Sustainability central to booming China and Latin America trade

9 May 2013

BEIJING: Sustainability is increasingly fundamental to China’s rapidly growing trade and investment in Latin America, according to an important new study by the International Institute for Environment and Development (IIED).

The new IIED report analyzes China's increasing trade and investment in mining, agriculture and forestry in Latin America with a big focus on Brazil, Chile and Peru, revealing that sustainability is fast climbing up the agenda for the emergent partnerships.

Booming trade

According to statistics from the General Administration of Customs of China, China-Latin American trade grew to US$261.2 billion in 2012, reflecting a year-on-year increase of 8.18%.

With China steaming ahead to overtake the European Union as the biggest trading partner of Latin America by the end of the year, the report's findings are crucial to understanding how international regulations, investors, consumers and civil society are shaping sustainability in trading partners.

Sustainable standards

The report examines the growing impact of both international and national sustainability standards. It suggests that national standards may become more important, as they are central to both the performance standards of Chinese businesses as well as investment legislation. On top of this, the Chinese government does not yet endorse some international standards. 

National standards in China include its Outbound Investment and Cooperation guidelines and new Green Credit plan, which assess environment and social risks to help shape Chinese banks’ investment decisions.

Emma Blackmore, a lead author on the report said: "China’s demand for materials – from timber and minerals to soybeans, its desire to access new markets and its strategy of south-south cooperation and ‘soft power’ diplomacy are driving a boom in trade and investment that will have important implications for the sustainability of natural resource development in the region."

She added: "Chinese investors face steep learning curves with respect to local practices and the contexts in which they are operating – both cultural and regulatory. But they are showing signs of increased recognition of the importance of sustainability in informing investment decisions and in building long-term relationships and China’s reputation in the region. The key test will be putting these good intentions into practice."

Emerging power

Changhua Wu, Greater China Director, The Climate Group, said: “The outbound capital flows present a unique opportunity for China to drive and lead a global clean revolution. It is estimated that China will invest US$500 billion in the next five years overseas while importing about US$1 trillion goods and products from other countries. If sustainability is well adopted in those capital flows, you could imagine what a positive impact China will have not only on its own but also on global development.

“I am delighted to see that progress has been made by China to regulate its investment overseas by taking sustainability into serious consideration, as illustrated by this study of the Latin American region. With the Green Credit policy in place driven by national banking regulators, the Chinese banking sector is learning and building up its own capacity and experiences in sustainable banking. Some Chinese banks, such as the Industrial Bank, are already leading the way.

“A convergence is forming; the increasing capital power among emerging economies offers a chance to transform the economic growth paradigm towards a clean and green future. This a chance that shall not be missed for the sake of not only this generation but future generations.”

Read the IIED study

By Clare Saxon

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