China's continued hunger for oil and gas has it outspending the emerging market development arm of the World Bank. (Shutterstock)
China's two development banks spent more money on global energy projects than the emerging markets lending arm of the World Bank, known as the International Bank for Reconstruction and Development (IBRD).
According to a Boston University study released on Monday, China Development Bank (CDB) and China Export-Import Bank (CHEXIM) loaned $25.6 billion in global energy projects alone last year compared with the $22.6 billion IBRD provided in financing across project lines. IBRD is the world's largest development bank.
Energy is China’s favorite pet project. Their two development banks have loaned out nearly $225.8 billion worldwide since 2000. Brazil was the second largest recipient with $5 billion in energy deals, trailing the $5.2 billion sent to Pakistan.
Hydropower and oil were the top two investments made by the Chinese banks.
Although the numbers are much higher than what the World Bank lends out worldwide for development initiatives, the two Chinese policy banks have scaled back.
In 2016, the Chinese lent $47.3 billion to global energy projects. The average over the last three years between 2013 and 2016 was $28.7 billion. The number of loans and recipients rose, but the amount the Chinese banks took on has shrunk. Much of this is due to earlier investments that are still ongoing, including those in Brazilian and Russian oil and gas.
The declines in Chinese development finance in the energy sector are concentrated in significant
reductions in new extractive activities and in energy transmission and distribution systems, according to BU researchers from the Global Development Policy Center.
What is somewhat masked in the data for 2017 is that there has been an increase in the dollar amount of loans in the power sector which almost tripled relative to 2016 and is also higher than the average from 2013 to 2016. The majority of the total, and the increase is in hydroelectric power plants, with one large one in Pakistan, plus seven new dams receiving financial support from China, report authors Junda Jin and Kevin Gallagher wrote yesterday.
The dollar amount of coal financing increased, though the number of coal projects decreased in 2017, as only three new coal power plants were reported. Four were financed in 2016 and there has been an average of five Chinese funded coal projects funded per year since 2000.
Vladimir Putin and billionaire Leonid Mikhelson, the founder and majority owner of Novatek, visit the Yamal LNG liquefied natural gas plant in the village of Sabetta by the Kara Sea. China is a major funder. (Photo by Mikhail MetzelTASS via Getty Images)
Who Got What
Brazil saw a marked decline in financing last year, like $10 billion less. Both were for oil-related deals, helping to finance purchases by the China National United Oil Corporation, China National Petroleum Corporation, and Zhenhua Oil, all state-owned. Last year's loan was for Unipec Asia Supply Company, a buyer of Petrobras crude and a partner with Chinese state-owned refiner, Sinopec.
Like Brazil, Russia saw a precipitous downfall in financing last year following a boom in 2016. Russia was on the receiving end of a $1.2 billion loan for Arctic LNG 2, a Novatek project. Last year, Russia got for Yamal LNG, also owned by Novatek.
Novatek is a publicly traded company majority owned by billionaire Leonid Mikhelson.
Russian oil and gas projects are the biggest recipient of Chinese development bank financing over the last 8 years.
Frontier market Nigeria was a large recipient of China funds last year. The Mambilla hydroelectric plant was co-financed with the Nigerian government. It is the second hydroelectric dam these two Chinese development banks have invested in, with the most recent being the 2013 loan to the Zungeru hydropower plant on the Kaduna River. A Chinese company owns that plant. It is roughly 50% complete.
The China Global Energy Database at Boston University’s Global Development Policy Center tracks the international financing to foreign governments by the CDB and CHEXIM. These banks do not regularly and systematically publish their annual global disbursements. A number of researchers have attempted to build estimates of Chinese overseas development finance from the ground up. BU has collaboratively adopted the data collection methodology used by the China-Africa Initiative at the Paul Nitze School for Advanced International Studies at John Hopkins University.
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