Clean at Home, Polluting Abroad: The Role of the Chinese Financial System's Differential Treatment of State-owned and Private Enterprises

Mathias Lund Larsen*, Lars Oehler

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review


Although China is the world’s largest investor in renewable energy, its overseas energy investments are primarily in fossil fuels. This is a cause of major concern as countries across the globe need to transition toward low-carbon development trajectories to meet the 1.5-degree warming target of the Paris Agreement. In this paper, we present data up until and including 2019 showing that power generation investment in renewables domestically (excluding medium and large hydro) is 77% while only 22% overseas. We add to the literature on the institutional environment surrounding Chinese overseas investment by finding that in addition to general barriers to renewables, such as higher up-front costs and different income cycles, Chinese renewable firms face significant structural financing disadvantages vis-à-vis conventional energy firms. We find that the underlying reason is that Chinese fossil fuel companies are largely state-owned while renewable companies are largely private-owned. The disadvantage then materializes through the Chinese financial system’s preference for state-owned enterprises. Lastly, we identify concrete policy options to overcome the disadvantage by addressing five types of actors: 1) policy banks that can emphasize their development focused mandate, 2) state-owned commercial banks currently financing the majority of Chinese overseas energy projects, 3) smaller financial institutions currently not involved in this type of financing overseas, 4) Sinosure, currently focusing on insuring fossil fuel projects, and 5) Chinese energy, utility, and construction companies that would benefit from further diversifying into renewables.
Original languageEnglish
JournalClimate Policy
Issue number1
Pages (from-to)57-70
Number of pages14
Publication statusPublished - Jan 2023

Bibliographical note

Published online: 3. March 2022.


  • China
  • Renewables
  • Fossil fuels
  • Climate finance
  • Energy investments

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