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Civil Society’s Multifaceted Response to China’s Belt and Road Initiative

Three years before the official christening of China’s Belt and Road Initiative (BRI) in 2013, a Chinese-financed copper mine in Myanmar provided a cautionary tale of the risks Chinese companies face in their overseas investments and the role civil society can play in pushing back (Yu 2021a).[1] The Chinese company in question was Myanmar Wanbao Mining Copper Limited (Wanbao), a subsidiary of China North Industries Corporation (Norinco), a large state-owned conglomerate mainly engaged in the defence industry. In 2010, Wanbao signed a contract to invest US$997 million in the Letpadaung Copper Mine, receiving the rights to operate the mine for 60 years and becoming a 49 per cent shareholder in the mine with Myanmar Economic Holdings (MEHL), a conglomerate owned by the Myanmar military, as the majority shareholder (Chan and Pun 2021).[2]

In what is often standard procedure for Chinese investors, Wanbao relied on government authorities to smooth the way for its takeover of the project. At the time, Myanmar was under military rule and civil society had limited influence, while China was Myanmar’s leading international investor. In this political environment, Wanbao had little incentive to consult with villagers. This situation changed when village heads began confiscating land for the mine, providing little compensation to villagers in the process. In response, villagers began to complain and protest. They became more emboldened with the dissolution of the military regime and the transition to a quasi-civilian government in March 2011 and the election of Aung San Suu Kyi and other National League for Democracy members to the still military-dominated parliament. By late 2012, thousands of villagers were participating in protests and, together with activists, community leaders, students, and even Buddhist monks, they occupied the project site. The response by Wanbao and the Chinese Embassy was clumsy and defensive. Wanbao blamed the protests on outside activists and the Chinese Embassy told journalists the mine was intended to benefit Myanmar’s development (Chan and Pun 2021: 11).

In December 2012, the new military-backed civilian government decided to halt the project and, with the military’s approval, set up a parliamentary commission headed by Aung Sang Suu Kyi to lead a review. The commission’s findings and recommendations led Wanbao to implement some corrective measures starting in 2013. In addition to a revised profit-sharing agreement, these included agreeing to provide villagers with job opportunities, supporting vocational and small business training, pledging 2 per cent of the mine’s profits to corporate social responsibility (CSR) activities, setting up a community social development team to consult with villagers, and commissioning a consulting company to carry out another environmental and social impact assessment (ESIA) (Cai et al. 2017; Chan and Pun 2021). According to Chinese researchers who conducted interviews with the villagers several years later, a significant gap still remained between Wanbao’s promises and the demands of the villagers, many of whom were not receptive to other solutions and simply wanted the project to stop (Personal communication with author, March 2021).

Recurring Themes from the Letpadaung Case

The Letpadaung Copper Mine is not an isolated case and is illustrative of the problems Chinese companies have faced elsewhere by failing to consult with local communities and civil society over land resettlement and compensation, ESIAs, and other related issues. Cai and Zhou (2018), who conducted interviews with 12 Chinese companies with large-scale investment projects in Myanmar, found only three were operating according to plan. Three other projects—the Myanmar–China Oil and Gas Pipelines (Yu 2021b), the Tagaung Taung nickel mine project, and the Letpadaung Copper Mine—had come under pressure from local stakeholders, while the Myitsone hydropower project was suspended due to domestic opposition (Yu 2021c). The Letpadaung case, however, is particularly valuable in providing a high-profile and well-documented example that foreshadows several themes related to Chinese overseas investment that reappear in other cases (Cai et al. 2017; Cai and Zhou 2018).

One such theme is Chinese companies partnering with local companies with ties to corrupt or autocratic governments with little transparency or accountability. In the Letpadaung case, Wanbao partnered with a very powerful company owned by the Myanmar military. Chinese companies may see these partnerships as providing investment security and political protection from legal and social risks, but in engaging in such collaborations, they tend to rely on host country partners to smooth the way and as a result take little responsibility for their own actions. They also reinforce public perceptions of collusion and rent-seeking between host-country elites and Chinese companies—a theme that aligns with findings from a study of Chinese investment in three conflict-affected BRI partner countries: Kyrgyzstan, Myanmar, and Uganda (Swaine et al. 2021: iii).

A second, and related, theme is that Chinese companies often find themselves operating in countries where the political situation is unstable, and they are frequently unable to adapt to rapid change. Wanbao entered Myanmar when the military government was in power and the voice of civil society was much more restricted. The company was content to operate within this status quo, making few gestures to communities and allowing local elites to deal with complicated land compensation and relocation issues. When the situation changed in the following year, Wanbao was slow to respond to escalating protests and took corrective actions only after recommendations made by the parliamentary commission.

A third theme is the way the Chinese Government and company representatives took a top-down, defensive, and even hostile approach to dealing with civil society organisations (CSOs) and communities. When protests gathered steam in the autumn of 2012, Wanbao and other Chinese companies in Myanmar sought to brand the protests as illegitimate, accusing outside activists of manipulating villagers. The Chinese Embassy also made a tone-deaf effort to defend the Chinese investment in the mine as socially responsible by saying it was intended to help the country’s industrialisation, adding that China would not back a project that did not support local people (Chan and Pun 2021: 12).

A final motif is the preference of Chinese companies to promote the economic benefits of their projects, emphasising how they support skills-building and job creation and expand market opportunities for village entrepreneurs, while often failing to deal with more difficult issues such as relocation and compensation demands, and creating long-term community consultation and grievance mechanisms.

Artisanal mines near Letpadaung Mountain (2013). Photo: Jacksontpb.
Artisanal mines near Letpadaung Mountain. Credit: Wikimedia Commons (CC).

The Diversity of Civil Society Responses

In a recent report, the Business & Human Rights Resource Centre (BHRRC) provided an account of the wide range of human rights violations linked to Chinese overseas investments it has documented. Of the 679 allegations BRHHC documented between 2013 and 2020, 31 per cent involved inadequate disclosure of environmental impact assessments (EIAs), 29 per cent involved land rights violations, 28 per cent loss of livelihoods, 19 per cent labour issues, and 18 per cent pollution and health (BHRRC 2021: 17–19; 2022). Community protests, like those in the Wanbao case, may be the most common image many people have when they think about civil society pushback against such violations. The reality is that responses have taken a wide range of pathways and strategies. One way to categorise these diverse responses is to group them into actions at the local, national, and international levels.

At the international level, some CSOs and communities have used international treaties and norms such as the United Nations Guiding Principles on Business and Human Rights and grievance mechanisms associated with international financial institutions such as the World Bank and International Finance Corporation (IFC) to hold Chinese companies accountable. Communities in Cambodia sought to use international human rights mechanisms to hold the Chinese sugar company Hengfu and its subsidiaries accountable for lost land and livelihood opportunities (Mackenzie et al. 2022). UN officials have written to the Chinese Government on the communities’ behalf and are awaiting a response (BHRRC 2021: 27). Similarly, in the past few years, international and local CSOs in Indonesia have worked together on an international media campaign and to file a complaint through the IFC’s accountability mechanism, the Compliance Advisory Ombudsman, about the dangers posed to nearby villages of a mine whose majority owner is a Chinese SOE and whose parent company received loans from a Chinese bank that was a client of the IFC (Inclusive Development International 2021a; Learning Spaces 2021a). In another instance, in April 2020, 260 civil society groups from across the world issued a joint letter calling on the Chinese Government to ensure that Covid-19–related financial relief for struggling BRI projects was not used to bail out projects mired in social, environmental, and financial risks (Inclusive Development International 2020).

At the local and national levels, CSOs, lawyers, and trade unions across the Global South have used environmental and labour laws to file complaints and lawsuits against Chinese investment projects, pushing Chinese companies to improve wages and working conditions, as well as environmental compliance. In the field of labour rights, for instance, mine worker unions in Zambia’s Copperbelt Province have fought to have Chinese-owned mines recognise and collectively bargain with them as required by Zambian labour laws (Learning Spaces 2021a). In 2020, the Chinese-invested Lamu coal plant project in Kenya had its environmental licence revoked following petitions by local communities and a complaint to the National Environment Tribunal over the project’s defective ESIA and insufficient public participation (BHRRC 2021: 15). The Industrial and Commercial Bank of China (ICBC) pulled its financing from the project soon after the tribunal revoked the project’s environmental licence (Kinney 2022). In 2021, soon after reports of a drastic decline in worker safety at Chinese-operated cobalt mines in Democratic Republic of Congo, a local worker injured at one of the mines was awarded damages by that country’s High Court (RAID 2021; Searcey et al. 2021).

These efforts often rest on the difficult, often unrecognised work done at the grassroots level by affected communities, workers, and CSOs in documenting project impacts, communicating with local regulators and policymakers, and carrying out protests, strikes, and campaigns seeking to raise concerns with Chinese companies and decision-makers. The Lamu case was the result of a coordinated campaign involving local communities and local and international CSOs (UNEP 2019). A strong local network of community, environmental, and social groups developed and linked up with global legal experts, environmental specialists, and campaigners, to build a persuasive message. In the US territory of Saipan, Chinese construction workers building casinos and hotels on the island took to the streets in 2017 to draw attention to poor working conditions and unpaid wages. Their efforts eventually led the Chinese companies for which they worked to negotiate settlements with the US Department of Labor in 2018–19 to pay nearly US$14 million in owed wages to 2,400 Chinese workers. In 2021, a US federal court awarded another US$5.4 million in compensation to the workers (Halegua 2020a, 2020b; Learning Spaces 2021c). In Ecuador, indigenous communities, with the help of anti-mining and environmental activists, organised protests in 2018–19 against the Rio Blanco mine jointly owned and operated by Chinese and Hong Kong companies for not engaging in consultation with the communities as required by the country’s constitution and the UN Declaration on the Rights of Indigenous Peoples (Latinoamérica Sustentable 2020). The judge, citing a past precedent, ruled in favour of the communities and ordered a temporary halt to mining activities (Hui 2019). In some cases, unaddressed community concerns have led to violence, such as in Kyrgyzstan, where locals attacked and burned down a Chinese-financed gold-processing factory in 2018 due to concerns about environmental impacts such as water contamination, mercury pollution, and findings that the company did not have the necessary construction permits and ESIA. According to the Oxus Society’s protest tracker, covering protests between January 2018 and December 2020, there were 42 rallies and protests in Kyrgyzstan that were in some way related to Chinese policy or investments (Swaine et al. 2021: 9).

The above examples have the following in common: they involve local and/or international civil society working outside China to call for redress for the human rights and environmental impacts of projects connected to Chinese companies operating overseas. There is another subset of civil society responses, however, that involves global civil society working in collaboration with Chinese stakeholders.

Insider versus Outsider Advocacy

Another way to think about civil society responses to Chinese overseas investment is to group them into ‘insider’ versus ‘outsider’ advocacy approaches (Learning Spaces 2021b). The insider–outsider framework borrows from the literature on lobbying (Kernell et al. 2017: Ch.13). Insider lobbying involves seeking direct, personal access to policymakers to influence policy outcomes, whereas outsider lobbying seeks to influence policy through grassroots campaigns that change public attitudes and mobilise the public. Similarly, insider advocacy in the context of Chinese overseas investment involves gaining access to Chinese decision-makers to raise their awareness about international environmental, social, and governance (ESG) standards, and build their capacity to incorporate those standards into policies and guidelines to improve outcomes. Outsider advocacy involves mobilising local and international groups to raise public awareness, raise concerns to Chinese decision-makers, and in the process apply pressure to encourage them to address ESG impacts. Viewed from this perspective, examples of insider advocacy with Chinese stakeholders are often overlooked. While the civil society responses cited earlier largely fall in the ‘outsider’ advocacy category, there are several CSOs that have chosen to explore opportunities to collaborate with Chinese stakeholders on these issues. Some of these are international CSOs, while others are Chinese CSOs and consulting companies.

These CSOs see the problem as stemming not simply from a lack of willingness on the part of Chinese stakeholders, but also from a lack of capacity. As a researcher formerly with Syntao, a Chinese CSR consulting company, told the author in November 2020, Chinese companies often face challenges dealing with affected communities and CSOs but lack the experience, knowhow, or resources to effectively communicate with those communities and address their concerns. In 2018, Syntao partnered with the Asia Foundation and the China International Contractors Association, a large industry group whose members include most of the major SOEs, to develop a community engagement handbook and used it to carry out three training sessions in China for more than 100 high-level SOE managers and frontline personnel (Syntao 2021). Syntao intended to carry out more training in overseas project sites in Southeast Asia but had to cancel those plans due to the Covid-19 pandemic (Personal communication with Syntao and Asia Foundation staff overseeing the development of the handbook, November 2020). Similarly, the international NGO Global Witness has partnered with another Chinese industry group, the China Chamber of Commerce of Metals, Minerals, and Chemicals Importers & Exporters, to develop guidelines on socially responsible mining and human rights due-diligence guidelines for its members (Learning Spaces 2021b).

Insider advocacy is an important channel for providing awareness-raising and skill-building for Chinese stakeholders who generally have very little experience dealing with communities and carrying out social and environmental due diligence and are wary of collaborating with civil society. The cases of Global Witness and Syntao indicate there is willingness among some Chinese stakeholders to work with CSOs they trust, particularly Chinese ones and those with a formal presence in China. Insider advocacy in China, however, has become more difficult in recent years given the rapidly shrinking civil society space there. Working to change the mindset and behaviour of stakeholders in China’s top-down, highly bureaucratic system is also a slow process. Chinese stakeholders may issue improved ESG policies and guidelines, but so far have been unlikely to invest more staff and resources to carry out better community consultation or address immediate grievances in projects on the ground.

Given the limitations of insider advocacy, outsider advocacy plays an important role in holding Chinese (and host-country) stakeholders accountable and pressuring them to act more quickly to address grievances, and it is often the only channel available to groups that lack access to Chinese decision-makers. Ideally, insider and outsider advocacy approaches would be complementary, each working through different channels to hold government and corporate stakeholders accountable. However, this would require the insider and outsider groups to share information with one another and collaborate closely on strategy—something that has not happened much to date, even though it is worth noting that some international CSOs such as Global Witness do engage in both types of advocacy.

Chinese Stakeholders Are Responding … Slowly

Since 2013, when President Xi Jinping first announced the BRI, there has been increased focus on Chinese overseas investment and finance. In many developing countries, Chinese capital has the potential to make a significant contribution to their infrastructure needs. The critical question is whether it will contribute to sustainable, inclusive development that will benefit not only government and corporate elites but also communities and more vulnerable groups that often have little voice or influence in these investment decisions. For that to happen, host-country governments and Chinese state and corporate actors need to make a much greater commitment to social and environmental standards in principle and hold themselves accountable to those standards in practice.

The demonstrated growing commitment of Chinese stakeholders to social and environmental responsibility over the past few years suggests that pushback by communities and civil society has had an impact. Government guidelines, policies, and regulations, as well as public statements from Chinese stakeholders, have increasingly mentioned the need for companies to ensure environmental protection, respect the laws and cultures of host countries, and follow international best practices for sustainability. Signalling this shift, a few years after the crackdown on the Letpadaung Copper Mine protests in 2012—and perhaps cognisant of the negative reaction received on that occasion—Chinese officials changed tone. When clashes occurred again in 2014, after Myanmar police fired on protesters, killing one and injuring at least 20 others, China’s foreign affairs spokesperson stated: ‘We express concern and regret at the reports of casualties. We call for the relevant parties to appropriately deal with those victims’ cases’ (Reuters 2014).

The most high-profile commitment came from President Xi in a speech at the Second Belt and Road Forum for International Cooperation in April 2019, when he spoke of the need for a clean and green, high-quality BRI:

We have agreed to act on the principles of high-standard, people-centred and sustainable development, align our cooperation with universally accepted international rules and standards, follow the philosophy of people-centred development, and pursue coordinated progress in economic, social and environmental dimensions. (Belt and Road Forum 2019)

The language of ‘high-standard’ overseas infrastructure development is now present in all major official speeches.

Soon after Xi’s speech, on 26 June 2019, Kenya’s National Environment Tribunal announced it was cancelling the licence issued for the construction of the Lamu Coal Power Plant, and the Chinese state-owned ICBC announced it was withdrawing from the project (Kinney 2022). Two days later, the Chinese Embassy opened its doors to the Save Lamu civil society coalition and China’s Ambassador to Kenya, Wu Peng, reassured the CSOs that ‘whether a coal power plant is built or not should always be and will in the future be the decision only people in Kenya can make’ (BHRRC 2021: 15).

In January 2021, the Chinese Government released a White Paper on international development cooperation that announced China’s intention to significantly step up its development cooperation with the Global South and listed the BRI as a major platform for doing so (SCIO 2021). The White Paper calls for the establishment of ‘a new model of international relations based on mutual respect, equity, justice and win-win cooperation, and build[ing] an open, inclusive, clean and beautiful world’. It devotes several sections to supporting the Sustainable Development Goals (SDGs), such as poverty reduction, protection of vulnerable groups, food security, health care, education, gender equality, and environmental protection.

