China’s Overseas Energy Lending Tumbles To Lowest Since 2008

Bookmark

China’s overseas energy financing dropped to the lowest level since 2008 after the pandemic hampered deal-making in developing nations.

Financing for foreign energy projects, including power plants and mines, fell by 43% to $4.6 billion, according to Boston University’s Global Energy Finance Database, which tracks data from two state-owned development banks. More than half of lending was for a natural gas pipeline project in Nigeria, the study showed.

The impact of coronavirus added to a trend of dwindling project financing for the energy sector from President Xi Jinping’s Belt and Road Initiative. Infrastructure projects funded by China’s program in developing nations, such as Pakistan and Sri Lanka, have suffered issues including heavy debt loads.

China’s Overseas Energy Lending Tumbles To Lowest Since 2008

“Power plant deals are not something you can do on your iPhone and it takes a lot of negotiation in structuring the finance and engineering specs,” said Kevin Gallagher, a professor at Boston University’s Frederick S. Pardee School of Global Studies.

China has previously rejected U.S. criticism that the initiative unfairly burdens developing nations with debt, while acknowledging that some countries have had difficulties repaying loans due to pandemic-induced recessions. Pakistan has had informal talks for relief on payments for power projects Beijing financed over the past eight years.

Three projects financed by Chinese state-owned lenders received concessional loans last year, according to the university’s study. It indicates that China is “trying to be more attuned to the debt sustainability aspects, by giving more concessional finance you have a better chance of getting paid back because the bill won’t be as large,” said Gallagher.

China Development Bank and the Export-Import Bank of China have provided $245.8 billion worth of financing for the energy sector since 2000, according to Boston University. Nearly 80% of those deals were done under the Belt and Road Initiative.

Below is a breakdown of China’s overseas energy financing in 2020 by country:

CountryAmountDescription
Nigeria$2.5 billionGas pipeline project
Ivory Coast$286 millionGribo-Popoli hydropower project
Rwanda$214 millionNyabarongo II hydropower project
Lesotho$70 millionSolar PV power plant
Bangladesh$970 millionPower grid strengthening project
Pakistan$260 millionThar 330MW coal-fired power project
Serbia$214 millionNew Belgrade district heating system
Cambodia$80 millionRural power grid extension project

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.