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China role for Africa energy transition: a critical review

January 2020

Affiliation: Oxford Policy Management

Authors:

Institute of Development Studies

This paper will review the current debates around China’s involvement in and contribution to Africa’s urgently needed energy transition. It tries to provide an answer regarding the ways in which Chinese government actors, investors, financiers, and project developers are shaping the transition pathways in various SSA countries, and helps to identify issue areas that require further investigation.

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Many countries in the sub-Saharan Africa (SSA) region face multiple challenges in the transition to a

modern and sustainable energy system. At the outset, there is a severe shortage of energy supply after a

decade of fast-growing economic activity in many SSA countries. Currently over 55% of the population, or

635 million people, still lack access to electricity (International Energy Agency (IEA), 2016). In the past

decade, per capita electricity consumption in SSA actually decreased from 520 kwh to 484 kwh, leading to a

widening gap with both developed and other developing countries (World Bank database, 2019). Even

within the areas that do have energy supply, the quality of the service is often low and unreliable, with

frequent power cuts that are crippling industrial and service sectors. According to the World Economic

Forum (WEF), the quality of the electricity system in most SSA countries ranked below 100th in the world

(Schwab and WEF, 2019). Although SSA is not a significant source of greenhouse gas emissions, the

widespread use of biomass such as straw, wood, and animal waste for cooking and heating, and diesel

engines for agricultural energy use, has caused various mainly local environmental and health concerns.

Only 15% of the population have access to clean cooking facilities and technologies, and the reliance on

biomass has exacerbated deforestation and desertification problems (Schlag and Zuzarte, 2008). In

addition, the indoor air pollution caused by these activities claims millions of lives each year (World Health

Organization, 2018). As a result, energy transition in SSA means promoting and managing urgent and multi-

dimensional transformations of energy access, reliability, and sustainability almost simultaneously, which

impose tremendous political, financial, and technological challenges that go beyond the capabilities of

many SSA countries.

The SSA region has enormous potential for various traditional and renewable energy resources (IEA, 2014;

Schwerhoff and Sy, 2016; Wu et al., 2017); the question is: who can work with African governments and the

private sector to tap these potentials by overcoming technological and financial barriers? In the past two

decades, China has emerged as a major player in Africa’s energy sector, along with traditional Western

donors and international organisations. Under the banner of a ‘going out’ strategy since mid-1990s, and the

Belt and Road Initiative (BRI) more recently, Chinese national oil corporations (NOCs) and state-owned

enterprises (SOEs) are actively involved in various energy subsectors in SSA, participating in nearly all

segments of the energy production chain: from extraction and energy generation, to energy transmission

and distribution. Chinese activities come in different forms, ranging from greenfield investment, turn-key

projects, construction contracting, or technology supply. These activities are often backed by large policy

banks, such as China Eximbank (CHEXIM), China Development Bank (CDB), and other development finance

institutions, through various instruments including massive concessional loans, export credit, and equity

finance. The IEA estimated that between 2010 and 2015 over 30% of newly added electricity capacity in the

SSA region was provided by Chinese contractors, who also added at least 28,000 km of transmission lines

(IEA, 2016). This trend is likely to continue in coming decades.

The fast expansion of Chinese involvement in Africa’s energy sector has attracted tremendous academic

and public attention. Various recent studies concentrate on the impacts and implications of China’s growing

presence in Africa’s energy development, using multiple analytical lenses. At macro (global) level, the

discussion often focuses on the geopolitical implications of Chinese overseas energy activities in Africa,

particularly contextualised in a broader debate about China as a rising power shaping the status quo of

global energy security, governance institutions and rules, and power structures with the traditional players

(Alden, 2005; Taylor, 2007). At meso (national) level, the effect of these activities on host governments in

SSA, particularly regarding their impacts on debt sustainability and national energy pathways are the key

areas for debate (Alden and Jiang, 2019; Onjala, 2018). At micro (project) level, the impact of these

activities on local environment and communities is the centre of analysis, as the lion’s share of Chinese

projects goes to fossil fuel industries or large hydro power stations that have a significant environmental

footprint (Bosshard, 2009; Monasterolo et al., 2018). In addition, the decision making processes around

Chinese projects are not inclusive and transparent, which has led to concerns about these activities’ long-

term impact on the local natural and social environment (Cooke et al., 2016; Yankson et al., 2015).

This article will review these literatures to understand the current debates around China’s involvement in

and contribution to Africa’s urgently needed energy transition. It tries to provide an answer regarding the

ways in which Chinese government actors, investors, financiers, and project developers are shaping the

transition pathways in various SSA countries. It also helps to identify issue areas that require further

investigation.

China’s involvement in Africa’s energy sector and its critics can be roughly divided into two stages. The first

stage is characterised by China’s massive investment in the crude oil sector since late 1990s, which is

mainly driven by China’s fast-growing domestic demand for energy and natural resources, after decades of

break-neck economic and industrial development (Alden, 2005; IEA, 2000; Zweig and Jianhai, 2005). China

became a net oil importer in 1993 and since then its NOCs have been actively seeking to maintain energy

security by diversifying oil imports from different regions, including SSA. China engaged major oil supply

countries in Africa including Nigeria, Sudan, and Angola (Andrews-Speed and Dannreuther, 2011; Brookes,

2007; Downs, 2004; Lieberthal and Herberg, 2006; and many others), and by 2010 over 28% of China’s oil

imports were from these countries. The academic debate and criticism at this stage mainly focused on the

issues of geopolitical impact and changing foreign relations with the West, and particularly the US; the

highly controversial so-called resource-credit swap model, where loans were repaid in local products and

primary goods including shipments of coal and oil; and the dubious impacts of Chinese investment on

African countries’ domestic problems, such as corruption, transparency, and social-environmental impacts.

Beijing is therefore often viewed as a ‘new colonist’ or ‘new imperialist’ that exploits Africa’s vast natural

and energy resources only for its own benefit and continuous economic growth at home, without any

consideration for improvements to these countries’ security (for example in Sudan), national governance,

and local communities’ social welfare (Downs, 2004). Many researchers, however, believe that most of

these claims lack strong supporting evidence (Brautigan, 2011a; Downs, 2004; Dreher and Fuchs, 2012).

Most of these debates remain unresolved and became arguably less relevant as China’s investment in

Africa’s crude oil sector has been decreasing. Oil imports from SSA fell to around 15% in 2018 (National

Statistical Bureau, 2019) with Angola as the only major African oil exporter to China. This is mainly due to

rising imports from Russia and other regions in the past decade. Instead, Chinese involvement in Africa’s

energy sector has entered a new stage, which is characterised by a large number of activities around

electricity generation and transmission infrastructures. Although there is not yet any authoritative database

to reveal the exact scale of China’s role in these activities, the IEA estimates that over 120 power plants and

grid expansion projects across the African continent have seen significant Chinese involvement since 2010,

and more are in the pipeline (IEA, 2016). These Chinese energy infrastructure projects sparked another

round of debates among academics, practitioners and the general public regarding the role and impact of

Chinese finance and technology on African countries’ economic, social, and environmental development,

which is the main focus of this review.

The rationale for conducting this review is threefold. First, given that the Chinese government is not

releasing any official information on these activities, the exact scale and size of Chinese activities in Africa’s

energy sector remains uncertain. In the past decade, researchers have adopted various methodologies to

identify ongoing and potential projects, and several comprehensive databases have been established based

on different energy sources, transaction models, and time periods, which need to be systematically

reviewed and compared to verify information and identify existing gaps. Second, there is a burgeoning

literature on the role and practices of various Chinese actor groups and institutions, particularly around

China’s distinctive policy banks and large SOEs, yet it remains largely unclear how the governance system or

decision making process actually functions, and how these institutions interact within China, and engage

with African institutions, to select, design, negotiate, finance, and implement specific projects. These

negotiations and interactions within China and with recipient countries are often obscured to outside view

due to the exclusive nature of the processes on both sides. Lastly, many discussions focus on the

environmental, social, and economic impacts of Chinese energy infrastructure activities, yet most studies

are based on individual case studies of specific projects, which need to be reviewed comprehensively to

identify general trends and implications. Consequently, this review will be organised to focus on these

three issues, namely the database, governance, and impacts. Both academic and grey literature are

examined as it is noted that many updated studies on Chinese energy activities in Africa are published as

research reports and working papers.

