae brief, delivered for the first time by a Chinese environmental lawyer at an Ecuadorian court in Cuenca, played an unprecedented role in bringing about a historic court order to suspend mining activities at a gold mine operated by Chinese mining company Junefield.

Panda Paw Dragon Claw spoke with Zhang Jingjing recently to get her take on the year ahead. Her insights about the evolving legal landscape surrounding a few high-profile Chinese outbound investment cases and the Chinese Supreme Court’s new interest in Belt and Road cases are as refreshing as ever.

Zhang Jingjing Boke2
Zhang Jingjing inspecting a borehole in a village affected by bauxite mining in Boke, Guinea. (Image provided by Zhang Jingjing)

Panda Paw Dragon Claw (PPDC): In the past two years you have been deeply involved in a case in Guinea, West Africa, where a consortium of Singaporean and Chinese companies led one of the world’s largest bauxite mining operations, affecting the livelihood and environment of local communities. Could you share with us the latest developments with this case?

Zhang Jingjing(ZJJ): Chinese businesses have been very active in Guinea’s bauxite mining sector. SMB, the consortium that consists of Singapore’s Winning Shipping and two Chinese companies [Shandong Weiqiao Group and Yantai Port Group], entered Guinea in 2015 after their bauxite supply chain got cut by an export ban from Indonesia in 2014 due to heavy pollution caused by the business.

Since the operation began, SMB’s activities have been shrouded in controversies over impact on the environment and livelihood of local communities. The mining roads, full of heavy-duty vehicles transporting reddish bauxite ores, create large amounts of dust pollution. Open pit mining disrupts the local hydrology, dwindling precious drinking water resources for villages and polluting water from wells and boreholes that villagers depend on. Mining areas were never, or poorly, rehabilitated with recovered topsoil and vegetation. Those existing problems have barely been resolved yet. SMB, pressured by a major anti-mining riot in 2017, is still updating an Environmental and Social Impact Assessment (ESIA) of their existing mining sites. And despite this ongoing situation, big Chinese investments are pouring into the sector, with Chinalco and Henan International Mining all lining up to enter the scene on bauxite.

PPDC: What is on the horizon for SMB and other Chinese bauxite involvements in Guinea in 2020?

ZJJ: SMB is set to expand its operations this year with new mining sites, a planned aluminium refinery, and new railway construction. Land acquisition and other preparations are already underway. ESIAs for the new mining sites and railway construction are already being carried out but so far information about the expansions is scant.

This represents a major upgrade of its operation from a purely extractive nature – mining bauxite and then shipping ores all the way back to China – to a more value-added business of aluminum making. What’s important is the possible model for that business. Shandong Weiqiao Group, a member of the SMB consortium, is China’s largest aluminum maker and is known for its unique model of captive coal power plus aluminum electrolysis (an extremely power-intensive process). Captive power, self-generated electricity unconnected with the power grid and not subject to grid dispatching, helps keep costs low (a crucial component for the model) but is highly controversial in China for staying outside the environmental regulatory regime on the power sector. Weiqiao Group’s captive power plants in China are known for pollution problems. If this model is now exported to Guinea, we can certainly expect much more significant environmental impacts.

PPDC: Are there efforts to make SMB accountable for its practices in Guinea?

ZJJ: Local communities and civil society groups have been making complaints to the consortium about pollution. Unfortunately, such complaints have now been internalized as a kind of routine for the companies. SMB prepares small compensations to be doled out when complaints are made. It has also initiated Corporate Social Responsibility (CSR) projects that provide small scale livelihood support for affected local communities. But these cannot substitute legal obligations to minimize and mitigate negative impacts.

Guinean civil society is even more concerned after SMB recently won a bid to develop the controversial Samandou iron mine located in a key biodiversity hotspot area, given the consortium’s previous environmental records in the bauxite sector.

Guinea adopted a relatively modern Mining Code in 2011, incorporating some of the good practices from regulatory regimes of other African countries. It provides relatively strong protection to affected communities but is poorly implemented in reality. The country also has a basic Environment Act in place. However, Guinean NGOs and communities have never initiated any legal challenges to corporate ESIAs, nor have they had experience bringing environmental lawsuits to the court. With the massive inflow of Chinese investment into bauxite and iron mining, both Guinea’s governance capabilities and the capacity of its civil society to safeguard community interests are put to great test.

