Environmental Engineering Reference
In-Depth Information
automatic transmission. Chang'An was disappointed with this choice because it wanted
to compete directly with the Buick Sail, and Chang'An feared that the technology was too
outmoded. But Ford would not relent and together they built a new factory to produce
the Fiesta in Chongqing. When it went into production, 62 percent of the Fiesta parts
were domestically sourced. The Fiesta was not a success. So Ford reversed course, agree-
ing to introduce a version of the more modern Ford Focus in a new factory that was later
built in Nanjing.
Similar to the Shanghai GM case, all of the Chang'An Ford vehicles met the Euro 2
standard, which was required by the Chinese government as of 2000. The Chang'An Ford
vehicles did not go beyond the Euro 2 standard, so the pollution control technology in the
Chang'An Ford vehicles was not as good as it is in Ford's US vehicles.
Lessons for research and policy
Based on the prior evidence and the cases presented above, there are several lessons that
can be learned about the environmental impact of FDI in China. First, policy matters. In
the absence of any environmental policy, no pollution control technologies were trans-
ferred to China. As soon as the Chinese government imposed its
rst pollution control
standard, all of the foreign-invested joint ventures immediately complied and the
foreign companies transferred the technologies su
fi
cient to meet the local standards.
Interestingly, none of the companies went 'beyond compliance', even though the Chinese
pollution-control standards were considerably weaker than US or European standards.
So long as the technology was good enough to meet the standard, that level of technol-
ogy was all that was be transferred - a phenomenon that can be called the 'good enough
phenomenon' (Gallagher, 2006b). Thus a second lesson to be learned is that environmen-
tal technology transfer correlates to the incentives in place. The stronger the incentive in
place, the better the technological response. Third, no environmental technological
leapfrogging took place in the sense that the Chinese skipped over previous generations
of environmental technology. Instead, by virtue of the Chinese government decision to
start at the relatively weak Euro 1 standard and then gradually make the standard more
stringent (as had been done in Europe during the 1990s), the
rms responded by meeting
only the standard imposed by the Chinese government, and never surpassing it.
Another important lesson is that technological leapfrogging is not automatic.
Incentives that push and pull the technologies into the market must exist. These cases
demonstrate that environmental policy can create a highly e
fi
ff
ective incentive structure to
require that technologies are transferred from foreign
rms to their joint venture part-
ners, thereby pulling them into China from abroad. In the automotive cases discussed
above, although they did not choose to do so, it is also conceivable that the Chinese
fi
rms
could have bargained for pollution-control technologies themselves during their joint
venture negotiations. There is no evidence that the Chinese
fi
fi
rms asked for environmen-
tal technologies; nor is there evidence that the foreign
fi
rms o
ff
ered more environmental
technologies.
References
Araya, Monica (2002), 'Environmental bene
fi
ts of foreign direct investment: a literature review,' OECD Working
Paper ENV/EPOC/GSP(2001)10/FINAL.
CCICED (2008), 'Report of Task Force on Innovation in Environmental Technologies', China Council for
International Cooperation on Environment and Development, November.
