Webinar Summary: China’s Global Energy Finance Database – Data Update

By Yudong (Nathan) Liu

On November 16, 2023, the Boston University Global Development Policy Center hosted a webinar to accompany the launch of new data in the China’s Global Energy Finance (CGEF) Database. The webinar was moderated by Oyintarelado Moses, Data Analyst and Database Manager, and featured presentations by Cecilia Springer, Non-resident Senior Fellow and Ishana Ratan, Global China Pre-Doctoral Research Fellow.

Oyintarelado Moses began with an overview, noting that despite a 2021 announcement that China would step up support for renewable energy in developing countries, the CGEF Database update revealed that China’s development finance institutions (DFIs) provided no new energy finance loans in the 2022 for the second consecutive year.

Cecilia Springer then presented the general trends in China’s global energy finance. She noted that the CGEF Database tracks loans for energy-related purposes from China’s DFIs – the China Development Bank or the Export-Import Bank of China – to either public or private entities with sovereign guarantees on a loan. These financing types are known as public and publicly guaranteed loans. According to the CGEF Database, China’s DFIs have provided 331 loans, totaling $225 billion for 65 foreign governments for energy projects around the world from 2000-2022. Springer noted that there has been a marked decline in finance in recent years, with two consecutive years of no new qualifying energy finance loans in 2021 and 2022. However, she noted that since 2016, China’s total loans of this type still outstrip the energy finance provided by any national or Western DFI. Springer also noted that from 2000-2022, a plurality of China’s energy finance – about $88 billion –  has financed oil projects.

Then, Ishana Ratan gave an overview of the process for loan identification, which involves web-scraping news articles from across the web based on the presence of keywords in multiple languages. Once aggregated, the research team manually checks and deletes false positives (for example, personal finance websites). Next, manual web searches of relevant host-country/Chinese official websites (finance ministries, companies involved in the relevant projects, Chinese embassies, state news agencies) are conducted, as well as searches on credible third-party websites. In the final step, researchers use results from the automated and manual searches to double verify the signing of loans and their attributes.

Springer then discussed the potential drivers of the recent decline in China’s overseas energy finance, including the ongoing effects of the COVID-19 pandemic and its associated restrictions, as well as economic worries precipitating a shift to a focus on domestic finance. She also noted the overall strategic shift Chinese institutions have recently adopted, evidencing a preference for smaller projects – and therefore smaller commitments – known as the “small is beautiful” or “small and/or beautiful” strategy. For recipient countries, worries regarding rising levels of debt distress have cooled demand for new loans.

Springer then turned to the issue of project suspensions and cancellations that have affected certain energy projects recorded in the database. She noted that such issues tend to effect coal and hydropower projects rather than wind and solar, and that they also appeared to be also linked to environmental risks. She pointed to two examples and their possible drivers, the first being the Mazar-Dudas hydropower plant in Ecuador, which has experienced debt distress, cost overruns and construction quality issues. Separately, the Tuzla 7 coal plant expansion in Bosnia & Herzegovina has faced local and governmental opposition.

Turning to the issue of green finance, Springer commented that Chinese finance in this area amounts to $1.8 billion of the total $225 billion, representing 1 GW of total power. Possible reasons for this lower level of engagement include competition from the private sector and  other DFIs like the World Bank, as well as the perception that such projects are less bankable due to smaller size and grid connection issues. She noted however that China’s experience supporting its own renewable energy boom still leaves it well positioned to support green energy overseas that extends beyond directly building plants to include support for supply chains, transmission and distribution.

Next, Moses demonstrated how to use the CGEF Database, showing users how to explore the data by energy source, energy sector, financing by year, country and lender.

Starting off the discussion portion, Springer highlighted that this year saw more incorporation of Chinese keywords and energy-specific websites as a focus point for the algorithms. Ratan noted that the research team adopted standardized definitions for energy subsectors. She noted the hope that the announcement at the recent The Third Belt and Road Forum for International Cooperation of a Green Investment and Financing Partnership could help turn China’s stated green energy commitment into action.

Regarding the risks that green energy projects could bring, Ratan stated that project developers will hopefully have learned lessons from past project development experiences to better track and mitigate environmental and social impacts. She also highlighted that it is important for such projects to support development in the areas around them.

In terms of explaining why the CGEF Database tracks energy finance from Chinese DFIs, Springer commented that this approach allows for direct comparability with energy financing by other DFIs, like the World Bank. She also noted that energy financing was the largest component of Chinese DFIs financing and energy projects pose unique environmental and social risks. For those interested in tracking foreign direct investment, Springer noted that the China’s Global Power Database tracks this in part, as does the China Overseas Finance Inventory (COFI) Database, a collaboration between the Boston University Global Development Policy Center, the Inter-American Dialogue, the China-Africa Research Initiative at Johns Hopkins University and World Resources Institute.

Springer also commented that recent research shows that when Chinese DFIs engage in overseas co-financing, or having multiple financiers in development projects from government agencies, development banks and private actors, better environmental outcomes occur compared to overseas projects financed with domestic partners or no partners. Ratan added that Chinese companies had been involved in co-financing for 20 GW, noting that the Chinese private sector is playing an increasing role in global energy finance.

In their final statements, Springer and Ratan both pointed to the new Sunnylands agreement by China and the US regarding a commitment to financing green energy as a bright spot in US-China relations. Springer posited that perhaps a working relationship between the two countries on climate and green energy issues could be reignited, despite lingering geopolitical tensions elsewhere. Ratan agreed that this was a cause for optimism, and looked forward to cooperation that might arise out of the 2023 United Nations Climate Change Conference (COP28). In closing, Moses commented that both cooperation and competition could play a positive role in encouraging DFIs to effectively assist the world in its green energy transition.

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Yudong (Nathan) Liu is a Research Assistant with the Global China Initiative and a Candidate for Juris Doctor at Boston University School of Law.

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