Lessons from my three years engaging with China’s hydropower giants

A first-person account of how China’s hydropower giants engage with civil society groups when operating overseas

By Stephanie Jensen-Cormier

PPDC-Hydro2
Flooded temples and homes, Lower Sesan 2 Hydropower Project in Cambodia, August 2018, International Rivers

Global hydropower is a big industry. It currently supplies around 16% of global electricity and, though capacity installation rates have remained steady since 2008, is seeing a huge rise in investments. In 2017 the amount of money committed to hydropower projects doubled from the previous year. Chinese hydropower companies hold by far the lion’s share of this market, up to 70% according to the People’s Daily.

Increasingly packaging their projects under the “Belt and Road Initiative”, China’s hydropower companies tend to speak of their overseas projects in terms of poverty reduction, improving livelihoods, protecting the environment, and encouraging development. The negative effects of large scale hydro projects have been broadly documented, however. To take just one example, dams have displaced over 80 million people worldwide and are estimated to have negatively affected 472 million people.

With evidence stacking up against their claims to bring green development to communities, it is important to assess and judge just how serious China’s hydropower companies are about their words. One lens through which to judge this is companies’ engagement with civil society, who play an indispensable role in increasing companies’ accountability and warning about negative environmental and social impacts which the company may otherwise ignore.

During my three years working for International Rivers in China I had the opportunity to engage with some of these companies on their overseas projects. I’ve seen companies take steps towards greater openness to engage, understand and learn about the environmental and social concerns surrounding their projects. This has even led to tangible results in some cases. On the whole, however, my experiences showed that there is a long way to go before China’s hydro giants are ready to take that extra leap away from their traditional operating models and towards one which is more transparent, accountable and open to engagement. This blog outlines some of my key observations from interactions with Chinese hydropower companies and thoughts about how such corporate – civil society engagement may progress in the coming years.

From increased budgets to limited engagement

Some companies have tried to improve their domestic and overseas operations by increasing the size of project teams responsible for environmental protection and conservation, increasing budgets to compensate resettled and affected communities and environmental management and biodiversity offsets. These actions can provide an important step in internalizing costs that are otherwise externalized onto local people and the environment. However, in order to avoid such endeavors from ‘green-washing’ harmful projects, companies need to prioritize efforts to meaningfully include communities and NGOs in discussions, especially in the planning and design stages.

The 1,075 MW Nam Theun 2 dam in Laos demonstrates the blind spots of simply throwing resources at the problem. Beginning operation in 2010, the dam was heralded by the World Bank as a way of ‘doing a dam better’, due largely to the amount of money allocated to resettlement (USD 16 million) and conservation (USD1 million annual conservation fund) out of USD 1.45 billion total budget. Nonetheless, reports published from 2010 through to today by the Independent Panel of Experts established by the World Bank and project proponents demonstrate that the project’s intention for genuine benefit-sharing failed and that outcomes had failed to ensure indigenous peoples’ rights, negatively impacted the livelihoods of displaced communities, damaged fisheries, and precipitated the degradation of forests and wildlife (Shoemaker, International Rivers).

What the Nam Theun 2 dam case shows is that there is a pressing need for hydropower companies to engage in frank discussions with civil society organizations and NGOs, often squeezed by local governments for speaking against their priorities,

Since 2009 PowerChina, which owns over 50% of the global market share for hydropower, has made efforts to communicate with International Rivers. The engagement has included dialogue over the Nam Ou hydropower cascade in Laos. Consisting of a seven dam cascade, the Nam Ou cascade is the first time a Chinese company has obtained rights to develop an entire river basin outside of China. Its location on a major tributary of the Mekong is of significant concern, as are limitations in the project consultations with affected communities and its projected impact on a large number of fish and other riverine species.

Over several years, PowerChina Resources and the Nam Ou River Basin Hydropower Co. Ltd (in which PowerChina Resources owns 85%) hosted International Rivers staff in meetings at the Nam Ou Hydropower Project head office in Luang Prabang and in site visits to the Nam Ou cascade. The company provided access to high level and relevant management personnel, documents related to the project and prepared presentations with updates on the project status. Company representatives endeavored to be welcoming, constructive and informative. These were all positive signs, but limitations remained in terms of the information shared, including non-disclosure of key project documents and impact assessments. This constrained the substantive dialogue on the social and environmental performance of the cascade that we were aiming for.

Nonetheless, the company have been open to receiving feedback and have indicated that they would like to have training sessions on some of the aspects in which their project could be improved to ensure better outcomes for the health of the river system and well-being of affected communities.

Nam Ou 7 construction site, Nov 2017, b
Part of the construction site at Nam Ou 7, Lao PDR, November 2017, International Rivers

Mismatched motivations

In 2015 International Rivers published a scorecard report on Chinese overseas hydropower companies. Ranking last out of seven companies, Huaneng Lancang River Hydropower Inc. (Huaneng Lancang), a subsidiary of energy monolith China Huaneng Group, used the moment to reach out to International Rivers, dropping an earlier unwillingness to interact with the organization over the Lower Sesan 2 dam in Cambodia.

In 2015 and 2016, International Rivers participated in a series of meetings with the Huaneng Lancang. Several executives, including the company Chairman, travelled from Kunming to Beijing on short notice in order to attempt to rectify the poor review of their company and project. The Chairman (who has since retired) even participated in exchanges with NGOs during the ‘2015 Greater Mekong Forum on Water, Food and Energy’ held in Phnom Penh.