More recently, in July 2021 and January 2022, China’s Ministry of Commerce and Ministry of Environment and Ecology released a set of voluntary ‘Working Guidelines for Green Development in Overseas Investment and Cooperation’ and ‘Guidelines for Ecological Environmental Protection of Foreign Investment Cooperation and Construction Projects’, respectively. Unlike past regulations and guidelines that largely focused on the importance of respecting host-country laws and culture, CSR, and communicating with affected communities, these go further in emphasising the importance of companies following international rules and best practice for environmental protection, improving their internal environmental management systems and personnel, and integrating environmental considerations into the entirelifecycle of a project (Nedopil et al. 2021; Wang 2022). In host countries where environmental governance is weak or insufficient, these guidelines recommend Chinese companies adopt the standards prevailing in international organisations or multilateral institutions, or China’s stricter domestic standards for investment and cooperation activities. Around the same time, following up on his earlier call for a green, clean BRI, President Xi announced at the seventy-sixth session of the UN General Assembly in September 2021 that China would no longer build new coal-fired power projects overseas and would focus on supporting the development of green and low-carbon energy in developing countries (UN Affairs 2021).

Looking Forward: Opportunities and Risks

These developments reflect progress in Chinese commitments in principle to adhering to social and environmental standards at the national and international levels. While they may seem incremental, they represent a welcome change from the originally clumsy, defensive, and even hostile responses of Chinese company and government representatives in the Letpadaung Copper Mine case nearly a decade ago. They also show that Chinese leaders and stakeholders are aware of, and sensitive to, the pushback they have encountered from civil society in the Global South. More importantly, given the Chinese responses have mostly been in the form of verbal and written commitments rather than actions, they provide an important opportunity for civil society groups to hold Chinese stakeholders accountable in practice by reminding them of their commitments and exerting pressure on their own governments and judicial institutions to enforce domestic human rights, labour, and environmental laws.

At the same time, civil society efforts to hold powerful government and corporate actors accountable are by no means risk-free. Reports of environmental and human rights activists in the Global South being harassed, detained, and even killed by host-country actors are all too common (Coalition for Human Rights in Development 2019). While the Save Lamu campaign was ultimately successful, a UN Environment Programme (UNEP 2019) blogpost noted that campaigners ‘encountered misinformation (sometimes deliberate), arrests, branding as terrorists, raided offices and further forms of harassment and intimidation’. In 2021, media reports emerged about the arrest of staff of an Ugandan CSO who had been working with communities affected by the proposed East African Crude Oil Pipeline being developed by the French company Total and the Chinese company CNOOC (Gyuse 2021; Inclusive Development International 2021b).

Civil society also faces risks from dealing with Chinese stakeholders who often hold unfriendly attitudes towards nongovernmental actors. One study’s interviews with Chinese companies in Myanmar found they had little understanding of and even suspicion about the motives of local and international CSOs (Cai and Zhou 2018). In the Letpadaung case, Chinese companies such as Wanbao viewed CSOs as outside instigators coming in to stir up community protests. Local and international CSOs are at times also wary of working with Chinese civil society groups on these issues given the Chinese Government’s increasingly draconian cooptation of, and restrictions on, those groups inside China (Tower 2020).

In this complex environment, civil society groups working to address the human rights impacts of Chinese overseas investment should be aware of the risks they face and put in place mitigation measures to protect themselves. They can do so, however, with the knowledge they will play a critical role in ensuring the realisation of the ‘open, inclusive, clean, and beautiful world’ promised in Chinese Government speeches and white papers.

[1] I use civil society and civil society organisations (CSOs) throughout this article to refer to a wide range of groups, including communities, informal associations, indigenous groups, social movements, as well as formally registered nongovernmental organisations (NGOs).

[2] The current production-sharing contract, modified after protests in 2012, gives 51 per cent of the profits to the Government of Myanmar—represented by the state-owned company Mining Enterprise 1. Wanbao Mining’s share of profits was cut to 30 per cent and MEHL’s to 19 per cent (Win Ko Ko Latt and Soe Than Lynn 2013). The mine was previously owned by Canadian company Ivanhoe, and has a controversial history punctuated by conflict with local people (Yu 2021a).

Engaging with China in Latin America: A Conversation with Paulina Garzón

Paulina Garzón.

Paulina Garzón is the Director of Latinoamérica Sustentable (LAS), a nongovernmental organisation (NGO) based in Ecuador that focuses on Latin America. Paulina is an Ecuadorian with 25 years of experience working on issues related to the environment, human rights, and international finance. Until 2012, much of Paulina’s work focused on the impacts of projects supported by Western multilateral banks, but with the expanding role of Chinese finance in the region, her focus switched, and she began to explore the drivers, practices, and regulation of Chinese projects. With few organisations working exclusively on Chinese projects and finance from community and environmental perspectives, LAS plays a unique role in documenting trends and project impacts, supporting local civil society groups to enhance their understanding of Chinese investment, and seeking to build lines of communication with Chinese companies, banks, and policymakers. In this conversation, we discuss with Paulina how she came to work on these issues and what motivated the establishment of LAS, the trends and impacts of Chinese investment in Latin America, as well as how she thinks the environmental and social performance of Chinese projects can be improved in the future.

Editors: Can you introduce yourself and tell us a bit about how you came to be interested in issues related to Chinese engagements in Latin America?

Paulina Garzón: I started working on issues related to the environment and community rights in Ecuador (where I am from) in the early 1990s. For 10 years, I was fortunate to be part of Accion Ecologica, one of the first ecofeminist groups in Latin America, before becoming the cofounder of a new NGO in Ecuador, the Center for Economic and Social Rights (CDES). Later, I moved to the United States. Before I started working on Chinese investments in Latin America, I was program director for the Latin America and the Caribbean Program at the Bank Information Center (BIC), an NGO based in Washington, DC. During all these years working, campaigning, and travelling extensively in many Latin American countries, I witnessed how vast and precious natural territories were being severely damaged by large extractive and infrastructure projects, many of which would never have seen the light if they were subjected to appropriate environmental and social risk evaluation or could at least have significantly reduced their impacts if appropriate standards, supervision, and mechanisms for public participation were put in place. It was especially hard to see how because of these projects, local communities were deprived of their lands, livelihoods, culture, and sometimes even their dignity.

Before 2012, my work mostly focused on helping local communities to address challenges caused by specific projects and trying to influence national governments and Western multilateral development banks to improve their regulatory frameworks and their implementation. Nevertheless, at that very moment, other important players were emerging in Latin America—in particular, the Chinese banks. As I observed them extending their activities in the region, I realised we knew very little about them. Watching Chinese financing grow rapidly in volume and importance, I was motivated to understand where these banks stood on issues related to the environment, community rights, public participation, and accountability. With these questions in mind, I began conducting research on the policies and guidelines that apply to Chinese banks and companies when operating overseas.

I found that, in fact, there are many significant commitments made by Chinese entities, regulators, and business associations to protect the environment and the communities that are impacted by the activities of Chinese financial institutions and state-owned companies—for example, the banking regulator’s Green Credit Guidelines, which aim to improve banks’ due diligence, client compliance review, and project assessment with respect to environmental and social issues. Unfortunately, these guidelines, at least at that point, had not yet made an impact in Latin America and the Caribbean (LAC). The idea of making these commitments and guidelines known and implemented in LAC was an important goal for me when I started to do advocacy work related to Chinese investments in the region.

ED: You recently established Latinoamérica Sustentable (LAS), a new organisation that focuses on finance and investment and the impact it has on the environment and human rights in the region. Can you tell us more about your organisation, what motivated you to set it up, and how you think it can contribute to promoting more sustainable development?

PG: We ‘officially’ established Latinoamérica Sustentable as an NGO in Ecuador in 2021. Since 2014 and before becoming LAS, we were known as the China–Latin America Sustainable Investments Initiative (CLASII), hosted by BIC. Therefore, although LAS is a new Ecuadorian NGO, it already had a longstanding commitment to these issues and a well-established portfolio of work.

Our mission is to support the protection of the environment and local communities within the context of Chinese investments in LAC. To achieve this, we share information and meticulous analysis with a broad audience in Latin America and in China, produce advocacy tools, work independently and with other civil society organisations (CSOs) in the region to conduct research, and produce materials to inform Chinese entities about the environmental and social conflicts related to projects with Chinese participation. We do all of this with the hope that the Chinese institutions involved in the approval, supervision, and implementation of Chinese overseas investments will be better prepared to address negative impacts on certain projects, but also to improve their environmental and social risk evaluations and management during the whole investment cycle.

There are many CSOs monitoring global Chinese investment and finance. However, LAS is the only NGO in Latin America fully dedicated to work on Chinese investments with a focus on the environment and community rights. Although there are many reasons to have a broader approach when focusing on international investors, our organisation is still small, while Chinese investments are often complex, large-scale, and increasingly relevant for the region. We hope that, with time, we will be able to expand our work to include more international banks and companies.

Coca Codo Sinclair Hydroelectric Project, the largest and most expensive infrastructure project in Ecuador’s history. It is funded by the Export–Import Bank of China and built by Sinohydro Corporation. PC:

ED: How would you describe the current situation in terms of Chinese investment in Latin America? Which countries are major destinations for Chinese investment and finance, and which sectors are receiving most attention? How has this changed in the past two decades? What are some of the issues in Latin America that may be unique compared with other regions and require special attention?

PG: LAC countries borrowed heavily from China between 2007 and 2017, peaking in 2015 (The Dialogue n.d.). In fact, according to our calculations, 35 per cent of the regional public debt during those years was linked to Chinese banks, and concentrated in Venezuela, Brazil, Argentina, and Ecuador. The largest Chinese lender in the area is the China Development Bank (CDB), which in just a few years managed to build a loan portfolio larger than that of the major multilateral financial institutions combined. However, this is no longer the situation.

During the past two years, Chinese finance has decreased dramatically in comparison with the previous decade. In 2018 and 2019, China lent US$3.2 billion to Latin America and the Caribbean compared with the US$125.8 billion it lent to LAC over the prior decade (see The Dialogue n.d., but the figure has been slightly adjusted based on our own research). However, this does not necessarily translate into a reduced Chinese presence in the region and, in 2019, while Chinese direct investment fell globally, Chinese direct investment in LAC increased lightly compared with the two prior years, reaching roughly 8 per cent of total foreign investment in the region. These data suggest the relationship between China and LAC could be moving from a financing to an investment axis. The Belt and Road Initiative (BRI) has become increasingly important in the region, with 21 countries signing memorandums of understanding (MoUs) to cooperate with the initiative—most recently, Argentina.

The core of the China–LAC relationship centres primarily on infrastructure and extractive projects and this will not change any time soon. Most governments in South America are announcing new programs to build infrastructure—such as the ‘Pro-Brazil’ plan (a US$43 billion plan to build transport infrastructure and part of the Brazilian Government’s pandemic recovery plan)—and to increase the extraction of natural resources, such as mining in Ecuador and Peru. Argentina has also named China as a ‘key partner’ and, in February, its President, Alberto Fernández, confirmed his government had officially signed a BRI cooperation agreement (making it the twenty-first BRI member in Latin America) and declared his country will receive around US$23 billion in new investments. The Asian Infrastructure Investment Bank (AIIB) is also steadily positioning itself in the region. Currently, Argentina, Brazil, Chile, Ecuador, Uruguay, and Peru are AIIB members, and Ecuador and Brazil have already received financing from it.

There is little doubt that China will continue to be a vital trade partner for most LAC countries. In fact, new and ‘upgraded’ free-trade agreements with China have been announced in Ecuador, Colombia, and Peru, among others. For many countries, the ability of the region to recover from the Covid-19 pandemic will be closely tied to additional financing from China, in the form of not only loans, but also public–private partnerships, joint ventures, and mergers and acquisitions.

All of this is happening based on strong and diverse cooperation frameworks between China and Latin American countries. Hundreds of bilateral agreements and declarations have been signed, but they say very little about the efforts that China and governments in the region will be willing to make to ensure that such cooperation not only prevents harm to the environment but also enhances protection for sensitive areas, such as forests of global importance in the Amazon region and the indigenous people who inhabit and protect them.

Community protest at site of Las Bambas copper mine in Peru. Owned by a Chinese consortium led by a subsidiary of China Minmetals, the mine has faced years of resistance from local residents. PC:

ED: What kinds of impacts are you seeing from these projects? How do you think Chinese financiers and developers can make a positive impact in the region, and what do they need to do better?

PG: Many civil society organisations are deeply concerned about Chinese banks and companies consistently choosing environmentally highly biodiverse and socially sensitive areas in which to invest, and the lack of proper environmental and social risk assessment. There is also much concern about the lack of information disclosure, high-quality standards, and means of accountability related to Chinese investments. These limitations have created social and environmental conflicts. A number of cases have been documented in a report titled Third Cycle of the Universal Periodic Revision of the People’s Republic of China Contributions of the Civil Society: Case Studies from Argentina, Bolivia, Brazil, Ecuador and Peru (CICDHA 2019). This was a ‘shadow report’ presented by 21 CSOs for the Third Cycle of the China Universal Periodic Review in 2018—the UN member states’ peer review of their human rights record. The report documented 18 projects with participation of at least eight Chinese banks and no less than 14 Chinese companies. Fifteen of these projects affected environmentally protected areas, and a large number have not fulfilled the obligations of Chinese state-owned actors to respect international covenants related to participation and consultation rights, environmental protection, and labour rights, such as International Labour Organization Convention 169.

Nevertheless, there are also reasons for hope. Increasingly, Chinese leaders are making commitments in China and globally to address climate change and to protect the environment. This could potentially translate into fewer projects related to fossil fuels, harmful hydropower, and large-scale extraction of raw materials; and more projects supporting truly green energy and sustainable development. At the same time, Chinese entities have promulgated a number of voluntary guidelines aimed at avoiding and mitigating environmental and social impacts in overseas operations. For example, in 2021, the Ministry of Commerce and the Ministry of Ecology and Environment of China issued the ‘Working Guidelines for Green Development in Overseas Investment and Cooperation’, which include several interesting advances. One very significant inclusion is that these guidelines promote the notion that Chinese overseas investments should go beyond ‘host-country rules’ in environmental protection standards when local regulations are lacking and adopt Chinese standards or international best practice. This marks a shift from the traditional approach of Chinese stakeholders to defer to host-country standards.

Very significantly, the China Banking and Insurance Regulatory Commission, which regulates and supervises China’s financial institutions, is in the process of developing a mechanism for processing complaints related to overseas projects financed by Chinese banks. The China Chamber of Commerce of Metals, Minerals, and Chemicals Importers and Exporters (CCCMC) is also working towards establishing a compliance mechanism for Chinese overseas mining projects. There is little public information on how these mechanisms will work, how communities around the world will be able to access them, or when they will be operational, but we consider these developments are important stepping-stones towards establishing effective, accessible, and predictable mechanisms that could potentially result in improved accountability, transparency, and engagement in the context of Chinese overseas investments.

ED: What challenges do communities and CSOs experience when trying to respond to the social and environmental impacts of Chinese projects? How responsive are Chinese stakeholders to community and civil society concerns?

PG: In our experience, it is an enormous challenge to build relationships with Chinese stakeholders both in China and in the host country. While we understand that geography, language, and culture are practical and formidable obstacles, Chinese institutions could do much more by just taking some small steps to be more transparent. For example, providing information on their websites about departments and employees that are in charge of certain geographical areas or business sectors, providing contact information and institutional addresses would create channels for communication with communities and civil society groups.

It sounds incredible that in a world that is highly interconnected in almost every way, it is almost impossible to get basic contact information for institutions that have approval and/or supervision powers over Chinese banks and companies. For example, the National Development and Reform Commission and Ministry of Commerce, which play a role in approving or recording overseas projects, are both near-impossible to access, as is the State-Owned Assets Supervision and Administration Commission of the State Council. Other ministries, such as foreign affairs, finance, and ecology and environment are also challenging to access. The banking regulator and even the more progressive business associations that have promulgated environmental and social guidelines are also difficult to engage and often non-responsive.

Moreover, many times when, after much effort, an appropriate contact has been identified and civil society groups have been able to successfully send letters and documentation, there is no response from the Chinese recipient. This has been a common experience for us. For instance, in 2021, we worked on a report titled Understanding the China Development Bank: Financing, Governance and Socio-Environmental Challenges for Latin America and the Caribbean. We wrote letters to CDB offices in Beijing, Anhui, and Río de Janeiro to request information for the research and, later, to ask for reviews and observations of the draft report. We did not receive any answers. The same occurred last December when we sent the published report to these offices. It is relevant to remember that the CDB has made more than 85 per cent of the Chinese loans to Latin America and it is not only a relatively unknown bank to most people in the region, but also an inaccessible one.

In any case, there are signs that the contents of our communications are read, which is why we believe it is critical to continue sending them to keep Chinese stakeholders appraised of concerns on the ground and create a sense of urgency among decision-makers and regulators to take action. We have heard from partners that while they rarely receive direct responses to their letters, some have seen improvements on the ground after they have raised concerns. Many NGOs from LAC have also tried to establish contact with Chinese embassies and specifically with the economic and commercial counsellors, but so far these efforts have not been fruitful in a meaningful way. In some cases, the NGOs have received a kind acknowledgement of the receipt of the letter, but not much beyond that.

It is worth noting that it in previous years, at least the CDB, the Industrial Commercial Bank of China, and the Export–Import Bank of China have occasionally responded to the letters of LAC NGOs. Unfortunately, this small window of openness did not last. One important exception is the CCCMC, which so far is the only Chinese business association that appears to be genuinely interested in learning about the experiences of local communities with Chinese overseas mining operations and is actively trying to make its guidelines implementable, seeking to provide technical advice and establish pilot projects to train companies.

We are afraid that conflicts are likely to grow in the coming decades, given the fact that references to the environmental and social implications of Chinese financing have been virtually absent from the cooperation agenda with Latin America, and that CSOs and local communities have limited information, tools, and expertise to effectively influence Chinese entities.

