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This document is downloaded from DR‑NTU (https://dr.ntu.edu.sg) Nanyang Technological University, Singapore. A tale of two states : explaining corporate social responsibility weaknesses of Chinese investments in Southeast Asia Gong, Xue 2017 Gong, X. (2017). A tale of two states : explaining corporate social responsibility weaknesses of Chinese investments in Southeast Asia. Doctoral thesis, Nanyang Technological University, Singapore. http://hdl.handle.net/10356/70665 https://doi.org/10.32657/10356/70665 Downloaded on 26 Sep 2021 04:37:29 SGT A Tale of Two States: Explaining Corporate Social Responsibility Weaknesses of Chinese Investments in Southeast Asia Gong Xue S. Rajaratnam School of International Studies Thesis submitted to the Nanyang Technological University in fulfilment of the requirement for the degree of Doctor of Philosophy 2017 Acknowledgements First and foremost, I would like to express my sincere gratitude to my two supervisors- Associate Professor. Li Mingjiang, for his insightful academic guidance, patience, and motivation; and Assistant Professor. Lee Chia-Yi, for her guidance, comments and support in the final stage of my thesis. Very special thanks are given to RSIS, who are supporting my studies and field trip, without which, this work could have never been produced. I am sincerely grateful to many people in RSIS who have supported me throughout the years of frustration and joy, notably Gong Lina and Zhang Hongzhou. I am indebted to Roxane, and Yee Ming, who supported my research. I am also grateful to many people in Singapore who have inspired me at different stage of my research. I also thank many interesting and helpful people that I had the chance to discuss with during my field trip in China, Indonesia, Japan, Myanmar and Vietnam. My heartfelt thanks go to my family, Gong Yunxia and Tan Ming Hui who have always believed in me and supported me throughout the years. Their love has given me enormous strength and courage in time of hardship and frustration. i Abstract China’s efforts in cultivating close economic ties with Southeast Asia, which often result in asymmetric interdependent relations, have been a key element in its regional strategy. However, in recent years, Chinese investments in the region have encountered local resistance and criticisms for their disappointing performance of corporate social responsibilities (CSR). This work seeks to address the question of why Chinese businesses’ CSR performance in foreign countries has been weak and problematic, despite the fact that the Chinese authorities have issued relevant laws and regulations that encourage and require Chinese companies to do well in fulfilling their CSR duties. This study proposes two hypotheses to answer the research question. First, the thesis hypothesizes that China’s fragmented institutional structure and incomplete political reforms hinder effective supervision and enforcement of the CSR activities of Chinese businesses overseas. Second, the paper posits that the development level of CSR regime in the target country also contributes to the Chinese companies’ CRS standard. These two major factors work together in shaping the CSR performance of Chinese investments in Southeast Asian countries. ii This study examines Chinese investments’ CSR in three regional countries, including Indonesia, Vietnam, and Myanmar. The findings of the three cases suggest that the lacklustre CSR performance of Chinese businesses can be broadly attributed to two major reasons – Chinese domestic institutional shortcomings and the under-developed CSR regimes in the host countries. This research is significant in that it explores a very important yet under-studied area in China’s international political economy. The proposed two-pronged approach may serve as a useful foundation for the field of CSR studies in general and future research on CSR issues of Chinese investments in particular. The study is also practically significant and policy-relevant given the fact that Chinese capital and industrial sector are increasingly moving out of China for investment opportunities throughout the world. Both China and the international society can draw many good lessons from the CSR experiences of Chinese investments in Southeast Asia. iii Contents 1. Chapter I - Introduction ...................................................................................... 1 1.1. Background ................................................................................................. 2 1.2. China’s investment in Southeast Asia .......................................................... 5 1.3. China’s policy changes on CSR ................................................................. 17 1.4. Research question and significance ............................................................ 20 Importance of the study ...................................................................... 21 1.5. Research Design ........................................................................................ 23 Case Studies ....................................................................................... 23 Structure ............................................................................................. 28 2. Chapter Two - An Analytical Framework ......................................................... 31 2.1. Introduction ............................................................................................... 31 2.2. Understanding Corporate Social Responsibility ......................................... 32 Definitions and concepts..................................................................... 33 Literature of China’s CSR performance in overseas investment .......... 36 2.3. CSR in China: adoption and adaptation ..................................................... 45 2.4. Examples of CSR from advanced countries ............................................... 56 2.5. Conceptual/Methodological Notes ............................................................. 62 2.6. Methodology ............................................................................................. 67 2.7. Analytical Framework: Explaining Variables............................................. 68 Domestic Institutional Shortcoming .................................................... 68 Development Level of an Effective CSR Regime in Southeast Asia.... 82 3. Chapter Three - PetroChina in Indonesia .......................................................... 86 3.1. Introduction ............................................................................................... 86 3.2. Economic Relations between China and Indonesia from Twentieth Century 90 3.3. Comparison between Chinese and other advanced countries in CSR ........ 105 3.4. Explaining Two Independent Variables ................................................... 112 Chinese domestic institutional shortcomings for the oil industry ....... 112 Indonesia’s CSR building ................................................................. 117 iv 3.5. Case Studies: CSR performance of PetroChina in Indonesia .................... 124 3.6. Conclusion .............................................................................................. 139 4. Chapter Four - China Railway Engineering Corporation in Vietnam ............... 142 4.1. Introduction ............................................................................................. 142 4.2. China’s Economic Relationship with Vietnam ......................................... 147 China-Vietnam Trade ....................................................................... 147 Investment ........................................................................................ 149 4.3. Impact of Chinese Investment on Vietnam ............................................... 155 Comparing Chinese CSR with Advanced Countries .......................... 156 Negative CSR Implementation by Chinese Companies ..................... 160 4.4. Explanation of Two Independent Variables ............................................. 169 Domestic Institutional Shortcoming in Construction Sector .............. 169 CSR regime in Vietnam .................................................................... 183 4.5. Case Study: China Railway Sixth Group Co., Ltd in the Cat Linh-Ha Dong Sky Train Project ............................................................................................... 191 4.6. Conclusion .............................................................................................. 210 5. Chapter Five - China Power Investment Corporation in Myanmar .................. 212 5.1. Introduction ............................................................................................. 212 5.2. Economic relations of China and Myanmar ............................................. 215 Sino-Burmese trade relations ............................................................ 215 5.3. CSR by Foreign Companies in Myanmar ................................................. 223 CSR practice by companies from advanced countries ....................... 223 CSR practice by Chinese companies ................................................. 227 5.4. Explaining two independent variables ...................................................... 232 Domestic background ....................................................................... 232 Myanmar’s CSR regime building ..................................................... 241 5.5. Case Study .............................................................................................