Transition of China’s global energy investment: Decarbonization,dispersion and denationalization

Abstract

China’s global energy investment (CGEI) plays a role in global energy transition. This paper uses a “3D” (decarbonization, denationalization, and dispersion) framework to analyze CGEI from 2005 to 2020 based on the China Global Investment Tracker (CGIT) database. Results indicate that significant decarbonization of CGEI has occurred, particularly after 2013, with the most pronounced effects observed in middle- and low-income countries. Dispersion is also significant as Chinas investment reached some 97 countries expanding across the globe to Africa and Latin America, led by solar and wind energy. On the other hand, a denationalization trend was less obvious. After a short period of expansion by private enterprises, denationalization stalled as central state-owned enterprises surged ahead in leading CGEI.

Keywords

Energy transition China’s global energy investment decarbonization denationalization dispersion

Introduction

China’s carbon emission per capita is currently similar to Europe’s (UNEP, 2019) and the government has made a “no new coal” pledge to hasten energy transition that has in turn influenced its global energy investment strategy (Schiermeier, 2021; Shen, 2020), especially in the hydro, solar, and wind sectors (Gosens et al., 2020; Yang, 2022). According to the Heritage Foundation and American Enterprise Institute, between 2005 and 2020, Chinese enterprises invested in some 1018 international energy projects, totaling US$752 billion, 425 (40.8%) were low-carbon energy projects with an investment of US$234 billion (30.6%). Yet there is little systematic work on China’s global energy investment (henceforth CGEI) that is likely to influence global energy transition.

This paper investigates CGEI transition from 2005 to 2020 based on China’s global investment data by the China Global Investment Tracker (CGIT). Until recently, China’s energy strategy has seen heavy investment in the fossil industry. Such a strategy has dictated the geography of its investment including investment in Central/West Asia, the Middle East, and North Africa. Furthermore, state-owned enterprises (SOEs) have led in outward investment, motivated by the Chinese government’s interest in energy security. These SOEs include China National Petroleum Corporation (CNPC), China National Offshore Oil Corporation (CNOOC), and the Sinopec Group which are among the world’s largest oil companies. While the China Investment Corporation (CIC), which is responsible for China’s foreign exchange reserve, has encouraged outward investment (Liew and He, 2012), the Chinese government has also targeted an energy mix where 15% of its energy needs would be met by renewable energy that has in turn, hastened outward investment in the renewable sector (Tan et al., 2013). Against this context, the paper seeks to answer three questions:

(i) How has China’s energy investment mix changed over time as priority shifts towards a greener economic development strategy?

(ii) What are the geographical patterns of renewable energy investments compared to the fossil sector?

(iii) Compared to the fossil sector, how dominant are Chinese SOEs in renewable energy investments?

The above questions will be examined using a 3D framework. This framework proposes that CGEI may be theoretically conceptualized and empirically investigated through the three dimensions of decarbonization, denationalization, and dispersion. The three dimensions will be analyzed through indices that we have developed. The rest of the paper is organized as follows. Section “Literature review and 3D framework” describes the framework of analysis, followed by data and methods in Section “Data and Indices.” Section “Results” presents the results and Section “Conclusion and policy implications” concludes the article with policy implications.

Literature review and 3D framework

China’s industrial and urbanization growth has been marked by a voracious demand for fossil energy, and early global investment in energy attempted to meet limited domestic energy supply in oil and gas. Since the late 2000s however, complex and profound changes in terms of the global energy market have taken place, with decarbonization, digitalization, decentralization, and democratization driving the change of key power infrastructures (Di Silvestre et al., 2018; Soutar, 2021). China aims to become carbon-neutral by 2060 and estimates that emissions will peak between 2025 and 2030 (The Institution of Engineering and Technology, 2020).

To achieve carbon-neutrality, the Chinese government has rolled out a number of policies and incentives. Its recent 14th Five Year Plan seeks to reduce carbon intensity to 18% in the next 4 years. The National Development and Reform Commission also published guidelines on President Xi Jinping’s “ecological civilization” including delegating CPC committees and government actors with the responsibility for peaking carbon emissions in 2030, prioritizing conservation, and promoting green technologies (China State Council, 2021). The committee has pledged to support use of clean energy in its investments in “Green Belt and Road” (BRI) countries (China State Council, 2017a, 2017b), supported by “The Belt and Road Ecological and Environmental Cooperation Plan” (China State Council, 2017c). This includes fortifying environment management of overseas investment and developing a green financial system such as green credit initiatives. In addition to BRI, the committee has also encouraged companies to address climate change in developing countries which have been a target of their investments.

