President Xi Jinping launched the Belt and Road Initiative (BRI) in 2013. In total capital, China is now the largest investor in least‐developed countries and in developing Asia, and the fifth‐largest investor in Africa. Motivated by concerns about the climate change consequences of China’s overseas investments, this paper identifies and evaluates Chinese policies governing China’s overseas investments and analyzes how those policies influence environmental outcomes in recipient countries. Policies governing domestic investments are analyzed in order to clarify inconsistencies between domestic and overseas policies. Key findings are that the Chinese government’s environmental policies governing domestic investments are more stringent than those governing overseas investments. Chinese environmental overseas investment policies are mostly voluntary in nature so long as firms comply with host country regulations. Disclosure and transparency of information about China’s investments is opaque. Even if there is a failure to comply with host country regulations, there do not appear to be serious enforcement consequences. Finally, China encourages overseas investments in clean energy as well as exploration and development of higher carbon industries and fails to specifically restrict or prohibit investment in carbon‐intensive and fossil fuel industries in its overseas investments, revealing a discrepancy between policy for domestic and overseas investment.
- Chinese policies governing the environmental dimensions of overseas investments are much weaker relative to their policies governing domestic investments.
- Chinese policies specifically aimed at limiting emissions of climate‐altering greenhouse gases from China’s overseas investment do not exist.
- China encourages overseas investments in clean energy as well as exploration and development of higher carbon industries and fails to specifically restrict or prohibit investment in carbon‐intensive and fossil fuel industries in its overseas investments, revealing a discrepancy between policy for domestic and overseas investment.
- China’s regulatory approach for overseas investments has shifted from ex ante review to management of the whole outbound investment process, inclusive of interim and ex post monitoring and supervision. The review process relies on self‐disclosure of information by Chinese firms.
- If the Chinese government’s default position is that Chinese firms and banks must adhere to recipient country policies, then recipient countries must put in place sound environmental governance regimes if they wish to pursue a greener development pathway.