ED: Looking back on the years you have been active in this field, how would you describe the strength of civil society actions regarding the impacts of Chinese engagements in Latin America? What do you think could be done to help this field grow?

PG: During the 1990s and early 2000s, we became used to seeing Chinese companies as subcontractors for Latin American state-owned companies, especially in the oil and infrastructure sectors. Their environmental and social practices were notably weaker but, at that time, most CSOs were focusing on the companies that bore responsibility for the projects, rather than on the subcontractors themselves. In Ecuador, it was common for public officials and foreign companies to ask local activists that were opposing their projects to think twice about their demands because if these international companies left the projects, the Chinese would take them over. For the most part in the past decade, the general assumption was the Chinese companies did not care about the environment, while the Chinese companies claimed they followed national regulations and showed limited interest in building their own reputation as environmentally and socially responsible entities.

Still, there were some opportunities to see Chinese companies ‘in action’ in the 1990s and 2000s, when they became the main operators and contractors of large infrastructure and extractive projects. In these cases, local communities and NGOs were not prepared to engage and influence them. There are obvious barriers like geographical distance, language, and culture that make it very difficult ‘to get to know each other’. Moreover, the lack of information and desire to engage from the Chinese side have created an environment in which conflicts and frustration have grown.

LAS has been working to better understand Chinese stakeholders and to build a bridge between both shores by finding and taking advantage of opportunities for bringing Chinese and Latin American stakeholders closer together. We highly appreciate the work and experience of other NGOs and communities in Asia and Africa, their learnings, and their generosity to share them with us in Latin America. While we certainly benefit much from them, we also know that ‘learning by doing’ is necessary when advocating with Chinese entities, and we continue to develop approaches that will hopefully bring about a paradigm shift and more responsible approaches to investment and financing in our region.

Read the interview in Spanish at this link.

Going Out Responsibly: Time to Take Human Rights Seriously in Chinese Overseas Business Operations

In the late 1990s, the growing exposure of corporate misconduct—such as the use of sweatshop factories by global clothing and footwear brands, as well as environmental destruction and gross human rights violations linked to extractive companies—prompted global debates about and efforts to regulate corporate behaviour and to improve the human rights responsibilities of transnational corporations and other business enterprises.

In 2011, the UN Human Rights Council unanimously adopted a formal framework, the Guiding Principles on Business and Human Rights (UNGPs) (OHCHR 2011), which is widely considered the authoritative standard in the new era of globalisation for states and businesses to protect and respect human rights, and to remedy harms. The UNPGs have helped shape national and regional laws, policies, and voluntary industry codes of conduct, and guided civil society actors to monitor and advocate for the human rights accountability of states and businesses.

PC: Shutterstock.

As Chinese companies go global, allegations of social and environmental violations related to their activities overseas have surged in number alongside China’s expanding economic footprint and influence across continents and sectors. Our organisation, the Business & Human Rights Resource Centre (BHRRC), an international non-profit organisation that tracks the human rights impacts of more than 10,000 companies in more than 180 countries, recently published a report analysing 679 publicly recorded allegations of human rights abuses linked to overseas Chinese business operations between 2013 and 2020, including the outcome of 102 attempts to seek company responses to these allegations (BHRRC 2021c).

The report analysed the alleged social and environmental impacts of the operations of Chinese businesses overseas using publicly available information. It explored the countries and sectors that face the highest risk of adverse human rights impacts and grievances, the human rights issues that are of highest concern to civil society actors, the measures taken by Chinese actors (that is, government and industry associations) to address concerns about responsible business conduct overseas and in global value chains, and the extent to which these measures have been effective. Finally, it examined how Chinese companies (including banks) demonstrate transparency and accountability through their responses to the allegations of abuse.

The report provides a clear overview of the current achievements and challenges of addressing the impacts of Chinese overseas investment, and creates a foundation for further discussion of how to promote responsible business conduct.

Human Rights Implications of China’s Overseas Business Operations

Human rights issues in high-risk sectors. Source: Business & Human Rights Resource Centre.

Key findings of our report include the following.

  • Higher rates of alleged abuses were recorded in countries with weaker governance and where Chinese investments are dominant—namely, Myanmar (97 allegations), Peru (60 allegations), Ecuador (39 allegations), Laos (39 allegations), Cambodia (34 allegations), and Indonesia (25 allegations).
  • Human rights risks were particularly high in the following sectors: metals and mining (35 per cent or 236 allegations), construction (22 per cent or 152 allegations), and fossil fuel energy (17 per cent or 118 allegations). Meanwhile, the growth of Chinese overseas renewable energy investment was also accompanied by increasing human rights risks (13 per cent or 87 allegations).
  • The lack of corporate transparency and accountability was pervasive. Chinese companies have a low response rate (24 per cent) when invited by our organisation to respond to human rights allegations related to their overseas operations. This is lower than the overall response rate from Asian companies (53 per cent), particularly those from other major economies in the region, such as Japan (68 per cent), India (47 per cent), and Indonesia (41 per cent). Chinese banks have a dismal 5 per cent response rate (one response from 20 invitations), which indicates potentially heightened risks within investment chains.
  • The 679 recorded allegations involved 1,690 identified rights issues linked to China’s overseas business operations. Across all sectors, the most frequently identified issues were inadequate information disclosure, including inadequate environmental impact assessment (EIA) (31 per cent of allegations recorded), followed by violations of land rights (29 per cent), loss of livelihoods (28 per cent), labour rights abuses (19 per cent), and pollution and health threats (18 per cent). Other frequently reported issues included protests, Indigenous peoples’ rights, beatings and violence, security issues and conflict zones, and workplace health and safety. Environment-related issues such as access to water, damage to ecosystems and wildlife, climate change, and deforestation were also common.

In our work, we also identified additional, emerging issues that warrant further examination. These include an increasing number of allegations of mistreatment of seafaring workers aboard Chinese-owned vessels, including abysmal working conditions, physical abuse, forced labour, and other forms of exploitation. For instance, in 2020, incidents of egregious human rights abuses of Indonesian crews on Chinese ships generated significant media attention and triggered a ban on seafood imports from a Chinese fishing fleet by US Customs and Border Protection (BHRRC 2020). In the past few years, local fisherfolk in various countries in Asia, Africa, and Latin America have also raised concerns about overfishing by Chinese-owned distant-water fishing fleets, which threaten the livelihoods of local communities (BHRRC 2021a). Some of these trawlers reportedly used fishing methods that were particularly destructive to the seafloor and marine life, and further depleted fishing stocks.

Another issue that has been consistently underreported are the living conditions and plight of Chinese migrant workers overseas, particularly during the pandemic (BHRRC 2021b). As a recent report from China Labor Watch (2021) reveals, rights infringements of Chinese migrant workers in Chinese business projects across Asia, Europe, the Middle East, and Africa are widespread and longstanding. Furthermore, China’s strict travel restrictions during the Covid-19 pandemic worsened the already vulnerable situation of thousands of Chinese workers stranded overseas. Some crosscutting issues relevant to development and the fulfilment of all human rights obligations also warrant further exploration. For instance, there has been little analysis to date of the gender impacts of China’s overseas investment and business operations (Yeophantong 2020). Moreover, human rights risks linked to renewable energy and ‘transition minerals’ essential to the transition to a low-carbon economy—such as lithium, nickel, copper, and manganese—are yet to draw the attention of Chinese policymakers despite progressive initiatives launched by Chinese industry associations (BHRRC 2021c, 2021d).

Gaps in International Human Rights Mechanisms

In 2018, China accepted the recommendations made during the third cycle of the Universal Periodic Review, a mechanism for the regular review of the human rights records of all UN member states established under the Human Rights Council. The recommendations include promoting legal and regulatory measures to prevent human rights harm caused by overseas infrastructure and extractive projects invested in or operated by Chinese businesses (CICDHA 2019).

While this is a welcome gesture, the translation of these recommendations into domestic policies has been slow. For instance, it took 10 years for the UNGPs, which were endorsed by the Chinese Government in 2011, to be explicitly referenced in its policy documents. The newly released Human Rights Action Plan of China (2021–25), for the first time, mentions them in the following terms:

Promoting responsible business conduct in global supply chains. It will encourage Chinese businesses to abide by the UN Guiding Principles on Business and Human Rights in their foreign trade and investment, to conduct due diligence on human rights, and to fulfil their social responsibility to respect and promote human rights. It will participate and play a constructive role in negotiations on the UN business and human rights treaty. (SCIO 2021b)

Elsewhere, the document also pledges to ‘formulate regulatory measures for and promote the reform of law-based disclosure of environmental information and clarify the responsibility for and content of mandatory disclosure’.

Compared with China’s previous human rights action plans, which largely overlooked the role of business (Liang 2016), the wording of the latest document shows progress and is a welcome first step. However, the success of these pledges will very much depend on how the commitments are integrated into national policies. And as an integral part of implementing the UNGPs, it is important for the government to clarify its plans to fulfil the first pillar of the guiding principles—namely, the state’s duty to protect human rights, including from violations perpetrated by businesses.  

At the global level, 30 governments—including those of Asian countries such as Japan, South Korea, Pakistan, and Thailand—have already adopted National Action Plans (NAPs) on business and human rights (DIHR 2017–21). In addition, two dozen countries are in the process of developing NAPs or similar non-state initiatives. Some countries, such as France and the Netherlands, have developed mandatory human rights due-diligence legislation and taken steps to strengthen access to remediation for victims of corporate human rights abuses (BHRRC 2019).

There remains much room for improvement when it comes to including human rights protections in Chinese policy and regulatory frameworks. A more integrated approach with emphasis on the indivisibility of rights—including the right to development, environmental rights, and other fundamental human rights—is also needed. Unlike other international initiatives such as the Sustainable Development Goals (SDGs) and the Paris Agreement, which have been integrated into many of China’s domestic and foreign policies, human rights language remains elusive in Chinese policy documents. The White Paper on China’s International Development Cooperation in the New Era, published in January 2021 and considered by one observer to be ‘China’s manifesto for leadership in global development’, is one document that would have benefited from stronger emphasis on human rights protection (SCIO 2021a; Zhang 2021).

As Chinese Confucian philosopher Mencius said: ‘Virtue alone is not sufficient for governing; laws alone cannot carry themselves into practice.’ It is insufficient to merely show bona fides in China’s new human rights policy. To realise the goals envisioned in the Human Rights Action Plan as ‘a responsible major power’, China must take bolder steps to integrate a human rights–based approach into its economic and international development policies and take practical action to achieve its commitments.

Under the Water: Cambodian Artist Sreymao Sao on the Lived Experience of Hydropower Dams

In this article, we continue to explore how art can ‘unflatten’ our understanding of mega-infrastructure like the Lower Sesan 2 Dam (see Milne and Mahanty’s essay in this issue). We focus on the remarkable work of Cambodian artist Sreymao Sao, who explores the lived experiences of communities displaced by the Lower Sesan 2 Dam—some 5,000 indigenous and ethnic-minority people from four villages (see Mahanty’s profile of the Lower Sesan 2 Dam in The People’s Map)—as well as those living upstream and downstream.

Sreymao Sao’s work—as seen in her exhibition ‘Under the Water’, a collaboration with Sa Sa Art Projects, shown at the MIRAGE Contemporary Art Space in Siem Reap, Cambodia, from 11 January to 11 February 2019—explores villagers’ changing experience of their rivers, lands, and lives. The title refers both to the villages submerged by the Lower Sesan 2 Dam and to downstream villages along the Mekong River who are geographically ‘under’ this and other dams.

The work resonates with what is now termed ‘socially engaged art’, which is a rising feature of art this century (Coombs 2021). It involves an artistic practice that engages with social contexts through collaborative activities and critical inquiries, stemming from a desire to make a difference, and to address pressing issues like climate change and displacement.

(Figure 1) In Koh Phdao, elders watch their children leave to find work outside the village, leaving grandchildren behind in their care. PC: © Sreymao Sao, 2018.

Sreymao’s inspiration for this exhibition came from her previous work with communities along the Mekong River. After graduating in 2006 from Phare, a school for the creative arts in Battambang, Sreymao worked with various nongovernmental organisations on visual arts projects that aimed to explore environmental and social change. This included a community arts project in 2008 in Kratie and Stung Treng provinces, which took her to Koh Phdao—a village on an island in the Mekong River. There, she learned about the power of community arts and developed deep relationships with local families.

When she returned a decade later, Sreymao observed disturbing transformations in Koh Phdao, where local villagers were contending with diminished water flows and reduced fish stocks. She also witnessed villagers’ acute uncertainty about the proposed Sambor Dam, which the government placed on hold in 2020 due to ongoing protests and widespread concerns about its impacts.

In our interview, Sreymao reflects on her exhibition and, more specifically, four of her works. She contrasts the violent disruption that dams impose on flooded villages, through the case of Srae Kor on the Sesan River, with the plight of downstream communities such as Koh Phdao, where change is more incremental. Sreymao’s wax sculptures and photographic images overlaid with drawings offer a haunting and emotional archaeology of the lived experience of dams across the riverscape.

Soksophea: Can you tell us how this exhibition came about? 

Sreymao: In 2018, my friend and I took a motorbike trip to Koh Phdao, a place I remembered from 2008 as one of the most beautiful I had ever seen. As we drove up, a group of children were playing volleyball in a dusty and smoky field. I was stunned. This was not the village I remembered. There were far fewer people, and many houses were locked up and seemed abandoned. I felt sad when I saw a man sitting alone, silently, in front of his neglected house, which I remembered as once being beautiful, organised, and tidy. He was a ‘model farmer’ when I knew him before, but his life had been transformed by a visual impairment. A couple who used to cook me meals when I worked there in 2008 had passed away. I felt heartbroken by the changes I observed; some of this may have been due to the dry season, but not all of it.

When I worked in Koh Phdao in 2008, the issue of hydropower dams—both upstream and downstream—was being talked about and was already seen as a problem. Yet, the village was beautiful and people seemed content with their lives. I remember their daily routines. Villagers woke up around 5 am and, as the day progressed, the village became noisier. There were mobile street vendors on bicycles who sold vegetables, meat, and other goods in the village, while other vendors came along the river, calling out to villagers to buy their products. Children prepared for school. I heard cowbells at dawn and, after some time, I could even recognise which cowbells belonged to which family in the village. I could guess that this uncle was passing the house or that person was coming because of the specific sound of their cowbells. The pagoda’s bell in the freshness of the morning breeze and mist is the other sound I recall.

In 2018, it was so different. The soil was dried and cracked. The dirt road was dusty when it used to be moist. The whole village was quiet. I learned that many people had migrated, and I believe this was because they could not find the fish they used to rely on before—a result of the upstream Lower Sesan 2 Dam.

Witnessing all of this, we decided to go to Stung Treng to explore the source of the changes. Even though communities were heavily impacted around the dam site, the changes in Kratie deeply affected me at an emotional level. I started thinking of how to share these stories about dam impacts.

Soksophea: What was your experience when you visited the communities at Lower Sesan 2? 

Sreymao: We had to be careful because villagers resisting the dam were accused of siding with the opposition party [the Cambodia National Rescue Party (CNRP), which gained more than 44 per cent of the vote in the 2013 national election and was dissolved on order of the Cambodian Supreme Court in 2017]. There were two parts of Srae Kor that were forced to resettle: Srae Kor 1 and Srae Kor 2. When I thought about people leaving their village in Srae Kor, compared with those leaving Koh Phdao, I felt there was a difference. In Koh Phdao, they had to leave for survival, and it was people’s own decision to leave—nobody forced them. But in Srae Kor 1 and Srae Kor 2, people were forced to leave against their wishes—even though they still could sometimes sneak back to their old village that had been flooded. I felt very sorry for them. I especially felt sad that they needed to leave their burial sites and many other things behind. I was sad that outsiders could not see how important it was to the villagers to take care of those burial sites, where their ancestors were buried. 

At the new resettlement village, these indigenous villagers were living just like Khmer people. The living cost was high compared with their old village because they needed to buy all their supplies from the market, whereas in the old village they could feed themselves from the river and the forest without cash. Even the house designs and construction processes in the resettlement village were different from their former traditional housing.

Soksophea: Sreymao, let’s turn now to some selected pieces from your exhibition, starting with this first image (see Figure 1), which represents Koh Phdao. Can you tell us a bit about what you were showing in this work?

Sreymao: This image shows the past, the present, and the future coming together in one place. The elders represent the past that is left behind in the village, as they silently watch their children leave. Their leaving the village is the present reality. But what about the future of the young children in the photo? Will they eventually need to leave their hometown, too? 

The elders are left behind to take care of the village and young children. But ultimately, those young children could become like their parents, sisters, brothers, and friends who are leaving on the boat. Their future is uncertain because people cannot currently survive in the village. I wanted the audience to understand this and to reflect on what they can contribute to improve this situation. 

(Figure 2) Moving homes in Srae Kor. PC: © Sreymao Sao, 2018.
(Figure 3) Loss and grief at Srae Kor resettlement village. PC: © Sreymao Sao, 2018.

Soksophea: What about these other two images representing Srae Kor (see Figures 2 and 3)?

Sreymao: The first image (Figure 2) represents resettlement from Srae Kor. Villagers here were forced to move to a new place and many were unwilling. I used red here to represent their bloodline, to show that they not only move their physical house, but they are also uprooting themselves from their ancestors, their memories, and their childhoods; this is an emotional loss as well as a physical one. It represents everything that they wanted to take and hold close during their unwilling resettlement.

