Agriculture & Forestry
Agriculture and forestry accounts for a relatively small percentage of China’s overall outbound investment, but this has been growing in recent years and the Belt and Road vision document states that China will “deepen cooperation in agriculture, forestry, animal husbandry and fisheries, agricultural machinery manufacturing and farm produce processing.”
In 2017, China’s National Development Reform Commission and Ministry of Agriculture jointly issued the Vision and Action on Jointly Promoting Agricultural Cooperation on the Belt and Road. This sets priority areas including technology sharing, trade and investment. Importantly, this vision document states:
- “Agriculture cooperation along the Belt and Road echoes goals on food and agriculture of the 2030 Agenda for Sustainable Development, and advocates the principle of mutual consultation, joint efforts and shared interests for a green Silk Road.” (II. Principles)
- “Concerted efforts are solicited to realize agricultural modernization with high efficiency, product safety, resource conservation and environmental consciousness.” (II. Principles)
- “China … encourages Chinese enterprises to take up social responsibilities and contribute to agricultural development along the Belt and Road by assisting the host country to advance agriculture, create employment opportunities, and improve livelihood.” (IV. Framework)
- “China is willing to make greater contribution to food and nutrition security and agricultural sustainability in the world.” (VI. Action & Future)
Chinese companies involved in overseas agriculture and forestry projects are subject to the policies and guidelines covered in the Standards section of this guide, as well as those applying to International Contracting. Likewise, banks financing such projects are expected to uphold Green Credit principles, as discussed in the Financial Sector section. Several companies also have their own internal policies related to environmental and social issues.
Agriculture
Both state-owned and private enterprises are active in overseas agriculture investment. State-owned companies tend to be involved in larger projects. For example, Yunnan State Farm has explored large-scale rubber investment in Myanmar, Cambodia and Laos.
China is also a major importer of agricultural commodities, including soybeans, rubber, palm oil, fruits, dairy and meat products. Major state-owned companies like China Oil and Foodstuffs Corporation and Sinochem are very active in trade of agriculture commodities. Chinese companies are becoming increasingly integrated into global agriculture supply chains from production through to processing and trade.
Although agriculture is a small portion of China’s overall global investment in terms of value, it is a potentially high-risk sector, especially when it concerns large plantations. This comes with implications for the land rights of local people, risks associated with chemical use and other types of pollution, and degradation of natural resources such as forests and waterways. In response, the China Association for the Promotion of International Agricultural Cooperation (CAPIAC) and Research Center for Rural Economy (RCRE) published Guidelines on China’s Sustainable Agricultural Overseas Investment (2018). CAPIAC is a non-profit organization which was previously affiliated with China’s Ministry of Agriculture and Rural Affairs. RCRE is a research center affiliated with the ministry.
In addition to reflecting existing Chinese state guidelines on outbound investment, the guidelines take into consideration international standards, such as the FAO Governance of Tenure Technical Guide 3 – Respect Free, Prior and Informed Consent. The guidelines provide instructions to companies with overseas agriculture-related investments and cover: establishing responsibility systems, selecting investment locations and projects, and building awareness of social responsibility. Among its guiding principles, the guidelines state that overseas agriculture investments should:
- Abide by international principles, including the principle of free, prior and informed consent and international practices related to conduct of environmental and social impact assessments.
- Respect the rights and interests of local communities in utilizing natural resources.
- Abide by local laws and regulations and disclose project information on a regular basis.
- Implement risk prevention and control systems.
- Respect the agricultural development paths and models of host countries.
- Ensure good relations with all stakeholders, including local communities, employees, related smallholder farmers and suppliers.
- Ensure that projects do not impact local food supply.
Chapter III, excerpts
(1) The projects shall be planned reasonably with detailed implementation plans. Based on sufficient communication and exchanges with local communities, the enterprises shall design the project appropriately with detailed implementation plans according to the local social, economic and natural resource conditions as well as the project planning and objectives agreed by both parties.
(3) The enterprise should never sign official documents with superior authorities before getting the recognition of the local communities and stakeholders.
The guidelines also make specific reference to legal compliance, environmental protection and management systems, resource use, employing local people, respecting women’s rights / gender equality, protecting workers’ rights, providing training, information sharing and transparency.