The company’s willingness to meet and exchange with NGOs was unprecedented for them and a step towards greater transparency. But parallel to these efforts, the Lower Sesan 2 project continued to face community resistance and was marred by negative attention concerning the project’s extensive environmental and social impacts, involuntary displacement of indigenous peoples, and lack of adequate consultation with affected communities.

Huaneng Lancang were keen to use their unprecedented engagement with International Rivers to urge us to modify the report ranking, which would cast the company and the Lower Sesan 2 project in a better light. We did not revise the report, however, and the company has since declined to meet with International Rivers. From 2017 Huaneng Lancang deprioritized communication and delegated junior employees with responding to us.

From the three year experience of our interactions with Huaneng Lancang it was apparent that there was a significant gulf between the two sides’ motivations for engagement. While International Rivers were keen to use the opportunity to engage the company on issues such as benefit sharing, comprehensive impact assessments and community engagement, Huaneng Lancang appeared to be seeking a quick fix, namely, changing their ranking in the scorecard report.

Since our interactions with the company were downgraded to junior staff, numerous reports, including a statement in 2018 by the UN Special Rapporteur on Human Rights in Cambodia, documented the project’s violations of the rights of communities. China Huaneng Group was expelled from the UN Global Compact in September 2018 for “failure to communicate progress.”

Hiding behind contract types

There are two main contract types for hydropower projects. In Build Operate and Transfer (BOT) arrangements, companies assume the liability for environmental and social aspects of the project; they finance, design and build in exchange for operating rights, typically 20-30 years. Engineering Procurement Construction (EPC) contracts have less liabilities. In my interactions and meetings, Chinese companies with EPC contracts tended to deflect the responsibilities for environmental and social impact assessments and compliance with local and international laws to clients – usually the host country government. Under an EPC contract, the company designs, builds and delivers the asset in an operational state. The client (not the company) is responsible for the financing, preliminary studies (including environmental, social and cumulative impact assessments) and legal requirements. Companies building EPC projects therefore have convenient excuses for why they do not ensure that proper due diligence is conducted. When companies with EPC contracts do implement environmental protection measures or provide compensation to resettled communities, no matter how insufficient these are, they claim to be going beyond their contract obligations.

Hiding behind contract types can mean that companies do not strive to develop better policies, mechanisms and practice, related to due diligence, environmental impact mitigation and monitoring or benefit-sharing with local populations.

This creates reputational risks for companies. For example, the complaints about improper contracts, low pay and poor treatment from workers of subcontracted companies at the 183 MW Isimba Hydropower Project in Uganda, expected to come online in this year, has had a reputational impact on the contractor China International Water and Electric and the parent company, China Three Gorges.

Failing to obtain a social license to operate

Chinese entities involved in developing hydropower projects overseas prioritize amicable government-to-government relations, and typically fail to actively demonstrate their social and environmental responsibility and commitments or understanding of benefit sharing.

The World Bank defines benefit sharing as “the systematic efforts made by project proponents to sustainably benefit local communities affected by hydropower investments.” It also contains recognition that affected people must be consulted about plans for compensation. In my experience Chinese hydropower companies have shown very limited understanding of this concept, and that lack of understanding is at the root of companies’ failure to obtain a social license to operate in the eyes of the public.

When companies have outlined their plans for benefit-sharing, these generally include providing one off payments of cash compensation for displaced communities, infrastructural development such as leveling land, building or improving roads and bridges, building schools or local community centers, adding fish to reservoirs or gifting company vehicles after the construction team leaves. Benefit sharing at this level, focusing on short rather than long term outcomes, falls short on a number of fronts.

Firstly, the individuals who comprise the ‘affected people’ are usually defined very narrowly in scope. International practice includes people who have been displaced as well as those who are impacted upstream, downstream or in the areas surrounding the reservoir. For most Chinese companies, however, only displaced people are eligible to receive benefits which have been defined by the company. For example, the Lower Sesan 2 compensation plan lists only six villages, while independent studies have shown that the dam impacted at least 250 villages.

Secondly, initiatives like building or improving roads improves access to the work site often benefiting the company more than local communities. Consulting with local communities in the process of infrastructure development could help ensure the public is better able to benefit from the new infrastructure. Adding non-native fish to reservoirs, which companies frequently do, including at the Lower Sesan 2 reservoir, is likely to diminish the balance of ecosystems and exerts even more pressure on native riverine species.

Lastly, these ‘benefit sharing’ initiatives are generally short term. Companies need to consider longer term monetary and non-monetary benefits like providing free access or preferential electricity rates, payments for environmental or ecosystem services, establishing long term community development funds, creating long-term employment, and ensuring custodianship over wildlife and other natural resources (World Bank).

Planned projects as a test cases

There are opportunities for Chinese companies, banks and the government to show that they are responsive to discussing projects with civil society organizations. One of these opportunities has been in the headlines in recent weeks. The Batang Toru hydropower project is a proposed 510MW dam in Sumatra, Indonesia, which, if constructed, will cut through the habitat of the Tapanuli orangutan, the world’s most recently discovered and most endangered species of orangutan. Campaigners say its construction will almost certainly lead to the species’ extinction.

The project is packaged under the Belt and Road Initiative, slated to be built by PowerChina Sinohydro and likely to be financed by the Bank of China. In recent months the Indonesian Forum for the Environment (WALHI) has filed a lawsuit challenging flawed environmental permits and has attempted to communicate with the Bank of China and Sinohydro for almost a year, but have been unable to open the door to meaningful discussions. In March, WALHI garnered support from peers in twelve countries to deliver letters to their local Chinese consulates and Bank of China branches. Despite months of unresponsiveness, the Bank of China publicly acknowledged reception of the letters within one business day.