The next image (Figure 3) is of the resettlement village for people from Srae Kor, where villagers found that their lives and livelihoods were completely different from their old village. Their spirits and souls were unwell, but this was hard for them to describe and speak about. The sketch in this image represents their loss. They said that at the old village, they could easily go fishing for meals and did not need cash to survive. In the new place, they could only survive with cash, and the cost of living was very high. Everything they needed had to be bought from the market. Some families said their improved access to main roads meant their children were getting into trouble. Some had accidents from riding too fast on their motorcycles, and there was a problem with drugs and substance abuse. Their spirits and souls were not healthy after leaving their old riverbank village.

Soksophea: Your images give the sense of the past living on through the present, as though ghosts of the village remain, even while the original village is underwater. Were you thinking of ghosts in this work? 

Sreymao: Well, the images are not literally ghosts. They represent what has been lost and show that only memories remain. They speak to questions about the past, present, and future. I want people to reflect on whether the benefits of these dams are worth the costs. That was what motivated me to create ‘Under the Water’.

Soksophea: Can you tell us about your wax sculpture of Srae Kor, which was a centrepiece of the exhibition (see Figure 4)?

Sreymao: I created the village from wax and installed it on a mirror. The mirror represented the water and the submerging of the affected villages. Later, when I burned this wax village, the fire was like the electricity from the dam, generated at the expense of these villagers. The melted wax was like the flooding caused by the dam.

Amazingly, when I burned the wax village at the end of my exhibition, I hadn’t predicted that the fire and the heat would make the mirror underneath the village crack. The sound of the cracking mirror was a very chaotic and violent moment. It was like a flashback. I thought back to what happened in those submerged villages. 

The very painful and violent process of resettlement for these villagers was hard for me or other outsiders to grasp fully. There are many things that we cannot feel and understand by just looking with our eyes, or through words. It can be hard to walk in these villagers’ shoes if these events have not directly happened to us.

But when I had to burn my beloved artwork and I heard the mirror crack, it gave me a small sense of their suffering and pain. It also reminded me of the collapse of the Xe Pian-Xe Namnoy Dam in Laos that happened around that time [on this, see Inclusive Development International and International Rivers 2020].


Ruptured Worlds: a Photo Essay on the Lower Sesan 2 Dam, Cambodia


Infrastructure is often introduced using basic facts. For instance, the Lower Sesan 2 Dam is Cambodia’s largest dam, located on the Sesan River, which is a major tributary of the Mekong. Other key pieces of information are that the project was approved in 2012, became operational in 2018, and has since directly displaced some 5,000 local villagers from their homelands and flooded more than 30,000 hectares. The 400-megawatt facility is now owned by a Chinese, Cambodian, and Vietnamese joint venture and, although plans for the project long pre-date the existence of the Belt and Road Initiative (BRI), it is now labelled a BRI project (see Mahanty’s profile of the Lower Sesan 2 Dam in the People’s Map of Global China).

Yet, the numbers we use to describe a dam’s impact—hectares under water, number of people displaced, tonnes of fish lost—are often inadequate or ‘flat’ (Sousanis 2015). Numbers cannot convey the enormity and complexity of transformation that is wrought by megaprojects such as the Lower Sesan 2 Dam. Nor can they convey how contestation continues over this dam, in relation to indigenous resettlement, livelihoods, resources, human rights violations, and cumulative environmental impacts (HRW 2021). Take, for instance, the terrifying failure of the Tonle Sap flood pulse in recent years (Fawthrop 2020). This floodplain lake is Asia’s largest freshwater fishery, and it depends on monsoonal inflows from rivers like the Sesan and Mekong. The Lower Sesan 2 Dam has contributed to this emerging crisis.

Dry-season aerial view of Lower Sesan 2 Dam, where reduced downstream flows are changing aquatic systems and squeezing livelihoods. Photo taken on 6 March 2020. PC: © Thomas Cristofoletti/Ruom.

So, if ‘the numbers’ are insufficient, how can we understand Cambodia’s Lower Sesan 2 Dam and the magnitude of its impacts? As Emily Raboteau suggests (2021), in discussing the climate crisis, perhaps art can provide a soft pathway into this dark subject.

Art does provide a powerful medium for interpreting what is confronting or unfathomable. It can therefore apply to the Lower Sesan 2 Dam, which showcases how mega-infrastructure projects can send ripple effects across time and space, often in ways that are beyond ordinary human perception. Given this, mega-infrastructure projects may be classified as what Timothy Morton (2013) termed ‘hyperobjects’—entities, like climate change or plastic pollution, which cannot easily be grasped because of their vast spatial and temporal dimensions. This notion resonates with our research on ‘rupture’ (Mahanty and Milne 2020), which shows how dams can create ‘open moments’ (Lund 2016) when society and nature are reworked in unpredictable ways. Traditional impact studies cannot capture the gravity of such processes.

Nick Sousanis’ (2015) work on ‘unflattening’ is helpful here: he proposes the use of multiple visual viewpoints to produce new forms of knowledge. Unflattening is therefore a kind of visual reasoning, which can powerfully counteract overly narrow or bounded viewpoints. Sousanis argues that this approach can give rise to new modes of understanding, beyond what we normally perceive—a potentially vital tool for apprehending hyperobjects or ruptures.

The work of photographer Thomas Cristofoletti conveys the power of ‘unflattening’ in the case of the Lower Sesan 2 Dam and its devastating impacts. Cristofoletti initially went to the dam site in 2015 to document indigenous resistance to the project. Since then, his multiple visits have produced remarkable images of human life and landscapes after the dam’s construction, as depicted in this photo essay.

The images play with our perceptions of space and time. For example, using drones, Cristofoletti captures expansive aerial views of the dam site that take us far beyond what we might see from the ground. Juxtaposed with this are intimate portraits of people’s daily lives around the dam, which convey the human dimensions of this tragedy. For these closer shots, Cristofoletti insists on using a 35-millimetre lens. ‘It’s like the human eye, there is no zoom, it forces you to get up close to people,’ he says.

The combination of granular detail, expansive scale, and temporal range in this photo essay provides a visual archaeology of the infrastructure and its effects. While there is a temptation to see beauty in the vast expanses of water and in the skeletal remains of dead forests, Cristofoletti’s intention is clear. This work is about bearing witness or drawing attention to the very real grassroots struggles and human–ecological tragedies that lie beneath sweeping narratives about infrastructure as progress and development.

Two workers survey the dam wall. Of the 150 technical staff on site, about half are Cambodian; the rest are Chinese (Asia Vision Institute 2020). Photo taken on 6 March 2020. PC: © Thomas Cristofoletti/Ruom.
A man untangles his fishing line below the dam gates. After the dam was built, fishermen from the downstream village of Phluk reported a dramatic fall in their catch. Photo taken on 5 March 2020. PC: © Thomas Cristofoletti/Ruom.
Srae Kor village, submerged by the reservoir since 2017. Villagers who remained on customary lands nearby pass this ghostly sight every time they catch the local ferry. Photo taken on 8 March 2020. PC: © Thomas Cristofoletti/Ruom.
Still grieving his lost home, a former Srae Kor resident recalls his community’s struggle against the dam. Photo taken on 7 March 2020. PC: © Thomas Cristofoletti/Ruom.
Rejecting the dam resettlement package, 72 ethnic Lao families rebuilt their homes on customary lands at the edge of the reservoir. Photo taken on 7 March 2020. PC: © Thomas Cristofoletti/ Ruom.
With a span of 800 metres, this bridge was made by ethnic Lao villagers to connect two parts of their new settlement, after they relocated from the now inundated Srae Kor village. Photo taken on 7 March 2020. PC: © Thomas Cristofoletti/ Ruom.
An ethnic Lao woman and her son harvest cashew fruits on their small farm near the reservoir. They were among the families who refused the government’s relocation package. Photo taken on 7 March 2020. PC: © Thomas Cristofoletti/Ruom.
Ghostly remnants of trees near the Srae Kor resettlement village. During the dam construction period, timber extraction was extensive and new settlers came in search of land and resources. Photo taken on 10 March 2020. PC: © Thomas Cristofoletti/Ruom.
Upstream from the dam, Lao and Khmer families from Ksach Thmey village lost 30 per cent of their farmlands to the reservoir, and their remaining land is now prone to flooding. No compensation was provided to them. Photo taken on 10 March 2020. PC: © Thomas Cristofoletti/Ruom.
Cattle roam across land that is now uncultivable due to periodic water infiltration and flooding, near Ksach Thmey village. Photo taken on 10 March 2020. PC: © Thomas Cristofoletti/ Ruom.
Signs of protest in Kbal Romeas village, before it was flooded. Here, 52 indigenous Bunong families refused the resettlement package and remained nearby on their customary lands after losing their village. Photo taken on 17 August 2016. PC: © Thomas Cristofoletti/Ruom.
One-third of the Kbal Romeas resettlement village consists of empty houses, because 52 families refused to take the resettlement package. The process caused rifts within families and across the community. Photo taken on 11 March 2020. PC: © Thomas Cristofoletti/Ruom.
When the dam gates closed, a fish boom occurred in the reservoir. Invasive species of fish and shellfish also began to appear. Ethnic Cham settlers from Kampong Cham Province, many of whom were landless or land-poor, moved in to take advantage of the fishery (depicted here), causing conflict with Bunong families from Kbal Romeas. Photo taken on 11 March 2020. PC: © Thomas Cristofoletti/Ruom.
Settlers from Kampong Cham near New Kbal Romeas cut fish to prepare prahok—a kind of fermented fish—for sale. Photo taken on 11 March 2020. PC: © Thomas Cristofoletti/Ruom.
A young man steers his ferry through stormy waters, transporting goods and people across the new reservoir. Photo taken on 27 April 2018. PC: © Thomas Cristofoletti/Ruom.


Is the Asian Infrastructure Investment Bank a Responsible Investor?

When the Asian Infrastructure Investment Bank (AIIB) was first announced by China in 2013, a flurry of speculation erupted around which countries would join and how closely the new institution would follow the path trodden by traditional multilateral development banks such as the World Bank. Human rights advocates and environmentalists were particularly concerned that the gains they had made in accountability in development finance over the past decades would be shunned by the AIIB, generating a new race to the bottom in social and environmental standards.

From the outset, the secretary-general and later president of the bank, Jin Liqun, proclaimed the AIIB would be ‘lean, clean, and green’ (Zheng 2015). But the slogan contained an inherent conflict: how would a lean bank, with a small staff, be equipped to conduct the rigorous due diligence necessary to ensure that its clients operating in high-risk countries implement international environmental and social standards in their infrastructure projects?

Power generation, transport, telecommunications, and water infrastructure are badly needed across Asia and beyond, but their development comes with risks to people and the environment, including forced displacement, destruction of forests and biodiversity, and pollution of air and waterways. In many countries, those who raise concerns or objections regarding investment projects that threaten the rights of communities face reprisals (Coalition for Human Rights in Development 2019). Since the 1980s, development banks such as the World Bank have required governments and companies to agree to a set of environmental and social standards to secure financing to develop infrastructure projects. While they are not perfect, when applied properly, they help mitigate the harm that infrastructure projects can cause.

In 2015, a few months before becoming operational, the AIIB began to develop its own environmental and social framework to guide its investments. To the surprise of some pundits who anticipated that it would reject the approaches of Western-led development banks, the AIIB brought on board seasoned veterans from established institutions. Jin Liqun himself was previously vice-president at the Asian Development Bank, the AIIB’s general counsel and chief financial officer both previously worked with the World Bank Group, and development of the AIIB’s Environmental and Social Framework (ESF) was led by an advisor who had worked for more than 25 years at the World Bank, where he also developed institutional safeguard policies. Following a contentious initial drafting process in 2015, the ESF adopted in 2016 was ultimately a scaled-back version of the environmental and social policies of the World Bank and other multilateral development banks (Humphrey and Chen 2021). This was reviewed and updated over the past year, and a revised version came into force in October 2021 (AIIB 2021).

The World Bank’s environmental and social framework, like that of most other development finance institutions, contains a broad set of standards to which clients must adhere to avoid and manage risks their operations pose. These standards include tailored requirements on labour and working conditions, resource efficiency and pollution prevention, community health and safety, land acquisition and involuntary resettlement, biodiversity conservation, protection of the rights of Indigenous peoples, cultural heritage, and stakeholder engagement. In contrast, the AIIB chose to impose specific requirements on its clients only in relation to two areas: resettlement and Indigenous peoples. Both frameworks contain a general ‘catch-all’ standard on environmental and social management, but the generalised nature of the requirements, which apply to all types of risk, means that much discretion is left to the bank’s clients to decide which types of risks to consider (and which ones to ignore) and how precisely to manage those risks. This is likely to result in weaker protections on the ground and ultimately an increased risk of harm to communities and the environment.

Stone with the name of Asian Infrastructure Investment Bank, photo by Yan Han (2019).

Financial Intermediaries

One area where the AIIB has adopted a robust policy relative to other development banks is in its financial intermediary investments. As the bank’s lending has expanded, financial intermediary investments have begun to occupy a significant portion of its portfolio. This form of lending, which has previously been described as ‘outsourcing development’, has become increasingly popular in development finance (Roasa 2016)—a trend that started in the 2000s, when institutions like the International Finance Corporation (IFC), the private sector arm of the World Bank Group, began to redirect much of its financing away from direct investment in projects and towards commercial banks and private investment funds. These intermediaries then on-lend this financing to end users.

While this ‘financial intermediary’ approach is justified as a way to broaden the reach of development banks to small and medium-sized businesses, it also makes it much more difficult to trace funds and ensure that institutional environmental and social standards are met where the rubber hits the road. For instance, investigations by our organisation, Inclusive Development International (IDI), revealed that the IFC was exposed to a host of harmful projects via its financial intermediary investments. This included projects linked to land rights abuses, state violence, deforestation, pollution, and a vast expansion of climate-wrecking coal-fired power plants, among others (IDI 2020).

The AIIB did not originally envision a large financial intermediary portfolio, but by October 2021, these types of investments made up almost one-quarter of the bank’s approved projects. This increased investment in commercial banks and funds came with attendant risk: civil society groups have raised concerns regarding intermediary investments through which the AIIB is exposed to problematic projects in countries including Myanmar (BIC Europe et al. 2018) and Bangladesh (BIC Europe et al. 2019), and the risk of the bank supporting fossil fuels via the ‘back door’ (BIC Europe and IDI 2018).

With its revised environmental and social framework, the bank should in theory be able to avoid indirectly backing these types of harmful projects. The framework expands the AIIB’s role in reviewing and approving—or excluding—the highest-risk projects from intermediary portfolios and adds important requirements for clients to develop environmental and social management systems (AIIB 2021). Whether or not the ‘lean’ AIIB will have the capacity to rigorously assess and monitor the potential investments of its clients and reject projects that will violate human rights or damage the environment is yet to be seen.

Capital Markets

While progress has been made in the way financial intermediary lending is handled under the AIIB’s ESF, the bank is now piloting an entirely new form of financing in capital markets. In 2019, the AIIB launched a series of new operations aimed at attracting institutional investors to finance infrastructure development in Asia (AIIB 2019). These operations delegate portfolios to a third-party asset manager, which makes decisions about investments in securities (for example, bonds) traded through capital markets.

As we have previously written (Bugalski and Grimsditch 2021), the AIIB’s new ESF expressly excludes capital market operations from its application, meaning that even its truncated standards on environmental and social management, resettlement, and indigenous peoples do not apply to these investments.

The AIIB argues that capital market operations cannot be subject to its regular environmental and social accountability system. Instead, it uses nebulous ‘Environmental, Social, and Governance (ESG) Frameworks’ to guide external asset managers. ESG began as a rudimentary way for investors to exclude from their portfolios companies that operate in controversial industries, such as tobacco and weapons, and has grown into a complex ecosystem in which dozens of ratings firms score companies using proprietary, big-data methodologies.

But as we articulated in our earlier article (Bugalski and Grimsditch 2021), ESG tools do not function as a risk-assessment and management system; they essentially help investors channel money towards companies that rate well across a range of criteria and limit investment in those that do not. While this may be an important goal for private investors, it is no substitute for the environmental and social safeguards that prevent harms from infrastructure development on the ground.

Although at present the AIIB has only approved four such projects, their total value is US$1.1 billion, and the approach seeks to crowd in additional finance from the private sector. The bank is also in the ‘proof of concept’ stage, in which it is piloting the projects with a view to potential future expansion. AIIB’s capital market operations seek to advance the bank’s ‘lean, clean, and green’ strategy. This represents an attempt at a non-bureaucratic, efficient mode of investment that mobilises private capital for infrastructure. But while it may be lean, its clean and green credentials are questionable: the public is still in the dark about what is in the AIIB’s capital market operations portfolio. With no public disclosure of portfolios by the bank, and no information published on how the bank interacts with fund managers, these projects effectively operate in a transparency and accountability void.

Safeguarding the Rights of Those Impacted by AIIB Projects

With the new ESF now in effect, attention must turn to implementation and ensuring accountability for noncompliance. The AIIB has expressed a commitment to learning as it grows, and nowhere is this as important as environmental and social protection. The bank’s portfolio has expanded to almost 150 projects worth close to US$30 billion (as of October 2021), and the bank is increasingly financing projects alone—rather than co-financing with other established banks. When the AIIB co-finances projects with other banks, the policies of the co-financier are generally applied, rather than those of the AIIB (Geary and Schäfer 2021). Going forward, the AIIB’s environmental and social standards will need to be interpreted and applied by its clients in an increasing number of projects across Asia and beyond.