Outward investment in renewables has become the principal mechanism for accelerating China’s energy transition to carbon neutrality. The government is actively constructing investment and financing systems that help move the country in this direction. It has promised to reduce investment in coal power and petrochemical while increasing investment in green transportation, carbon capture, and storage. The level of China’s global fossil investment has been decreasing since 2013, while the share of investment in grid and renewable has been rising especially in gas, wind, and solar (Baltagi et al., 2007; Lin and Bega, 2021). Cabre et al. (2018) suggest that China is uniquely poised to lead renewable energy global investments in its competitive solar and wind industries, supported by energy financing from policy banks. For the above reasons, the first dimension of the 3D analysis assesses China’s decarbonization.

Much of the decarbonization work have focused on the country’s global energy investments in terms of scale, content, actor, and geography (Li et al., 2020; Tan et al., 2013). Here, the literature has focused on the factors that influence CGEI’s locational choices in global energy projects. These factors include market size, bilateral relationship, resource endowment, and geographical distance at the macro-level (Pareja-Alcaraz, 2017; Tan et al., 2013). At the micro-level, local actors including governments, elites, and domestic enterprises have been found to influence CGEI (Camba, 2021; Dulal et al., 2013). Localization factors driven by the distribution of natural resources, in particular, have influenced China’s investments in Africa compared to other major investors in the continent (Koku and Farha, 2020). Host country location decisions reflect risk allocation between Chinese SOEs and host country’s politics. SOEs’ overseas investment are attracted to strong legal institutions and political stability (Chalmers and Mocker, 2017). In addition, promotion of socio-economic and environmental development of host countries has seen considerable work (Gong, 2022; Lema et al., 2021; Shen, 2020; Wu et al., 2020).

Examining global coal flows using network analysis, Song and Wang (2019) found that coal traffic shifted from North America to Japan, South Korea, and India between 1996 and 2015. While Russia and Italy lost prominence over time (Guo et al., 2021; Wang et al., 2019), China retained its centrality in coal traffic networks. Trans-Pacific shift in coal consumption, particularly China’s sizeable imports, has led investors to more cautiously allocate China’s global energy investment to avoid the potential disruption of energy supply particularly in the context of geopolitical tensions (Yu et al., 2021). Market size, resource endowment, political intimacy have all been confirmed factors conducive to an optimized global allocation of CGEI (Tan et al., 2021b; Wolfe and Tessman, 2012; Xu et al., 2019). Notably, “intimate relations” in the form of immigrant numbers, senior officials visits and institutional distance have also been found to influence CGEI patterns (Tan et al., 2021a). However, these studies are focused on fossil investments, or, they do not as in the case of Tan et al, distinguish between fossil and renewable energy, and may not apply to renewable investment patterns.

Unlike fossil energy, investment in hydro, solar, and wind energy tends not to be localized, hence resource exploitation is less relevant in influencing investment patterns compared to motivation of technology and market. China’s CGEI in Europe for example is motivated by market-seeking and R&D (Lv and Spigarelli, 2015). On the other hand, CGEI in developing countries like Africa is influenced by turnkey project development, and the importation of labor and equipment from China (Lema et al., 2021). Jackson et al suggest that demand for low carbon energy infrastructure in host countries may be met by Chinese investment and technology. Their study shows that Chinese firms in the solar photovoltaic (PV) industry are more involved in downstream activities and manufacturing overseas, along with some manufacturing activities with minimum upstream activities. They conclude that opportunities exist for technology transfer in the solar value chain of the firms’ overseas activities. Notably, they advance a model of South-South technology transfer with China playing a role in transferring solar technology overseas (Jackson et al., 2021). The above suggests that unlike fossil investment, green investment is less constrained by the localized geography of natural resource, and is influenced by the need to enhance technology assets and ownership advantages in Europe, and, technology and market exploitation in Central Asia, Africa and other developing countries. For this reason, we expect CGEI to be more geographically dispersed over time as investment in renewable energy rises; hence dispersion is the second construct in the 3D framework.