It is very difficult to give a precise estimation regarding the overall statistics on Chinese energy

infrastructure in Africa for several reasons. First, no official data is available from the Chinese government

and banks, as the portfolio of Chinese overseas projects is still treated as classified information in China.

This problem is particularly acute regarding potential projects that are still being negotiated (often behind

the closed doors). In addition, it is also uncommon for the recipient governments of Chinese financing to

fully disclose transaction and financing details. As a result, acquiring official information from either end is

notoriously difficult. Secondly, there are various types of ‘Chinese’ project, in the forms of either direct or

equity investors, project developers, contractors, or technology suppliers. Some of these activities are not

financed in line with traditional definitions of OECD-DAC categories (Bräutigam, 2010 and 2011b). It is

highly challenging to include different types of activities within a single dataset. Lastly, the information

from media reports and coverage on Chinese energy activities in Africa is often incorrect, as some reported

projects are either non-existent, abandoned, or taken up eventually by a non-Chinese organisation (Hwang

et al., 2015). Therefore, the various attempts to estimate Chinese aid and loans result in wide variance

(Bräutigam, 2011b; Lum et al., 2009; Strange et al., 2013a).

Despite these challenges, many researchers in the past decade have collected and validated information on

Chinese energy projects by adopting different methodologies for identifying and filtering information via

various channels and sources. Several comprehensive and authoritative databases were established

including information on specific energy subsectors, recipient countries, transactional models, and financial

instruments. In this section, these databases and methodologies are reviewed with a discussion of their

advantages and limitations.

AidData was first developed in 2009 as a research and innovation lab located at the College of William and

Mary. It is one of the largest databases covering various types of foreign aid provided by both bilateral and

multilateral donors with project-level information (Tierney et al., 2011). In 2013, it released its first

database on Chinese-backed aid projects from 2000 to 2011, which includes information on 1,673 projects

in 50 African countries with over US$ 75 billion in commitments of official finance (Strange et al., 2013a).

The database is based on a Media-Based Data Collection (MBDC) methodology that gathers and

standardises project-level information with two stages of data processing (Strange et al., 2013a; 2013b). In

the first stage, relevant projects are identified through a coded search via Factiva, a Dow Jones-owned

media database. In stage two, once these projects are targeted, refined research is conducted through

public search engines to extract valuable information on the projects (Strange et al., 2013b). This two-stage

investigation aims to avoid duplication and incorrect project information by triangulation among various

information sources. This methodology was later revised and relabelled as the tracking underreported

financial flows (TUFF) method (Strange et al., 2014; 2017a), which is designed to mitigate many of the risks

associated with using media sources to collect data. The most updated version of the TUFF methodology

includes machine-learning software and adds other information sources, such as Chinese embassy reports,

for project identification in stage 1 (Strange et al., 2017b). TUFF also added a third stage of quality control

that seeks to identify and eliminate potential errors, biases, and data holes wherever possible (Strange et

al., 2017b).

AidData China is a massive database that includes all the Chinese official development assistance (ODA) and

non-ODA projects around the globe, plus those activities that are hard to categorise. The current version of

the database includes 100 Chinese energy infrastructure projects (48 ODA projects, 32 non-ODA projects,

and 20 unidentified projects) in Africa (AidData, 2019), with the total commitment of more than US$ 25.5

billion (as some projects’ value remain unidentified). There is no subcategory for different energy sources

or transaction types, such as between fossil fuels and renewables, or between power generation and

transmission projects. However, such information can be obtained from the project descriptions under

each project code if needed. AidData China also differentiates projects that are already completed or still in

their implementation stages. Yet it contains no information on current outstanding payment under each

project and loan facility. The other limitation is that this database does not cover any activities contracted

before 2000, some of which may be as long ago as 25 or even 30 years and still within repayment periods.

Hence, while the database can roughly illustrate the aggregate amount of Chinese lending in the energy

sectors since 2000, it cannot provide accurate ‘snapshots’ of current outstanding liability with particular

countries or debtors. Last, the accuracy of the information is often questionable as there are omissions and

duplicate projects, and others simply do not exist due to various reasons, such as when reported project

plans were later cancelled.

Launched in 2014, the China–Africa Research Initiative (SAIS-CARI) is based at the Johns Hopkins University,

and CARI’s China–Africa Loan Finance Database was developed in order to build a highly reliable source of

data that can be used to better understand the scope, nature, and modalities of China’s loan finance (CARI,

2019). One of distinctive features of this database is that its methodology relies heavily on process tracing

to track projects from initial reports to completion by using in-country contacts and field visits as

opportunities to update and verify information (Bräutigam and Hwang, 2019b). This method largely

improves the reliability of the datasets, compared to those that are developed almost entirely through

distant desktop research. CARI’s methodology also uses both Chinese and African official and unofficial

online sources as complements to standard investigation through Western media sources, which makes the

work ‘more akin to investigative reporting or detective work than accounting’ (CARI, 2019). The CARI’s

database is said to be based on a more stringent scrutinisation process. For example, in one working paper

on Chinese hydro power stations, it is noted that only 17 out of 51 hydropower projects reported by

AidData and International Rivers involve actual commitment from Chinese banks (Hwang et al., 2015).

According to this database, total Chinese finance to Africa’s energy sector between 2000 and 2016

amounted to US$ 30.12 billion. There is a dramatic but non-linear growth trend in Chinese activities

throughout these years (Figure 1). The top ten destination countries for Chinese financing are Angola (US$

1.54 billion), Botswana (US$ 0.83 billion), Cote d'Ivoire (US$ 1.27 billion), DRC (US$ 1/04 billion), Ethiopia

(US$ 2.55 billion), Ghana (US$ 2.24 billion), Nigeria (US$ 1.14 billion), Sudan (US$ 2.89 billion), Tanzania

(US$ 1.16 billion), and Uganda (US$ 1.93 billion).

Source: CARI China–Africa Loan Finance Database

One of the limitations of this database is that there is no breakdown of project types and specific energy

sources, and each entry contains little descriptive information compared to AidData. It covers only power

generation activities, whereas power transmission and distribution lines are not included. CARI have

separate datasets for Chinese ODA and foreign investment, but with no sectoral breakdown, so it is difficult

to estimate the percentage of different energy sources in these types of activities. Like AidData, the current

CARI database does not include any project information before 2000, and it does not provide information

on the repayment of loans under each transaction. Therefore, the database cannot reveal current

outstanding liability of Chinese loans for individual recipient countries, sectors, or projects.

The China Global Energy Finance database is based at Boston University, and it tracks and displays Chinese

overseas development finance in the energy sector provided by China’s two policy banks – CDB and

CHEXIM. It is the only database focusing solely on energy activities, including both extractive and electricity

sectors. It is noted that this database shares its data collection methodology and data with CARI’s database

(Ma et al., 2019) mentioned above. The datasets are available only in the format of interactive webpages

without any downloadable file, as the master file is kept in-house. One of the biggest advantages of this

database is its subcategories based on various energy sources (coal, hydro, wind, solar, and others) and

project types (extraction, energy efficiency, power generation, transmission, etc). According to this

database, the total Chinese finance to Africa’s energy sector between 2000 and 2018 amounted to US$

41.6 billion, which actually lagged behind other regions such as Latin America (US$ 61.5 billion) and Asia

(US$ 64.2 billion). However, the percentage of China–Africa finance increased dramatically from around 7%

of total finance each year between 2008 and 2012, to 55% in 2018 (Ma et al., 2019).