Adequate disclosure is crucial to ensure that the public is informed when the AIIB is involved in a project—both directly and indirectly. This will require full transparency about projects and companies that receive AIIB support, as well as the recipients of its intermediary lending. A major question mark remains around the bank’s capital market projects. At present, with minimal information available, there is no way for the public to assess the effectiveness of their ESG frameworks. What’s more, because there has been extremely limited disclosure of specific portfolio investments, it is currently next to impossible for the public to trace where funds from these projects are flowing.

Another crucial test of the AIIB’s commitment to responsible and sustainable investment will be the independence and effectiveness of the bank’s accountability office, the Project-affected People’s Mechanism (PPM). As its name suggests, the mechanism’s mandate is to receive and address complaints from people affected by AIIB-backed projects who are seeking redress for harms. The office, which is yet to receive a complaint, has commenced outreach activities in several countries (World Bank Inspection Panel 2021), but remains relatively unknown. In several areas, it also falls short of the operating standards of the accountability mechanism of other development finance institutions (Pike 2019). Worryingly, the AIIB’s capital market operations are immune from accountability through the PPM. Nonetheless, the office may ultimately play a central role in interpreting how the ESF should be implemented on the ground and whether the AIIB’s standards are effective at protecting local people from the risks of development projects.

The AIIB’s membership has now swelled from its 57 founding members to more than 100 countries, with membership expanding beyond Asia to include most EU countries, Australia, Canada, and others from Latin America and Africa. Policy developments at the AIIB reflect the fact that the bank’s shareholding is structured in a way that gives Asian countries, including borrowing nations, a much larger voting share than European countries (which, when combined, account for around 25 per cent of the votes). The lean approach of the bank and the stripped-back nature of its policies are likely welcomed by many borrowing members, who see bureaucracy at established institutions as cumbersome and imposing unwelcome conditions on them. However, if the AIIB is to build a reputation as a responsible infrastructure investor, it will ultimately have to reckon with the fact that high-risk infrastructure projects must have in place the strongest possible safeguards and corresponding mechanisms for addressing harms when they occur. The jury is still out on whether its policies and systems are yet up to the task.

This op-ed was authored by Natalie Bugalski, Legal and Policy Director and for Inclusive Development International.

China’s Overseas Coal Pledge: What Next for Cambodia’s Energy Development?

In September 2020, Chinese President Xi Jinping announced in a speech to the UN General Assembly that China aimed to hit peak carbon emissions by 2030 and achieve carbon neutrality before 2060 (Xi 2020). The statement focused on China’s domestic emissions, but in the months that followed, there was much speculation about what it would mean for China’s involvement in overseas coal power plants. Just short of one year later—again, in a speech to the General Assembly—President Xi addressed this speculation, stating that China would no longer build new coal-fired power plants abroad (Xi 2021). This section of the speech is worth quoting in full:

We need to improve global environmental governance, actively respond to climate change and create a community of life for man and nature. We need to accelerate transition to a green and low-carbon economy and achieve green recovery and development. China will strive to peak carbon dioxide emissions before 2030 and achieve carbon neutrality before 2060. This requires tremendous hard work, and we will make every effort to meet these goals. China will step up support for other developing countries in developing green and low-carbon energy, and will not build new coal-fired power projects abroad. (Xi 2021; emphasis added)

After years of campaigning by local and international civil society groups to bring an end to the construction of new coal plants, this statement was welcomed, but a number of questions remain. What does ‘build’ mean? Which projects will be regarded as ‘new’? When will this come into effect?

As documented in various project profiles on The People’s Map of Global China, Chinese energy projects often involve a diverse range of actors, all of which, in their own ways, contribute to the ‘building’ of coal power plants. While public attention often falls on the project developer, Chinese policy and commercial banks provide financing, insurers such as Sinosure provide risk guarantees, and (usually state-owned) Chinese firms are brought on board as engineering, procurement, and construction (EPC) contractors. Subcontracts are then awarded to other firms for survey and design work, inspection and monitoring, equipment supply, and construction of components for the plant and supporting infrastructure (Zhang 2021). If Xi’s statement is interpreted broadly, the interests of a huge number of actors are potentially at stake.

The question of which projects will be regarded as ‘new’ is crucial. A conservative interpretation could exclude projects that are already under discussion, whereas a broader reading, and one that climate campaigners, including my organisation Inclusive Development International, and affected communities are pushing for, is all projects that have not yet reached financial close—that is, signed a binding financing agreement. Complex and expensive energy projects may sit in the pipeline for years as they are studied, discussed, restudied, and shepherded through host-country approval processes. Even when EPC contracts are signed, they often stipulate the contract will come into effect only when the project reaches financial close and secures insurance. Because of this protracted project cycle, many Chinese-linked coal plants around the world are now in a state of limbo as developers wait to see how state agencies, banks, and insurers formalise their positions in light of Xi’s announcement.

While we wait for a clearer signal on how President Xi’s speech will be interpreted, a few actors have taken the initiative and publicly set out their own positions. One of the first movers was the Bank of China. Just three days after the General Assembly speech, the bank announced that, from 1 October 2021, except for projects for which an agreement is already signed, it would no longer provide financing for new overseas coal mining and coal power projects (Bank of China 2021). Private steel company Tsingshan Holding Group was even faster to react and, within 24 hours, issued a statement saying it would ‘proactively implement the spirit’ of the announcement by moving away from overseas coal power projects and prioritise hydropower, wind, and solar (Tsingshan 2021).

Both announcements are significant. Bank of China is one of the largest financiers of coal plants in the world (Bank of Coal 2021) and, although a commercial bank, it is majority state-owned. Importantly, the bank’s statement goes a step further than Xi’s by excluding coal mining and may also give an indication of how ‘new’ will be interpreted by other financial institutions. The move by Tsingshan could also have major impacts, as it is the world’s largest steel producer and the driving force behind the huge steel and nickel production complex Indonesia Morowali Industrial Park (Ginting and Moore forthcoming). The park has its own dedicated power stations, with 1.26 GW generated from coal. There were plans to expand this capacity, but these may now be reassessed. Just the month prior, the Tsingshan announcement, the company signed a contract with China Energy Engineering Corporation to build three 380 MW coal power units in Morowali. It is unclear whether this contract will be affected by Tsingshan’s new commitment (Seetao 2021).

Amid such uncertainty, countries that have included new coal plants in their near-term national energy planning—such as Indonesia, Vietnam, and Pakistan—may find themselves having to rapidly adjust these plans (Yu 2021). Another country that could feel the impacts of this shift in both the near and the long term is Cambodia. Chinese capital has played a huge role in developing the country’s energy infrastructure and, in addition to operational plants and those under construction, Cambodia is depending on as-yet-unrealised coal projects to meet the power demands predicted by its energy planners. Looking at the Cambodian case, therefore, can yield some insights into the challenges ahead as China shifts away from coal.

Stung Hav coal power plants​. PC: ​Dmitry Makeev​ (CC).

China’s Role in Developing Cambodian Coal Power Plants

As I discussed in another essay earlier this year (Bo 2021), all but one of Cambodia’s proposed, under construction, and operational coal plants have some level of involvement from Chinese stakeholders. Chinese investment, finance, and aid have played an indispensable role in drastically expanding Cambodia’s energy-generation and transmission infrastructure and boosting domestic generation capacity. The role of Chinese companies is so extensive that, by 2018, almost three-quarters of Cambodia’s domestic power supply came from Chinese-built and financed power plants (Mao and Nguon 2018). Much of the power generated reaches businesses and homes via transmission lines that, in many cases, are also Chinese funded and built; according to the then Chinese Ambassador, as of mid-2019, about 8,000 kilometres of transmission lines had been built by Chinese companies (Huang 2019).

Chinese companies are the driving force behind five coal plants, one of which is operational, three under construction, and one in the stage of clearing and preparing land (see Table 1).

Table 1: Cambodian Coal Plants Developed by Chinese Companies

ProjectChinese developerFinancingProject statusInstalled capacity
CIIDG Erdos Hongjun Sihanoukville Coal Power PlantErdos GroupBank of ChinaOperational405 MW
CIIDG–Huadian Sihanoukville Coal Power PlantHuadian GroupICBCUnder construction700 MW
Sihanoukville Special Economic Zone Coal Power PlantWuxi GuolianICBC, Bank of ChinaUnder construction100 MW
Oddar Meanchey Coal Power PlantGuodian KangnengUnknownUnder construction265 MW
Botum Sakor Coal Power PlantSinosteelUnknownUnder preparation700 MW
Total   2,170 MW

The development of these projects came in response to the Cambodian Government’s drive to expand energy-generating capacity and ensure stable and affordable power. While Chinese investment in power projects initially focused on hydropower, the precarity of Cambodia’s reliance on dams for close to 50 per cent of its power was laid bare during recent droughts. This resulted in the fast-tracking of approval for the Botum Sakor and Oddar Meanchey plants (Bo 2021).

The expansion of coal power in Cambodia has alarmed not only environmentalists, but also private sector actors, principally manufacturers who produce or source products from Cambodia and who have made pledges to green their supply chains (Bo 2021; Turton 2020). Some estimates suggest that current energy planning puts Cambodia on track to an energy mix that is more than 75 per cent dependent on fossil fuels by 2030 (Zein 2020)—a huge jump from the 51 per cent in 2019 (Electricity Authority of Cambodia 2020). This shift could push companies with public commitments to move towards 100 per cent renewable supply chains to take their business elsewhere (Ford 2020). Vietnam has committed to a target of 30 per cent renewables in its energy mix by 2030 (Tachev 2021) and is moving towards allowing companies to buy power directly from renewable energy producers, which will likely create further competition for Cambodia (Nguyen 2021).

On the ground, the full impacts of Cambodia’s already operational coal plants are not well understood. Most have not made their environmental impact assessments widely available and, if there is monitoring being conducted of air and water pollution, it is not being published. Cambodia now has three operational coal plants and one under construction, with this coal power concentrated along a stretch of Preah Sihanouk Province’s coastline, and one plant under preparation across the Bay of Kampong Som in Koh Kong Province. This is an important marine fishery for local people and no studies have been published that examine the impacts of industrialisation of this coastline.

One of the most immediate impacts on those living in the vicinity of the existing plants in Stung Hav District, Preah Sihanouk Province, has been pollution from coal ash waste. Companies purchase the waste ash and process it for use in products such as cement. For years, media have reported on the plight of villagers close to the ash-processing factories, who reported suffering rashes, sores, hair loss, and breathing problems because of the ash falling on their homes (Pike 2019; Sony and Keeton-Olsen 2021). The largest ash-processing factory in the area was finally closed in 2021 after years of warnings from local government (Soth 2019; Ouch and Keeton-Olsen 2021). However, as more coal plants come online, the amount of ash and other types of waste will increase, as will associated harms to local communities, inevitably testing the already stretched regulatory capacities of provincial and environmental authorities.

How Might Xi’s Statement Impact Cambodia’s Coal Power Plants?

While noting that there is still a lack of clarity around how President Xi’s statement will be interpreted and implemented, given the centrality of Chinese investment and finance to Cambodia’s energy sector, it is important to assess the impact this may have on the country’s power development. Of the projects currently under construction, the 700 MW CIIDG–Huadian plant and 100 MW Sihanoukville Special Economic Zone (SEZ) plants are well advanced and have received financing from Chinese commercial banks (Ham 2021a, 2021b). These projects are unlikely to be affected by Xi’s statement.

The situation for the Oddar Meanchey and Botum Sakor plants is less clear. The 265 MW Oddar Meanchey plant is under construction, but this has been slowed by the COVID-19 pandemic (Ham 2021c). The lead EPC contractor of the Cambodian-Chinese joint venture, Guodian Kangneng Technology, reports that the project will be financed 25 per cent by the developers’ equity and 75 per cent through bank financing. It provides no information on which bank(s), and no information could be found indicating the project had reached financial close. The Botum Sakor plant has a similar equity–finance structure (IDI 2021). In November 2020, local company Royal Group signed an EPC contract for the project with Sinosteel, and one of the conditions for the contract to become effective was the project reaching financial close (Sinosteel International 2020). Again, no further information is accessible confirming whether financial close was achieved. If the two projects are not yet fully financed, Xi’s no-coal pledge could have serious impacts for the developers.

The statement could also have potential impacts beyond Cambodia’s borders that will have to be reckoned with. Cambodia still imports power from neighbouring countries to meet domestic demand and, in September 2019, signed an agreement with Laos to purchase 2,400 MW of electricity over 30 years (Khan 2019). These purchases were set to begin in 2024, with power coming from two as-yet unbuilt coal power plants in Xekong Province (Xinhua 2019). Cambodia approved a new US$330-million 500 kV transmission line linking Phnom Penh to the Laos border to facilitate this power transfer (Thou 2020). This raised serious concerns among conservation groups, as the powerlines will run directly through the heart of Prey Lang Forest, a wildlife sanctuary and the largest of Southeast Asia’s few remaining major lowland forests (Keeton-Olsen 2020). There is limited transparency around the status of these plants and who is developing them, but Chinese companies are connected to at least one of them (MofCOM 2013). If they have not yet reached financial close, they could also be in jeopardy.

While we can only speculate on whether the projects in Cambodia and Laos will be impacted by China’s move away from overseas coal, if these projects are indeed dropped by Chinese firms and banks, it could leave a sizeable hole in Cambodia’s power development plan. To date, Cambodia’s strong reliance on Chinese energy infrastructure investment has been a boon in terms of enhancing domestic generation capacity, but also leaves the country exposed to policy shifts within China. With the global coal power industry on the rocks, various countries including key coal financiers South Korea and Japan have moved to stop public finance flowing to overseas coal projects, followed by several key commercial banks (IDI 2020). While these commitments vary in terms of their comprehensiveness, the pool of coal financing available is drying up, and the likelihood that non-Chinese actors will step in to finance coal power around the world is increasingly slim.

Developing Green and Low-Carbon Energy

While committing to stop building new overseas coal plants, President Xi also said: ‘China will step up support for other developing countries in developing green and low-carbon energy.’ Even though no concrete measures in this sense have been announced yet, in 2019, China was described by the International Renewable Energy Agency as ‘the world’s largest producer, exporter and installer of solar panels, wind turbines, batteries and electric vehicles, placing it at the forefront of the global energy transition’ (IRENA 2019: 40). As such, it is well placed to make such a commitment a reality.

Both China and countries that heavily rely on Chinese-backed coal plants now find themselves at a crossroads and, once again, Cambodia is a good example of this dilemma. Even if all existing coal power projects in Cambodia move forward as planned, there is unlikely to be financing to cover new plants in the future, yet power demand will continue to grow. Although China views hydropower as green technology, such projects often come with extensive environmental and social impacts and in some cases have proved highly controversial in Cambodia (see, for instance, Mahanty 2021, on the Lower Sesan 2 Dam). There are plans to increase imports of natural gas and develop national infrastructure for its distribution, but this will not address the worsening climate crisis.

Cambodia’s renewable energy industry is nascent and growing slowly, but China’s move away from overseas coal could represent an important catalyst for its development. Cambodia has now approved at least 11 solar power projects; Chinese actors are involved in more than half of these.

Table 2: Cambodian Solar Power Projects with Chinese Involvement

CompanyRoleProvinceStatusInstalled capacity
JinkoSolarProvide solar panelsKampong SpeuOperational60 MW
Risen EnergyDeveloperBattambangOperational60 MW
China Energy Engineering GroupEPC contractorBanteay MeancheyOperational39 MW
JA Solar TechnologyProvide solar panels
JinkoSolarProvide solar panelsKampong ChhnangOperational60 MW
JinkoSolarProvide solar panelsPursatUnder construction30 MW
China CACS EngineeringEPC contractorKampong ChhnangUnder construction60 MW
Total   309 MW

As can be seen above, the installed capacity from Chinese-linked solar projects is a little more than one-tenth of that of Chinese coal plants. However, there is much potential for Cambodia’s solar industry to grow. In September 2021, a Chinese company received approval for a US$30-million solar panel factory, which could further improve the competitiveness of the solar market (Phal 2021). Cambodia does not yet have any wind farms, but a Chinese firm is currently studying a US$200-million 100 MW wind farm in eastern Mondulkiri Province (Hin 2021).

For the past few years, there has been a gradual shift in Chinese overseas energy investment, with renewables on the rise (Springer 2020). However, Chinese renewable energy companies face challenges expanding globally and have been less likely to receive state financing than firms involved in traditional energy. It is important to consider here the ‘pull’ and ‘push’ factors at play (Kong and Gallagher 2021). On the one hand, Chinese investment is generally market and demand driven. If a country does not actively seek financing for renewables and if local market circumstances are not favourable, it is much less likely to attract investors. On the other hand, China’s policy banks often view overseas renewables as unattractive as they have less experience financing such projects, which are often small in scale and distributed (rather than grid-based), and of much lower value. Financing multiple smaller projects creates more work for bank investment managers and makes it harder to hit lending targets.