Decarbonization and dispersion are paralleled by a number of investment initiatives including the development of hydropower infrastructure in the Global South (Hensengerth, 2013; IMF, 2015), and wind and solar industries (Gosens and Lu, 2014; Jackson et al., 2021) where a large Chinese domestic market has offered comparative industrial advantage (Gosens and Lu, 2014; He et al., 2020; Xia and Song, 2009; Zhang et al., 2015). In the case of the solar sector, CGEI initially focused on technology acquisition in the global PV module manufacturing industry, followed by a vertical integration strategy to secure inputs from the upstream sector and to establish leadership in technology (Corwin and Johnson, 2019; Zhang and Gallagher, 2016; Zhu et al., 2019).

Though market liberalization in the 1990s and 2000s has not resulted in increased privatization in the petroleum sector, some studies maintain that the state’s role has also been more fluid in the renewable sector, with both the state and market mutually influencing each other (Chen and Chen, 2021). In particular, local state-owned enterprises (LSOEs) and private enterprises (PTEs) have emerged as important actors in CGEI. LSOEs’ rise is influenced by local governments which provided support through subsidies for the PV industry and preferential land contracts, while decreasing their global coal investment. All this has facilitated the development of local state-owned solar PV manufacturers (Corwin and Johnson, 2019; Tan et al., 2021a). Binz et al. (2017) study of solar PV panels shows that China’s relative success in the industry is not due to top-down governance by the state through their close relationships with SOEs, but to private actors. Chinese returnees from overseas in particular helped to fuel private solar PVs. Capital from returnees alongside subsidies from local governments helped spawn start-ups.

One good example is the development of solar water heating (SWH) technology in Shandong province. Goess et al (2015) found that the industry developed without local or city government subsidies in the initial phase. Rather private companies like Linuo were able to vertically integrate the value chain from mining of quartz sand, manufacturing of raw tubes to assembly and sales. Assembly of heaters was performed by many small firms and the industry grew to well over 500 SWH firms. Part of the success was due to extensive collaboration in research and development (R&D) with principal universities such as Tsinghua University and Shanghai Jiaotong University which resulted in local knowledge spillovers as an industrial cluster of SWH technology emerged. A nascent literature is thus moving beyond the central role of the state in China’s decarbonization goal and arguing that the government has opened up a space for private actor participation. New entrepreneurs have emerged among low carbon companies that are engaged in innovation, risks and business opportunities even when markets pose as threats (Sheng, 2020). Photovoltaic modules and wind turbines are largely produced and exported by PTEs. 64% of cross-border investment in the energy-sector is by Chinese private enterprises in renewables (Zhou et al., 2018). At the same time, SOEs are adjusting their strategies turning to project contracting and export of technology instead of merely seeking energy resources compared to the fossil sector. For these reasons, the final construct, denationalization, attempts to capture the rising role of private enterprises (PTEs).

Summing up, the three dimensions of Chinese global energy investment, that is decarbonization, dispersion, and denationalization, may be conceptualized in Figure 1. Decarbonization involves increasing the scale of investment in renewables by diversifying the mix of energy investment. Such a move implies that localization factors that focus on resource-rich regions play less of an important role than market exploitation and technology-sourcing or augmentation. In turn, CGEI is less localized and more geographically dispersed. Finally, decarbonization has seen the entry of new institutional actors, namely private enterprises, diminishing the role of SOEs, a process that is captured by denationalization in Figure 1. These 3D factors will be examined as part of China’s energy transition below.

Figure 1.

“3D” model of CGEI’s transition.

Data and indices

Data

Energy investment consists of equity investment and construction investment. The former includes greenfield investment and cross-border mergers and acquisitions, while the latter includes international energy infrastructure construction through project contracting and energy equipment supply. Our data comes from the China Global Investment Tracker (CGIT) database, which is compiled by the American Enterprise Institute (AEI) and the Heritage Foundation (HF). The database has recorded 3643 large-scale international investment projects from China with an investment of more than US$100 million since 2005, including 1041 projects in the energy sector.