The database only includes two Chinese policy banks, CDB and CHEXIM, which are believed to be the major

engines behind Chinese overseas energy activities and provide more development finance than the World

Bank and its counterparts (Gallagher, 2018). The finance provided by other Chinese commercial banks and

ODA loans is not included. The database also illustrates that, currently, Chinese energy financing in Africa

still concentrates on coal-fired and large hydro power stations, but it has tremendous potential to support

cleaner energy technologies, given their more flexible financial models (Cabré et al., 2018; Gallagher, 2018).

The China Global Investment Tracker (CGIT), based at the American Enterprise Institute, focuses on China’s

global investment and construction activities. The database has an interactive webpage with downloadable

dataset, which includes 3,100 large transactions across energy, transportation, real estate, and other

industries since 2005. It reveals little of its methodology and its estimate of Chinese energy activities in

Africa is much bigger than that of the previous databases, amounting to US$ 96.54 billion between 2005

and 2019 (CGIT).

Besides the abovementioned databases, researchers at the University of Cape Town’s Power Futures Lab

have an in-house database on Chinese-funded power generation projects larger than 5 MW in SSA, based

on their decade-long primary and secondary research (Eberhard et al., 2016 and 2017). The secondary

sources include World Bank databases, the Private Participation in Infrastructure database, Energy

Information Administration (EIA), AidData, CARI’s database and the OECD, among others. Primary data is

collected from regulators in the recipient governments, and Chinese contractors. This database

documented a total of 78 projects amounting to US$ 44 billion and 23 GW power generation capacity,

among which hydropower took 51% and coal-fired power stations took 39%. Viewed alongside the IPP

database that similarly tracks investment in utility-scale private power projects, it is clear that China has

quickly become the most prominent funder of power generation projects in SSA.

To sum up, despite tremendous academic efforts being exerted to precisely estimate Chinese overseas

energy activities in Africa, the wide range of estimations from different databases (from around US$ 25

billion to over US$ 96 billion) illustrates that there is still tremendous potential to further improve these

estimations. The recent methodology in data collection indicates two notable trends. One is reliance on

machine learning and big data technology to expand online searching capability to identify unreported

projects (AidData, 2017); the other is to combine data collection with fieldwork and visits to stakeholders in

China and recipient countries to verify different projects through first-hand information (Bräutigam and

Hwang, 2019b). Both techniques are needed to avoid omission and erroneous project information from

different open public sources from China, recipient countries, and internationally.

Another significant limitation among all the databases is that they can only provide a cumulative estimation

of Chinese finance, and cannot reveal current outstanding liability. Considering that some of these loans

were contracted in the early 2000s, there can be a significant gap between total commitment and

outstanding amount. For example, CHEXIM’s annual report in 2017 calculates only RMB 417.56 billion

(roughly US$ 60 billion) as outstanding liability for its buyer and seller credit loans around the world

(CHEXIM, 2018). Outstanding liability is more relevant to evaluate the crucial impacts of Chinese finance,

such as the debt service in the recipient countries, and Chinese institutions’ current priority SSA countries

and sectors for investment.

Lastly, none of the databases cover activities around Chinese energy equipment exports, which can play a

significant role in Africa’s energy transition. For example, Chinese solar panels dominate some SSA

countries’ local markets (Baker and Shen, 2017) highlighting China’s contribution beyond the more notable

roles of contractors, lenders or investors.

In China, the governance of overseas energy projects is situated in several regulatory subsystems

overseeing foreign aid, overseas foreign direct investment (OFDI), and overseas construction contracts

(OCC) respectively. All the databases analysed previously indicate that OCC is the most dominant project

type. Each subsystem includes both core and peripheral actors ranging from government ministries and

departments, development finance institutions, SOEs, and private companies. These regulatory subsystems

function as enclosed and independent policy communities with intense interactions among their members

that are often obscure to outsiders. Among these regulatory subsystems, foreign aid and OCC activities are

relatively well studied (Bräutigam, 2011a and 2011b; Corkin, 2011; Lancaster, 2007; Tan-Mullings et al.,

2010; Varrall, 2016; Zhang and Smith, 2017) compared to OFDI activities (Abodohoui et al., 2018; Gopal et

al., 2018; Luo et al., 2010; Tan, 2013). This is mainly because the majority of Chinese overseas energy

activities in Africa are OCC and foreign aid projects. The actor maps of these three regulatory subsystems

are illustrated below (Figure 2).

On the surface, there are notable overlaps of these regulatory subsystems, as many key organisations, such

as the Ministry of Commerce (MOFCOM) and CHEXIM, are located in more than one subsystem. Yet

previous studies illustrate that specific departments or operational units within these organisations are

often in charge of specific types of activity (Zhang and Smith, 2017). For example, CHEXIM has dedicated

departments for no-interest or concessional loans under the foreign aid subsystem, and another team for

‘non-aid’ loans (Bräutigam, 2011a). MOFCOM also set up dedicated departments on foreign aid, OCC and

OFDI activities. As result, each subsystem is rather detached from the others and enjoys high levels of

autonomy for strategic decisions and individual project approvals. In this section the roles of key ministries,

financial institutions, SOEs, and other peripheral actors are reviewed.

Although MOFCOM is often treated as the key guardian ministry of Chinese overseas aid and investment

activities (Corkin, 2011), other ministries’ influence in the decision making processes cannot be overlooked,

particularly that of the Ministry of Foreign Affairs (MOFA), Ministry of Finance (MOF), and National

Development and Reform Commission (NDRC). Among these ministries, MOFA is a core member for

overseeing foreign aid activities, which are viewed as an important instrument for promoting China’s

diplomatic relations with African countries (Tan-Mullins et al., 2010). MOF is involved in both foreign aid

and OCC subsystems because these activities are essentially funded by the state budget managed by MOF.

Meanwhile, MOF is not involved in the OFDI subsystem, as these activities are driven mainly by private

capital and funding. OFDI activities are actually regulated by NDRC within its Department of Inward and

Outward Foreign Direct Investment.

Source: Bräutigam, 2011; Corkin, 2011; Luo et al., 2010; Zhang and Smith, 2017

MOFCOM, as the key ministry involved in all three subsystems, has subtle relations with MOFA, MOF, and

NDRC. Besides common struggles and competition over regulatory power and status (Corkin, 2011), these

ministries often have different motivations and priorities. For example, the projects’ contribution to the

improvement of diplomatic relations is often MOFA’s biggest concern, so MOFA officers usually care less

about the economic viability of these activities. MOFA is the main organiser of the Forum on China–Africa

Cooperation (FOCAC), the highest-level diplomatic platform for Chinese and African governments,

established in 2006, which serves as the incubator for important bilateral aid and commercial projects

(Taylor, 2010). Meanwhile, MOF, as ‘the keeper of purse strings’, is usually more risk averse and takes a

more cautious and stringent attitude in scrutinising the financial viability of individual project activities and

the overall portfolio (Zhang and Smith, 2017). As a result, MOFCOM has to balance these contrasted

preferences in making policy and approving individual projects. MOFCOM also needs to prevent cutthroat

competition among Chinese companies by hosting discussions between competitors in specific projects,

recipient countries, or sectors. Despite these power struggles, these ministries in general share a common

goal and vision of supporting the continuous expansion of Chinese overseas activities, which is also in line

with China’s grand ‘going out’ strategy or BRI. Some researchers conclude that they are just operational

arms of the Chinese Communist Party (CCP), which is the ultimate commander of the overall strategy (Kong

and Gallagher, 2017; Zhang and Smith, 2017).

However, it is noted that since late 2017 most of the OCC and OFDI project applications no longer require

any approval from these ministries (State Council, 2017; MOFCOM, 2018; NDRC, 2017). According to the

new policies, applications only need to be registered online with relevant ministries. Only those activities

located in ‘sensitive’ countries, such as countries having no diplomatic relations with China, or ‘sensitive’

industries, such as cross-border water or hydropower projects, still require government approval. As a

result, the decision making power of government ministries on individual projects is significantly weakened.

