China’s Global Strategy Based On Building Coal Power Far And Wide

  • Date: 16/05/17
  • China Dialogue

China was involved in 240 coal power projects in 65 of the Belt and Road countries between 2001 and 2016.

Officials and leaders from over 110 countries will gather in Beijing on May 14-15 for the first ever Belt and Road Forum. China’s ambitious attempt to boost economic growth across a vast area stretching from its southeast coast all the way to Africa is known as the Belt and Road Initiative (BRI).

Its two parts – a Silk Road Economic Belt and a Maritime Silk Road – are focused on channelling enormous investment in infrastructure to connect the region and to open new markets for Chinese products, services and capital.

But the BRI is also causing concern within China and internationally because Chinese companies are investing heavily in coal power in BRI countries. The fear is that China will help lock developing countries into coal-power assets that will last decades, damage people’s health, and contribute to climate change.

Investments on the up

The Global Environment Institute (GEI) has recently carried out a long term review of China’s involvement in coal power projects in 65 countries that are now participating in the Belt and Road Initiative.

GEI’s figures show that between 2001 and 2016 China was involved in 240 coal power projects in BRI countries, with a total generating capacity of 251 gigawatts. The top five countries for Chinese involvement were India, Indonesia, Mongolia, Vietnam and Turkey.

The GEI research also found that China’s involvement in coal power projects in BRI countries, which often takes the form of contracting and equipment supply, has been increasing overall, despite large year-to-year fluctuations.

In the early 2000s Chinese enterprises were encouraged to acquire assets and expand business overseas as part of the government’s Going Out Strategy, leading to an increase in overseas coal projects.

However, there was a steep decline in such projects in 2010 because of policy changes in countries receiving investment, particularly India, which adopted protectionist policies barring foreign participation in domestic coal power projects. Investment in overseas coal projects picked up in 2013 though with the launch of the BRI in 2013, and then slowed following the signing of the Paris Agreement in 2016.

Higher risk expectations

More than 40% of the projects China is involved in are currently in the preparation phase; with 7% still in planning, 15% with contracts signed, and 23% under construction. A further 48% are already in operation, with the rest either cancelled, suspended, or having unclear status based on publicly available information.

The research found international concern around the risks associated with coal projects. Interregional laws, diplomacy and national policy all have a bearing on the projected risk of investments.

For example, India, Indonesia and Mongolia have all adopted policies to increase the proportion of renewables in their energy mixes. Meanwhile India, previously the top destination of Chinese coal-power investment along the Belt and Road, has seen relatively little Chinese involvement since a ban on foreign participation in major thermal power projects in 2009.

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