Grist Magazine: China Syndromes - Will hard-won environmental and social gains survive China's economic rise?

By John Elkington and Mark Lee
23 Aug 2005

The way China has catapulted itself onto the Monopoly board of global capitalism has caught most Western leaders on the hop. Like Butch Cassidy and the Sundance Kid looking back at their pursuers, top U.S. and European Union businesspeople are wondering, "Who are those guys?"

After all, how much do we know about the China National Petroleum Corp., which yesterday bid $4.18 billion for PetroKazakhstan, a Canadian oil company with big reserves in Central Asia? Or Haier, which earlier this year tried to nab U.S. white-goods company Maytag? Or Lenovo, which bought IBM's PC business? How do you pronounce corporate acronyms like CNOOC (the China National Offshore Oil Corp., which recently tried to purchase Unocal), SAIC (the Shanghai Automotive Industry Corp., which fought Nanjing Automotive Corp. for Britain's Rover), or TCL (the TV company that bought France's Thomson Electronics)?

China has been a global trade presence since well before Marco Polo trekked there, but, as the recent flurry of successful and attempted acquisitions of major Western brands suggests, its influence has surged of late. If you like the German spectator sport of schadenfreude, one delicious consequence of this is watching presidents, prime ministers, and CEOs from other nations scramble for position in the rapidly rearranging global business turf. Countless commentators have raised questions about the economic and global security implications of this rearrangement, but the murmur about the potential environmental and social consequences has been far more subdued.

Take CNOOC. Earlier this month, the company withdrew its $18.5 billion offer to buy Unocal in the wake of a political firestorm in the United States. That firestorm was triggered not by the company's corporate-responsibility record, which would have been a reasonable subject for discussion, but rather by the idea of selling off a U.S. oil company that some regard as a national strategic asset. On that issue, we go along with Thomas Friedman, who wrote in The New York Times that, "if China wants to overpay for a second-tier U.S. energy company, that's China's business. Anyway, the more starved Americans are for oil, the sooner we will adopt alternatives and get off this drug once and for all."

But Friedman made a deeper point -- one that's not going away with the CNOOC bid off the table. As he put it, China and America have become economic "Siamese twins." He writes, "We have slipped into a symbiotic relationship with another major power that is neither a free market nor a democracy." That, surely, is the real issue. How can we help bring China -- and other emerging economies -- up to speed on environmental, human-rights, and anticorruption protections?

One major obstacle to doing so is the hypocrisy of many Western approaches to globalization. After years of insisting they were 100 percent committed to free markets and no-holds-barred globalization, political and business leaders in the U.S. and E.U. are having their bluff called by China, Inc. From the East looking West, it's increasingly clear that, in fact, Americans were 100 percent committed to Americanization, Europeans to Europeanization, and so on. It's hardly surprising, then, if some Chinese business leaders view Western concerns about corporate social responsibility and sustainable development as little more than protectionist trade barriers.

Still, that hardly makes legitimate concerns about the environment and worker rights disappear. Today's China is awash in contrasts. The newest factories, whether churning out cars or pharmaceuticals, are among the best in the world. At the same time, the country has some of the worst sweatshops and some of the most dangerous working conditions; think of the endless stream of coal-mine disasters that kill hundreds, if not thousands, of Chinese miners every year.

The civil society and nongovernmental-organization (NGO) sectors are gradually gaining their feet, but those feet are still tightly bound by government controls that massively constrain NGO evolution and censor what such organizations can say. Instead of expanding civil liberties and liberalizing economic policy simultaneously (as some other governments are doing), China's leaders are trying to increase economic health while maintaining tight political controls -- in the hope, apparently, that wealth will suppress the nascent appetite for democracy.

It's hard to say whether this high-stakes gamble will succeed. On the one hand, Public Security Minister Zhou Yongkang recently told a closed meeting that 3.76 million Chinese took part in 74,000 mass protests last year alone. On the other, such public activism can hardly be taken for granted; the London Times reported last week that China has created elite police squads in 36 cities to crush protests.

What is certain, though, is that anything that enables China to operate without civil-sector watchdogs should make the rest of us uneasy, not just about the nation's growing economic clout, but also about its environmental reach. (Air pollution from the country's great urban-industrial concentrations is now turning up as far afield as Canada. And that's to say nothing of the country's coal-powered carbon-dioxide emissions that will help accelerate global climate change.) In a July 2005 survey by Toronto-based polling company GlobeScan, over 300 sustainability experts worldwide were asked whether they thought China would adopt the "best environmental and energy technologies and practices available." Forty-four percent thought it unlikely, against 28 percent who were confident that China would rise to the occasion.

One of the optimists is eco-designer Bill McDonough, whom we bumped into in Beijing, at the Fortune Global Forum this May. As chair of the China-U.S. Center for Sustainable Development, he believes China will be forced to become a leading incubator of environmental innovation simply because the in-country collision between people's needs and the ability of natural systems to support them is already so acute. As he notes, "The Chinese have to build new housing for 400 million people in 12 years." General Electric Chair and CEO Jeff Immelt also sees China's impending crises as a huge opportunity for sustainability solutions, telling Fortune, "While Europe has been a driver for innovation in cleaner technologies, China promises to be its market."

Having met people from CNOOC, PetroChina, and Sinopec, it's clear to us that sustainable development will be a tough sell in China. That said, we share McDonough and Immelt's optimism, not least because of two meetings we had with Vice Minister Pan Yue, deputy director of the State Environment Protection Administration. He and SEPA have stalled dozens of major development projects that ignored environmental laws. The fact that anyone would even try to stop the juggernaut, let alone succeed, is encouraging.

We owe people like Pan all the support we can offer. We must use the oft-claimed leverage gained by engaging China as a trade partner to help its leaders and citizens fight for new rights and responsibilities. Otherwise, we risk having our own undermined.

London-based John Elkington is cofounder and chair of SustainAbility. He blogs at johnelkington.com.
Canadian Mark Lee is a director of SustainAbility and makes his home in San Francisco.