Foreign aid subsystem:

Ministry of Commerce

Ministry of Finance

Ministry of Foreign Affairs

CHEXIM

SOE contractors

OFDI subsystem:

Ministry of Commerce

National Development and

Reform Commission

CDB and CHEXIM

SINOSURE

Project investors

OCC subsystem:

Ministry of Commerce

Ministry of Finance

CHEXIM and CDB

SINOSURE (China Export

Credit Insurance Co.)

SOE contractors

Commercial banks

Private companies

Previous studies indicate several other ministries that are also involved in policy-making processes, such as

the State-owned Assets Supervision and Administration (SASAC), the People’s Bank of China (the central

bank, or PBC), the State Administration of Foreign Exchanges, etc. (Kong and Gallagher, 2017). However, it

is noted that these government organisations are not responsible for the strategic planning of any

subsystem, nor do they have significant influence on each project’s approval. They are, rather, peripheral

actors in the policy communities mentioned above. The newly established China International

Development Cooperation Agency will be responsible for long-term strategy in the foreign aid sector while

the implementation of current aid projects is still regulated by MOFA and MOFCOM.

Lastly, the regulators of domestic energy sectors, such as the National Energy Administration (NEA) or

Ministry of Industry and Information Technology, are also not included in the decision making processes on

overseas energy activities. Therefore, unlike the governance of China’s domestic energy sector, which sets

clear targets for different energy sources, Chinese overseas energy activities are governed without specific

short-term and long-term planning (Shen and Power, 2017).

The retreat of state ministries in both sectoral planning and project-level approval further elevated the role

of development finance institutions, whose services and funding support are crucial for the success of the

projects. The key financial institutions involved in China’s overseas energy activities include two policy

banks (CHEXIM and CDB), one policy insurance company, known as China Export Credit Insurance Co.

(SINOSURE), plus several commercial banks such as the Industrial and Commercial Bank of China (ICBC) and

Bank of China (BOC). CHEXIM and CDB jointly take the lion’s share of total energy financing through various

loan instruments including buyer or seller credit loans and preferential loans (Gallagher, 2018), whereas

SINOSURE provides further insurance or guarantee packages for some of these loan facilities with higher

repayment risks. ICBC became particularly active in African markets after their strategic investment in

Africa’s largest commercial bank, Standard Bank in South Africa (Corkin, 2008), and established ICBC

Standard Bank in 2015. In addition, there are several sovereign equity funds that provide equity investment

financing, such as the China–Africa Fund, managed by CDB (Gu et al., 2016).

Many studies on Chinese development finance focus on the operation of the two policy banks (CHEXIM and

CDB), particularly in comparing their loan instruments, interest rates, lending procedures, and risk appetite

to Western standards and practices (Bräutigam, 2011a; Gallagher, 2018; Wang, 2016). The key finding is

that the majority of Chinese development finance is not strictly in line with OECD foreign aid criteria and

these loan facilities work more like commercial finance (Bräutigam, 2011a), even though many of the

lending decisions are clearly not solely based on the financial viability of individual projects. Citing public

speeches of former CHEXIM bank presidents, Tang (2014) argues that Chinese policy banks’ evaluation

criteria is different from those of traditional Western financial institutions, as Chinese policy banks focus

more on these infrastructure projects’ overall and long-term contribution to the development of recipient

countries, rather than the financial return. Another often overlooked factor is that a significant segment of

the CHEXIM and CDB loan portfolios to high-risk countries and sectors is covered by SINOSURE’s export

credit insurance services, which has further increased Chinese banks’ risk appetite for high-risk projects.

However, it is still unclear how such unique risk appetite is translated into daily evaluation and decision

making practices for both policy banks and the export credit insurance agency. In general, most of these

organisations pursue rather aggressive strategies to expand their portfolios, but how such expansionary

strategies are compatible with internal risk management policies is the crucial missing link for current

analysis of Chinese development finance institutions.

The majority of Chinese overseas energy projects were undertaken by large SOEs, who have notable

lobbying capacity to influence both African and Chinese governments (Zhang and Smith, 2017). This poses a

crucial question regarding the autonomy of Chinese ministries and development finance institutions in

making policy or loan decisions. It is noted that the strength of state control over the policy agenda is

dubious, as SOEs’ behaviour often contradicts the Chinese government’s promises and articulated strategy

(Xu, 2014). SOEs in the petroleum and electricity sectors in China have been particularly powerful interest

groups for decades, and their bosses often have strong patronage ties with the highest political figures

within the CCP (Cunningham, 2015). In addition, there are frequent personnel exchanges between senior

SOEs’ managers, and regulators (Zhang and Smith, 2017). It would be simplistic to view these SOEs as mere

operational arms of the Chinese government.

Most SOEs actively involved in African energy markets have decades-long histories of business

development in many SSA countries. Previous studies identified the most important companies in the

power generation sector, including Sinohydro, Gezhouba, Three Gorges Corporation, China International

Water and Electric Corporation (CWE), China National Electric Engineering (CNEEC), Shandong Electric

Power Construction Corporation, and China Machinery Engineering Corporation (Hwang et al., 2015; IEA,

2016). In addition, the State Grid Corporation of China, as China’s oligopolistic grid operator, is the main

contractor for transmission lines and distribution projects in Africa (IEA, 2016). However, since 2011, there

have been significant mergers and reforms among these SOEs, and many of them have been integrated into

various gigantic SOE groups under new banners known as Power China, Energy China, and SINOMACH (see

Figure 3.)

Source: SOEs’ official websites

As illustrated in Figure 3, the majority of Chinese SOEs operating in Africa are contractors on energy

infrastructure projects with strong expertise in the hydropower sector. Chinese energy utilities or project

developers are less involved in overseas projects.

This therefore explains why hydropower and OCC

contracts, financed by development banks, dominate the current project pipeline in the SSA region (IEA,

2016). In addition, the characteristics of these large SOEs as quasi-state actors means they have ample

political resources to wield, and can establish close relations with African governments through the strong

support of Chinese embassies or endorsement by Chinese political leaders during high-level diplomatic

visits (Lam, 2017; Xu, 2014). Such strong connections also enable these SOEs to identify project

opportunities early on, and to engage and negotiate deals with African governments behind closed doors.

Among the largest Chinese energy utilities, none has significant operations overseas. There is a clear distinction between domestic

and overseas business in terms of actors and institutions in China’s energy sector.

Power China

•Sinohydro

•SEPCO

•and over 70

subsidiaries

Energy China

（CEEC）

•Gezhouba

•and over 30

subsidiaries

China Three

Gorges Corp.

•CWE

•and over 20

subsidiaries

China Industrial

Machinary Corp.

(SINOMACH)

•CMEC

•CNEEC

•and over 50

subsidiaries

Chinese SOEs therefore prefer bilateral negotiations and are often found to be less enthusiastic to

participate in open auctions or tendering programmes. Such a preference can also explain why Chinese

contractors are dominant in large hydro and coal-fired power plants, but less so in the non-hydro

renewable energy sector: open auctions are rare for supersized infrastructure projects, but become

increasingly popular for wind and solar energy projects (IRENA, 2017). For example, South Africa’s flagship

renewable energy procurement programme is the largest renewable IPP initiative in the SSA region, yet less

than 2% of the transactions were awarded to Chinese project developers (Baker and Shen, 2017; Shen and

Power, 2017). This indicates that Chinese SOEs’ preferences have a strong influence over project selection

and development. Chinese solar panel suppliers are also found to be more enthusiastic to export modules

or be EPC (Engineering Procurement Construction) contractors than to make direct equity investment, due

to lack of experience as project developers overseas; whereas leading wind farm developers in China tend

to focus on the domestic market and only take on overseas project occasionally (Shen and Power, 2017).

Yet such a situation may change as the growth of domestic markets for wind energy is slowing down (Baker

and Shen, 2017).