PPCFR5_web
A puddle frog on a large leaf at night in the Atewa Range Forest Reserve, Ghana. (Image: Alamy)

PPDC: In the past year, another bauxite mining project has garnered much more international attention. In exchange for Chinese supported infrastructure, Ghana plans to open up the precious Atewa forest for bauxite mining, using the ores as repayment for the US$2 billion deal. What is the prospect for this project in 2020?

ZJJ: It is almost certain that the project will encounter fierce opposition for its environmental and social impact. Ghanaian society is still very much traumatized by the havoc wreaked by Chinese small-scale gold miners (galamsey). Today you can still see the scarred landscape left by such illegal activities. Even though the individual Chinese miners were not part of any national strategy, they nevertheless shaped the Ghanaian impression of Chinese investment and would definitely overshadow the massive resource–infrastructure swap deal.

Unlike Guinea, Ghana’s governance capabilities are more advanced, and the country has an active civil society, including a great number of environmental lawyers. They are already mobilizing to challenge the deal through legal means.

PPDC: The company behind the Ghana deal, Sinohydro, is also currently at the center of another major infrastructure project in Peru. The Amazon Waterway project aims to dredge the Amazon river to facilitate transportation and commerce but has met with strong opposition from indigenous groups for its potential impact on fisheries and local culture. How is this case being handled in Peru?

ZJJ: The project’s Environmental Impact Assessment (EIA) is being challenged from multiple angles now by indigenous groups, which will likely affect the timetable of this major infrastructure program that Peru and Brazil have planned for over two decades. Even though reports are saying that approval of the EIA is imminent (as early as April this year), I have learned that local civil society will keep challenging it. Lawsuits might be on their way.

A few Latin American countries, including Peru, have enshrined indigenous rights in their constitutions, particularly the right to be informed and consulted before projects like this can go ahead [Free, Prior and Informed Consent, FPIC]. It is therefore unsurprising that local groups are now challenging the EIA for lack of prior consultation with indigenous people and have sent the case all the way to the Supreme Court in Lima.

None of the legal actions are directly targeting the Chinese company. Rather, their objective is to revert administrative approvals and decisions made by host country authorities. If those challenges are successful, they will invariably delay the progress of the project and bring losses to the developers. This is a prospect that any Chinese investors in the region should be aware of.

PPDC: You have been following a few other cases in 2019, including legal challenges to coal power projects around the world. What signals have you picked up from them?

ZJJ: A tidal wave of “climate litigation” is coming. Kenya’s Lamu power plant case, in which Chinese companies are deeply involved, is but one outstanding example of how a combination of lively civil society and an independent judiciary can become a formidable obstacle for environmentally questionable projects.

Globally, with climate change becoming an increasingly urgent concern, climate litigation is set to become more commonly used by communities and activists to challenge not only coal power but also government policies allowing such projects. In the past year, Indian farmers and fishermen have brought the International Finance Group (IFC) to court in the United States for funding a coal power plant in Gujarat. Bosnia-Herzegovina’s China-funded Tuzla 7 coal power plant is also bogged down by legal challenges.

Just a few weeks ago, the Dutch Supreme Court delivered a historic ruling ordering the government to cut greenhouse gas emissions 25% below 1990 levels by the end of 2020, after NGO Urgenda sued the Dutch government. Those developments around the world foreshadow the bumpy legal roads ahead if China continues funding and building coal power plants overseas.

PPDC: So far, those legal battles have all been fought in host countries. But people often wonder, can China’s own legal system be activated to make Chinese investment accountable overseas?

ZJJ: In transboundary cases, it is a commonly accepted principle to give host countries jurisdiction over lawsuits on environmental and social impacts. This is because their judiciary can more easily ascertain facts concerning damages and infringements on their native ground.

This doesn’t mean China’s regulatory regime has no role to play in injecting responsibility into its overseas investments. In fact, a host of policy items have been promulgated to steer outbound investment towards a more sustainable path. The 2017 Guidance on Promoting Green Belt and Road, published jointly by four ministries, calls on Chinese companies to abide by host country laws, global treaties and international high standards. But such policy items are often mere aspirational statements without binding force. The very few binding rules, such as the National Development and Reform Commission’s (NDRC) Measures on Outbound Investment, are low-level departmental rules with limited force. So China does need to install higher level outbound investment laws and regulations to introduce accountability to its companies going global.

