For the first time in its history, China has shifted the majority of its foreign power investments towards renewable energy, with nearly 70% allocated to solar and wind projects from 2022 to 2023. This change marks a significant departure from China’s previous trend of prioritizing fossil fuels, notably coal, in its overseas energy financing. According to an analysis from Boston University’s Global Development Policy Center, this shift is part of a strategic move following President Xi Jinping’s pledge in September 2021 to cease financing new overseas coal-fired power plants. Consequently, investments in renewables not only reflect a growing commitment to green energy technologies but are also poised to address energy transition financing gaps in developing nations.
However, the overall energy investment landscape remains nuanced as China’s total foreign direct investment has declined since its 2016 peak. Despite the higher percentage of renewable investments, the actual financing for these projects has been relatively modest, amounting to just three gigawatts of wind and solar capacity funded over the last two years compared to an average of 16 gigawatts annually from 2013 to 2019. Moreover, existing coal projects that were initiated before the 2021 pledge may still be completed, contributing significantly to global carbon emissions. Ongoing initiatives like the Green Investment and Finance Partnership may help bolster sustainable development efforts, but transitioning China’s overseas energy portfolio towards a greener future remains an evolving challenge.