To sum up, the governance of Chinese overseas energy activities is implemented through several policy

subsystems for foreign aid, OFDI and OCC activities. In each subsystem, government agencies, development

finance institutions, and large SOEs work closely together with a shared expansionary goal, despite conflicts

and power struggles over specific issues or projects. Whereas ministries such as MOFCOM, MOFA, and

MOF are key actors responsible for overall strategy and planning via setting policies, rules, and guidelines,

the project-level decisions are increasingly made by development banks and the export credit insurance

company, whose autonomy is notably constrained by the large SOE contractors. Therefore, recent studies

increasingly endorse the argument that instead of an orchestrated policy process led by the CCP and

central government, there are actually highly diversified institutional interests at play driving Chinese

overseas activities (Breslin, 2013; Downs, 2014; and many others). The common view of a highly

coordinated, state-led ‘China Inc.’ model is rather missing the point (Taylor and Xiao, 2009). The pace of

Chinese overseas renewable energy activities is actually determined by leading SOEs and, to some extent,

the policy banks and export credit agencies.

In the previous sections, I examined the literature on estimating the volume of Chinese energy projects in

Africa and the key actors and institutions involved in the decision making processes. As China’s contribution

to Africa’s energy sector has been increasing, the other major strand of studies focuses on various impacts

of Chinese energy activities on a wide range of global, national, to local issues, such as climate change,

technology transfer, environmental degradation, local employment, and community livelihood. In this

section the main critics and debates are reviewed under the broad categories of political and economic,

environmental (both global and local), and social impacts.

There were once concerns that massive Chinese aid or financing in the energy sectors would crowd out

Western donors and financiers (Downs, 2007). However, given the large funding gap for Africa’s much

needed energy transition, it is increasingly clear that Chinese finance can be a crucial additional source to

Western funding. Another concern is whether Chinese activities are fuelling corruption in the recipient

countries, given their less transparent negotiations and implementations, often referred to as ‘rogue aid’

(Naim, 2007). Based on analysis of AidData’s China database, several studies present evidence that the

increase of Chinese aid projects is indeed associated with a higher perception of corruption among local

residents near the project sites (Isaksson and Kotsadam, 2018a; Brazys et al., 2017). Chinese activities also

discourage trade union involvement (Isaksson and Kotsadam, 2018b). Dreher et al. (2018) further argue

that between 2000 and 2012 China’s less concessional loans are more likely to go to countries with higher

levels of corruption. There can be multiple reasons for this. First, Chinese policy banks and SOEs have

different financial modalities or risk appetite and are more tolerant of engaging highly corrupted

governments, or China, as a relatively new player in bilateral projects, still lacks awareness the effect of

corruption on project risk management, particularly during the earlier stage, before 2012 (Dreher et al.,

2018).

Another debated issue is the impact of Chinese infrastructure financing on the public debt service in many

SSA countries, when the external debt-to-GDP ratios have been increasing since the early 2010s (Caulibaly

et al., 2019; Mustapha and Prizzon, 2018; Were, 2018). Countries like Sudan, Angola, Kenya, Gabon, and

Mauritius have a collective GDP of more than US$ 300 billion, and debt-to-GDP ratios above 60%, and other

countries, including Ethiopia, Cameroon, Ghana, Mauritania, and Zambia, have been told by multinational

organisations to rein in public spending (Gill and Karakülah, 2018). Since China is the single largest creditor

for many of these countries, a narrative was developed that China was using debt to gain geopolitical

leverage, by trapping poor countries in unsustainable loans (Were, 2018). Empirical analysis in Kenya and

Zambia (Ofstad and Tjønneland, 2019; Onjala, 2017) echoes these concerns. Yet Gill and Karakülah (2019)

present contrasting evidence that external public debt to China has remained low to moderate in the top

ten recipients of Chinese official finance, and Chinese finance has not yet created an unsustainable burden

on these countries.

However, as illustrated in the previous section, the debt issues are more likely fuelled

by Chinese policy banks and SOEs’ own expansionary behaviours, rather than an intentional outcome of an

orchestrated strategy from Beijing.

Despite the weak consensus among academics, these early warnings have already sparked new measures

from the Chinese government, with small-scale debt relief (mainly on interest free loans) and rescheduling

arrangements being achieved in countries like Zimbabwe, Sudan, Zambia, and Ethiopia (Alden and Jiang,

2019). However, the lack of transparent rules and institutions on debt evaluation, relief, and management

systems in China make the rescheduling processes slow and non-uniform (Alden and Jiang, 2019). Although

most of the analysis on debt is cross-sectoral, it has significant implications for future Chinese projects in

the energy sector because the growing concerns about debt service are pushing Chinese SOEs to consider

becoming project owners and investors instead of contractors, hence a notable shift from the OCC model

to the OFDI model (Alden and Jiang, 2019). The Chinese government is also encouraging policy banks to

support BOT (Build Operation and Transfer) or PPP (Public-Private Partnership) transaction models

(MOFCOM, 2019), which are less reliant on the sovereign debt service.

Since a large share of Chinese development finance goes to the power generation sector, it would be

important to know what direct impact these projects are having on Africa’s power generation capacity and

energy access rates. A recent study noted that among most of the major recipients of Chinese official

finance in the SSA region, there has been notable growth in both installed capacity and energy access rate

since 2000, except for Zimbabwe and South Africa (Gill and Karakülah, 2019). The improvement is

undeniable, but how much of this is attributable to Chinese finance and technical transfer is difficult to

estimate, because some countries, such as Kenya, Cameroon, and Ghana, received less funding from China

but are actually performing even better.

The last important but under-discussed issue is the impact of technology transfer (TT), which has long been

an important element of China–Africa cooperation. TT may be described by different terms, such as

knowledge transfer and knowledge learning, or take different forms via local employment, training, joint

ventures, and equipment trade (Li ,2016). Rui et al. (2016) argue that although Chinese technologies are

not necessarily superior, they are more relevant for the African context in terms of their applicability,

assimilability, and affordability, and that such relevance will render Chinese companies more competitive in

The top ten recipient countries include South Africa, Ethiopia, Angola, Sudan, Nigeria, Zimbabwe, Kenya, Cameroon, Ghana, and

Cote D’Ivoire.

African markets. There have been several studies on the potential and challenges of TT, particularly in the

renewable energy sector. For example, it is believed that massive imports of solar panels and cells from

China is the key barrier to developing Africa’s own solar firms, and some protectionist approaches need to

be taken into consideration to enhance local technological capacity (Amankwah-Amoah, 2015). However,

measures like local content requirements for government procurement programmes may further

discourage potential investors (Kuntze and Moerenhout, 2012). Chinese solar panel exporters and

contractors are also reluctant to establish local manufacturing facilities unless the market and policy

prospects in host countries are promising (Baker and Shen, 2017; Shen and Power, 2017).

In the hydropower sector, most power plants will operate for more than 25 years and their maintenance

depends on local skills and expertise, not just the transfer of hard technology or equipment (Urban et al.,

2015). By comparing the World Bank financed Lom Pangar dam and the Chinese financed Memve’ele dam

in Cameroon (both contracted by Chinese companies), Chen and Landry (2018) argue that both projects

involve hardware and software TT. However, in the Memve’ele project, all the machinery, construction

equipment, and raw materials including steel and concrete were imported from China, mainly because of

quality and cost concerns, which significantly reduced the opportunities to create local value chains and

constrained TT (Chen and Landry, 2018). As for training, both projects included training on-site and

programmes in China, showing Chinese contractors’ deliberate engagement in skills and expertise transfers

to local populations (Chen and Landry, 2018).

The environmental footprint of Chinese energy projects in Africa has attracted tremendous attention. The

debate is focused on coal-fired and large hydro power stations, which dominate the current project

portfolio. CDB and CHEXIM provided US$ 6.4 billion and US$ 16.8 billion loans by 2018 in these two sectors

(the China Global Energy Finance database, 2019), and new transactions are brooding across the continent.

The main African countries that received Chinese coal power projects include Zimbabwe, South Africa,

Mozambique, and Tanzania (Zaman et al., 2018). According to IEA (2016), Chinese investment in coal-fired

power stations has been gradually decreasing since 2010, but large hydropower projects are still on a rising

trajectory (Hwang et al., 2015).This is mainly because most Chinese new coal power projects are

concentrated in Southeast Asia and South Asia since the launch of BRI (Ren et al., 2017).