Projects as destructive as Batang Toru are currently under consideration by PowerChina Sinohydro and other Chinese hydropower companies. Similarly, the Koukoutamba Dam in Guinea, if constructed, would seriously impact Critically Endangered chimpanzees, flooding a protected national park area and resulting in the deaths of up to 1,500 specimens. If projects like these get built, they will not only damage the reputation of the financiers and builders, but also exacerbate public distrust in the intentions of the Chinese government’s Belt and Road Initiative, something which voices in China are increasingly expressing concern about.

Long term impacts

The foremost experts on dams have warned against a lack of consideration or monitoring for the long-term social and environmental impacts of dams. It is essential for companies to take into account the cumulative impacts of their projects as rivers perform tangible and intangible services on which we all ultimately depend. Yet, Chinese hydropower companies generally lack appropriate tracking and monitoring mechanisms to evaluate the cumulative impacts of multiple projects in their areas of activity. They tend to look exclusively at the project site, ignoring the broader repercussions on the environment and people.

If Chinese hydropower companies open to deeper engagement, their powerful interests will likely be challenged and they may have to change the way they conduct business. In particular, they may need to evaluate whether proposed large infrastructure projects are a means to decrease poverty and promote environmental conservation. They may also have to more closely determine whether governments in Belt and Road regions have sufficient capacity to evaluate, monitor and oversee such projects. Chinese hydropower companies would be able to adapt — they usually have broad energy portfolios and have elsewhere proven their ability to build clean energy projects like solar and wind.

China has the potential to be a global and responsible leader in developing clean energy, but it must not shy away from constructive engagement with civil society and communities. In its endeavor to connect the world in a “people-centered” manner, China must ensure that its SOEs build genuine relationships of open and constructive dialogue with local communities, indigenous peoples and NGOs. If Chinese companies and banks decide to ignore global civil society’s requests to engage, communities will inevitably resort to more confrontational actions to have their concerns and voices heard.

Stephanie Jensen-Cormier is an independent consultant based in Costa Rica where she works on themes that interconnect environmental and social justice. She lived and worked in China for eight years; her last position prior to leaving in 2018 was as International Rivers’ China Program Director.

Rising China in the eyes of its closest neighbors

What a collection of ethnographic studies about “neighboring China” can tell us about the Belt and Road

by Tom Baxter

At over 22,000 km, China has the world’s longest land border. Lined up along that border are a total of 14 countries, countless local communities and long histories of interaction and isolation, trade and suspicion. The Art of Neighbouring: Making Relations Across China’s Borders (pdf available for download here) is a selection of essays that look at the diverse experiences of living on China’s border from the perspectives of the communities who live with its presence on a daily basis.

From Laos to Nepal, to Mongolia and Vietnam, the regions along China’s long border are too often seen as peripheral, on both sides — the northern highlands of Laos and Vietnam border China’s mountainous Yunnan province, Nepal neighbors the Tibetan plateau. But as China’s economic, political and social presence and engagement across the Asian continent expands, not least via the official encouragement of China’s “going out” policy and the more recent Belt and Road Initiative (BRI), the experiences of these border regions are becoming increasingly important in understanding China’s role across the continent. At the same time, it is the communities on both sides of the border who often feel the most direct impacts of the increased interaction being encouraged by Beijing.

In attempting to understand and assess the impact and the on-the-ground reality of the BRI, this year celebrating its sixth birthday, it is important that we acknowledge those communities’ experiences and look at, in the words of the collection’s editors, Martin Saxer and Juan Zhang, the “smaller scale processes of exchange”, which are undergoing rapid change. Through a series of in depth, mostly ethnographic case studies, The Art of Neighbouring is a step in that direction.

The case studies in the book all date from before 2012. That is, from before the Belt and Road Initiative was announced in October 2013. Nonetheless, they reflect the impacts of a trend of China’s increasing presence outside its own borders which holds true both before and after Xi Jinping’s BRI speech in October 2013. Each chapter of the book focuses on a case study from a total of eight of China’s neighboring countries. Running through those geographically disparate case studies are couple of major themes which deserve highlighting.

art of neighboring

Reimagining histories

In a number of the book’s case studies the rapidly increasing interconnectivity with China is not a new phenomenon, but rather a revival of a historical norm. This is particularly evident in the case of Martin Saxer’s ethnographic study in northern Nepal where the trading relationships across a previously porous border was the basis of existence for borderland communities. It was only in the 1950s and 1960s that the border between China and Nepal became strictly demarcated and regulated. Where trade had once occurred wherever there was a passable valley, it now became limited to just six official border crossings. Before that, highland communities sought their existence as intermediary traders between the arid and harsh Tibetan plateau and the fertile lowlands of Nepal and India. Since the 1970s China’s increasing wealth and the renewed connectivity brought by new roads which link the borderlands to China much more directly and tightly than to Kathmandu revitalized this centuries old norm.

Along with these physically changing realities, local communities have also reimagined their place in the history of China-Nepal relations and understand their current occupations as following in the footsteps of their ancestors as borderland trading communities. “The new roads are primarily conceived of as ways back to what is remembered as prosperous trans-Himalayan exchange,” Saxer writes. In other words, in the eyes of local communities, a rising and more internationally present China is not so much a disruption of the world order, but is facilitating a return to normality after a comparatively brief interlude.