Meanwhile, Cambodian energy planners have been reluctant to move decisively towards renewables, often presenting the technology as unproven or unable to meet demand. A recent Nikkei Asian Review article quoted a director-general from Cambodia’s Ministry of Mines and Energy defending the fast-tracking of fossil fuel projects as a necessary balance between ‘green’ and ‘the economy’ (Turton 2021). However, renewable energy advocates challenge this calculation. Local nongovernmental organisation (NGO) EnergyLab Cambodia argues that current modelling shows solar, wind, and storage can build on the already operational fossil and hydropower output and meet demand, and at a lower overall system cost (McIntosh 2021). The economic argument for shifting to renewables has been bolstered by the recent rocketing price of coal, which in the past 12 months has almost quadrupled (Duguet 2021). Cambodia’s shift to coal was in part motivated by a desire to increase energy security and reduce dependence on imports, yet operational plants are 100 per cent fuelled by imported coal—almost all of which comes from Indonesia. This means Cambodia is exposed to both price volatility in the coal market and the risk of supply chain disruptions.

The above calculation does not consider the economic costs of the health impacts of polluting energy projects or the costs associated with decommissioning plants when they reach the end of their operating life. Nor does it consider the millions of dollars that could be generated by nurturing a local renewable energy industry, with parts of the production based in Cambodia, generating revenue and jobs, and providing economic stimulus to support the country through the post–COVID-19 economic contraction. NGOs are not the only ones championing renewables for Cambodia. In an interview with The Third Pole, Pou Sothirak, an academic and former Minister for Industry, Mines and Energy, National Assembly member, and Cambodian Ambassador to Japan, stated:

Solar energy represents a viable prospect for meeting energy demand in Cambodia and diversifies renewable power. For a nation that counts on large dams, fossil fuels and coal power to meet increased energy demand, solar energy in Cambodia has potential to be a significant step toward a lower-carbon electricity grid. Solar is a renewable energy that allows Cambodia to opt away from controversial hydropower that could adversely affect the Mekong River and it reduces Cambodia’s dependence on fossil fuel–generated power. (Roney 2021)

A New Chapter in ‘Greening’ the Belt and Road?

President Xi’s statement came as a surprise to many, perhaps including stakeholders who have significant interests in the construction of overseas coal plants. In particular, state-owned construction companies that have ‘gone global’ have benefited hugely from coal plant contracts, and they could take a significant hit. With coal plants representing such a large portion of China’s global energy portfolio, it will not be a simple task to shift focus, but countries like Cambodia, with still developing energy infrastructure, present promising testing grounds for an invigorated push into renewable energy development. In Cambodia and beyond, excluding the most polluting forms of overseas energy projects could represent a major shift towards the ‘Green Belt and Road’ China has been promoting.

Is China’s Belt and Road Initiative Slowing Down?

More than seven years since China launched its ambitious Belt and Road Initiative (BRI), a widely held view from the outside is that this endeavour has now slowed down. Such an assessment is typically supported by evidence that China’s overseas financing was in decline even before the COVID-19 pandemic. An influential article published in the Financial Times in December 2020 provides a perfect case in point (Kynge and Wheatley 2020). Citing data collected by Boston University showing a sharp drop in the overseas lending of China’s two main policy banks in 2019, the article concludes that China is ‘pulling back’ from the world.

This begs the question of what is the proper measurement of the BRI’s progress? Answering this question first requires an accurate conceptualisation of what the initiative is about. Outside China, reports tend to describe the BRI as an infrastructure project and give it a price tag. The same Financial Times article, for instance, refers to the BRI in these terms: ‘China has promised to spend about $1tn on building infrastructure in mainly developing countries around the world—and finance almost all of this through its own financial institutions.’ This reflects a common view of the BRI as a centralised deployment of China’s financial resources exclusively targeting the infrastructure sector. As such, the BRI’s progress is measured by how much funding China can dispatch and how many projects are realised.

How, on the other hand, does the Chinese Government measure the progress of the BRI? A report released in April 2019 by the Office of the Leading Group for Promoting the Belt and Road Initiative (推进‘一带一路’建设工作领导小组办公室), the secretariat of the top decision-making body for BRI-related issues, provides a template. Progress is reported under the six pillars of the initiative: policy communication, infrastructure connectivity, trade facilitation, financial integration, people-to-people ties, and industrial cooperation (Office of the Leading Group for Promoting the Belt and Road Initiative 2019). They are measured not just by the number of infrastructure projects being implemented, but also by the number of multilateral and bilateral statements endorsing the BRI, initiatives for sectoral cooperation, newly opened logistics channels, trade and taxation agreements, increased flows and new forms of trade, cross-border co-investment funds, lending syndicates, fundraising tools, currency swaps, cultural festivals and tourism events, international scholarships, humanitarian assistance, and overseas industrial parks, among others.

Clearly, not all these activities can be measured in terms of financial value, and relevant outputs of the BRI involve a much wider array of activities than just infrastructure projects. The BRI should instead be seen as an all-out drive to build political, institutional, social, industrial, and financial ties with countries around the world; while infrastructure is the most talked-about element in it, it is not necessarily the most important one. The level of Chinese bank lending is also a poor measurement of the BRI’s progress, as these outputs require inputs of not only financial resources, but also diplomatic capital and administrative and technical capacity.

A Pyramid-Shaped System

With this understanding, we can start to make a more granular analysis of the BRI’s content and progress. Here I propose a framework that divides the BRI’s activities into four levels in terms of the actors involved, which together can be thought of as constituting a pyramid-shaped system. At the top are the high-level diplomatic engagements leading to the formation of intergovernmental agreements for cooperation. This is also the set of statistics most often used by the Chinese Government when reporting on the progress of the BRI: as of June 2021, 205 documents have been signed with 140 countries and 31 international organisations, the latest being with the Democratic Republic of Congo and Botswana in January 2021 (Xinhua News Agency 2021a, 2021b; 2021). The majority of these documents are general memoranda of understanding on the ‘co-construction of the Belt and Road’, which may be no more than a written record of the areas in which both countries have agreed to strengthen cooperation, and which may or may not be followed by concrete action. Only for a small number of countries and organisations—for instance, the African Union, Cambodia, the Czech Republic, Hungary, Kyrgyzstan, Laos, Tajikistan, and Ukraine—has a more concrete ‘Cooperation Plan’ been signed, suggesting a greater specification of objectives and responsibilities. But none of these documents is legally binding and they can be adjusted or reversed, as seen in the recent cancellation of the ‘Framework Agreement’ between the Victorian State Government in Australia and China’s National Reform and Development Commission, as a result of the souring Australia–China relations (State Government of Victoria 2021).

The second level takes into consideration the more technocratic undertakings regarding trade, investment, financial infrastructure, taxation, customs, standards harmonisation, and so on, which involve the relevant central state bureaucracies reaching out to their counterparts in partner countries or proposing new initiatives in international forums with the aim of reshaping the international institutional environment. For example, China’s agreements with at least 10 countries on the avoidance of double taxation or tax exemption for certain services have gone into effect since 2016 (State Taxation Administration 2021). Standard harmonisation is another area China is actively pushing, as it recognises the strategic value of increasing the international acceptance of Chinese technical standards. Two three-year action plans have been proposed for the 2015–18 and 2018–20 periods (Xinhua News Agency 2015, 2018), with the goal of completing the standard cooperation mechanisms with all countries along the Belt and Road by 2020. The plan also includes providing training for foreign governments on Chinese standards through China’s foreign aid programs. On top of that, various other central state bureaucracies have issued more than a dozen action plans in the past few years, covering fields including international cooperation in science and technology, energy, agriculture, cultural development, ecological and environmental protection, transport connectivity, language studies, technical standard-setting, and certification and accreditation. There are even plans to promote Chinese traditional medicine and China’s animation industry. This layer of activities is largely overlooked in international media reports and thus receives little public attention, but it may be where the most substantive international negotiations are taking place.

The third level is the subnational, where provincial and municipal governments engage in their own economic and cultural diplomacy, depending on their local conditions. For example, Ningxia Hui Autonomous Region, a province in northwestern China with a significant Muslim population and historical ties with the Middle East, has been active in engaging with Arab states. Similarly, the southwestern and southeastern provinces are tapping into their diaspora communities in continental and maritime Southeast Asia to identify new opportunities for engagement. Provincial and municipal governments may also be following in the footsteps of local companies into overseas markets, in their attempt to deepen ties. For example, Jiangsu Province has been actively involved in public diplomacy and foreign aid programs in Cambodia, because Jiangsu-based manufacturers are very active in that country, including Hongdou Group, a major investor in the Sihanoukville Special Economic Zone.

The fourth level is what most external discussions about the BRI are focusing on: the infrastructure and investment projects carried out by Chinese companies and financial institutions. While the first three levels are largely activities by state actors, this bottom level sees extensive involvement of nonstate market actors as well. These economic activities include not only those with obvious strategic value, such as the construction of key infrastructure projects, but also ‘ordinary’ commercial activities by both state-owned and private enterprises, such as setting up a garment-making factory. A lot of the state activities in the first three levels are meant to generate and facilitate activities at this fourth level, and the intensified economic ties are in turn supposed to tighten social and political relations. Therefore, the BRI cannot be reduced only to the activities at this last level; infrastructure and investment projects must be seen as part of China’s comprehensive effort to build international ties.

A Coherent Whole?

How are the activities at different levels related to each other? Scholars have highlighted the mobilisation of competing domestic interests and the resultant fragmentation in this process (Jones and Zeng 2019; Ye 2019). Indeed, the dialectic relationship between the centralised political authority and local adaptations is perhaps one of the most obscure and least understood aspects of China’s governance system: the central political authority sets high-level visions, which are kept purposefully vague and aspirational so they are amenable to local interpretations. Local political leaders—in the bureaucracy, subnational governments, and key state-owned enterprises—are then supposed to interpret these visions and develop localised action plans towards these goals, a process in which their bureaucratic, regional, or corporate interests are taken into consideration to provide proper incentives for further action down the line.

This seeming autonomy in local interpretation is, however, not risk-free. The central political authority still has the ultimate say on whether things are going in the right direction; in the event that certain local attempts go too far or cause disruption, the central political authority can blame local leaders for not doing their jobs well. As the control of personnel is highly centralised in China, this can mean the end of the political career of a local leader. Conversely, if some local attempts prove successful, the local leader may stand a better chance of promotion. In other words, China’s governance system is largely result-oriented rather than rules-based, and the system operates with risk-taking at every level of the political hierarchy. As scholars have explained, this system of ‘experimentation under hierarchy’ emerged during China’s economic transition, when the country’s leadership had to cope with highly uncertain circumstances (Heilmann 2008). This coping mechanism was activated once again for the BRI as China waded into the unchartered territories of this ambitious new agenda.

Therefore, the various levels of activities are only loosely linked by some vaguely defined notion of the BRI. While the top-level diplomatic activities draw out the broad strategic contours for the BRI, they do not impose strict boundaries or spell out specific instructions for the other layers of activities. It is therefore futile to try to set an exclusionary definition of what a BRI project is: any project can be argued to serve the BRI’s tie-building goals if the actors involved can make a plausible case for its potential. Companies have strong incentives to make their projects appear more credible—and many may be actively lobbying for recognition by the Chinese and host-country governments—to receive the state’s diplomatic and financial support. As many of the BRI target countries are high-risk environments and Chinese companies tend to be inexperienced in these markets, such state support can be critical for their survival in the new ventures.

That of course does not mean that the central political authority endorses every attempt to frame a project as part of the BRI. For example, the Chinese developer of the Shwe Kokko Special Economic Zone in Myanmar presented this project as contributing to the BRI in an attempt to legitimise the highly controversial venture, only for it to be categorically rejected by the Chinese Government after a scandal erupted around activities in the zone (Embassy of the People’s Republic of China in the Republic of the Union of Myanmar 2020). However, rather than providing definitional clarity of what is considered a BRI project, the Chinese system is more focused on mobilisation, which is why it has chosen to maintain some ‘strategic ambiguity’ to activate local incentives to the maximum extent possible.

As the 2019 Office of the Leading Group document cited earlier shows, the BRI produced many outputs. However, while China’s mobilisation system may be good at generating quantitative ‘outputs’, it is not necessarily good at ensuring the achievement of qualitative ‘outcomes’, especially when the desired outcome is hard to measure. The Chinese political leadership has framed that ideal outcome as ‘building a community of a shared future for mankind’ (构建人类命运共同体)—lofty language that does not lend itself to setting tangible milestones. It is not clear how China is examining whether the BRI is approaching this outcome while actors in the system are more geared towards reporting outputs.

Since 2019, after concluding that previous BRI activities had reached a satisfactory level of overall structural coverage, the Chinese political leadership has recalibrated the objective of the BRI to be ‘high-quality development’ (高质量发展) (Xi 2019). Again, the concept of ‘high-quality development’ is kept vague except for the statement, inscribed in President Xi Jinping’s speech at the Second Belt and Road Forum for International Cooperation, that ‘[t]he BRI must be open, green, and clean, and follow a high-standard, people-centred and sustainable approach’. As in the previous period, various actors in China’s bureaucracies, subnational governments, and companies are now competing to interpret the mission statement. As can be expected, actors will likely choose to highlight indicators for which progress is easier to quantify and demonstrate, while qualitative assessment of the complex underlying issues may be sidelined. Meanwhile, external actors are also taking the opportunity to influence the agenda-setting in China. For example, in April 2020, 265 civil society organisations from around the world issued a public statement addressed to the Chinese authorities, which set out 10 principles to ensure that projects are ‘high quality’, and highlighted 60 Chinese-sponsored projects in various sectors that do not meet these criteria (Civil Society Groups 2020). It is not clear how the Chinese Government is responding to such suggestions.

Towards Proper Measurement of the BRI

Going back to the view about the slowdown of the BRI mentioned at the beginning of this article, it may not be an accurate assessment due to the improper measurement methods adopted. Even if overseas lending has dropped from previous years, we need to see whether trade and investment flows are following the same trend. According to Chinese official statistics, trade in goods with the 64 Asian and European countries in the originally conceived Belt and Road regions increased by 6 per cent and 0.7 per cent in 2019 and 2020, respectively, while China’s outward foreign direct investment in these countries dropped by 7.6 per cent in 2019 before bouncing back to a 18.3 per cent growth in 2020. Notably, the rebound of investment into these countries took place against the backdrop of a dip in China’s outward investment globally. But besides these economic activities, the diplomatic activities on the first three levels analysed above have continued to build, the tracking of which requires a more sophisticated BRI ‘accounting’ system. The more challenging task, however, is to evaluate the quality of these outputs, and that will take some serious collective efforts by researchers around the world.

Featured Image: Warp Speed, Bund sightseeing tunnel, (CC) Robbie Sproule.

Going Global: The International Endeavours of Chinese NGOs

On 4 August 2020, a large amount of improperly stored ammonium nitrate exploded at the Port of Beirut, killing at least 178 people, injuring more than 6,500, and leaving 300,000 homeless (WHO 2020). In response, the Beirut office of the Peaceland Foundation (平澜公益), a Chinese organisation founded in 2018 that already had a presence in more than 10 countries, purchased 600 sets of emergency food supplies and, within two days, delivered them to affected Lebanese citizens (Peaceland Foundation 2020). Meanwhile in Africa, Binbin Yin, a co-founder of the Dream Building Service Association (造梦公益), a nongovernmental organisation (NGO) established by Chinese residents in Kenya, was busy preparing a project to deliver free meals to poor African students and their families affected by the COVID-19 pandemic. The project was implemented in partnership with Free Lunch International (国际免费午餐), an international extension of the well-known Free Lunch for Children (免费午餐) project in China—an initiative dedicated to providing free lunches to schools in impoverished areas of the country.

Six years ago, when I was working for the Clinton Health Access Initiative (CHAI), an international nongovernmental organisation (INGO) operating in more than 30 countries with US$192 million of revenue in 2019 (CHAI 2020), I was just starting to follow the global expansion of Chinese NGOs. At that time, I wondered whether I would ever see a Chinese INGO of a similar size to CHAI in the future. Even though they are still quite small compared with my then employer, CHAI, the organisations in the snapshots above are already of a variety and scale that I could not have imagined back then.

Children who have received assistance from the Free Lunch International show support to Wuhan. Source: Free Lunch International official WeChat account.

The Emergence of Chinese NGOs as Global Actors

The international exposure of Chinese NGOs is not a recent phenomenon. Starting in the late 1970s, China reopened its doors to INGOs and other international organisations, which have since supported the development of a large number of Chinese NGOs. What is new today is that we are starting to see Chinese NGOs branching out of China and acting as donors and partners to organisations in developing countries. The first substantial international humanitarian activity by Chinese NGOs was in response to the 2004 earthquake and tsunami in the Indian Ocean. Back then, the Red Cross Society of China (中国红十字会) and the China Charity Federation (中华慈善总会) donated US$90 million for assistance to the victims (Xinhua 2007). At the same time, the China Foundation for Poverty Alleviation (中国扶贫基金会, CFPA)—today China’s most internationally active foundation—made its first major international donations (Deng 2019). Another natural disaster in Asia, the 2015 earthquake in Nepal, stimulated a new round of international engagement by Chinese NGOs. Many Chinese foundations made their first international forays in response to this tragedy, as did many volunteer rescue groups, and a few Chinese NGOs stayed on in Nepal, providing post-earthquake reconstruction support and other services. During the COVID-19 pandemic, Chinese NGOs, especially large corporate foundations, are actively making international donations. For instance, the Alibaba Foundation, together with the Jack Ma Foundation, has donated more than 100 million medical masks and millions of COVID-19 polymerase chain reaction tests to 150 countries, as well as to the World Health Organization (WHO) (Ma 2020).

