From nickel processing plants in Indonesia to rare earth mines in Myanmar, Chinese companies are expanding operations in sectors that environmentalists warn could have severe long-term consequences for rivers, air quality and local communities.

The shift is driven partly by stricter rules and excess industrial capacity in China, as well as by the lure of cheaper labor, weaker environmental enforcement and resource-rich landscapes in neighboring countries.

While Beijing has become Southeast Asia's biggest financier of clean energy, analysts say its green investments are often overshadowed by its involvement in some of the region's most polluting industries.

The result is a complicated picture: Chinese capital is helping to build solar farms and hydropower dams, but also fueling environmental disputes, health risks and rising political tensions.

It's also putting the spotlight on whether Southeast Asian governments are as committed to protecting the environment as they say.

"The reality is that most governments care more about economic development than they do environmental sustainability; exactly as the Chinese government did," Zachary Abuza, professor at the National War College in Washington, D.C., told DW.

Rising pushback in Indonesia

Since late last year, there have been protests and strikes at several Chinese-run nickel processing plants in Indonesia.

In July, Jakarta announced it would sanction companies for environmental violations at the sprawling Morowali Industrial Park nickel hub, run by the Chinese metals giant Tsingshan Holding Group, on the island of Sulawesi.

In February, the US government-funded security nonprofit C4ADS found that more than three-quarters of Indonesia's nickel refining capacity is controlled by Chinese companies, many with ties to the government in Beijing.

Two firms alone, including Tsingshan, account for more than 70% of Indonesia's refining capacity.

"A lack of domestic control leaves Indonesia reliant upon Chinese investment… which may limit the government's ability to hold the industry accountable," the report said.

Are Chinese firms polluting the Mekong River?

Pushback has also grown over allegations that Chinese firms are polluting vast stretches of the Mekong River through expanded rare earth extraction in war-torn Myanmar.

Communities in Laos and Thailand have complained in recent months about spikes in arsenic and other toxic metals.

In June, Thailand's pollution agency tested water in northern Chiang Mai and Chiang Rai — across the border from Myanmar's Shan State, a mining hot spot — and found arsenic levels nearly five times higher than international drinking water standards.

A report by the Institute for Strategy and Policy in Myanmar found that the number of rare earth mines in one state has nearly tripled to about 370 since the military coup in 2021.

Thai officials and parliamentarians have pressed Beijing to curb the environmental impact of these operations, prompting China's embassy in Bangkok to insist that all Chinese firms "comply with the laws of the host country and… conduct their business in a legal and orderly fashion at all times."

Pianporn Deetes, campaigns director at NGO International Rivers, warned that the risk is "expected to become even more concentrated and persistent" with the planned, Chinese-funded Pak Beng hydropower dam in Laos, which "could trap and accumulate polluted sediments in its reservoir."

China's green push

There's mounting criticism, but: China is also Southeast Asia's largest investor in renewable energy.

The international research organization Zero Carbon Analytics reported in June that China poured more than $2.7 billion (€2.3 billion) into clean energy projects in the region over the last decade, largely through the state-led Belt and Road Initiative.

However, Chinese companies are simultaneously expanding into pollution-heavy sectors.

An article in Nikkei Asia by Soon Cheong Poon and Guanie Lim of Japan's National Graduate Institute for Policy Studies noted that "pollution-heavy industries are leaving China… and settling in smaller Southeast Asian countries."

These include the waste-paper and iron and steel industries.

"Facing stricter environmental regulations and excess capacity at home, Chinese steelmakers have turned to Southeast Asia since 2017," the article said.

Lim told DW that avoiding US tariffs is another motivation for relocation.

"These plants, because of their scale, tend to create employment and linkages to the broader industrial ecosystem. However, many of these jobs are low-paying and pose health hazards," she said.

Fengshi Wu, associate professor in political science and international relations at the University of New South Wales in Australia, noted that several Southeast Asian states, especially Indonesia, have adopted "resource nationalism," introducing export bans to ensure minerals are processed domestically.

This allows them to gain value-added profits from resource extraction, rather than simply exporting the raw materials for foreign companies to make the bulk of the revenue.

"Indonesia would like to see more minerals processed inside the country. So comes the pollution, unless more effective environmental pollution measures are taken," Wu said.

The bigger picture

Ultimately, analysts say the issue comes down to supply and demand.

"China has some of the world's most experienced, capable companies in some of the most polluting, high-environmental-impact sectors," Juliet Lu, assistant professor in the School for Public Policy and Global Affairs at the University of British Columbia, Canada, told DW.

These sectors are increasingly shunned by development finance institutions but remain attractive to Southeast Asian governments eager for rapid economic growth.

With global competition for rare earth elements intensifying, Southeast Asia's untapped deposits are becoming more strategically valuable.

"The question that is not asked frequently enough is whether and how non-Chinese companies operating in the same sectors and country contexts do things differently," Lu said.

"If Chinese company violations are more egregious than others, where are the positive levers to push both in China and in the host country?"

At the end of the day, she added, China's funds, technical expertise and services are in high demand, and "countries like Indonesia, Malaysia, Myanmar, who want roads built, energy infrastructure established or mines opened have multiple reasons they turn to China."

Edited by: Srinivas Mazumdaru