A case study of traders in Kyrgyzstan and Kazakhstan demonstrates a similar historical processes of a border region “under fuzzy sovereign rule” becoming closed borders during the Cold War to re-opening in the last thirty to forty years. Henryk Alff’s study of the traders reveals that they often attempted to rekindle (perceived) historical ethnic allegiances across borders with, for example, Hui Muslims in China. One Dungan trader from Kyrgyzstan states, “some of us had remote kinship ties with places in China where our ancestors originally came from.” In the post-Soviet and rising China period, traders have been able to take advantage of these perceived cross-border common identities to ease deals and partnership. It is another example of regional history re-imagined, which in turn informs how local people comprehend China’s growing presence and interconnectivity on the continent.

Nepal2
A truck preparing to enter into China at Nepal’s border to Tibet in Rasuwagadhi, image by: Nabin Baral

China as threat / China as opportunity

Which leads on to the second major theme in the book’s case studies. Informed by local history and present day circumstances, communities all along China’s border are divided in their perceptions of China as a threat or an opportunity.

In Saxer’s Nepal case study he provides an example of an embracing attitude towards China’s presence. Moreover, it is a welcoming coming from local communities and a bottom-up approach, rather than via the top-down government initiatives involving state owned companies, banks and political MOUs through which we normally make sense of China’s presence abroad.

In 2010 a former member of Parliament and local to the northern border region of Humla pulled together local business people to form a Road Construction Committee which lobbied Kathmandu to provide funding to build a road through the lesser used Limi valley to China. They were successful and, after securing funding from Kathmandu, also managed to reach agreement with China to temporarily open the border through the valley for sales of diesel for the construction equipment. By the end of the year the first section of the road was complete, and a Chinese delegation even came to attend the inauguration ceremony.

In another example, a study conducted between 2009 and 2012 of Myanmar Muslim communities residing in Ruili in China’s Yunnan province by Renaud Egreteau reveals that to these communities China is seen as a refuge and a sanctuary compared to the situation they face at home. One of his Ruili-dwelling Myanmar interviewees even says “it’s paradise here!”

In contrast, the histories of Cold War suspicion, tension and conflict along China’s Russian and Vietnamese borders do not wash away overnight. Two case studies of these borderlands show that a perception of China as a threat persists through to this day. A Vietnamese border trader interviewed by Juan Zhang in her study of the Lao Cai – Hekou border crossing says, “even now the Chinese are not much better than before…One can never be too careful.”

Within countries there are of course also divided perspectives on China as threat or opportunity. These as yet unsettled perspectives played out in a number of high profile elections in 2018 in Malaysia, Sri Lanka and the Maldives. 2019 is likely to see more of this tension as more politicians, banks, constituents and other interest groups push back on some of the excesses of Chinese projects and work towards establishing national level strategies on how to interact (or how not to interact) with China and the Belt and Road. Elections in India and, in particular, Indonesia this year could display snapshots of this trend.

What can we learn?

The voices and the world views of communities experiencing and engaging in China’s increasing global presence are an important part of the Belt and Road “story” and the rapidly changing on-the-ground reality across Asia. For one, they represent world views that are often overlooked in mainstream coverage of China’s influence abroad and the Belt and Road. While media often seek comment from local communities on their attitudes toward a specific project, it is rare to hear their take on the larger scale shifting reality or on such big questions as whether China is primarily conceived of as a threat or as an opportunity. As narratives on BRI become more and more polarized between the Beijing story and the Washington story or the Brussels story, it is important not to forget the voices of those who are far more directly impacted by the, in some places, transformational, change BRI is bringing.

But these local community voices are not just “color” for media stories. They are also agents in and of themselves. Saxer’s fascinating case study of a local community proactively campaigning for infrastructure connectivity with China is a case in point. The agency of these local communities is also being played out at very local levels, in national elections and in the establishing of recipient country policies and strategies toward the Belt and Road. In a recent article on Euromoney, Djiboutian minister of finance, Ilyas Moussa Dawaleh, stated “we have problems with the current Belt and Road narrative”. His voice may represent that of a recipient country political elite, rather than the grassroots voices explored in The Art of Neighbouring, but it points to the same problem — the current narrative of the Belt and Road too often overlooks the diversity of agency playing out in its growth and development.

The Art of Neighbouring points a way towards a deeper and more complex understanding of China’s growing presence and engagement on the Asian continent and of the dynamics playing out along the Belt and Road. For these reasons it is useful for all of us in the emerging “Belt and Road watcher” community. Even better will be more recent ethnographic studies of local communities’ perspectives on China since the announcement of the Belt and Road in 2013. This watcher, for one, is waiting keenly for that.

Zooming In, Zooming Out: the frames through which Western media see Belt and Road

An awareness of the narrative frames used by Western media to portray BRI can lead to better reporting

FT-frame
Chinese commentators are starting to take note of international negative coverage of the BRI since the beginning of 2018. (Screenshot from FTChinese.com)

In April this year the China-Africa scholar Deborah Brautigam published an article in the Washington Post which essentially fact checked and myth-busted Western media reporting on China’s role in Africa. It included the debunking of such commonly held assumptions as Chinese companies’ investments and projects not providing jobs or skills to local communities, Chinese banks’ loans as predatory and burdensome, and China as a land-grabbing power, a notion whose implications of colonialism by stealth Brautigam debunks as straight up fake news.

Panda Paw Dragon Claw‘s inaugural article took a look at how some of China’s more independent media outlets — Caixin and Caijing — are interpreting and writing about the Belt and Road Initiative (BRI) and China’s growing involvement abroad. Not surprisingly, that deep dive found certain firmly-rooted perspectives, biases and blind spots in the outlets’ reporting of China abroad, all of which are contributing to shaping the dominant narrative of China’s engagement overseas in the eyes of their audiences.

