Commentary: As part of my effort to track foreign direct investment (FDI) in various parts of the world, I subscribe to updates from the Global Development Policy Center (GDPC) of Boston University. This organization’s mission is to “advance policy-oriented research for financial stability, human well-being, and environmental sustainability across the globe.” The GDPC has developed an interactive database that tracks all the power plants that China has helped finance through its two global banks and through Chinese foreign direct investment. The database is set up to display this information based on CO2 emissions, lender, deal type, technology, capacity, and status.
The database is truly interactive in the sense that a globe displays all of the countries of the world, and the user is able to click on any country to see all the aforementioned information. According to a summation of the data, between 2000 and 2018, Chinese banks and private companies invested in 777 power plants in 83 countries throughout the globe. In these plants, 106.2GW of generation capacity is already operational. When completed, these plants will have a total generation capacity of 186.5GW, accounting for approximately two percent of the world’s total electrical power outside of China. When looked at as a percentage, two percent doesn’t seem like a lot until one considers that this is a percentage of all non-China capacity on earth.
When initially reviewing the database, I thought that the GDPC’s main goal was to track Chinese investment in order to make the case for how influential China has become in virtually every part of the globe, especially in developing countries. However, as I dug deeper into the data, I realized why the GDPC carefully tracks CO2 emissions. Forty percent of the energy projects that China has helped finance are coal-fired plants, 27 percent are hydroelectric, and only 11 percent are renewable energy. As developed countries attempt to move away from fossil fuel power to try to deal with climate change, China is doing the exact opposite, helping to construct coal-fired plants, the vast number of them located in developing countries. Forty percent of the coal-fired plants are in southeast Asia, 31 percent are in south Asia, and 16 percent are in Africa.
The completed Chinese-financed power plants throughout the globe are currently generating emissions of approximately 314 metric tons of C02 per year or about 3.5 percent of the annual CO2 emissions outside of China. It is estimated that future Chinese-financed projects will add an additional 211 metric tons of C02 emissions.
The countries that have received the most Chinese investment in their power projects are Brazil, Pakistan, and Indonesia. The GDPC uses the summed megawatts of projects to rank the biggest beneficiaries of Chinese investment, but it is easy to scroll through the data to see the total number of projects that China has helped finance. Brazil has constructed or is about to begin construction of projects producing 23,454MW of power. However, Brazil’s power projects facilitated by China number in the hundreds.
The GDPC’s database reveals how truly impressive the spread of Chinese investment in the global energy sector has become. Aside from larger developing countries such as Brazil and India, Chinese money has also reached poorer countries such as Chad, Bangladesh, and Gambia. Mexico has 3,227MW of power generation facilitated by Chinese investment. And, powerful, developed countries are also beneficiaries of Chinese investment. With 10,088MW of power projects made possible with Chinese money, the United Kingdom is the sixth largest recipient. Australia has 5,066MW of Chinese-financed power. Although just a smidgeon of its total power generation, even the U.S. has 2,842MW of power plants financed by China.
The billions of dollars of Chinese investments in the energy sector are not altruism, nor are they simply a manner of investing money in order to maximize returns. A large part of the motive in these investments is to develop leverage and spread Chinese power throughout the world. This is especially true with developing countries, which struggle in attracting FDI to improve their infrastructure. It has become easy to accept Chinese money, but harder to oppose China if the country is struggling economically and having trouble paying back the investment. It also becomes extremely tough or even suicidal to oppose Chinese foreign policy or its actions at home when it suppresses dissidents or even the dissemination of information, such as that related to the spread of the coronavirus. Many developing countries find themselves in the unenviable position of having to give up natural resources or strategic ports to China when they are strapped to pay the money back.
Other than food, it is hard to imagine an industry more important to modern human beings than the ability to generate power to support the many aspects of our lives. Years ago, China made a strategic decision to invest in this sector in diverse countries throughout the world. Through foreign policy and its quest to become a major player in the developing world, it is now reaping its rewards.