For the first time in two decades, Chinese policy banks did not make any new energy financing commitments to governments and government-related entities, according to a new study published by the Boston University Global Development Policy Center.
The center manages the Global Energy Finance Database (GEFD), which tracks lending by the two Chinese policy banks.
The study, authored by Cecilia Han Springer and Honest Shao, attributes the precipitous decline in energy financing to pandemic-related travel restrictions and debt distress in developing countries, as well as lower risk tolerance among Beijing’s policy banks. The authors do note that in 2021, China EXIM Bank took part in a loan to finance a private sector coal-fired power plant in Bangladesh.
Despite the precipitous decline, Chinese development banks have a massive overseas lending portfolio, including in the energy sector. According to the GEFD, China Development Bank and China EXIM Bank have issued over $230 billion in loans for overseas energy sector projects. Roughly $75 billion of those loans were disbursed since 2016 to countries like Pakistan, far surpassing lending by the World Bank or any other lender.
Springer and Shao assess that Chinese policy bank lending for overseas energy projects could eventually rebound. China, they argue, has an opportunity to reset and focus instead on clean, green energy.