As with other industry association guidelines, the CAPIAC guidelines are not binding and do not contain penalty provisions for non-compliance. However, if you are concerned about a Chinese agriculture project you may draw on these guidelines in your communications with investors. You may also wish to draw on the Ministry of Agriculture and Rural Affairs’ Vision and Action on Jointly Promoting Agricultural Cooperation on the Belt and Road (discussed above).
Natural Rubber
Starting in the mid-2000s, global demand for rubber products increased dramatically, in large part due to increased car ownership and the need for natural rubber to make car tires. This led to expansion of rubber plantations across Southeast Asia and Africa, which in some cases have been connected to serious environmental and social impacts. China has been a major destination for much of this rubber production, and Chinese companies have expanded their role in global rubber supply chains, including production, processing and trade of the commodity.
In 2017, the Chinese Chamber of Commerce for Metals, Minerals and Chemicals Importers and Exporters (CCCMC) released its Guidance for Sustainable Natural Rubber. CCCMC is a non-profit industry association which was previously affiliated with the Ministry of Commerce, but it does not have regulatory powers. The Guidance was developed with support from the UK’s Department for International Development and had input from China’s Ministry of Commerce, various research institutes, companies, and NGOs. It is available in English and Chinese.
The Guidance applies to businesses that invest in, plant or process natural rubber, but it notes that upstream and downstream actors can also draw on the guide. The document states at the outset that it is voluntary. Nonetheless, it provides a useful framework for Chinese companies to identify, prevent and mitigate risks, establish due diligence systems, and conduct effective monitoring and reporting. The Guidance covers the full project cycle from planning through operation, and it provides guidance on dealing with risks connected to land tenure, indigenous people, labor, and the environment, among others.
Practical Advice: Framing your communications using the rubber guidance
As with the CCCMC guidelines on mining and minerals discussed earlier, if you are looking at a rubber plantation that is invested in or developed by a Chinese company, you may consider using the Guidance for Sustainable Rubber as a framework for evaluating the project and integrate the language of the Guidance into your communications with the company and other stakeholders. It may strengthen your advocacy if you inform CCCMC of the assessment results.
Some examples of important provisions include:
- Legal compliance: Abide by all applicable laws and regulations of the host country, respect international codes of conduct, law and conventions (Article 2.1).
- Community relations: Identify and engage affected communities, respect affected communities’ free, prior and informed consent. Deepen understanding of local cultures, values, religions and traditions, and avoid or appropriately mitigate impacts on areas of specific cultural and community value (Article 4.1.3). Take appropriate measures to prevent environmental, health and safety impacts on local people (Article 5.1.1).
- Land rights: Before making decisions that involve land acquisition, acquire a comprehensive understanding of land-related laws and regulations and carry out comprehensive assessments of customary tenure and user rights related to land, water, forest and other natural resources (Article 4.2.1). Forced displacement must be avoided unless absolutely necessary and should not leave people homeless or vulnerable to other rights violations (Article 4.2.2).
- Environment: Conduct thorough environmental assessments in advance of commencing a project, conserve biodiversity and fulfil the Zero Deforestation principle. Reduce adverse environmental impacts and avoid planting on sloping and high conservation value areas (Article 4.3.1). Protect rare and endangered species, reduce chemical use, and protect the forests (Article 5.2.1).
- Human rights: Avoid violating human rights and monitor the conduct of business partners to ensure they do not violate human rights, including the rights to free speech and assembly (Article 4.1.3).
- Indigenous peoples: Comprehensively evaluate impacts on indigenous peoples and respect their special status. Obtain free, prior and informed consent before implementing any measures that may affect them.
Forestry
China is a net importer of timber, much of which comes from countries with weak rule of law and poor regulation of their timber industries. China’s Forest Law (2020) includes a provision that states that companies producing or processing timber must keep records of movements of these products, and prohibits individuals and companies from purchasing, manufacturing or transporting timber which is known to be from illegal logging sources (Article 65). This requires further regulation setting out the detailed requirements of Chinese companies, but it is an important provision that requires timber to be legally sourced.
The first sector-specific guidelines for Chinese overseas investment were for forestry projects. The Guide on Sustainable Overseas Silviculture by Chinese Enterprises was published in 2007. This was followed later by the Guide on Sustainable Overseas Forest Management and Utilization by Chinese Enterprises. Again, these documents provide guidance to companies, but are not legally binding.