What is really encouraging is that at the end of 2019, China’s Supreme People’s Court issued a groundbreaking opinion on how the judiciary system should support the Belt and Road Initiative, stating that China should “proactively contribute its judicial resources to global environmental governance”. More specifically, it calls on the Chinese judiciary to strengthen environmental public interest litigation and tort litigation to “stop environmental violation” and “enforce liability for damages”.

If these words are meant genuinely, the opinion in effect opens the doors of Chinese courts to environmental public interest litigation and tort cases on damages happening outside China’s borders, particularly along the Belt and Road. China’s judicial resources, and its experience with trying domestic environmental disputes, are now accessible by communities affected by Chinese investments in countries with underdeveloped environmental governance. This is certainly the best new year present I have received as a Chinese environmental lawyer and an offering that I am keen to activate in the coming year.

This interview has been co-published with China Dialogue

Following China’s footsteps from Andes to Amazon: advice from a Colombian journalist

Andres Bermudez Lievano, who has covered China for a Latin American audience from Beijing and Bogota, shares his views about how China reporting in the region can improve

China and Latin America exist largely in a commodity-centered relationship that is defined by a distinct close-distant paradox, bound together by increasing volumes of trade but separated by physical and psychological distance.

For Andres Bermudez Lievano, the relationship is both the cause and consequence of inadequate reporting about China’s involvement in the continent. As a veteran China reporter from Colombia, Andres has been following China’s footsteps from Beijing, where he ran a news service for Latin American publications, to Bogota, where he tracks Chinese companies and bird watchers to help readers make sense of a China presence that they hardly understand.

Besides being a reporter, Andres also spent two years working in the government office in charge of negotiating one of the world’s most historic peace deals, between the Colombian government and an armed rebellion group (FARC), that ended a half-century armed conflict. The experience equips him with particular insights into conflicts and how they should be covered by media. A great number of China-related stories in Latin America are conflict-filled, from communities resisting Chinese extractive industries in areas devastated by violence to countries caught in the crossfire of US-China trade disputes. These social and environmental conflicts often lend themselves to simplistic, dramatic presentations that Andres has a bone to pick.

Panda Paw Dragon Claw recently interviewed Andres on the side of a workshop in Yangon, Myanmar, another country grappling with conflicts complicated by a large inflow of Chinese interests. Andres shared his views on how to better tell stories about Chinese overseas footprint in Latin America and offered invaluable advice to peer reporters around the world who are trying to cover the expanding Chinese presence for their own readers and audiences.

Andres
Andres (right) with villagers of Caquetá, a conflict-stricken department of Amazonian Colombia where the activities of Chinese oil companies have stirred up controversies.

Panda Paw Dragon Claw (PPDC): Could you give us an overall picture of Chinese involvement in Latin America, particular in relation to the Belt and Road Initiative?

Andres Bermudez Lievano (A): Latin America has not had a historically significant relationship with China, beyond maybe one or two immigration booms more than a century ago and some ideological connection in the 1950/60s. It’s only since the early 2000s that the relationship started to warm up again due to China’s growing appetite for resources and commodities that Latin America could offer in large quantity.

Now everybody has to face the political and economic reality that China is already Latin America’s second largest economic partner, leading the third by a wide margin. And it has already become the number one partner for significant economies like Brazil, Chile and Peru. Despite the closer economic bond, you still have that simple understanding of China reduced to clichés, in government, academia, civil society and in media. This is made worse by the fact that there is almost no presence of Chinese actors on the ground, except for a couple of Confucius Institutes.

This is characteristic of a commodity-centered relationship which is transactional by nature. You don’t have a long-term China presence that people can relate to. Therefore, we have a big gap between close economic ties and true understanding.

BRI in LatAm

PPDC: How is this reality manifested in media coverage about the BRI and Chinese involvement in Latin America?

A: There are generally two prevalent frames adopted by media reports on China. One is the perception that China is a dangerous actor, that they are taking away everything, they are so strange, you never know what they are really here for.

The second frame is more of a fantasized China. One common argument among many businesspeople who want to do business with China from Colombia and wider Latin America is “there are so many millions of them, it’s obviously a good deal”. But when they come to China, they immediately hit the wall. They do not understand the market and the Chinese consumers. They have never figured out Chinese taste and what ticks the Chinese people. Our understanding of China does not go far beyond the fact that “it has many people”.

