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This article explores the magnitude, motivations, and mechanisms of the globalization of Chinese finance for energy. Like the national development banks and export–import banks of industrialized countries before them, China’s policy banks have provided large amounts of financing to Chinese energy companies to enter global energy markets. What is mo...
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Context 1
... based on the estimates the authors have compiled, China has provided national governments around the world with upwards of $128 billion in finance for energy between 2005 and 2014 through the CDB and the CHEXIM. Table 5 compares the global finance for energy the two Chinese policy banks and the major Western-backed multilateral development banks (MDBs) have offered. It shows that the total magnitude of Chinese global energy finance almost matched that provided by the World Bank, the ABD, the IADB combined during the time frame of 2007 and 2014, for which the comparative data is available. ...
Context 2
... (US$ million) % In other words, China has doubled the amount of global finance for energy projects to developing countries through the CDB and the CHEXIM between 2007 and 2014. Measured by the annual average provision of finance for energy around the world during the same period, as indicated by Table 5, the two Chinese policy banks were almost on the equal footing of their MDB peers combined. Therefore, it is unambiguous that China now leads the world in energy finance through the CDB and CHEXIM. ...
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Citations
... As China relies on its NOCs to ensure sufficient oil supply, the central government provides financial and diplomatic support for the NOCs" oil development and production activities. The Chinese policy banks, which are the main force in China"s global energy finance, drive the NOCs" overseas oil exploration and investments by offering a large amount of funds (Kong &Gallagher, 2017). For example, the policy banks provided $225 billion energy financial support between 2000 and 2017, of which over 70 per cent flowed to the NOCs" fossil fuels projects which contributed to easing the domestic energy shortage (Kong, 2019). ...
The COVID-19 pandemic has seriously challenged the global oil market, and coronavirus-induced oil prices crash, oil demand decline and global economic recession affect China’s oil supply as well. China has high oil vulnerability due to its rising oil import dependency which aggravates Beijing’s concerns about oil security, despite at a time of the pandemic-induced oil oversupply. This study uses the SWOT analytical model to identify the strengths, weaknesses, opportunities and threats in China’s oil sector, and the changes in opportunities and threats caused by the COVID-19 pandemic. The pandemic has brought multiple impacts to China’s oil security. Results from the analysis show that the existing opportunities such as oil investments in the Belt and Road Initiative (BRI) and domestic upstream opening-up have been weakened; new threats that the uncertainty over global oil demand-supply and decrease in global upstream investments have emerged; opportunities that an increase in domestic strategic petroleum reserve (SPR) and low-carbon development are rising amid the pandemic. Notably, the COVID-19 pandemic has demonstrated the vulnerability of the global oil market to systemic risks and accelerated the transition to renewable energy.
... Chinese lending and development finance have attracted considerable attention due to their large scale and significant economic, environmental and social impacts (Dreher et al., 2021;Horn et al., 2021;Iacoella et al., 2021;Kong & Gallagher, 2017). Although China is the largest official creditor worldwide, since neither the Chinese creditors nor their sovereign debtors tend to disclose the content of their loan agreements, we have limited knowledge on the terms and conditions attached to its lending. ...
We explore the extent to which Chinese lending to African countries promotes participation in Global Value Chains (GVC). Using loan-level data on Chinese and World Bank lending to 37 African countries between 2000 and 2018 we find that in contrast to World Bank lending, Chinese lending is associated positively with an increased GVC participation. This association is driven by infrastructure lending, which is likely to reduce trade costs, making it easier to participate in GVCs. This increased GVC participation is persistent over time and concentrated on the downstream sectors and, thus, is likely to contribute to export and productivity growth.
... Building on studies that understand energy systems as complex adaptive systems (CASs) [28,30,31], we expand beyond a reductionistic 'single-species' research approach [28] by creating a granular power plant unit-level network perspective that includes all main commercial entity types involved in CDI-and MDB-funded power plants globally. This is particularly valuable in the Chinese context as it has been suggested that CDIs and Chinese companies constitute a highly interlinked system in their internationalization with a considerably higher degree of state coordination in comparison to the approach from the West ( [6,18,[32][33][34]; supplemental text S1 for literature review). ...
Chinese investments into fossil fuel-based electricity generation capacity under its belt and road initiative will create lock-in for decades. Despite China’s recent rise as major public finance provider for the electricity sector of the developing world and the related environmental impacts, there is limited knowledge of the extent and characteristics of non-Chinese participation in Chinese-funded projects. We apply complexity theory approaches and network modeling on a new dataset that links funding activities of developmental institutions (Chinese developmental institutions (CDIs), Western-backed multilateral development banks (MDBs)) and the involvement of companies in different roles (i.e., as direct investors, contractors, equipment suppliers, and other service providers) to power plants around the world at the unit-level (1999–2020). Previous literature suggests that CDI funded projects show preference to Chinese commercial partners, but we find more than 70% include non-Chinese participants. This also applies for fossil-fuel based technologies where we observe increasing shares of international actors that together account for nearly every third commercial linkage. However, involvement levels and interaction patterns not only differ by technologies (fossils, hydro, non-hydro renewable, nuclear) but also by the time period and types of commercial partners and we observe overall convergence between the CDI- and MDB-supported power plant networks over time. The decreasing involvement of Chinese companies in CDI-funded projects, across technologies, in favor of increasing Western involvement, has important implications for development and climate policy on which we elaborate. However, the failure of both MDB and CDI funding to promote domestic company involvement in the recipient countries may be the largest failing of both sets of agencies in the pursuit of development outcomes.
