China turbocharged its lending to overseas energy projects last year, burnishing the attraction of its “infrastructure diplomacy” to the developing world and reinforcing its position as the dominant supplier of global development finance as Donald Trump draws back on such US funding abroad.
A new database, published on Tuesday by Boston University’s Global Economic Governance Initiative, shows that lending by China’s two global development banks rose 40 per cent last year to $48.4bn, a figure estimated to be several times the total funds allocated to energy infrastructure by the World Bank and other western-backed lending agencies.
Sam Geall, executive editor at China Dialogue, sees China’s increase in global energy finance in geopolitical terms.
In terms of sector, China’s finance was directed mainly towards oil, gas, coal and hydropower plants, marking a shift from previous years when Beijing devoted a larger share of its capital towards funding the construction of coal-fired power stations.
The motivation behind such funding is not simply to further China’s diplomatic clout in the developing world. It is also to transform local companies into multinational champions and open up overseas markets for industries blighted by chronic overcapacity, analysts said.
Support for the renewable energy industry reveals the way in which China’s financial muscle is assisting its goal to build globally dominant industries, Mr Geall said. “China is reaping the rewards of its long-term policy to support renewables as solar power becomes a genuinely cost-competitive technology that is creating a new market,” Mr Geall said.
China increased investments in green technology overseas by 60 per cent to $32bn last year, far in excess of the amounts deployed by any other country, according to the Institute for Energy Economics and Financial Analysis, a US-based think-tank.
Chinese companies made 11 outbound investments in excess of $1bn in 2016, adding up to a combined $32bn, compared with eight deals for a combined $20bn in 2015, according to research by IEEFA.