This results in a very simplistic coverage about China. It’s already not very often that media in Latin America cover China. Even when they do, they often get it wrong or they get it in a very black and white way. You have a lot of stories about social conflicts distilled into very simplistic narratives (e.g. small communities against monstrous Chinese corporate giants). You have a lot of reporting about trade numbers without even explaining what those numbers mean. When media report on “trade deficits with China,” for example, nobody bothers to explain why it exists or what goods are being traded both ways, leaving the impression that China is invading with cheap imports. However, deficit is not a problem in itself: it’s the nature of the traded goods that matters. Costa Rica manages to sell value-added products like computer microchips to China in large volume. And that tends to be an underreported story.

As the US relationship with China sours there is a new trending coverage, which is how our relationship with China can affect our ties with the US, which it shouldn’t. Unlike a marriage, you actually can have mature relationships with two different countries. Serious countries like Chile, Costa Rica and Peru would argue that they have successful and well-negotiated Free Trade Agreements (FTAs) with both the US and China. Why not?

PPDC: What is the consequence of such simplistic coverage of Chinese footprint?

A: The consequences are manifested on a conceptual level. First of all, we have no nuanced view of the socio-economic or environmental footprint of the Chinese presence. China’s involvement in the continent is complex and multi-dimensional. For example, I have reported on how wealthy Chinese bird watchers create opportunities for conservation efforts in Latin America. And yet a very respected conservation biologist that I know simply couldn’t wrap his mind around that idea as he has been so deeply influenced by the image –which is sometimes also true- of China as a biodiversity “bulldozer”.

When our analytical framework of China is entirely oriented towards commodities, we cannot understand China on a more complex level. We focus our attention on selling oil, soybean or beef to China and think little about value-added products or a more evolved relationship. Moreover, we tend not to see the impact behind the trade numbers. An increase of soybean exports can have a direct or indirect result of deforestation in Latin America. The interactions between those two factors are already complicated and usually there are more factors in play. But in a commodity-driven analysis these other factors do not come in.

Equally importantly is the pervasive inability to understand the internal complexity of China and its many players that are active in Latin America. Lately there has been a lot of discussion in Ecuador about problems with the Coca-Codo Sinclair hydroelectric project funded by China and built by a Chinese company. When cracks appeared in the structure soon after its completion, one major newspaper ran a story titled “Chinese company Harbin will weld cracks in dam”. They didn’t know that Harbin is a city in China, different to state-owned Harbin Electric International Company. This was a story about THE most important China-related project in Ecuador and they couldn’t get the company’s name right.

This is not restricted to Ecuadorian media. We confuse the China actors all the time. Very few major economies have such an intertwined web of companies and government. To understand the entire State-owned Enterprise (SOE) system is not easy. But without that we easily confuse the Chinese government, SOEs and Chinese private companies. And that affects how reporters cover a situation. Contrary to what many believe, Chinese private companies are sometimes more obscure than an SOE when they operate abroad. And they face LESS public scrutiny. A Chinese SOE blundering abroad is a much larger story as they are better known economic players back home and dispense with what’s considered publicly-owned funds. Knowledge like this will help a reporter gain a nuanced understanding of the vulnerability and strength of key Chinese players in their stories.

PPDC: What does your experience with researching and covering conflicts tell you about reporting on Chinese projects in Latin America?

A: You know conflict is one of the areas that I cover the most, so I tend to reflect more on this. Social conflict or socio-environmental conflict caused by infrastructure and extractive projects is an area we are not reporting properly. Seeing the conflicts after they erupt is already a bit too late. But at least we are seeing them. What reporters really need to do is to lift the rug and look underneath.

There are fundamental social fabrics to the conflicts in our societies that aren’t necessarily created by China, but tend to emerge when Chinese-invested projects go wrong. For instance, respecting the rights of ethnic minority groups is an area we are not doing very well. Non-compliance with such rights, especially the right to free prior informed consent (FPIC), is a major issue. Colombia struggled with it. But when I went to Ecuador, I found that many projects literally never complied with it. You can see how in a series of Latin American countries they end up going around rights that are constitutionally protected. Chinese companies can exacerbate this existing situation in our societies because this is part of China’s reality: China has a complicated relationship with its own ethnic minorities and this probably make Chinese companies less sensitive and less likely to understand the importance of compliance.