To extract the data, information on investors’ ownership and industry of the transaction are checked in detail. Chinese Central SOES (CSOEs), LSOEs, and PTEs are identified and they may be further disaggregated as traditional energy enterprises, manufacturers of products and equipment, engineering contractors, state-owned power companies, and financial institutions. Next, we identified companies in the coal, oil, gas, grid, hydro, solar, and wind sectors. Here, grid includes power transmission and transformation projects and the merger of local electric companies. “Other fossils” refer predominantly to thermal power plants that use a mix of different fossil fuels. Nuclear and waste-to-energy activities are classified as “other renewables” investment, but they are not the main focus of CGEI in this paper. The above process is supplemented by cross-checks against the websites of the enterprises and news reports about the transactions.

3D indices

To examine CGEI’s transition under 3D, indices that measure decarbonization, dispersion and denationalization are constructed below.

Decarbonization index (DCI)

Decarbonization is expected to be paralleled by changing energy mix in CGEI where renewables gain priority. The decarbonization index (DCI) below is based on the weighted proportion of investment in different energy sectors.

W P_{i} = \frac{C G E I_{i}}{\sum_{i = 1}^{n} E I_{i}} \times w_{i}

(1)

H C I = \sum W P_{i}, if i is high - carbon sector

(2)

L C I = \sum W P_{i}, if i is low - carbon sector

(3)

D C I = {\begin{matrix} \frac{L C I}{H C I}, i f H C I > 0 \\ 100, i f H C I = 0 \end{matrix}

(4)

Where $W P_{i}$ represents the weighted sum of CGEI proportions in each sector. $C G E I_{i}$ denotes the level of CGEI across different sectors (n = 9), $w_{i}$ the carbon impact of each sector, with high-carbon sectors weighted by their direct emissions and low-carbon sectors by their lifecycle emissions (Amponsah et al., 2014; Forest Research, 2024; GOV.UK, 2022). Table 1 details the specific energy sectors and their corresponding weights. $H C I$ and $L C I$ represent the weighted sums of CGEI proportions in high-carbon and low-carbon sectors, respectively. $D C I$ measures the level of CGEI decarbonization, calculated as the ratio of LCI/HCI. A higher DCI value indicates a stronger shift in investment towards low-carbon energy, signifying a more active low-carbon transition. This metric not only quantifies each energy type’s contribution to overall low-carbon investment, but also tries to reflect the carbon emission characteristics of different energy sources through adjusted weight coefficients.

Table 1.

CGEI sectors and their weights considering carbon emission effect.

High carbon		Low carbon
Sector	Weight	Sector	Weight
Coal	1	Grid	0.4
Oil	0.7	Hydro	0.15
Gas	0.5	Solar	0.2
Other fossils	0.8	Wind	0.1
		Other renewables	0.3

“Other fossils” primarily refers to thermal power plants and other facilities that use fossil fuels but cannot be classified under a single primary energy source. “Other renewables” mainly includes nuclear energy, waste-to-energy projects, and biomass energy initiatives.

Dispersion index (DPI)

The Dispersion Index (DPI) measures the geographical spread of CGEI, or conversely, if CGEI is regionally concentrated. Here, we use Shannon Entropy and the Gini coefficient expressed below to evaluate how CGEI investments are distributed across different countries.

G i n i = \frac{\sum_{j}^{m} (2 k - m - 1) p_{j}}{m \sum_{j = 1}^{m} p_{j}}

(5)

D P I = 1 - G i n i \times (1 - \frac{\log (1 + m)}{k})

(6)

Where the $G i n i$ index shows if CGEI tends to concentrate in a few countries. $p_{j}$ indicates the proportion of CGEI of country j in total, and m is the total number of countries. k refers to the ranking of categories (sorted by share). Here, $k$ is used to adjust the influence of the number of countries on the DPI. Considering that this study involves a total of 125 countries, we set $k$ to 5 to ensure that the value of $\log (1 + m) / k$ remains approximately within the range of (0, 1).

Denationalization index (DNI)

As noted previously, PTEs’ investment strategies are motivated by market and technology-seeking factors. Here, we construct the Denationalization Index (DNI) using the following formula below.

D N I = {\begin{matrix} \frac{I P T E}{I C S O E + I L S O E} * 100, i f I C S O E \neq 0 o r I L S O E \neq 0 \\ 100, i f I C S O E = 0 a n d I L S O E = 0 \end{matrix}

(7)

Where $I P T E$ , $I C S O E$ , and $I L S O E$ are the level or amount of CGEI by private-owned, central state-owned and local state-owned enterprises, respectively. The higher is DNI, the greater the contribution from PTEs.