Western media outlets are no different. Approaching the topic with their own world views and their own needs to satisfy the desires of their readers (customers), Western media are also engaged in the construction of narratives around what Jonathan Hillman at the Center for Strategic and International Studies has called “the best known, least understood foreign policy effort” of the 21st century. And as Professor Brautigam pointed out, some of Western media’s blind spots and assumptions can lead to pure factual inaccuracy — anathema to any journalist worth their salt.

More often, however, these perspectives present the Belt and Road through a certain framing, which is neither correct nor incorrect, but does have significant bearing on how the often mysterious initiative is understood in the eyes of readers.

As the construction of something approaching a common, global understanding of Belt and Road is underway, it is worth reflecting, analysing and, where appropriate, critiquing these frames. While some framing of stories is inevitable in order to make sense of the enormous, nebulous and often opaque initiative, an awareness of these frames, their strengths and their blind spots can lead to better coverage and a more complex understanding of China’s overseas involvement. This in turn, we hope, could lead to increased and more effective engagement with the initiative from those who stand to gain or lose the most – local communities and their civil society partners.

So what are the major frames through which major Western media outlets are looking at the Belt and Road? Below are three major framings identified from a read through of BRI coverage from Reuters, the New York Times, The Guardian, Bloomberg and the Economist. This analysis is not exhaustive, but has attempted to be broad in its sources and aims to be a starting point for broader discussion.

Great Power Rivalry

In response to China’s increasing global clout, Western governments’ perspectives have included the hawkish and the more softly, softly approach. While one perspective sought to absorb China into the global order as a new “responsible global player”, another, knee-jerk, reaction has been to label China a neo-imperialist and expansionist power. Hillary Clinton has even used the phrase “neo-colonialism” in response to China’s increasing presence in Africa.

Media have not been immune from the influence of aspects of the latter of these perspectives. One of the major lenses through which Western media covers Belt and Road is that of geopolitical rivalry. BRI is commonly explained as in direct competition to the post-WWII order, and much coverage of BRI in Asia and Africa has directly pitted US influence against Chinese influence, a binary in which, like a weighing scale, more on one side necessarily equals less on the other.

This framing is evident, for example, in the New York Times warm up piece to the first Belt and Road Summit in Beijing in May 2017. The authors of the article attempt to define the Belt and Road — no easy task — and focus on its direct challenge to the West, one which, in their view, comes right from the top, President Xi Jinping himself. “Mr. Xi is aiming to use China’s wealth and industrial know-how to create a new kind of globalization that will dispense with the rules of the aging Western-dominated institutions,” the authors write. The article also directly compares BRI to the US’s post-WWII Marshall Plan, which served the dual functions of post-war reconstruction and the fundamental reshaping the global economic and political order in the US’s interest.

The New York Times also assert that, with infrastructure projects the key component of the geopolitical strategy, even unprofitable and risky projects are, at the end of the day, worth investing in as, for Beijing, politically strategic gains trump concerns over profitability. The case of the US$ 6 billion trans-south east Asia railway project beginning its construction in Laos is cited as an example. According to the New York Times’ interpretation, despite major concerns in regards to Laos’s ability to afford their share of the price tag and a feasibility study that estimated the rail line will remain loss-making for at least 11 years, Beijing is nonetheless willing to push ahead with the project as Laos is a central part of China’s plan “to chip away at American influence in south east Asia.”

Economist_China v Marshall_screenshot
The Economist pits BRI against the Marshall Plan, March 2018. (Screenshot from The Economist)

The Economist adopted a similar BRI versus post-WWII global order framing in the March 2018 article titled ‘Will China’s Belt and Road Initiative outdo the Marshall Plan’. While similar geopolitical concerns have been raised by numerous media in regards to China’s port investments in Sri Lanka and Pakistan, whose purported solely civilian usage has met with scepticism.

While there is nothing explicitly wrong about viewing BRI through this geopolitical rivalry lens, it can be limiting. It often underplays or disregards the role of ‘recipient’ countries and tends to overlook the multiplicity of roles from China’s side, wrapping the actions and incentives of ministries, banks, state owned enterprises and other players under the broad banner of “China”, or even going one step further and portraying it all under the name of Xi Jinping. This can lead to a broad brush approach to the multiplicity of incentives and intentions, which often lurk deeply shrouded in opaqueness.

One major exception to this is the New York Times’ recent investigation into the handing over of Sri Lanka’s Hambantota port to China on a 99 year lease. The article broadly takes the geopolitical framing as its reference, but digs deep into the multiple players and stakeholders involved to show a far more complex face of a BRI project than is commonly seen in the media.

The geopolitical frame can also elevate politics above other driving factors of BRI, such as Chinese companies’ rush to find new markets as they face overcapacity at home and the threat of a domestic economy slowly but surely transitioning away from the heavy industries of the 8+% growth era of previous decades.

Most likely almost all BRI projects see an overlapping of all these elements – macro-level geopolitical moves, local level political agency, the push force of China’s economic transition, and more. How to account for and tell a story which can encompass all these elements is a question journalists and researchers may want to ask. No one frame is necessarily more correct than the other, but one frame more often that not leads to the telling of only one part of the story’s whole.

International Development… with Chinese characteristics

Whereas the above lens generates much suspicion, when Western media look at the development impacts of China’s investments, a more ambivalent tone is to be found. There are two main reasons for this. One is that, once key projects take off, they often do have radical and tangible impacts in those recipient countries. Secondly, if part of what China is doing with Belt and Road is spreading its theory and practice of development to other parts of the world, given China’s impressive track record on development, this can hardly be dismissed outright.

