Many investors reportedly are willing to bet that a great environmental rehabilitation in smog-choked China could bolster its stock market.
And the added rocket fuel to boost China’s markets is President Donald Trump’s decision to pull the U.S. out of the Paris climate accord, “ceding leadership over the global green agenda to China and Europe,” the Financial Times reported.
So far no countries have said they will follow Trump's lead, which has been widely condemned, with China and Europe pledging to unite to save "Mother Earth" in the face of Trump's decision to take the world's second largest carbon polluter out of the Paris climate change pact, Reuters explained.
“What the Chinese dream is about is blue sky and blue water,” Karine Hirn, partner at EastCapital, an emerging market asset manager, told the FT. “Investment into the global leaders in environmental protection is very exciting,” Hirn told the FT.
The “scale of environmental degradation in China — the world’s biggest emitter of greenhouse gases — has created an unstoppable “green” momentum galvanised by social pressure and reinforced by Beijing’s regulatory will,” several analysts told the FT.
This means that "there is no chance that Beijing could follow the U.S. and back out of the 2015 Paris agreement to combat climate change," Wang Yao, director-general of Beijing’s International Institute of Green Finance, told the FT.
“The U.S. is pulling out of the Paris accord . . . and this makes China into a leader, but really we are just doing what we must do for our own domestic reasons,” Wang told the FT. “We face a very serious environmental challenge so we must continue with green development.”
However, there are other investing ramifications from Trump's decision to pull out of the Paris climate accord, Reuters warns.
To be sure, Trump's controversial move will affect foreign direct investment (FDI) and may lead to investor-state disputes, the head of investment at the U.N. trade and development agency UNCTAD has warned.
James Zhan, senior director of investment and enterprise at UNCTAD, said that U.S. policy was an important influence in the global pattern of FDI flows such as crossborder corporate mergers and investment in start-up projects abroad.
"We cannot quantify it but we see there will be an important impact on global FDI and on FDI into the U.S. as well," he said, referring to Trump's announcement.
Many countries have signed up to investment treaties that protect the rights of companies, allowing firms to sue a government in an ad hoc arbitration if they feel their rights have been abused, such as by a change in the legal basis on which their investment was made.
So-called investor-state dispute settlement (ISDS) is intended to reassure investors but it is controversial because it gives companies rights over governments, and has led to huge payouts, such as Ecuador's agreement to pay Occidental Petroleum Corp roughly $980 million for seizing one of its oil fields.
The full impact of Trump's decision still depended on whether other countries would follow the U.S. lead and decide to withdraw from the pact, he said. Many countries had already put policies in place relating to the Paris deal, he added.
"And now what are they going to do? Are they going to adjust for that? Investors have already envisaged the investment prospects and the business prospects and the potential benefit from the policies that have been put in place."
(Newsmax wires services contributed to this report).
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