Green Horizons? China’s Global Energy Finance in 2022

A new update to the China’s Global Energy Finance (CGEF) Database, managed by the Boston University Global Development Policy Center, estimates that from 2000-2022, China’s two development finance institutions (DFIs)—the China Development Bank (CDB) and the Export-Import Bank of China (CHEXIM) — have provided 331 loans, totaling $225 billion for 65 foreign governments for energy projects around the world.

For the year 2022, the CGEF Database recorded a total of zero new energy sector loan commitments from CDB and CHEXIM to foreign governments, signifying two consecutive years of no new lending.

The CGEF Database is an interactive data project that provides an estimate of lending commitments for global energy projects from CDB and CHEXIM. The commitments tracked are international sovereign loans, which means the recipient is a public entity, public majority owned or a private entity with a sovereign guarantee. It is important to note that CGEF Database loan amounts are not equivalent to government debt, as the database tracks commitments, and not disbursement, repayments or defaults.

A new policy brief by Cecilia Springer, Ishana Ratan, Nathan (Yudong) Liu and Jia Gu analyzes the state of China’s global energy finance during this period of flux.

Main findings:

• From 2000-2022, CDB and CHEXIM provided 331 loans, totaling $225 billion, for 65 foreign governments for energy projects around the world.
• 2022 marks the second year in a row that China’s DFIs did not issue new loan commitments for the energy sector overseas.

Figure 1: China’s Global Energy Finance, 2000-2022

• Despite the decline since 2016 in loan commitments and size, the amount of energy finance China’s DFIs have provided surpasses the energy sector lending offered to public entities by any other global lender and significantly outstrips the cumulative energy sector lending by the World Bank.
• The largest share of existing loan commitments from China’s DFIs has gone to exploration and extraction activities in the energy sector.
• Power generation received the second largest amount of lending commitments across energy subsectors. In terms of energy source, fossil fuels have received the most support, with coal, oil and gas representing 73 percent of the lending. Oil was the largest energy source by amount of finance, followed by gas and liquefied natural gas (LNG).

Figure 2: Flows of Energy Sources to Energy Subsectors (billion USD)

• China’s commitments to stepping up support for green and low-carbon energy have yet to emerge in the form of development finance.
• Suspension and cancellation of China’s energy projects underscore a paradigm shift in both global energy decision-making and China’s overseas financing practices. This is especially pertinent for coal and hydropower ventures, given environmental concerns.
• Project-level issues reflect a larger trend in China’s overseas lending towards a ‘small is beautiful’ approach and alternative types of finance and investment besides development finance.
• Experiences in the energy sector have in part led China to emphasize sustainable and environmentally conscious development.

Despite China’s 2021 commitment to step up support for green and low-carbon energy in developing countries, a shift towards renewable energy development finance has yet to emerge. As the world recovers from the COVID-19 pandemic and as the costs of renewable energy decrease, China’s established financial and technical prowess is uniquely positioned to foster green energy transitions abroad. In addition, China’s recent Belt and Road Forum indicated significant support for scaling up overseas green-energy related activities.