As James Milward, a historian at Georgetown University, wrote in a New York Times opinion piece in May this year, “China’s economic progress over the past century has been phenomenal, lifting hundreds of millions of Chinese out of poverty. So when the Chinese government offers to share its experience in development … it should be taken seriously.” And few could dispute this.

Milward goes on to cite concerns in the current trend of this sharing of development experience – the debt burden on Sri Lanka which culminated in Sri Lanka’s leasing of the deep water Hambantota port to China for 99 years, for example. But other scholars take a very different view. Professor Brautigam, mentioned at the start of this article, for one, takes a more optimistic, or at least open, view of the benefits Chinese investment can leave behind in recipient countries. In her Washington Post opinion piece, for example, she writes: “Chinese loans are powering Africa, and Chinese firms are creating jobs… China may boost Africa’s economic transformation, or they may get it wrong — just as American development efforts often go awry.” The benefits should not be overlooked, and the jury should remain out.

When focusing on the development frame, news reports have also noted the benefits Chinese investment has and can bring. Bloomberg, for example, put together a list of the projects that will have the most direct positive economic impacts, including the Gwadar port in Pakistan, the  Kyaukpyu to Kunming oil pipeline, running from Myanmar to China’s most south westerly province, Pakistan’s Thar coal mines, and the very same south east Asia rail link the New York Times called out as representative of the geopolitical gaming of Belt and Road.

While many (including myself) would not necessarily view the above list and its strong fossil fuel representation so positively,the point Bloomberg makes about the projects’ large and tangible impact, especially on economic indicators such as GDP, cannot be denied.

Big picture and local voices

Sourcewatch_Lamu_No Coal
Protest against Lamu coal power plant, Kenya, November 2015. Photo: Maarufu Mohamed/Standard via Sourcewatch

While many outlets have published articles attempting to encompass and report the entire Belt and Road – grand, macro picture sweeps such as the Guardian‘s ‘The $900 billion question‘ and Bloomberg‘s ‘China’s Silk Road’, for example – Western media’s reporting strength on the BRI has often been in local level case studies. These stories aim to act as miniatures of the larger Belt and Road story. Taking a leaf from the journalism 101 book, they tend to focus on points of conflict and disagreement, and in doing so are key mediums for amplifying the often underheard voices and concerns of local communities.

Reuters‘ 2017 in depth report on local opposition to the Petrochina-operated crude oil pipeline in Myanmar is a case in point. It leads into the story from the perspective of one of hundreds of local fishermen who have been ordered to cease all fishing activities and goes on to focus on the lack of consultation with local communities.

“Chinese companies said they would develop our village and improve our livelihoods, but it turned out we are suffering every day,” said Nyein Aye, the local fisherman interviewed by Reuters.

From another continent, the New York Times‘ report on the controversial Lamu coal plant on Kenya’s coast performs a similar function of amplifying and contextualising a variety of local voices, including the ambivalence of one young man: “If it comes with a job I’m ready to take it”. Local opinions can come in all shapes and forms, and international media is one powerful channel through which those different opinions can be expressed to the world.

These articles’ focus on human stories and the conflicts and tensions between big business interest and local communities in some senses help to fill a gap too often seen in China’s domestic coverage — that of on-the-ground coverage from grass roots perspectives, as noted in this blog’s opening article.

Disconnect

Perhaps what is most striking from all the above, however, is the apparent lack of connection and dialogue between Western media perspectives and Chinese. Bloomberg and Caixin’s reporting on the same project in Sri Lanka is a case in point. In their article, Bloomberg elevate local voices, opening the piece with an anecdote about a local farmer and his family drying rice on a newly built road, financed with Chinese money. Caixin on the other hand, puts its spotlight on local engineers and contractors who are benefiting from more business opportunities, treating local fishing community voices as footnotes and, as this blog previously pointed out, “like fire hoops for Chinese actors to jump through.”

It’s as if the two operate in separate bubbles, when in fact they could and should be in dialogue, both complementing and critiquing each other’s coverage.

This article’s overview and critique of some of the key narrative framings Western media are using in their coverage of the Belt and Road Initiative is intended to trigger awareness of and reflection on these framings. Some may see more framings out there, or see the above as overly simplified. My hope, however, is that through an awareness of the presence of these narrative framings readers, journalists and researchers will take note and see the gaps and blind spots that may exist in current reporting on BRI, with the ultimate purpose to improve, diversify and strengthen media coverage of what is surely one of the most important and rapidly unfolding stories across the world right now.

Tom Baxter works in communications and on the environmental impacts of Belt and Road projects at Greenpeace East Asia. You can find him on Twitter via @TomBaxter17

 

Green Evolution: can China’s new multilateral banks make Belt and Road more sustainable?

by Calvin Quek and Lauren Huleatt

In his articulation of the Belt & Road Initiative (BRI), President Xi outlined an international vision that connects economic, security, cultural, and development themes. However, across China’s policy-making machinery, Chinese bodies associated with supporting the initiative face formidable challenges in realizing this vision.

The foremost challenge is this: how to bridge Xi’s new international vision with domestic priorities. On the one hand, Xi’s vision calls for multilateralism, win-win partnerships, and sustainable development. On the other hand, China’s domestic priorities, most clearly articulated in its five-year plans and industrial policies, have seen a shift towards stronger central government control over all aspects of the economy, particularly of China’s state-owned enterprises.