Results

Decarbonization

To examine if decarbonization has occurred, we examined DCI, that is the ratio of high-carbon investments (oil, gas, etc.) and low-carbon investments (solar, wind, etc.) over time. Additionally, we explored the differences in decarbonization level of countries with different income levels.

CGEI has undergone significant decarbonization in the period between 2005 and 2020. Figure 2 shows that DCI rose from 0.05 to 0.43. This period is characterized by expansion of CGEI in grid and renewables as CGEI in these sectors reached US$14.7 billion, almost fifteen times higher than 2005 (US$1.1 billion). Decarbonization is accompanied by the shrinking of the oil sector. CGEI in the oil sector, once a main target, shrank from $6.8 billion in 2005 to $2.0 billion in 2020. The shift in the CGEI energy mix has led to a decrease in the weighted share of high-carbon investments from 65.74% in 2005 to 30.05% in 2020, while the share of low-carbon investments increased from 3.23% to 12.97% over the same period. This captures China’s ambition in decarbonization although the coal and gas sectors are still important, accounting for 15.9% and 16.9% of total investment in 2020, respectively.

Figure 2.

Decarbonization of China’s global energy investment.

The figure shows that decarbonization occurred in phases. From 2005 to 2012, DCI expanded rather slowly, averaging 0.03. This was a period when the gas sector was important, accounting for 29.5% of total energy in 2012. Gas is cheaper, more environmentally friendly and accessible than oil, and was regarded to be a reasonable substitution of oil and coal. After 2012, decarbonization accelerated paralleled by expansion in grid and renewables, in particular grid and hydro. In the 4 years between 2013 and 2016, DCI rose from 0.07 to 0.26. However, from 2016 to 2018, CGEI in the oil sector rose again. One explanation may be that oil prices began to rebound in 2017. But when the COVID-19 pandemic hit in 2019, DCI rose sharply before slowing down in 2020.

Decarbonization is most pronounced in middle- and low-income countries (Figure 3). High income countries experienced a spike in 2019 but this is due to the $8.9 billion nuclear project investment by China General Nuclear Power Group in the United Kingdom. While there is significant investment in coal in low and middle-income countries, large investments in grid infrastructure and hydropower drove decarbonization as DCI reached 0.54 in 2020. In contrast, there is greater volatility in low-income countries because of fewer investment opportunities and weaker financial support.

Figure 3.

Decarbonization of China’s global energy investment across income groups.

Africa, South America, and Europe displayed significant decarbonization. By 2005 to 2009, China had already made substantial renewable energy investments in Africa, primarily in hydropower, totaling $7.4 billion (Figure 4). Sinohydro alone accounted for $5.3 billion across 10 hydropower projects in nine African countries, including Ethiopia, Ghana, and Mali. This trend continued and expanded into South America from 2015 to 2020, with low-carbon investments in power grids and renewables reaching $3.5 billion, including $1.6 billion in hydropower, $780 million of which was in Brazil, and led by China Three Gorges.

Figure 4.

During the same period, CGEI in Europe also became more low-carbon, with 34 projects in power grids and renewables, compared to 15 in the high-carbon oil and gas sector. The region enjoyed considerable investments in renewables that reached $23.6 billion compared to just $6.8 billion in oil and gas. Unlike Africa and South America, low-carbon investments in Europe were primarily in power grids ($1.3b), solar ($1.3b), and wind energy ($7.5b). Other low-carbon sectors such as nuclear, biomass, and waste-to-energy also saw some CGEI investments.

In contrast, China’s investments in the United States (US) remained focused on the oil and gas sector, with only $3.33 billion directed to power grids and renewables between 2005 and 2020, so that the impact on low-carbon is lower. This may be due to the U.S.’s relatively abundant fossil energy resources and investment restrictions. Decarbonization is also less evident in South Asia and Southeast Asia, where traditional high-carbon fossil fuels like coal continue to dominate.