African countries are not a significant source of greenhouse gas emissions. SSA accounted for less than

3.7% of the world’s carbon dioxide emissions in 2014, with emissions per capita being much lower than the

world average and remaining stable at 0.85 metric tonnes over the past 30 years. Therefore, apart from

coal-dominated South Africa, most SSA countries do not have either a moral or legal obligation to commit

to cutting their carbon emissions under current international climate negotiations and agreements.

However, huge investment in fossil fuels may have the effect of ‘locking in’ SSA countries to a high-carbon

development pathway for decades (Zwan et al., 2018). The fast dropping cost of renewable energy and

rising protest against coal could also turn these fossil fuel investments into ‘stranded assets’ in the future

(Gallagher et al., 2018).

There are several concerns regarding China’s investment in these coal power plants. At the outset, these

investments may shape the political economy of energy transition in some of the coal abundant countries

by helping to grow and strengthen coalitions around coal incumbency (Baker et al., 2014; Jacob, 2017;

Newell and Johnstone, 2017), and consequently discourage newly emerged political and commercial

interests around the renewable energy sectors (Power et al., 2016). Second, as most of the SSA countries

have significant public finance constraints, as discussed earlier, investment decisions on fossil fuel projects

will almost inevitably squeeze out opportunities for more sustainable and cost-effective energy sources.

Second, it is unclear what drives the impulse for huge investment in these coal power plants, either within

China or in recipient countries. One reasonable guess is that increasingly stringent coal phasing-out policy

and fast-growing renewable energy sectors within China have pushed Chinese fossil fuel industries to

export their overcapacity overseas (Zhao and Alexandroff, 2019). However, whether such a ‘survival’

strategy has gained acquiescence or support from the Chinese policy banks who are actually the project-

level decision makers, as explained previously, is unknown. Concerns have also been raised regarding the

agency of African governments (Corkin, 2015; Mohan and Lampert, 2013) in hosting these projects willingly

or autonomously. It is noted that there is no international agreement, such as a Fossil Fuel Non-

Proliferation Treaty (FF-NPT) proposed recently by researchers on global climate governance (Newell and

Simms, 2019), to ban or limit fossil fuel investment in developing countries. The key question that remained

unsolved is how to change the incentives from both the demand and supply sides of these coal power

projects. One potential solution is to provide further incentives to endorse investment in renewable energy

projects; this will be further reviewed later.

The other strand of criticism is around China’s large hydro power stations and their various local

environmental impacts, as some of these dams are suspected of damaging aquatic biodiversity, national

parks, and natural reserves, and causing riverbed sediment. It is noted that the latest round of fast

expansion of Chinese hydro power stations is also closely linked with its domestic power sector reforms,

particularly after 2003 when large utility SOEs were established and moved quickly to secure new assets

through a surge in domestic and overseas dam building (McDonald et al., 2009). In China’s 13th five-year

plan for the hydropower sector (2016–2020), international cooperation is an important element for

implementing its ‘going out’ strategy and BRI, and the policy goal is to enhance the Chinese hydropower

sector’s international competitiveness and influence (NEA, 2016).

Both the Chinese government and policy banks require all Chinese projects to be developed and operated

in line with local laws and regulations, which is stated clearly via various open statements or internal

guidelines. However, the environmental impact assessments of many Chinese dams in Africa appear to be

slack and failed to meet international standards, particularly at earlier stages in the early 2000s, when the

adverse environmental impacts of Merowe Dam in Sudan and Bui Dam in Ghana attracted significant

attention (Bosshard, 2009; Hensengerth, 2013; and many more). However, things changed slightly in the

last decade when more foreign institutions were recruited to conduct EIA processes (Hwang et al., 2015),

and stringent guidelines and CSR (Corporate Social Responsibility) policies were gradually adopted by key

SOE contractors (Tan-Mullins and Mohan, 2012). Major Chinese banks have adopted green credit policies

similar to the Equator Principles (Sun and Tang, 2015). Yet these approaches produced mixed results and

implementation of these guidelines or policies is often a bigger challenge (International Rivers, 2012). For

example, both CHEXIM and SINOSURE have rules declaring that they should discontinue their loans or

reject insurance claims if Chinese contractors have violated local environmental laws. However, triggering

such clauses can be highly challenging in reality, due to the potential obstacle of the close relations

between these organisations as a policy community, as explained earlier.

Another recent criticism is that China does not have significant investment in non-hydro renewables in

Africa compared to other energy sectors (Gallagher et al., 2018), despite it being a global leader in wind and

solar energy investment domestically and despite Africa’s huge untapped potential in renewable resources

(Cabré et al., 2018). Chinese contractors have only been taking up renewable projects in Africa very

recently in a piecemeal fashion (Tan et al., 2014). According to Shen and Power (2017) there are several

factors that affect Chinese engagement in renewable energy activities. First, leading Chinese SOE

contractors in Africa are not specialised in the wind and solar sectors, compared to hydro and coal power

projects. In addition, the Chinese domestic market is still more attractive than overseas markets, due to

government subsidies and strong local state support, particularly compared with the relatively higher-risk

markets in the SSA region. Yet the Chinese contribution to Africa’s renewable energy market should not be

underestimated, as Chinese supplies of solar panels dominate many SSA markets (Baker and Shen, 2017).

To scale up Chinese green energy in OFDI and OCC, however, requires both innovative financial and risk

management instruments at global level to mitigate perceived high project risks (Studart and Gallagher,

2018). Additional incentives are needed because renewable energy projects are often smaller in size,

meaning a higher transaction cost for the financiers, and receive less political endorsement from both

sides. In addition, further institutional reforms within China are required to nudge leading Chinese

renewable companies to explore overseas markets more actively.

Another interrelated strand of criticism regards the social impacts of Chinese energy infrastructure.

Discussions are mainly around whether these activities are delivering on their promises to enhance local

welfare, including employment, education, and access to and consumption of electricity (Tang and Shen,

2019; Hwang et al., 2015) In addition, there are studies that analyse such impacts of Chinese energy

activities on local communities as unsatisfactory resettlement, affecting production activities (fishery and

farming in particular), land seizure, and damaging cultural resources (Cooke et al., 2016; Hensengerth,

2013; International Rivers, 2012; Kleinitz and Näser, 2011). The case studies around social impacts are

focused on several large dams such as Bui Dam in Ghana, Gibe Dam in Ethiopia, and Merowe Dam in Sudan.

The key finding is that these projects are not specifically increasing electricity access for local residents

compared to the national average (Tang and Shen, 2019) and the livelihoods of the resettled communities

are negatively affected by the construction of the dams, in terms of land, food, water, and energy access

(Yankson et al., 2015). These studies also revealed massive population dislocations, inadequate

resettlement options, and little or no community engagement (Bosshard, 2009; Gleick et al., 2012) when

implementing these projects. In addition, cultural and archaeological heritage were also destroyed, partially

due to project developers’ lack of engagement with local communities (Kleinitz and Näser, 2012).

The debate, however, focuses on whether Chinese companies or policy banks should be responsible for

these unfair outcomes. As mentioned earlier, for most of these projects Chinese companies are only

contractors under the OCC arrangement, who normally do not get directly involved in residential or cultural

heritage relocation and planning for energy distribution and access. Carrying out these works is mainly the

responsibility of local government, whose capability and accountability in implementing these challenging

tasks has varied significantly (Hensengerth, 2013). Some promises made in the early planning stage by

government agencies, such as new irrigation systems, were eventually not kept (Yankson et al., 2015),

which caused further dissatisfaction and even massive local protest during the implementation stage

(Bosshard, 2009; Gleick, 2012), which eventually put Chinese contractors on the frontline of the

confrontations. In addition, Chinese policy banks often do not adopt existing international standards for

environmental or social impact assessment, at least until recently. Cooke et al. (2016) proposed an

extended environmental justice framework to make sense of the resettlement and compensation schemes

for indigenous peoples who were affected by the large dams. They argue that besides a fairer distribution

of cost and benefits and more transparent or inclusive procedures, a ‘just’ project should also aim to

maintain the functioning of local communities and their bond with the natural environment (Cooke et al.,

2016). Yet it is still unclear what rules or standards should be deployed to achieve these goals, and who

should be responsible for implementing them, and held accountable if they are not met.