Another common problem underneath those conflicts is the scarce availability of public records in many Latin American countries. Everything from contracts, relocation plans to environmental impact assessments (EIAs) are very difficult to access, leading to a strong sense of secrecy and mistrust among affected communities. And even when they are available, we as journalists and civil society have another challenge of not having the skills to read many of these documents properly. For example, in an infrastructure deal between China and a recipient country, is it really better for that country to have more equity share in that project than letting China have more? What is the risk-ownership ratio that will bring the most benefit to the country? These are not issues we can properly interpret for our readers unless we have access to the files and can digest them properly.

Another reality that is fundamental to understanding many confrontations surrounding projects is the sophistication of community resistance. Across Latin America, communities have understood that it’s better for them to fight cases legally, as we have relatively serious legal systems, with strong constitutions and well-respected constitutional or supreme courts. Communities are currently winning major cases in courtrooms. This has caught many governments and corporates unprepared. Communities are more legally empowered than before and sharing their legal strategies with peers.

PPDC: On a micro level, what do you look for in a conflict situation? What exactly lies “underneath the rug”?

A: Relationships among different actors involved in a controversial project are entangled. More often than not, it is not the simple equation of A vs. B. Sometimes projects are approved on a national level, but even local governments are kept in the dark. So in a conflict seemingly between a company and a town, there might be a hidden central government and a sympathetic local government involved, let alone a set of secondary players: public “ombudsman” institutions, private security companies, military or police forces, legal and environmental NGOs, indigenous organizations…

Plus, people don’t usually understand that conflict is a process. They don’t just happen in one specific moment but over a long period of time. Part of doing good reporting on conflicts is to understand how they really began and how they play out over time. If you look carefully, you will find that there are usually a lot of myths around the origin of a conflict. All of this helps us understand how tensions escalated and what are the future possible scenarios. 

A good piece of journalism about a social conflict or an environmental conflict should be able to show all the sides involved, the different things at stake, and whether there is space for real dialogue. Actors involved in a tense conflict situation often have a “race-horse syndrome”, limited by a narrow tunnel vision. Our reporting is supposed to render a more complete picture of the problem, and it can potentially, one would wish, enable actors to better reflect on how to deactivate a social crisis.

PPDC: What would be your advice to peer reporters who are keen to shed light on some of the same dynamics around Chinese projects in their own regions?

A: For stories specifically related to Chinese interests, it is important to incorporate the Chinese actors’ point of view.

And in this regard we are oftentimes guilty of not making enough of an effort to contact them. Even though we know they are not likely to answer or they have to refer the request to headquarters in China, it’s important we continue seeking answers from them. If anything, doing so builds pressure on them. And ultimately, the Chinese side need to realize that it does them more harm to not have their side of the story reflected in the coverage.

We need to enhance skills for reporters to understand key documents such as project contracts and loan deals. And we should also be able to fact-check claims from all sides, including the affected communities themselves. I have encountered communities instrumentalized by NGOs and radical groups that shout slogans like “they take our water!” without any specific facts that proves it. Often groups in conflict will emphasize more extreme positions (thinking these are more convincing), when in fact the more interesting nuggets of information emerge when you get past these simplistic and crowd-pleasing soundbites.  

And finally, we reporters need to follow up on projects over time, understanding them as evolving processes. There is a large Chinese mining company in Peru that carried out a huge, ambitious and well-publicized relocation of a local community which was considered a successful case in the industry. For many that was the end of social conflicts and of the journalistic story. At the exact sixth anniversary of the relocation plan we teamed up with a Peruvian outlet to revisit the place. What the reporter discovered on the ground was completely unexpected: instead of a poster child relocation case, it had developed into two different conflict situations. On the one hand, some people still refused to relocate, which meant the original conflict was still there. On the other side, the new town turned out to be not functional. It looked beautiful on photos, but shop owners did not have customers and their living stand had diminished, meaning a new conflict had emerged.

In infrastructure projects we tend to only follow up when something bad happens. “The Chinese built this road or bridge which now has a crack”, we realize. But few journalists come back to check if the bridge is actually being used or if the dam really provides as much energy as the developer says. Going back to check the utility of the infrastructure project is as important as checking the problems it is having.