Thus, the external optics of the BRI can be confusing. Despite the strong public display of domestic support for the BRI theme, there is as yet, no single coordinating authority body in China. China’s newly announced State Aid Agency does not appear to be immediately operational or influential, and incumbent Chinese institutions are likely jostling for influence, each pushing their own version of a program that they believe adheres to Xi’s goals.

This dissonance is particularly apparent in the field of development finance, where China’s new crop of financing institutions operate in a field that was previously the domain of more traditional and conservative players. Here, even though they are all associated with the BRI, the China-based Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB), operate in an observably different fashion from China’s largest policy banks, the China Development Bank (CDB) and the Export-Import Bank of China(EXIM Bank).

A bumpy, but hopeful start

Recent news that the AIIB is considering financing solar power in one of the riskiest countries on earth, Afghanistan, is the latest sign of how it is charting its own course and surprising skeptics along its path. Famously proclaiming to be “lean, clean, and green” at its inception, it continues to be small, with less than 150 staff, has set up a compliance team that reports to the board, not to management, and has so far avoided financing any mining, oil, or coal projects. Over in Shanghai, the NDB has similarly attempted to match sustainability rhetoric with real action. At its first annual meeting in 2016, it announced financing for five non-fossil fuel renewable energy projects in its member countries, and has committed 60% of its funding towards renewables – a target that few of its multilateral banking peers have aimed for.

ppdc charts.png

However, both are far from perfect. The AIIB’s small size inhibits its capability, and its shareholders, particularly from borrowing countries, privately demur about the bank’s slow rate to lend commensurate with its invested capital. Since its establishment two years ago, the bank has only committed USD $4.4 billion, far below its stated objective of USD $10 – 15 billion per year for its first five years. This undershooting of expectations may either be a display of valuing quality over quantity, or be indicative of how “lean” may also mean prohibitive. Further, the bank has also faced criticism from civil society. Its energy policy trails some international peers in setting restrictions on coal power finance, and a few of its projects have raised some concerns among NGOs over environmental and social risks.

While the NDB has deployed more shareholder capital relative to paid-in capital, committing USD $3.4 billion in its first two years, this might have come at the expense of disclosure, due process, and policies, which so far lag that of the AIIB. In addition, despite the strong initial momentum, a combination of economic and political turbulence in several of the five-nation BRICS bloc may have dampened collective interest in the NDB project. It is also an ongoing question whether the bank can truly expand lending beyond its five-country mandate.

Crucially, even if the NDB and AIIB are representing a shift in China’s funding of sustainable development, they are minnows in both total China’s commitments to development finance, and as a share of projects identified with the financing into the BRI. As of year-end 2016, the AIIB and NDB together made up only 1.4% of the estimated USD $292 billion estimated outstanding loans or equity investment into BRI countries.

Yet despite their small size, the new multilateral development banks have become almost synonymous with the BRI, and have become both the poster children and the punching bags for everything that is perceived to be right or wrong with China’s growing assertiveness. Few seem to realize how small their piece of the pie actually is compared to more established domestic players. In response, both the AIIB and NDB have remained at arms-length on having an explicit connection to the BRI; The AIIB has said that it “maintains a qualified relationship to the Belt and Road Initiative (BRI)” and the NDB has said it “sees [BRI] as something that will clearly spur economic activity in the region”.

Nonetheless, their size and initial bumps notwithstanding, the trend being outlined by these two newly-created organizations does broadly tilt towards the spirit of multilateralism, win-win partnerships, and sustainable development that President Xi has espoused. Projects announced by both the AIIB and NDB have not, for the most part, been particularly unilaterally China-driven. Albeit NGO dissatisfaction with several issues, both banks have published environmental standards, and both have engaged the public and the media. Whether this showboating is hiding more nefarious intentions remains to be seen, but the general trajectory may suggest some tacit optimism may be warranted.

Table 1. Comparison of CDB, EXIM Bank, AIIB, NDB, IBRD and IFC

AIIBnew

 

Dinosaurs in need of a new script

The same cannot be said for the other end of this spectrum in China’s development finance arsenal. Dominated by heavyweight incumbents, the China Development Bank (CDB) and the Export-Import Bank of China (EXIM Bank), both banks exhibit a public character very different from the AIIB and NDB, and suggest a BRI strategy less informed by multilateralism and sustainability. This matters, because the CDB and EXIM Bank accounted for 37.7% and 8.2%, respectively, of estimated outstanding loans or equity investment into BRI countries at year-end 2016. At the same time, this finance is flowing into hard infrastructure that has broad and lasting economic, financial, social, and environmental implications, both positive and negative.

For sustainability, while both the CDB and EXIM Bank have nomenclature for corporate social responsibility, they have almost zero published detailed standards for sustainability, information disclosure, and grievance handling. While China’s Green Credit Guidelines promulgated by the banking regulator applies to these policy banks, it only requires the “bare minimum” (e.g. ensure compliance with local laws and regulations). Moreover, the CDB and EXIM Bank are the largest funders of carbon-intensive infrastructure globally. According to the Natural Resources Defense Council, the two banks combined for the largest proportion (approximately 34%) of international public financing from G20 countries into the coal industry since 2013. Research by Boston University also shows that despite both banks being significant funders of the renewable energy sector in China, they strongly support fossil-fuel energy financing into BRI countries. In 2017, BRI countries received 55.9% of total energy financing from the two banks, and of that financing, 34.2% was made into the coal sector, with no investment at all into solar or wind since 2015.