Dispersion

In the case of dispersion, geographical expansion into a wider number of countries is more noticeable before 2010. Figure 5 shows that from 2005 to 2010, DPI rose sharply from 0.74 to 0.93, marking the fastest period of dispersion. DPI increased to 0.98 in 2016 before falling to 0.88 in 2020. Lorenz curves highlight three phases: In the first phase (2005–2009), China’s CGEI spread across 58 countries, with a DPI of 0.9 and a Gini coefficient of 0.55. During the second phase (2010–2014), the number of countries where China had invested increased to 93 resulting in a rise in DPI (0.63) and Gini coefficient (0.94). In the third phase (2015–2020), DPI and Gini coefficient reached 0.95 and 0.65 as investments covered some 97 countries. Despite the slowdown, 97 is still a large number of countries and Chinese firms have become one of the most global investors in energy in the world.

Figure 5.

Dispersion of China’s global energy investment.

Dispersion of CGEI is more pronounced in lower-middle and low-income countries, while it tends to be more concentrated in high-income and upper-middle-income countries. Although countries across different income groups have similar DPI values, there are notable differences in Gini coefficients and the number of countries involved (Figure 6). For example, CGEI covered only 20 low-income countries, out of a total of 27 classified by the World Bank in 2020. In contrast, there were 80 high-income countries in 2020, but investments reached less than half of the countries, that is 33 countries. The Gini coefficients suggest that CGEI is more geographically concentrated in high-income (0.67) and upper-middle-income countries (0.69) compared to lower-middle (0.57) and low-income (0.53) countries.

Figure 6.

Dispersion of China’s global energy investment in by income level.

Dispersion is highest in the hydro, oil, and gas sectors compared to solar and wind energy, CGEI. As shown in Figure 7, hydro, oil, and gas tend to have the highest DPI, that is over 0.88 while solar and wind’s Gini coefficients are much lower at 0.48 and 0.52 respectively. One explanation is the localized feature of fossil and hydro energy, that is, oil, gas and abundant moving water from large rivers are not geographically ubiquitous and are located in a more limited number of countries. Capital investment is also significant with higher risks.

Figure 7.

Dispersion of China’s global energy investment in different sectors.

Asia and South America have become major regions for the dispersion of CGEI investments. Figure 8 illustrates the global distribution of CGEI over different periods, highlighting the top five recipient countries in each region. In 2005 to 2009, CGEI was concentrated in oil and gas-rich nations like Kazakhstan, Iraq, and Iraq. Between 2010 and 2014, China continued to secure oil and gas supplies, expanding its investments to the U.S., Canada, and Russia, while also investing in coal projects in Australia and hydropower in Brazil. By 2015 to 2020, Brazil, Russia, Pakistan, the UAE, and Indonesia had become primary destinations, with Pakistan and Brazil driven largely by coal and hydropower investments.

Figure 8.

Denationalization

The degree of denationalization may be investigated through the involvement of central state-owned enterprises (CSOEs), local state-owned enterprises (LSOEs), and private enterprises (PTEs). In Figure 9, denationalization shows an upward trend initially and especially in the few years following the 2008 financial crisis which saw rapid economic recovery. Such a trend however was shortlived as DNI peaked at 18.3 in 2014 before declining to 4.7 in 2020. CSOEs consistently played the most significant role, and are responsible for 89.7% ($675 billion) of CGEI investments. LSOEs played a much smaller role contributing $37.4 billion versus $40.1 billion by PTEs. Notably, PTEs emerged after the financial crisis only to decline after peaking in 2014. Overall denationalization occurred briefly in the post-financial crisis period and the momentum did not last.

Figure 9.

Denationalization of China’s global energy investment (CGEI).

When disaggregated by sectors, solar and wind experienced the highest degree of denationalization. Figure 10 shows that coal, oil, gas, grid, and hydro CGEI projects have seen minimal private sector participation. On the other hand, solar and wind industries involve component manufacturing, supply chains, and decentralized installations, creating significant opportunities for Chinese private enterprises. Hence, from 2012 to 2015, solar CGEI projects were largely led by PTEs which contributed to the DNI value of nearly 100. The index remained significantly high in the subsequent years averaging 60.53. Similarly, wind energy also saw an upward trend, rising from 8.71 in 2017 to 100 in 2020. Furthermore, private enterprises were relatively active in small-scale renewable energy projects, such as biomass and waste-to-energy. As a result, the DNI index for “Other renewables” CGEI was relatively high between 2015 and 2018 averaging 31.5.

Figure 10.

Denationalization of CGEI across country groups and sectors.