China has been playing an increasingly important role in Africa’s urgently needed energy transition, mainly

by implementing many energy infrastructure projects in the past two decades. Chinese activities have

sparked tremendous academic and public interest and concern. Current studies aim to precisely estimate

the scale and volume of Chinese projects and finance, to understand the governance and decision making

processes around these projects, and to evaluate their political, economic, environmental, and social

impacts. In providing a critical review of this literature, I argue that a new research agenda is needed.

First, existing databases on Chinese aid and energy finance in Africa have laid a solid foundation for

understanding the actual size, types, and trends of Chinese project activities, yet the available estimate is

currently far from precise. Datasets on OFDI, trade and export, and transmission or distribution activities

are particularly underdeveloped compared to OCC on power generation projects. Current databases cannot

provide outstanding liabilities under each loan, which can be a useful indicator for analysing their economic

impacts, such as the external debt burden. As for methodologies, most of the databases combine media

content research with primary field investigations to triangulate the online information with interview data.

Yet it is difficult to conduct primary investigation across all the SSA countries that host Chinese energy

projects. In addition, it is difficult to keep updating the database with repeated field investigations.

Therefore, a new methodology, particularly one based on big data or machine-learning technologies, could

be potentially useful to expand the search scope and validate the research result.

Second, regarding the governance and decision making processes, current studies have identified several

central ministries (MOFCOM), policy banks and financial institutions (CHEXIM and CDB), and large SOE

groups as the key actors in driving these project activities. However, how these actors interact and

coordinate to facilitate specific transactions, sectoral planning, and institutional development is not yet

clear. The black box of governance is only half open to outsiders. In addition, little research is being done to

understand the links between these Chinese actors and those from the recipient countries, apart from

diplomatic activities between political leaders. Future research should focus on the analysis of actor

networks to understand complex multilevel and bilateral interactions and power relations among these

actors, which could help to improve our understanding of why some (controversial) activities can emerge

and succeed in securing political endorsement and financing. Such investigation would be particularly

valuable to our understanding of whether and in what way that China is influencing SSA countries’ energy

development pathways. In general, more country-specific case studies that focus on institutions,

interactions, and agencies from both sides will be crucial to generate better insights on perceived project

risks and governance structures.

Regarding the various impacts of Chinese activities, most of the current studies are based on country- or

project-specific case studies. With more reliable databases being developed, future studies can test the

correlations between Chinese activities and specific indicators of energy sector transition and

modernisation in SSA regions, particularly around energy sufficiency, efficiency, and sustainability, such as

in relation to the energy sector indicators developed by the WEF and UNEP (WEF, 2019; UNEP, 2016). The

impact of Chinese activities on recipient countries’ economic performance, technology capability, and

social benefits also require further investigation and evidence.

As for environmental and social impacts, it is increasingly clear that improvement is needed but consensus

on the role Chinese companies, policy banks and ministries in the current contractual arrangement is weak,

if there is no international agreement or consensus on limiting fossil fuel or scaling clean energy investment

in the global South. Current studies have proposed a global ban on coal-fired power projects and the

development of a global guarantee system for renewable energy projects (Newell and Simms, 2019;

Studart and Gallagher, 2018). Such proposals will surely provide the sticks and carrots needed to shape

Chinese actors’ overseas strategy and incentives. As for the local-level impacts, more stringent monitoring

and accountability systems should be installed, particularly at the project implementation stage. Further

studies should focus on in what way Chinese actors can contribute to institutional development on

environmental justice and accountability. Another question is how to standardise these practices across

different SSA countries to change the current ad hoc nature of environmental and social impact assessment

and monitoring.

It should also be noted that China’s overseas energy activities are closely linked with its domestic market

and policy changes, which surely deserve further investigation to test assumptions that China is exporting

its overcapacity in fossil fuel and large hydro sectors, and increasingly so in new sectors like nuclear, wind,

and solar energy activities. It should be noted that China–Africa energy relations is hugely shaped not only

by China and SSA countries, but also by other major developed and emergent markets. The production

chain of energy sectors is increasingly globalised, with more intense competition and division of labour

among major technology suppliers, project developers, and financiers around the world (Lachapelle et al.,

2017). New research is therefore needed to understand how China and SSA countries’ cooperation on

energy transition is embedded and influenced by these fast changing technological developments,

geopolitical implications, and market relations, and what new forms of trilateral or multilateral cooperation

can emerge to further address some crucial technological, capacity, and financial challenges faced by SSA

countries.

Last but not the least, more research attention should be focused on various barriers to Chinese actors in

scaling up their non-hydro renewable energy activities in the SSA region. China is the world leading investor

and innovator on wind and solar energy capacities and technologies, but their overseas activities,

particularly in Africa, are limited and incomparable with their domestic wind and solar market

development, or other overseas energy activities, such as large hydro or coal power facilities. Previous

studies touched on several factors, such as reluctance towards equity investment, negotiation preferences

on bilateral deals over open auctions, lack of experience or additional incentives for companies to explore

more challenging markets. Little is done, however, to explore potential remedies to address these issues

both from Chinese and recipient countries’ perspectives, or the potential role of international actors.

Empirical inquiries on how the perceived high risks can be changed, what are the potential co-benefits that

can provide additional incentives, and what are the potentials for local green energy TT and green

manufacturing capacity needs to be addressed in future studies.

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Unpacking local agency in China-Africa relations: Frictional encounters and development outcomes of solar power in Kenya

Article

Feb 2021
GEOFORUM

China is a 'rising power' in Africa, and growing Chinese investments in the renewable energy sector in SSA (e.g. in wind and solar) are gaining traction. The ways in which China is shaping low-carbon energy transitions in SSA and the implications of it doing so merit attention. While existing research has tended to focus on fossil fuels and hydropower, it is crucial to undertake analysis of Chinese-backed wind and solar projects and of the micro-level engagements of Sino-African actors in order to further unpack the nature and complexity of Chinese involvement as it unfolds on the ground. In this article, we employ the concept of 'frictional encounters' in order to investigate empirically the development of the first utility-scale solar PV project in Kenya, which was delivered as a turnkey package along with a Chinese investor, technology supplier and construction contractor. Building on qualitative research methods, including semi-structured interviews and focus-group discussions, we explore the micro-level frictional encounters between Chinese and Kenyan actors involved in the project in the areas of community development and employment. The article offers two important insights: (I) that the project organization has important implications for the scope of the development outcomes; and (II) that these outcomes are not likely to accrue automatically without deliberate government intervention. In addition, the article offers a finer-grained perspective on Chinese projects in Africa focusing on the often overlooked significance of local African agency in Sino-African relations. Finally, the article provides a contribution to furthering understanding of the theoretical processes and features of the concept of frictional encounters.

Zambia's looming debt crisis - is China to blame?

Technical Report

Full-text available

Jun 2019

Debt trap diplomacy is a recent term used to describe Chinese loans for infrastructure and Development. Zambia is one of the countries where China is the biggest single creditor and a major provider of finance for development. This CMI Insight reviews the sources of the Zambian debts, examines how the loans have been used and misused, and asks whether any defaults will result in Chinese takeover of major public assets.