On multilateralism, it is also unclear. The mandate to implement China’s ambitious industrial policies such as “international capacity cooperation”, which aims to promote Chinese “advanced industrial technologies” to international markets, falls squarely on the shoulders of the EXIM Bank. And with technologies such as high-efficiency ultra-supercritical coal power plants formally included in the high-profile “Made in China 2025” strategy as key advanced technologies that ensure China’s industrial competitiveness, it is hard to see how the policy bank would deviate from its set course.

A generation gap

Granted, the CDB and EXIM Bank were borne out of a context vastly different from today’s China. Unlike the AIIB and NDB, which were launched under President Xi’s watch, and are connected to his global vision, the CDB and EXIM Bank were both founded in 1994, when the country’s leadership was then staying true to Deng Xiaoping’s maxim for China to maintain a low foreign profile and to focus on domestic development. Both the CDB and EXIM Bank’s mandates flowed from this focus, with a majority of their funding flowing to domestic heavy industry that would support China’s development. For the CDB, it was central towards spurring domestic investments in infrastructure through local government financing vehicles (LGFV) which used land as collateral. For the EXIM Bank, it supported China’s “going abroad” strategy, providing financing for overseas deals, often at concessional rates that would favor Chinese companies and suppliers. It bears worth mentioning that these practices favoring domestic industry is characteristic behavior of other rising developing nations in the past, from the US in the 1900s, to Japan in the 1970s, through to the East Asian “tigers” of the 80s and 90s. China and its financing institutions are following a familiar pattern.

Nonetheless, the contrast in policy and practice between China’s newly created multilateral banks and its domestic policy banks is jarring. With a set of completely different mandates and priorities, China’s policy banks are more insular than their more internationally-oriented  siblings and are more committed to domestic policy goals than they are to international environmental goals such as the Paris Climate Agreement. Thus, it remains to be seen which version of a BRI finance strategy will characterize overseas development finance flows.

Will the real BRI please stand up?

The larger picture that emerges is one of competing visions in China’s overseas finance space, to say nothing of other important BRI-associated organizations, such as the China-Pakistan Economic Corridor (CPEC), the Forum on China-Africa Cooperation (FOCAC), or the Sino-Russia and wider central Asia cooperation via the Shanghai Cooperation Organization (SCO). Perhaps this divide between China’s overseas finance players is indicative of an emerging trend that the BRI concept has become inflated, and increasingly means many different things to different organizations, with various implementing bodies, themes, and programs.

As a result, despite the fanfare and excitement that the launch of the AIIB and NDB elicited, and despite their efforts to espouse multilateralism and sustainability, China’s new batch of BRI-associated institutions have so far not been able to set the tone for the whole Belt and Road Initiative. This has frustrated many early proponents of the initiative, most notably European governments, who have visibly backed away from explicitly endorsing the projects over objections of China’s lack of trade reciprocity, and given further legitimacy to the concerns of the South Asian giant, India, which has refused to support the initiative. Given the ratcheting suspicions over China’s foreign policy, the time is now is for China’s top leadership to reassert President Xi’s commitment to sustainability and multilateralism through action. Pushing China’s policy banks to meaningfully engage the world would be a good start.

Calvin Quek is the head of Greenpeace East Asia’s sustainable finance program; Lauren Huleatt is a staff member of the same program.

Screen Shot 2018-06-07 at 3.08.18 PM.pngppdc charts.png

Why “Panda Paw Dragon Claw”?

China’s increasing visibility and influence on the global stage have induced a mixed response.

Many in the field of studying Chinese involvement overseas have invoked the image of the dragon. Professor Deborah Brautigam, an authoritative scholar on China’s aid programs in Africa, named her groundbreaking book about that subject “the Dragon’s Gift”. Professor Kevin Gallagher, a Boston University expert on China-Latin America economic relations, titled one chapter in his book “the Dragon’s footprint”.

Fully aware that the dragon metaphor might be clichéd and stereotypical, we believe that it nevertheless captures the menacing posture that many associate with China. Its ambitious global program to boost infrastructure building, to finance development projects and to expand the reach of its industries overseas at times seem like the muscular claw of the dragon trying to snatch its preys, be it energy or mineral resources.

But we should not forget China’s other global image, which is more cuddly and warm, as represented by the giant panda. Like the affection those chubby animals invoke in zoos across of the globe, many Chinese projects and initiatives overseas are actually welcomed and embraced. These include its longstanding medical aid program to Africa since 1960s, and more recently, its South to South climate aid.

The overused and value-neutral concept of “footprint” is inadequate in its imagery force to truly reflect the complexity of China’s involvement beyond its own borders. Here we take the liberty of juxtaposing the two polarized images, panda paw and dragon claw, and leave it to our readers to decide which one they see. We hope the site can work like a hologram.

panda-paw_logo_small-01

We hope the site can work like a hologram.

We are also acutely aware of the fact that stories about China’s overseas adventures are often told from the standpoints of elites, in and outside the country. While documenting and analyzing the decisions and activities of politicians, financial institutions and business leaders are important, telling the story from the “civilian perspective”(民间视角) is also crucial to complete that story. To us, the words from a Sri Lankan fisherman are no less relevant than those of a European finance minister.

This blog is started by those who aspire to tell a better story about China’s involvement beyond its borders. We are journalists, campaigners, analysts, scholars and practitioners with years of experience navigating Chinese politics, bureaucracy, finance and their ramifications overseas. We hope that it will serve as a convening place for the community of China “storytellers” to share, discuss and debate about China’s impact globally, with a particular focus on developments in the energy and environmental fields.