... Conversely, a series of rescues by the Communist Party of China (CPC) enabled the HEC and, to a lesser extent, the DEC to maintain alignment with incumbent power generators and key technological capabilities. The CPC exercised power over personnel to appoint state-owned enterprise leaders with better performance in higher positions in the country's political hierarchy, incentivizing them to comply with government priorities (Kong and Gallagher, 2017). To rescue the HEC's financial distress, the CPC transferred the president of the DEC to the HEC to acquire knowledge and technologies to foster BMI (Yu, 2016). ...
The sustainability transition literature has paid scant attention to incumbent generation equipment manufacturers, constituting a complementary element in electricity systems. To fill this research gap, this study develops the concept of networked sustainable business model innovation (SBMI) as an analytical framework to explore how incumbent manufacturers change business models in response to changes in incumbent power generators and how these changes influence transitions in electricity systems. Based on case studies of three major Chinese incumbent power generation equipment manufacturers, our findings reveal that the networked SBMI by incumbent power generators and power generation equipment manufacturers can accelerate transitions to RES-E-based electricity systems in the segments where incumbent power generation equipment manufacturers have the capabilities to reorient and gain a competitive edge in the market. However, incumbent power generators can resume coal power projects unless incumbent power generation equipment manufacturers completely scrap coal power equipment production capacities.
... Over recent years, Chinese development finance has attracted considerable attention due to its large scale and significant environmental and social impacts (Brazys, Elkink and Kelly, 2017;Kong and Gallagher, 2017;Chen, Gallagher and Mauzerall, 2020;Dreher, Fuchs, Parks, et al., 2021;Iacoella et al., 2021;Yang et al., 2021), but limited attention has been paid to the effects of cofinancing. Existing literature drawn from other development programs shows that cofinancing can impact project outcomes (Chatterjee, Sakoulis and Turnovsky, 2003;Kotchen and Negi, 2019) and previous conceptual work highlights the existence of various types of cofinancing arrangements in Chinese development finance (Lin and Wang, 2017;Chin and Gallagher, 2019;Humphrey and Chen, 2021;Sauer et al., 2022). ...
... For this reason, cross-border deals are supported by extra-firm institutions, especially the state's development and policy-backed financial institutions(Kong and Gallagher, 2017;Gallagher, 2018;Chen, ...
Both the “going global” strategy and the Belt and Road Initiative have prompted Chinese companies to carry out overseas investment and global financing. China’s three major national oil companies (NOCs), China National Petroleum Corporation (CNPC), China Petrochemical Corporation (Sinopec), and China National Offshore Oil Corporation (CNOOC) have pursued “modernization through globalization” while balancing profitability and national energy security. This paper attempts to shed some light on NOCs’ going global process by integrating global production networks’ (GPNs) extra-firm (state–firm) relations and global financial networks’ (GFNs) emphasis on world cities and financial and advanced business services providers. Going global, however, has also increased NOCs’ geopolitical risks, resulting in a retreat from the financial centers of world cities and a return home. This paper contributes to the GPN/GFN literature by examining the interactions between lead firms from developing economies and extra-firm actors while also emphasizing the increasing significance of geopolitical risks.
... Is the rise in power imports linked to the increased use of renewable energy? That suggests that reducing carbon dioxide emissions in power plants to achieve energy independence is inherently irrational (Kong and Gallagher 2017). ...
The research intends to investigate the green financing trends movement with renewable energy dependence of G-20 economies. The data envelopment analysis (DEA) technique explains research results and illustrates current topicality. The Wald econometric method is utilized for robustness analysis, and a comparative picture of public support is provided. The research demonstrated that green financing metrics are significantly affected by public support during the COVID-19 crisis. Due to the volatility of COVID-19, public assistance funding plays an uneven role in green finance. G-20 member nations financed 17% of total green financing using public funds, which contributed 4% to GDP and achieved 16% of annual energy dependence improvement due to COVID-19 and 24% additional production from renewable energy resources. The results of this research demand maximal support by using positions in the government, ministries in charge of energy efficiency, and departments for energy efficiency improvement. Several possible policy interventions are discussed in this paper that may increase renewable energy efficiency via several alternative approaches, including on-bill financing, direct efficiency grant, guaranteed energy efficiency contracts, and credit lines for energy efficiency. If recommended policies are implemented successfully, they are expected to reduce the crisis’ impact and elevate funding for energy efficiency.
... In addition, the mercantilist approach requires a stringent evaluation of the commercial viability of each project, which would certainly empower the DFIs and ECAs, including C-EXIM, CDB and Sinosure that dominate the financing landscape of Chinese overseas energy activities (Kong & Gallagher, 2017). These agencies are often referred to as policy financial institutions (政策性金融机构) and were established at the height of Chinese economic reforms in the late 1990s and early 2000s. ...