DNI tends to be higher in high-income (13.5) than low-income countries (3.0). Consistent with the previous paragraph, three of the four income groups of countries in Figure 10(a) saw a gradual increase in DNI followed by a decline after 2014. Only one group, upper-middle-income countries balked the trend, displaying a rising trend that reached 35.2 in 2020. One explanation is that low-income countries have seen minimal PTE involvement as PTEs tend to be target higher-income countries in line with their market and technology sourcing motivations.

Nonetheless, Figure 11 also shows that DNI was virtually driven by SOEs between 2005 and 2009 reaching 100 in Japan and Tajikistan. This was due largely to the investments of Wuxi Suntech and Tebian Electric Apparatus. Following this 2008 financial crisis, firms began to expand to North America, Africa, and Asia and DNI averaged over 30. Chinese PTEs invested $3.1 billion in the U.S., $2.3 billion in Canada, and $330 million in Mexico between 2010 and 2020. Investments were led by three firms, namely, Yantai Xinchao, Sinoenergy, and Goldleaf Jewelry, all in the oil sector. As we have observed previously, the US had become a net oil exporter by this time (Poon et al., 2024).

Figure 11.

On the other hand, investments in lower income countries in Africa and Southeast Asia were concentrated in the renewable energy sector. One company, Tebian Electric Apparatus, alone accounted for 61% of all private energy investment between 2010 and 2020, targeting hydropower and grid construction in six countries, including Angola, Tanzania, and Zambia. Other private investors, Western Power, Solargiga, and Zhenfa New Energy Science, focused on solar energy. Similarly, Southeast Asia and Oceania, Thailand, Singapore, and Australia all saw investments in wind and solar projects contributing to relatively high DNI values.

Conclusion and policy implications

This paper’s investigation of CGEI under the 3D framework highlights three principal findings. First, the period 2005 to 2020 saw notable decarbonization, particularly after 2013. This was largely due to China’s investment in renewable energy resources in middle- and low-income countries. Decarbonization was highest in Africa, South America, and Europe led by solar and wind projects. Second, while dispersion was observed, this largely occurred before 2010 especially in lower-middle and low-income countries. CGEI was more geographically concentrated in high-income countries particularly in North America in the oil and gas sectors.

Finally, denationalization has not been particularly strong. While the private sector was encouraged to participate, their activities weakened after 2014 relative to SOEs’. Central State-Owned Enterprises (CSOEs) remained the most dominant actor in overseas energy investments.

Nonetheless, China’s sustained investment in the renewable sector overseas not only benefits China’s own goals of decarbonization through clean energy imports. It can also facilitate global decarbonization by offering access to cleaner renewable energy in host countries, particularly low income countries. This is best seen in increased geographical dispersion to Africa and Southeast Asia. Dispersion is also driven by oil and gas investments in North America which explains the persistent role of SOEs—the largest oil companies in China are all SOEs with the financial capacity to undertake large capital-intensive projects. This may have crowded out PTEs whose role appears to have diminished over time.

Finally, some limitations of the study are reported. The CGIT database only reports projects exceeding $100 million, which may result in the exclusion of smaller yet significant investments. Additionally, data inconsistencies and gaps, particularly in regions with less reliable reporting, may affect the findings. Moreover, the methodological approaches used, such as income level categorizations, may need to be refined. These factors suggest the need for future research to expand the scope, enhance data accuracy, and consider a broader range of sectors and regions to provide a more comprehensive analysis.

Footnotes

Author contribution statements

Jiashun Xue: Software, Validation, Formal analysis, Methodology, Data Curation, Writing - Original Draft, Visualization, Writing - Review & Editing. Jessie P.H. Poon: Conceptualization, Writing - Review & Editing.

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: The authors acknowledge support from the Special Fund of the National Natural Science Foundation of China (Grant No: 72348003).

ORCID iD

Jiashun Xue

Author biographies

Jiashun Xue is a PhD candidate at the Institute of Geographic Sciences and Natural Resources Research (IGSNRR), Chinese Academy of Sciences (CAS). His research focuses on economic geography and regional development.

Jessie PH Poon is a Professor at Department of Geography, University at Buffalo-SUNY. She is once the chair of Regional Studies Association (RSA), and she has been nominated as a fellow of the American Association of Geographers (AAG). Her research focuses on international trade and investment, regional economic development, energy and finance.

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