In addition to humanitarian donations and assistance, Chinese NGOs are quickly making their mark in providing development aid. The Chinese NGO Internationalization Database I have developed for the Leiden Asia Centre includes (as of March 2021) more than 700 items of international donations and projects from 130 Chinese NGOs across more than 100 countries (Wang 2021). Of 294 development projects noted, 70 per cent are in the education and healthcare fields, followed by the environment and sustainability, sanitation, and livelihoods. Most projects involve traditional charitable activities—that is: donating money and goods, such as school supplies, scholarships, free lunches, and medical supplies (39 per cent); building infrastructure, such as hospitals and schools (26 per cent); providing medical assistance, such as free cataract surgery (17 per cent); volunteering (5 per cent); and training (5 per cent). The remaining areas of action, which are mainly in the environment and sustainability field, include policy advocacy and wildlife preservation. Some of the most sizeable overseas projects are extensions of initiatives that already existed in China, such as the ‘Fraternity Home’ (博爱家园), a project of the Chinese Red Cross Foundation (中国红十字基金会, CRCF) promoting community governance and disaster prevention in urban and rural communities, and the ‘Panda Pack Project’ (爱心包裹), a project of the China Foundation for Poverty Alleviation that donates schoolbags and stationery to children in underdeveloped areas in China. Such initiatives are especially prevalent among government-organised NGOs (GONGOs).

The Chinese NGO Internationalization Database relies on a systematic and intensive search through various online sources, including the China Foundation Centre database, official sources such as NGOs’ websites, WeChat accounts, annual reports, and media articles, to geolocate Chinese NGOs’ international humanitarian and development assistance projects or donations implemented between 2005 and 2020. It captures donations/projects from 130 Chinese NGOs across more than 100 countries globally. More information can be found at:

In comparison, the projects of independent NGOs are more diverse—for example, the Peaceland Foundation has participated in patrolling a wildlife reserve in Zimbabwe, as well as in a landmine detection project in Cambodia. The Global Environment Institute (永续全球环境研究所, GEI) has advocated for better forest conservation and sustainable investments in Africa and Southeast Asia. The Paradise International Foundation (桃花源生态保护基金会) has participated in a campaign in the Virunga National Park in the Democratic Republic of Congo to encourage the planting of bamboo to combat deforestation and set up a 10-year African Ranger Awards program with the Alibaba Foundation to honour wildlife rangers in Africa. These independent NGOs have contributed significantly to the diversity of Chinese NGOs, although they are usually smaller entities than GONGOs such as the CFPA, with only short-term or sporadic activities. Overall, based on Korten’s (1990) categorisation of NGO development, most Chinese NGOs are considered to be in the first (relief and welfare) and second (community development) generations of development, with a few operating in the more ‘developed’ third generation (sustainable systems development). So far, none has reached the fourth generation—that is, people’s movements.

It is hard to estimate total donations or revenue, but we can get a sense of scale from some of the largest Chinese NGO projects. CFPA spent RMB40 million (about US$6.2 million) on its overseas Panda Pack project (爱心包裹), delivering school supplies to children in more than 10 countries in 2019 (CFPA 2020). The Chinese Red Cross Foundation’s Silk Road Fraternity Fund (丝路博爱基金), which is specifically dedicated to international development projects in countries that have joined China’s Belt and Road Initiative (BRI)—for instance, sending medical teams to Pakistan and providing free surgery for children with cataracts or congenital heart disease in Mongolia—recorded annual expenditure of RMB13 million (US$2 million) in 2019 (CRCF 2020). While substantial for China, none of these projects even comes close in size to that of established INGOs, such as Save the Children or Plan International, which reported program expenditures of US$704 million and €679 million, respectively, over the same period (Plan International 2020; Save the Children 2020).

CFPA’s Burmese version of Panda Pack to be delivered to children in Myanmar. Photo by the author.

Regardless, the international involvement of Chinese NGOs has evolved from pure donations into permanent overseas operations. Several established Chinese NGOs have registered and established offices overseas, such as the Yundi Behavior and Health Research Centre (云迪行为与健康研究中心) in Cambodia, the Ruili Women and Children Development Centre (瑞丽市妇女儿童发展中心) in Myanmar, and Ramunion (公羊会) in Ethiopia. CFPA, which has operations in Nepal, Myanmar, and Ethiopia, is a good example of how a Chinese NGO has developed internationally. The organisation started making international donations in 2005 and, after 2008, began to temporarily send its staff to recipient countries for project implementation—the second stage of development. Since 2012, CFPA has been operating at the third stage of long-term establishment in recipient countries, including establishing project offices and hiring local employees (Deng 2019). However, local registration and permanent establishment in a host country remain rare for Chinese NGOs. The involvement of most Chinese NGOs is still limited to making donations and working on a temporary basis.

In terms of geographical distribution, China’s neighbours have benefited from approximately half of all projects (Wang 2021). According to various Chinese NGOs I have interviewed, convenience and cost-effectiveness are two key reasons for concentrating projects in nearby countries, given the resource constraints that NGOs usually face. Addressing cross-border issues is also a priority for NGOs, such as wildlife protection along the border between China and Myanmar. According to my database, overall, Southeast Asia, South Asia, and East Africa are top regions for Chinese NGO assistance, comprising 34 per cent, 26 per cent, and 15 per cent, respectively, of total projects before the COVID-19 pandemic. Nepal, Myanmar, Cambodia, Laos, and Ethiopia top the list of recipient countries.

The Challenges to the Internationalisation of Chinese NGOs

Chinese NGOs face many challenges working internationally, such as inadequate regulatory and policy frameworks, insufficient funding, and limited management and operational capabilities (see, for instance, Deng 2013, 2019; Huang 2011; Li and Dong 2018; Yang 2013). All of these challenges are characteristic of an emerging field in which regulatory, financial, and human resource infrastructure are not yet fully developed (Wang 2020).

Lack of government support is often discussed among Chinese NGOs and scholars (Deng and Wang 2015; Li and Dong 2018), as there is no regulation specific to Chinese NGOs operating internationally. The concept of Chinese NGOs operating internationally is just as new for Chinese regulatory bodies as it is for the NGOs themselves. For example, several NGOs I interviewed mentioned that it took the Civil Affairs bureaucracy a long time and much explanation to accept foreign invoices during their annual checks on NGOs’ accounts. In 2016, the General Office of the Central Committee of the Chinese Communist Party (CCP) and the General Office of the State Council issued the joint ‘Opinion on Reforming the NGO Management System to Promote Healthy and Orderly NGO Development’ (关于改革社会组织管理制度促进社会组织健康有序发展的意见). The opinion—which, though important, is not a regulation—includes some regulatory guidance, such as ‘if it is necessary to establish [representative] offices outside China, approval must be obtained from the authority in charge or the administration in charge of foreign affairs’. This indicates that the Chinese state is aware of the challenges, and that it has been learning and gradually developing regulations for NGOs operating outside China, although most regulations and administrative guidance to date remain vague.

Limited financial resources are another major constraint on the international development of Chinese NGOs. Chinese NGOs fund their international projects through donations from diverse sources: corporations, international foundations and organisations, government, and the public. Corporations are an important financial source for Chinese NGOs’ international projects, especially for large foundations, such as CRCF and CFPA. These corporations and foundations usually already have established sponsorships or partnerships for domestic projects. Lacking previous contacts and networks, it is much harder for independent and small Chinese NGOs to raise funds for international activities from large corporations. Similarly, international foundations and organisations prefer to fund Chinese NGOs which they have long supported in China. For example, Give2Asia, a long-term partner with CFPA in China, has supported CFPA’s microfinance project in Nepal (Deng and Song 2019). Blue Moon Fund has sponsored GEI’s projects both in China and abroad (GEI 2021). Currently, open government funding for Chinese NGOs is very limited. For instance, Yunnan Province has an official aid budget of less than RMB600,000 per project per year to allocate to a few local NGOs (mostly GONGOs) for international projects, but there is no such mechanism yet at the central level (Department of Commerce of Yunnan Province 2020). Public funds, raised mainly through the internet, are an important financial source for both GONGOs and independent NGOs. According to my calculations, based on publicly available information from Tencent and Alipay (the top-two internet platforms for charitable online fundraising in China), as of the end of 2020, the total funds raised for international humanitarian and development projects through these two channels was RMB45 million. This amount seems almost irrelevant if compared with mature markets for international donations, such as that of the United Kingdom, where the public donated £10 billion over the past five years (Banks and Brockington 2020).

Human resource constraints and limited organisational capacities are internal bottlenecks for NGOs. In general, the salaries of Chinese NGO staff are very low. In 2018, in the 210 Chinese foundations that registered under the Ministry of Civil Affairs—either national public foundations or private foundations with initial capital beyond RMB20 million, including the largest and most important foundations in China—56 per cent of employees had an annual salary of less than RMB100,000 (US$15,000) (Wang 2019). Taking CFPA as an example, the average annual salary of its staff in 2018 was RMB122,629 (US$19,000) (CFPA 2019), which is less than half the average salary in large INGOs—for instance, US$48,000 for Save the Children (Zippia 2020b) and US$52,000 for Oxfam (Zippia 2020a). Such salary levels are not competitive internationally to attract talent in recipient countries who are familiar with Chinese, local, and global systems of operation. In addition to human resource shortages, Chinese NGOs face the complicated challenges of understanding the needs of local communities, designing and implementing sustainable projects, localising operations, and communicating with international partners using global development discourse. As one independent NGO leader told me in September 2020: ‘Even if I was given a 100 million renminbi [to undertake a project], I wouldn’t accept it because I wouldn’t be able to implement it.’

The Driving Forces of Internationalisation

Internationally, the development of INGOs has gone through cycles, each driven by different political, economic, social, environmental, and technical factors (Davies 2014). Similarly, the growing presence of Chinese NGOs overseas is also driven by a set of external factors. First among them is the strong economic progress China has made over the past few decades, which has freed up resources that can now be allocated more flexibly for international causes. CFPA, the biggest foundation for poverty alleviation in China, made moving into the international realm an organisational strategy years ago, foreseeing its role in poverty reduction within China shrinking. Second, the country’s national strategies related to the BRI have provided a supportive political environment for the internationalisation of Chinese NGOs. The Chinese Government referenced the strategic role of NGOs in building social connections in BRI countries at the Belt and Road Forum for International Cooperation in 2017 and then again in the Action Plan for People-to-People Bonds in the Belt and Road Initiative for Chinese Social Organisations (2017–20) (中国社会组织推动‘一带一路’民心相通行动计划 2017–20). Third, the Chinese public is now more accepting of making international donations. Chinese NGOs have become more optimistic about gaining public donations for international projects because they face less pushback from the public. Based on several of my NGO interviews, they are now less likely to hear complaints such as: ‘Why do you donate to Africa when there are still so many people in need at home?’ Fourth, increasing environmental and social concerns about China’s overseas investments, especially in extractive industries, have prompted some Chinese NGOs working on the environment and sustainability, such as GEI, to develop projects abroad. Fifth, since China opened its doors to the world and embraced social and economic globalisation, Chinese NGOs have gained greater international exposure by attending international conferences, participating in international exchange programs, and partnering with other international foundations and NGOs. As Deng (2019) has discovered, the frequency of exchanges between Chinese foundations and foreign NGOs is one of the most important factors impacting on whether those foundations make overseas donations, as well as the scale of such donations.

Although the diplomatic factors mentioned in the second point play a role in the internationalisation of Chinese NGOs, especially for GONGOs, this does not necessarily mean these organisations are co-opted by the Chinese state. GONGOs have varying levels of autonomy and their ties with government should be viewed as ranging along a spectrum, rather than as absolutes (Hasmath et al. 2019). For example, the China NGO Network for International Exchanges (中国民间组织国际交流促进会, CNIE), founded by the International Department of the CCP’s Central Committee to promote cooperation between Chinese and foreign NGOs, is solely financed by the Party-State. It is often considered an extension of the government, and some of its projects are directly related to promoting the BRI, as indicated by names such as ‘The Silk Road Community Building Initiative’ (丝路一家亲). The CRCF’s ‘Silk Road Fraternity Fund’ (丝路博爱基金) and the China Foundation for Peace and Development’s ‘Friends on the Silk Road’ (丝路之友) are two other examples of how the BRI influences the international projects of some GONGOs.

However, there are many other GONGO projects that are not driven by the BRI. The CFPA has developed a range of projects in Nepal since providing humanitarian assistance in the wake of the 2015 earthquake. Funding for these projects comes from a variety of sources—including corporations, international foundations, and the public—and the CFPA has decision-making autonomy over project initiation, location, and design. Independent NGOs usually do not link their projects to the BRI directly but may refer to it to gain political legitimacy when dealing with Chinese Government officials. Overall, the BRI provides a favourable backdrop for Chinese NGOs moving into overseas operations, but it is definitely not the only driver.

Looking Ahead

Most of the facilitating factors for the internationalisation of Chinese NGOs cited above are unlikely to fade in the short to medium term. Especially during the current pandemic, the degree of international engagement by Chinese NGOs, which have been providing donations and participating in online conferences with both developing and developed countries, is quite unprecedented, further confirming the growing trend of internationalisation.

However, these dynamics might change once the Chinese state becomes more involved in the internationalisation of Chinese NGOs. During the COVID-19 pandemic, fundraising for donations to other countries has been controlled by the Chinese state apparatus, and only a few public foundations are authorised to fundraise publicly for international projects. This demonstrates the government’s ability to interfere with international donations, even without establishing any formal regulation. As the size and scale of Chinese NGO engagement overseas develop, it is expected the Chinese Government will take measures to regulate the sector. It is also worth watching the development of the South–South Cooperation Assistance Fund (南南合作援助基金), an initiative started by the Chinese Government to assist developing countries in implementing their post-2015 sustainable development agendas. The fund has made Chinese NGOs eligible to apply for funding and will likely start allocating funds to them for international projects in 2021. This will become the most important official channel of funding for Chinese NGOs working internationally. How will these new financial resources and incentives change the dynamics of Chinese NGO internationalisation in terms of geographical presence, areas of concern, and approach? Will these measures and resources lead to more support and healthy competition or will they shackle the diversity of NGO behaviour? The answers to these questions will depend on how the Chinese state designs its regulations and manages funding to NGOs.

Aside from the direct government interference that affects NGOs within China, we should also pay attention to the development of NGOs themselves as this, by extension, will affect their ability to internationalise. China has no established Western-type INGOs with international development causes as their sole purpose; it is not even possible for a Chinese social entrepreneur to register with the Ministry of Civil Affairs as an NGO working solely for children in Africa. International projects are currently merely add-ons for Chinese NGOs, with domestic projects remaining the priority. The same factors that constrain or facilitate the development of NGOs in China will also affect their internationalisation. Chinese NGOs working internationally remain fundamentally Chinese, and their overseas behaviour does not go beyond the established boundaries of the domestic government–NGO relationship. The many organisational bottlenecks referenced above are caused by complex systemic problems that are unlikely to change in the near future.

Will the size and scale of Chinese NGOs’ international presence eventually be comparable with medium-sized INGOs like the one I used to work with? Considering the rapid development of Chinese NGO internationalisation over the past five years, I am optimistic that a few might be able to reach such a scale in the medium to long term. However, what is more important to consider are the causes for which NGOs fight, the approaches they take, and the resources they can leverage. In the end, what matters is the real impact Chinese NGOs can make on global public welfare. Such influence can only be achieved if the domestic development of Chinese NGOs is more robust and autonomous.

A Disappointing Harvest: China’s Opium Replacement Investments in Northern Myanmar Since 2009

The launch of the ‘Going Out’ strategy in 1999 precipitated more than a decade of rapid growth in Chinese outbound investment activity. From trivial levels in the late 1990s, Chinese outbound foreign direct investment (FDI) reached US$20 billion in 2006 before surging up to US$196 billion in 2016, according to data from the Ministry of Commerce (MOFCOM 2017; MOFCOM et al. 2007). The past several years, however, have seen China’s first major FDI retrenchment in the post–Going Out era, with MOFCOM-reported outbound FDI volumes down to US$137 billion in 2019 (MOFCOM 2020).

Much commentary on this shift has focused on the decline in outbound infrastructure investment and lending. Boston University’s Global Development Policy Center, for instance, reported, as of May 2021, a roughly 95 per cent drop in its database of lending commitments by China’s two major policy banks to governments, intergovernmental bodies, and state-owned entities between 2016 (US$75 billion) and 2019 (US$3.9 million) (Ray et al. 2021) [1]. More than half of the commitments in its dataset from 2008 to 2019 were for infrastructure projects (Ray and Simmons 2020). Large-scale infrastructure projects represent some of the most visible and well-publicised forms of Chinese outbound investment, with national-level government-to-government coordination, high project costs, and the involvement of China’s largest state-owned enterprises (SOEs).

The outbound activities of China’s small and medium-sized enterprises (SMEs) are more difficult to track. Domestically, SMEs are the bulk of the Chinese economy, accounting officially for more than 60 per cent of gross domestic product (GDP) and 80 per cent of urban employment as of 2018 (Xinhua 2019). But public data on Chinese SMEs’ outbound investment are limited. Their investments are necessarily more disaggregated and on a smaller scale; the average outbound investment project by SMEs from Zhejiang Province in 2014 (excluding joint ventures) was just US$96,700, according to Chinese SME researcher Chen Nan (2016: 31). Their projects also may not take place through channels captured in either Chinese or host-country reporting. The sectors in which they concentrate, however—such as low-end manufacturing, services, and agroindustry—can have significant effects on local livelihoods, with higher local labour intensity and, in the case of agriculture, substantial land requirements (Xia 2019: 13; China Textile Industry Federation 2018: 4; Shen 2013: 7). These are also the sectors in which transaction costs can diminish significantly with the types of connectivity infrastructure upgrades driven by large SOEs; in this way, facilitating outbound SME investment represents one channel by which the Chinese state actualises potential gains in economic integration from infrastructure investment.

