By David C. Humphrey & Brian White in Beijing
Lord Mayor – Alderman David Lewis came to the Beijing on June 27 as part of his worldwide tour to promote investment and understanding for the City of London, the financial district within the broader London metropolis.
During an media interview in Beijing on June 27 (watch the video), Lewis touched on investment issues concerning the "green" industry, the development of western China, and most importantly the need for increased liberalization of the Chinese markets.
On Green Investments
Regarding questions about investment into green projects in China, the answers were largely in reference to the Clean Development Mechanism (CDM) arrangement in the Kyoto Protocol.
Basically, the arrangement states that Annex 1 countries, which are industrialized nations, may invest in projects that reduce emissions in the developing world as an acceptable alternative to more expensive emission controls in their own country. This reaches the larger goal of the protocol, which is to reduce global emissions. It provides an incentive to invest in countries that cannot invest in emission controls themselves.
For example, if an Annex 1 manufacturing firm estimates that the cost of compliance to their home country's environmental standards are too high, they can invest in a non-Annex 1 project for less.
There are three "flexible mechanisms" in the Kyoto Protocol:
1. CDM
2. CET (Carbon Emissions Trading) - parties can purchase carbon permits from other countries to meet their goals
3. JI (Joint Implementation) - much like the CDM but Annex 1 countries can invest in other Annex 1 countries; Eastern European investment from Western Europe is an example
The Lord Mayor cited that about 50 percent of the world's CDM projects are in China, which I confirmed on the UNFCCC website:
Of these CDM projects in China, approximately 37 percent have UK ties and investment. This is on par with global CDM investment of approximately 36 percent by the UK, no data was available for the City of London:
The Lord Mayor also talked about the City of London as being a hub for talent in green industries. Europe has already committed large amounts of capital to environmentally conscious products and services and London is the financial center of Europe. It is well-placed to take advantage of what the Lord Mayor considers to be a huge growth market.
On Development in Western China
The Lord Mayor was also asked about China's Western Development Strategy and it's opportunities for investment. Since the economic reforms of Deng Xiaoping, China's economy has boomed. However, China's economic success was only evident in the eastern part of the country, while the development of western provinces lagged behind considerably. He said that firms from the City of London would be eager and delighted to invest in China's western provinces, while also stressing the fact that foreign investment banks will need to be introduced into these provinces. This influx of foreign capital would rapidly spur the development of the economy in western China.
China's Western Development or "Go West" strategy was implemented in 2000 and many of its goals were highlighted in the country's 10th Five-Year Plan. Some of these goals include development of infrastructure and industry, as well as controlling widening development gaps. After the approval of the 11th Five-Year Plan in 2006, the Chinese government has aimed to expand the goals of the previous five-year plan even further. Pertaining to China's western provinces, the government wants to build new socialist rural areas, optimize and upgrade industrial structures, build a conservation-minded and environment-friendly society, as well as further system reform and enhance opening-up. The Lord Mayor made it clear that London was open to investing in China's developing western provinces.
On the Markets
The main point of the Lord Mayor's trip was advocacy on liberalizing Chinese markets. He called for the Chinese government to allow foreign companies to list on the Shanghai and Shenzhen exchanges and to open up to foreign investors. The Lord Mayor also encouraged more Chinese firms to list on the London Stock Exchange. When asked how he thought Chinese companies would perform on the London Exchange, he simply replied "have you seen the share prices of the 74 Chinese companies that are listed now? They are doing just fine." It is the City of London's goal to have 100 Chinese companies listed on the London Stock Exchange by 2010. All these points highlighted Lewis's message to increase openness, transparency, and cooperation between China and the City of London.
(China.org.cn July 4, 2007)