Current and future struggles to eliminate coal

Article

Full-text available

Jun 2019
ENERG POLICY

Reductions in coal use necessary to meet the objective of keeping global temperature increase well under 2.0 °C faces serious political economic hurdles. To transition from coal, existing use must be eliminated and new growth in coal consumption must be stymied. Efforts to reduce existing consumption in a speedy manner faces challenges in domestically oriented markets where coal industry coalitions resist anti-coal policy and pursue industry protection. In addition, we identify a serious loophole in coal restraint exercised by a number of the users including: China, Japan and Korea. Continued support for coal capacity expansion abroad in both public and private sectors in these markets appears to reflect the lack of incentives, or sanctions in reining in such external capacity expansion. Such external expansion currently is not counted in nationally determined commitments for the Paris Agreement of the United Nations Framework Convention on Climate Change (Paris Agreement). Without greater national political efforts, the necessary reduction in coal use cannot be achieved.

One Step Ahead, Two Steps Backwards: Energy Transitions and Coal in Developing Countries

Conference Paper

Full-text available

Oct 2018

Anthropogenic climate change necessitates a transformation of the current fossil-based energy systems towards renewable energies. Despite large agreement on the huge costs of (climate) inaction, several developing countries currently see a massive uptake of carbon-intense coal-based power generation. This study aims to contextualize investment flows for coal projects, with a focus on the Global South. We applied a bipartite network analysis to investigate investment patterns between donor and recipient countries using a secondary database. The results indicate that China, Japan and South Korea are key players in the massive coal extension currently observed in several developing countries of Asia and Africa. While the analysis presented in this paper aids the problem identification and illustration, the lurking grey energy transition will require further research and policy attention.

Fueling Global Energy Finance: The Emergence of China in Global Energy Investment

Article

Full-text available

Oct 2018

Global financial investments in energy production and consumption are significant since all aspects of a country’s economic activity and development require energy resources. In this paper, we assess the investment trends in the global energy sector during, before, and after the financial crisis of 2008 using two data sources: (1) The Dealogic database providing cross-border mergers and acquisitions (M&As); and (2) The “fDi Intelligence fDi Markets” database providing Greenfield (GF) foreign direct investments (FDIs). We highlight the changing role of China and compare its M&A and GF FDI activities to those of the United States, Germany, UK, Japan, and others during this period. We analyze the investments along each segment of the energy supply chain of these countries to highlight the geographical origin and destination, sectoral distribution, and cross-border M&As and GF FDI activities. Our paper shows that while energy accounts for nearly 25% of all GF FDI, it only accounts for 4.82% of total M&A FDI activity in the period 1996–2016. China’s outbound FDI in the energy sector started its ascent around the time of the global recession and accelerated in the post-recession phase. In the energy sector, China’s outbound cross-border M&As are similar to the USA or UK, located mostly in the developed countries of the West, while their outbound GF investments are spread across many countries around the world. Also, China’s outbound energy M&As are concentrated in certain segments of the energy supply chain (extraction, and electricity generation) while their GF FDI covers other segments (electricity generation and power/pipeline transmission) of the energy supply chain.

The Political Economy of Incumbency: Fossil Fuel Subsidies in Global and Historical Context

Chapter

Full-text available

Aug 2018

The Politics of Fossil Fuel Subsidies and their Reform - edited by Jakob Skovgaard August 2018

Do China-financed dams in Sub-Saharan Africa improve the region's social welfare? A case study of the impacts of Ghana's Bui Dam

Article

Jan 2020
ENERG POLICY

China has become an increasingly important financier of energy infrastructure development in the Global South, especially hydropower projects. Despite an increase in investigations on Chinese models of infrastructure financing in these regions, there is a lack of empirical research on the impacts of the China-financed infrastructure. Using data from Johns Hopkins SAIS CARI China-Africa Loan Database and the Demographic and Health Survey (DHS) Program Database, we estimate the impacts of the China-financed Bui Dam in Ghana. We use two difference-in-differences models to identify change of the likelihood to have access to electricity, and to own several electric appliances among over 29,000 local households receiving electricity transmitted from Bui Dam. We found that after the Bui Dam's completion, the likelihood for households living in the treatment regions having access to electricity increased by about 4 percent. However, our models also show that urban households witness a much higher increase in their ownership of various electric appliances, suggesting that the Bui Dam's improvement of electrification may be predominant in the urban and rich households.

Brave new world: debt, industrialization and security in China–Africa relations

Article

May 2019

China's ties with Africa are evolving into a multi-faceted relationship of increasing complexity. After nearly two decades of debt-financed infrastructure development, Beijing's exposure to African debt is reaching disquieting proportions with an estimated US$132 billion owed to China in 2016. Managing this new role as Africa's creditor poses uncomfortable questions for creditor and debtor alike. Concurrently, the quiet surge of Chinese investment in manufacturing in Africa is transforming local economies in ways that are beginning to alter the continent's position within the global economy. Finally, the proliferation of Chinese businesses and migrants across Africa is inspiring greater Chinese involvement in UN peacekeeping and private security initiatives. This article examines how these structural changes are challenging core practices and principles which guided China–Africa relations in its formative decades. For instance, under the banner of an alternative to western policies China promoted the absence of conditionalities attached to its concessional loans and grants. Equally, promotion of industrialization of African economies marks a key shift away from China's resource-centric engagement with the continent. And, in the case of security, Beijing's commitment to avoid intervention in domestic affairs is being set aside with implications for its principles, and ultimately status, in Africa.

Renewable Energy: The Trillion Dollar Opportunity for Chinese Overseas Investment

Article

Dec 2018

This paper compares the global flows of Chinese overseas investment in power plants with renewable energy investment potential embodied in “Nationally Determined Contributions.” With over US

1tn (671 GW) in Nationally Determined Contributions renewable energy investment potential in developing countries, we estimate the total level of power plant investments from China's policy banks and commercial entities since the early 2000s at US

216bn (158 GW). Although past investment has mainly been directed at fossil fuels and hydroelectric power, we argue that China is uniquely poised to lead renewable energy global investments for three reasons: (i) China's solar and wind industries are globally competitive; (ii) Chinese policy banks can give domestic firms advantages in financing global expansion; and (iii) renewable energy investment opportunities still exist in developing countries with less sovereign risk than for traditional energy investments. The Chinese government should provide special incentives for the policy banks to capitalize on these investment opportunities by deploying Chinese solar and wind technologies to Belt and Road countries and beyond.

Climate Transition Risk and Development Finance: A Carbon Risk Assessment of China's Overseas Energy Portfolios

Article

Nov 2018

The role of development finance institutions in low‐income and emerging countries is fundamental to provide long‐term capital for investments in climate mitigation and adaptation. Nevertheless, development finance institutions still lack sound and transparent metrics to assess their projects' exposure to climate risks and their impact on global climate action. To attempt to fill this gap, we develop a novel climate stress‐test methodology for portfolios of loans to energy infrastructure projects. We apply the methodology to the portfolios of overseas energy projects of two main Chinese policy banks. We estimate their exposure to economic and financial shocks that would result in government inability to introduce timely 2°C‐aligned climate policies and from investors' inability to adapt their business to the changing climate and policy environment. We find that the negative shocks are mostly concentrated on coal and oil projects and vary across regions from 4.2 to 22 percent of the total loan value. Given the current leverage of Chinese policy banks, these losses could induce severe financial distress, with implications on macroeconomic and financial stability.

Energizing development finance? The benefits and risks of China's development finance in the global energy sector

Article

Nov 2018
ENERG POLICY

This paper provides the first estimates of China's global developmental finance institutions in general and China's policy bank lending to foreign governments for energy in particular. According to the China Global Energy Finance database, between 2000 and 2017, China Development Bank (CDB) and China Export-Import Bank (CHEXIM) provided $225.75 billion in overseas energy development finance. We find that: China's ‘policy banks’ and funds have doubled the availability of global development finance –and hold more assets than the major Western-backed MDBs operating in developing countries. With the onset of a new family of funds and multilateral development banks co-financed by China, China is poised to be the largest development lender in the world as Western-backed MDBs appear stagnated in their ability to increase their capital bases. China's global energy portfolio is heavily exposed to country, macroeconomic, climate, and social risks, however. To mitigate such risks and meet the broader sustainable development challenge for the 21st Century, China's development finance will need to shift the composition of its global energy lending in a significant manner.

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