China's ExIm Bank Discloses its Environmental Policy

China's Export-Import Bank is a large and growing instrument of China's strategy in boosting trade and investment (and influence) abroad. As Todd Moss and I noted, it is now among the largest export credit agencies in the world, with primary commercial operations in 2005 exceeding those of the U.S., Japan and the UK.China's ExIm has been a driving force behind China's expansion into Africa, an expansion which is viewed with mixed reactions by other donors. On the one hand, Chinese export credit offers African governments new sources of finance, particularly in sectors where the supply of Western private or official capital has been insufficient to meet demand--sectors like infrastructure that Western donors have largely avoided in recent years in favor of health and education spending. On the other hand, there are concerns that China--which follows a "no strings attached" approach to lending--by providing an alternate source of financing, has the potential to act as a cartel breaker for Western donors' political, environmental or human rights conditions that come as part of the aid package. Much of this concern over China ExIm's involvement in Africa stems from a fear of the unknown. China, which is not a member of the OECD, is not party to the organization's agreements on transparency and environmental conditions, and China ExIm's lending practices, from its loan terms to its labor and environmental standards have been opaque and subject to much speculation. This may be starting to change.China ExIm adopted an environmental policy in November of 2004 but did not publicize it, doing little to assuage speculation about lax environmental standards. Just last month, however, in response to a request from Pacific Environment (a US NGO that advocates for the environmental protection of the Pacific Rim), China ExIm publicly disclosed its environmental policy for the first time. The policy (pdf, available in both Chinese and English, though only the Chinese version is official) is quite broad and includes provisions for improving environmental legislation and incorporating environmental management efforts in social and economic development programs. It also offers financial support in the form of tax returns/exemptions or capital investment to firms that actively abate pollution, and requires the use of advanced, more green technologies where available; for firms that use older, more inefficient technologies, the policy requires a phase-out plan. On a broader level, the policy stresses China ExIm's commitment to international cooperation in environmental affairs; that said, the policy does retain an emphasis on respect for national sovereignty amid international cooperation leaving certain room for interpretation.China ExIm's willingness to publicize some of its policies and conditions suggests that China may be recognizing the importance (and the value) of playing the role of a donor according to existing rules. Western donors should see this as an opportunity to increase dialogue with the Chinese and earnestly work to engage them in the OECD framework of increased disclosure, other rules and a more cooperative partnership.