The recent retrenchment in outbound infrastructure lending, in addition to shifting domestic economic circumstances, reflects a process by which the Chinese state has sought to absorb the lessons of earlier waves of outbound investment relating to challenges of political risk and commercial sustainability. Big-ticket infrastructure investments, largely undertaken by large SOEs, have attracted much research. SMEs can face many of the same basic challenges, but with a different set of strengths and weaknesses. Their status (in almost all cases) as private actors can offer greater flexibility and responsiveness in adjusting to shifting business conditions. However, as Wang et al. (2020: 33) note, they often have weaker access to a host of resources that SOEs can leverage in managing outbound investment risk: international business expertise and access to financing, as well as close state support.

China’s Opium Replacement Planting (ORP) program captures how those risks can end up severely harming the commercial profile of SMEs’ outbound investment, particularly when accompanied by promises of subsidies. Since the early 1990s, authorities in Yunnan Province have been supporting crop-substitution projects by Chinese firms in former opium-growing regions just over the border in neighbouring Myanmar and Laos. These efforts, undertaken almost entirely by Yunnan-based SMEs, expanded significantly in the mid-2000s with hundreds of millions of renminbi in support from central authorities and reached 2,000 square kilometres across both countries, according to Chinese researchers.

These efforts prompted fierce debates between Chinese supporters and international sceptics, who regarded the program as a driver of peasant dispossession and environmental degradation with little impact on opium cultivation (Kramer and Woods 2012). Less well known, however, is that, since 2009, civil war and market fluctuations have severely undermined the profitability of ORP firms’ investments in Myanmar, and ORP program subsidies proved a limited and at times unreliable tool for offsetting these risks.

Background and Early Stages

Assessing the fortunes of Chinese opium-replacement planting in northern Myanmar over the past decade requires a grasp of the complex political environment in Myanmar within which these initiatives take place. In the decades since achieving independence from the British Empire in 1948, the central government of Myanmar has never been able to fully assert political authority outside the central lowlands straddling the Irrawaddy River, which is the heartland of the Burman ethnic group. In the far northern hills, a number of ethnic armed groups (EAGs) have claimed authority over the China–Myanmar borderlands of Kachin and Shan states. In these regions, they contend for power with units from the Burmese army (the Tatmadaw), which has ruled the country intermittently for most of the past 50 years. The army retook power in a February 2021 coup from Myanmar’s most recent civilian government, which had been established during the early 2010s.

Conflict among these various power players in northern Myanmar has been entangled with the drug trade since the early days of independence. From the 1950s through to the 1970s, a succession of armed groups in the Shan State borderlands developed large-scale opium cultivation and trading operations to fund their activities, including anticommunist Kuomintang (KMT) units in the 1950s that had fled to Myanmar after their defeat in the Chinese Civil War (1945–49), and Tatmadaw-aligned militias in the 1960s and 1970s (Lintner 2000). The Communist Party of Burma (CPB) emerged as a major sponsor of the opium trade during the 1980s, after the Chinese Communist Party withdrew its support for the organisation after the end of the Cultural Revolution in the late 1970s. The CPB’s embrace of opium cultivation drove dramatic production increases that would turn Myanmar into the world’s largest opium producer. After a mutiny in 1989, those production networks would be inherited largely by the CPB’s three successor groups in Shan State: the United Wa State Army (UWSA), based in the Wa Hills opposite Pu’er Prefecture in Yunnan, and the most powerful EAG in northern Myanmar today; the Myanmar National Democratic Alliance Army (MNDAA), based in the Kokang region opposite Lincang Prefecture in Yunnan; and the National Democratic Alliance Army (NDAA), based in the area around Mongla Township opposite Xishuangbanna Dai Autonomous Prefecture in Yunnan (UNODC 2001: 49, 2017: 3; Lintner 2019: 10).

Yet expanding opium cultivation in the borderlands was not welcomed so enthusiastically within China. The cross-border narcotics trade between Myanmar and China first began growing from the late 1970s, alongside the expansion of cross-border exchanges and broader transformations in Chinese society that followed the end of the Mao Zedong era and the opening of the Chinese economy in the late 1970s. These flows continued to expand during the 1980s amid the CPB-led opium boom and emerged as a major public health concern in neighbouring Yunnan Province, which in response developed some of the China’s earliest drug addiction treatment centres and professional anti-narcotics expertise (Chin and Zhang 2007: 7–9; 2015: 210, 230–31).

As a result, the drug trade has become an important issue in China’s relations with the EAGs. Chinese authorities supported crop-substitution efforts as part of their formal narcotics-control toolkit starting in the early 1990s, in the EAG territories of northern Myanmar and the borderlands of northern Laos. The first effort was a series of small-scale experiments in the 1990s and early 2000s undertaken by border counties in cooperation with neighbouring EAG elites in northern Myanmar and Laos. Central authorities consolidated and built on these efforts with a 2006 order that authorised a series of new regulatory supports, administered by Yunnan Province and funded largely by the Chinese central government. Most important was the provision of tax exemptions and import quotas, which offered legal importation routes for crops like rice, corn, and sugar that would otherwise have to rely on small-volume border trade or smuggling to avoid severe import tariffs [2]. The focus remained on EAG-controlled territories in the borderlands. EAG leaderships in Wa, Mongla, and Kokang forcibly banned opium cultivation in their territories during the 1990s and early 2000s, partly in response to Chinese and international pressure. The 2006 order spoke of eradicating opium cultivation and heroin production in target territories within 15 to 20 years by supporting local economic development, starting with agriculture and expanding eventually into industries like processing, mining, and tourism (State Council 2006).

The expansion of the ORP program in the mid-2000s prompted a surge of agricultural investments by Chinese firms in borderland EAG territories. The Yunnan Bureau of Commerce (BOFCOM) reported that the number of ORP program enterprises increased from 71 in 2005 to 198 in 2009, and statistics from a Chinese academic reported 127 ORP-backed firms with investments in Myanmar in 2009, more than three-quarters of which targeted EAG-administered ‘special regions’ (Yunnan BOFCOM 2009; Shao 2013: 190). Investors with ORP program affiliations received hundreds of millions of renminbi during this period in import tax exemptions and direct subsidies for their projects, and major crops registered under sponsored projects included rubber, corn, rice, and sugar, among others (Yunnan BOFCOM 2009; Shao 2013: 186). According to the Opium Replacement Office at the Yunnan BOFCOM, in 2010, the bulk of these firms were ‘small and medium enterprises … from Yunnan border regions’ (Yunnan BOFCOM Opium Replacement Office 2011: 235). Even ORP program quota applicants from the provincial capital of Kunming had a median registered capital—representing capital subscriptions by shareholders, and often exceeding the amount of capital actually injected by shareholders—of just over US$1 million in 2009. In contrast, one of the largest firms participating in the ORP program, the provincially owned rubber giant Yunnan State Farms, had registered capital that year of US$121.5 million (Kunming BOFCOM 2009).

ORP Firm Struggles in the 2010s

The background paper for the Second International Conference on Alternative Development in 2015, an event sponsored by the United Nations Office on Drugs and Crime and the Thai and German governments, cited influential research by Kramer and Woods (2012) to state that the ORP program ‘mainly benefits local authorities and Chinese businessmen instead of the local opium growing communities’ (ICAD-2 2015: 14). But firms which participated in the investment surge of the late 2000s have faced enormous commercial challenges over the past decade. The resumption of conflict and a decline in rubber market prices made production in Myanmar riskier and less profitable for many firms—challenges the limited and at times unreliable subsidies associated with the ORP program could only partially offset.

The ORP program’s expansion during the late 2000s took place in a period of relative stability in northern Myanmar produced by ceasefires between the Tatmadaw and major EAGs from 1989 onwards. It was by no means a risk-free zone for investors. They still faced concerns about expropriation and threats to physical safety in a region where the key power players were military and paramilitary groups (Liu 2011), but the ceasefires promised at least a minimal level of political stability.

From 2009 to 2011, however, Tatmadaw ceasefires with the MNDAA in Kokang and the Kachin Independence Army (KIA) in Kachin State broke down and the ensuing clashes displaced hundreds of thousands of civilians (Buchanan 2016: 19; Buckley 2009; The Irrawaddy 2014). The following decade has continued to see waves of conflict between the KIA and its allies and the Tatmadaw (Qiu 2014). These conflicts turned some of the sites of Chinese agribusiness investments in these regions into battlefields, with new risks of landmines, property confiscation, and more widespread extortion in the form of protection fees (Lushui County BOITIT 2011; SAFE Yunnan Branch 2018; Shao 2013: 194–95; Woods 2018: 19; Yang 2014: 90). In August 2012, Yunnan BOFCOM Vice Minister Yang Hui described the cumulative effects of the turmoil on ORP firms in these terms: ‘Because the situation in northern Myanmar is not stable, and there are many elements of instability and hidden threats to safety, the confidence of firms has suffered a heavy setback’ (Yang 2013: 66).

Rubber tree plantation in Myanmar. (CC) Dale Winling.

The resumption of conflict coincided with a major re-evaluation of the ORP program’s pace of growth. Public statements by officials and businesspeople involved with the program described a ‘three no-increases’ (三个不增加) policy instituted around 2009–11: ‘No increase in the number of ORP firms, no increase in the number of ORP products, and no increase in ORP planted land’ (Menglian County BOICIT 2012). Public data on firm-level ORP quota applications suggest the three no-increases policy largely closed off the program to firms that did not at least claim to have already established agricultural investments in Laos and Myanmar by 2009 (Dehong Unity News 2019; Kunming BOFCOM 2019; Lincang BOFCOM 2019; Pu’er Daily 2019; Xishuangbanna BOFCOM et al. 2019). Conflict was at least one of the motivations for this policy’s establishment, as acknowledged by local Chinese authorities in Dehong Dai and Jingpo Autonomous Prefecture, which borders KIA territory (Dehong BOFCOM 2017).

Meanwhile, ORP firms cultivating one of the program’s most popular crops, rubber, suffered in the 2010s from plummeting market prices. The expansion of central government support for ORP investments in the mid-2000s came amid a decade of surging rubber prices and expanded domestic rubber demand within China, with one Singapore-based global benchmark seeing a real increase of more than 500 per cent (IMF 2016; OECD n.d.). Yunnan is itself one of China’s major rubber-producing regions, and a wave of local producers established new projects in Myanmar and Laos with ORP support amid the program’s expansion, turning rubber into one of the program’s signature crops. The bulk of these investments in Myanmar were concentrated in Wa and Mongla—areas unaffected by the fighting.

Rubber trees take five to seven years before planters can start harvesting them for latex, so plantations established in the mid-2000s would be able to begin producing rubber around the early 2010s. But the rubber price peak in 2011 was followed by a rapid decline, driven by global oversupply. Global rubber prices have remained beneath US$1.00 per pound since April 2014 and averaged US$0.75 per pound in 2019—a real decline of 70 per cent since 2011 (IMF 2016). This drop has severely hampered the commercial profitability of rubber investments in northern Myanmar. A People’s Bank of China researcher in Yunnan reported in 2014 that, ‘even under quota benefit policies, prices for cross-border imported rubber are less than costs’ (Ma 2014: 258). Representatives from a large ORP program–sponsored rubber investor said in an interview in 2018 that they had been unsuccessfully seeking to get a government price floor on rubber in the midst of volatility, as the prices they were receiving for their output had dropped by two-thirds since 2010–11 (Interview #1).

Firms planting crops with ORP program support also contended with limits on the availability of subsidies. The central government order that initiated the ORP program’s expansion in 2006, as well as subsequent implementation regulations from Yunnan Province, proposed a host of different incentives for firms: import quotas and tax exemptions, per-unit subsidies for the total planted land, interest reimbursements, subsidies on financial guarantees, and insurance. As mentioned above, the most important of these supports during the 2010s were import quotas and tax exemptions. However, deeper constraints for SMEs around financing outbound investment, such as an absence of sufficient domestic collateral, hampered the utility of proposed financing supports, while subsidy volume more generally declined over time (Interview #2; Ma 2014: 258; People’s Government of Mengla County 2011; Ruan et al. 2019: 10). Firms persistently expressed reservations that their quotas did not cover their production needs and they sought to enlist provincial and local authorities to lobby the central government on their behalf, with limited success (Bao 2018; Dehong BOFCOM 2018; Yunnan BOFCOM 2019a).

To be sure, it is not unusual for firms and local officials to want more quotas, and for central funders to view matters differently. Indeed, in both Laos and Myanmar, the program faced serious challenges around monitoring the proper use of quotas, as firms overreported the amount of planted land to claim larger quota volumes or resold quotas on secondary markets (Lu 2017: 732; Li 2015: 90; Shao 2013: 24, 197; Interview #3; Shi 2016). BOFCOM authorities themselves likewise acknowledged the risk of encouraging firms’ overdependence on subsidies: Vice Minister Hui in 2012 stressed that, in the program’s implementation, ‘support via the market should be primary [第一位], and government financial assistance should be secondary [第二位]’ (Yang 2013: 66).

But SMEs’ concerns about quota support also touched on a more basic issue around the timing of import windows. Firms seeking to import to China from Myanmar or Laos under the ORP program were granted authority to do so in specific windows during the year, but the central government’s release of quotas to firms was slow and those windows did not necessarily align with firms’ needs (Lu 2014: 224). Representatives from two firms with ORP rubber quotas in Laos and Myanmar noted in interviews in 2018 that slow government approval processes and narrow 10-day rubber import windows added difficulties in getting their crops home (Interviews #3 and #4). Poor import window timing also forced rubber producers to store their product for extended periods—an added expense that also degraded product quality (The Irrawaddy 2015; Shi 2016).

Looking Ahead

The ORP program’s expansion and struggles underscore the consequences of subsidising outbound SME investment with minimal regard to their heightened risk profile. In the early years after the post-2006 policy expansion, hefty government subsidies and high prices for commodities like rubber and sugar attracted a surge of overly optimistic investments by Chinese firms with limited resources and expertise. From the start, the Yunnan BOFCOM’s Opium Replacement Office reported, in 2010, that ‘enormous political, economic, and safety risks’ meant that ‘large domestic enterprises stepped back’ from ORP program participation, while the SMEs attracted by the program were often not up to the task, as ‘their capabilities [实力] are limited … management and operations capacity levels and reliability among certain firms are low’ (Yunnan BOFCOM Opium Replacement Office 2011: 235). The rubber and sugar price declines exposed firms that had overextended themselves in these crops. Other firms suffered substantial losses associated with the civil war. In 2017, the Yunnan BOFCOM described the cumulative effects of these struggles on participating firms in these terms:

At present, replacement planting firms face increasing downward economic pressure, fairly capricious policies by cross-border governments, stubbornly high investment risks, and a tumultuous political environment in northern Myanmar. Firms’ burdens are fairly heavy and their interests have suffered harm, and the energy of firms in replacement planting work has shown a level of decline in comparison to the past. (Yunnan BOFCOM 2017: 260)

The ORP program persists today with modestly reduced ranks (in at least some prefectures) and a stronger public campaign around reducing quota abuse and reasserting the central place of drug control in the ORP program’s mission (Everbright Securities 2020; People’s Government of Dehong Dai and Jingpo Autonomous Prefecture 2019; Yunnan BOFCOM 2019b). Official statements suggest there is no likely expansion of quota support on the near horizon (Yunnan BOARA 2020). Meanwhile, major resource-based growth sectors surfacing in Chinese outbound SME investment in Myanmar—like watermelon, bananas, and rare earth elements—have not relied on systematic subsidy schemes for their expansion, with the exception of some ORP program support for the banana industry.

When companies receive subsidies, it increases the risk of ill-advised investments that firms would not consider without state support. But lower expected risk profiles for unsubsidised SMEs’ outbound investment do not mean risks are absent. Consolidation and tighter regulation in the rare earth mining industry in China have encouraged an influx of Chinese rare earth SMEs into Myanmar since the mid-2010s, and these operators have had to navigate several temporary bans on rare earth trade along the Yunnan border since 2019 (Roskill 2019a, 2019b). Fighting in Kachin State has disrupted the banana trade periodically across the past decade, while peasant dispossession and environmental degradation associated with banana plantations have attracted local protests and political declarations around intensified regulation, though the concrete impacts of these pledges were murky even before the February 2021 coup (Hayward et al. 2020; Liu 2011; Qiu 2014; Hu and Luo 2020). In this sense, even as the ORP program stagnates, it remains a salient example of the importance of focused risk-assessment training and capacity for Chinese SMEs in their outbound investment activities, in Myanmar and elsewhere.


[1] Some critics (for instance, Kenderdine and Yau 2020) have noted the growth of financing outside Chinese policy banks, as well as potential incompleteness in the data for 2019, and questioned whether the Boston University (BU) team’s data can support broad claims about trends in Chinese outbound infrastructure financing. But the broad decline in the BU analysis does align with trends observed by other analysts (see Mingey and Kratz 2021).

[2] ‘Border resident trade’ (边民互市) offers exemptions on import and value-added taxes but must be carried out by border residents in small volumes (< RMB8,000/day) (China Customs Administration n.d.).

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