Renewable energy activities have increasingly become the central component of China’s proposed green Belt and Road Initiative. Yet, scaling up these activities requires significant institutional changes of the current Chinese state and financial-industrial complex. Informed by a conceptual framework that builds on multi-level institutional analysis, we assess the institutional challenges constraining the scalability of Chinese renewable energy projects in South Africa and Ethiopia. Our study reveals that the institutional fragmentation and vacuum in China have led to the lack of a clear engagement strategy with African markets. In addition, the development of wind and solar energy projects in Africa is often taking place amid the ongoing and fast-changing energy sector governance, which is not yet appreciated by the key Chinese actors. We argue that promoting Chinese-backed renewable energy projects in Africa requires new institutional arrangements that can adapt to competitive and divergent local market conditions and regulatory changes.
... Key strains in the empirical literature on the scale and impact of Chinese investment include Li et al. (2020) with a statistical overview of energy investment, Gallagher (2021a, 2021b) on Chinese development of coal plants and renewable energy overseas, and Cabré et al. (2018) on the current scale and potential scope of Chinese overseas investment. On the other hand, the main literature on the governance of Chinese overseas investment includes Kong and Gallagher (2017) on the role of Chinese policy banks, Qi (2018, 2021) on the Chinese regulatory environment for overseas investment, Shen and Power (2017) highlighting the decentralized organization of Chinese investment in Africa, and Kaplan (2016Kaplan ( , 2018 on the political economy of Chinese patient capital and finance in Latin America. This is further related to the broader topic of China's role in global climate governance, such as on bilateral finance (Ha et al., 2016), through the G20 (Ren, 2017), or Chinese-initiated multilateral development banks (MDBs) (Wang, 2017). ...
A growing number of emerging economies receive significant parts of their overseas finance and investment from Chinese state‐owned or state‐linked institutions. While academic research has focused on how Chinese policy and state‐owned banks approach sustainable development issues, Chinese sovereign‐backed overseas development funds are a critical yet overlooked component. This paper addresses this knowledge gap by providing the first comprehensive overview of such funds regarding their scope, activities and capitalization, as well as by assessing the funds' policy approach to sustainability. Qualitative and quantitative data are collected from databases, funds' websites, newspaper articles and public statements in both Chinese and English to identify common features between funds and to analyse their sustainability policies in comparison with global best practices. The paper specifically analyses the funds' sustainability approaches rather than impact due to a lack of comprehensive data on the funds' investments. First, the paper finds that given their number, announced capital size of US$213 billion, geographic scope and sectorial focus, including on high‐emissions projects such as mining, energy and heavy industry, the funds are influential players in global development finance. Second, regarding the funds' approaches to sustainability, the paper finds that the funds lack transparency about their policies and practices, which is a key component of sustainable fund management practices. Third, based on an in‐depth analysis of available information, we identify a lack of sustainability in the funds' mandates, an absence of safeguards, limited project pipeline disclosure and no sustainability performance assessment. Lastly, the paper provides four policy recommendations on how to improve the funds' sustainability approaches based on the unique way they are governed by different parts of the Chinese state apparatus.
... También se ha demostrado en el caso de las inversiones energéticas que la articulación financiera de la IED china se realiza en gran parte con préstamos bancarios que debe pasar por una decisión gubernamental. En el caso del Banco Central, este tiene un papel clave ya que debe habilitar las reservas internacionales para el préstamo, a la vez que controla la política monetaria y de tasas de interés, y por último porque es el principal accionista del Eximbank desde 2011 (Kong y Gallagher, 2017). Dussel Peters calculó que las empresas públicas representan 11% de las IED en el mundo entre 2003 y 2010, pero solo 6,2% en los países desarrollados, mientras que en China las empresas públicas representan 67% del total de sus inversiones extranjeras en el mismo período (Dussel Peters, 2012). ...
Las firmas de acuerdos entre Argentina y China suelen ser conside-rados por el gobierno sudamericano como hitos importantes en sus relaciones internacionales, y los anuncios de inversión suelen ser esenciales para la comunicación oficial donde la preocupación por la llegada de inversiones extranjeras y la mejora de la infraestructura local tiene en la agenda un lugar primordial. Por el lado de la oposi-ción y de algunos académicos, se sobreexponen los anuncios de inver-sión en sectores estratégicos y se los caracteriza como un avance del gigante asiático sobre la soberanía del país bicontinental. No obstante, la distancia entre esos anuncios y la realidad de esas inversiones parece existir una diferencia abismal, y las estadísti-cas reflejan un escaso avance de las inversiones y del comercio entre ambos países desde 2011. En efecto, mientras Argentina le exporta cada vez menos a China, las inversiones de China en Argentina solo representan 1% del total de la IED en el país. Estos resultados que trataremos de reflejar en este capítulo contrastan con lo que ocurre a nivel internacional, donde la presencia de China a nivel internacional es creciente.