The 2007 Guide on Sustainable Overseas Silviculture by Chinese Enterprises sets out the fundamental principles and basic requirements for Chinese enterprises “engaged in realizing sustainable silviculture” (tree plantations). The guidelines were issued by China’s State Forestry Administration (now known as the State Forestry and Grasslands Administration) and the Ministry of Commerce.
As with all other guidelines on Chinese overseas investment, the guidelines state that Chinese companies must follow host-country laws and plantation activities must be in line with legal requirements of the host country. The guidelines explicitly state that logging must be conducted in a way that follows local law (Article 3.3.5) and high conservation value forest should not be illegally transformed (Article 3.3.5). These provisions are important, as plantations in areas with valuable timber are often connected to illegal logging and forest conversion.
The guidelines state that companies must operate according to clear and long-term plans that take into account the local situation, including social and environmental factors. These plans should consider the presence of high value conservation forest and the local land tenure situation. Companies are also urged to conduct forest and environmental protection planning. Local communities and government departments should be kept informed of plans for plantation activities. Importantly, the guidelines state: “Natural forest should not be turned to man-made forest” (Article 4.2.7.2).
The guidelines include specific sections on biodiversity and community development. This includes provisions for protection of endangered plants and animal species, protection of forest ecosystems and biodiversity, protection of worker’s rights and the rights of others that use the forest resources, and establishment of mechanisms for consultation with local communities. If these are areas of concern in a project that you are monitoring, it may be helpful to read the guidelines and assess the extent to which the Chinese companies involved are in compliance.
Practical Advice: Refer to international conventions
The silviculture guidelines include a provision that states that relevant conventions signed by the host country and China should be observed by Chinese companies (Article 3.1). This includes:
- Convention on Biological Diversity
- Vienna Convention for the Protection of the Ozone Layer
- Convention of Climate Change and Biodiversity
- United Nations Framework Convention on Climate Change
- International Convention for the Protection of New Varieties of Plants
- Convention on the Conservation of Migratory Species of Wild Animals
- Convention of the International Trade in Endangered Species of Wild Fauna and Flora
- Convention on Wetlands of International Importance Especially as Waterfowl Habitat
- Convention for the Protection of Birds
- Agreement Concerning the Cooperation on Plant Quarantine and Infestation and Diseases Prevention
- Agreement Concerning the Conservation of Migratory Birds and Their Habitat
- International Tropical Timber Agreement
- The Rio Declaration on Environment and Development
This means that if you are monitoring a tree plantation with Chinese investors, you can refer to host-country law and Chinese guidelines, as well as these international conventions and agreements.
The 2007 guidelines were followed by a further guideline in 2009, the Guide on Sustainable Overseas Forest Management and Utilization by Chinese Enterprises. This was again developed by the State Forestry and Grassland Administration and the Ministry of Commerce, with support from international NGOs.
The guidelines aim to encourage Chinese enterprises to rationally manage, utilize and protect overseas forests in order to play a positive role in sustainable development of global forest resources. They apply to all Chinese companies involved in overseas forest harvesting, wood processing and utilization, and related activities.
Chinese companies are encouraged to follow the provisions of the 2007 guidelines, as well as the 2009 guide, which adds additional detail regarding management, processing and transport; ecological protection; and community development. With regards to community issues, the guideline adds some important provisions:
- Article 6.1.2 When conducting the activities related to the forest management and utilization, the enterprises concerned shall give full consideration to the interests of local residents, and take appropriate measures to prevent the said activities from directly or indirectly infringing, threatening or undermining the ownership or right of use of local residents toward legal resources.
- Article 6.2.2 Encourage and support community residents to participate in major decision-makings of forest development. Reveal to local residents, as necessary, the management and utilization contents, progress and management situation during the forest management process, so as to promote the enterprises, foster good images and enhance credibility.
- Article 6.2.3 Respect the customs of local residents, establish the consultation mechanism with local communities and maintain friendly relationship with local residents.
- Article 6.2.4 Actively consult with local residents to designate and protect the forestland with specific cultural, ecological, economic or religious significance to local residents.