As West Goes Green, China Dominates Global Energy Infrastructure Finance

  • Date: 04/04/17
  • James Kynge, Financial Times

Lending lifts Beijing’s diplomatic clout in developing world and opens up overseas markets

China turbo-charged 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.

“China is . . . exporting its model of infrastructure-led development abroad to those countries that are demanding energy and infrastructure but can’t get the financing from traditional sources,” said Kevin Gallagher, a Boston University professor and co-director of the Global Economic Governance Initiative.

He estimated that China’s lending to overseas energy projects was close triple the average annual energy finance of $16.9bn provided by the World Bank and three other institutions, the Asian Development Bank, the Inter-American Development Bank and the African Development Bank, between 2007-2015.

Much of China’s lending to oil, gas, coal, hydropower and other energy facilities in 2016 was directed toward the developing world and in particular to countries covered by “One Belt One Road”, a key geopolitical strategy championed by Xi Jinping, the Chinese president.

Mr Trump, by contrast, has proposed big cuts to funding for the US Agency for International Development, as well as for the World Bank and the International Monetary Fund. This US stance is likely to cede further dominance of international development finance to China, analysts said.

Taken together, the China Development Bank (CDB) and the Export-Import Bank of China (Ex-Im Bank) already eclipse the World Bank in total international assets, according to Boston University data.

Sam Geall, executive editor at China Dialogue, sees China’s increase in global energy finance in geopolitical terms. “China is opening the prospect that it will be managing a lot of power infrastructure, particularly in the developing world and in the electrification sector and that puts them in a powerful position globally,” said Mr Geall, who is also an associate fellow at Chatham House, a UK think-tank.

In terms of sector, China’s finance was directed mainly towards oil, gas, coal and hydropower plants (see chart), marking a shift from previous years when Beijing devoted a larger share of its capital toward funding the construction of coal-fired power stations.

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