Do Chinese power companies employ investments in foreign power projects as a geographical diversification strategy?

Abstract

China increased investments and contracts in foreign coal power projects after the Chinese government implemented more stringent regulations on air pollution and CO2 emissions and the Belt and Road Initiative (BRI). Against this backdrop, this chapter investigates the relations among them to further understand their effect on carbon relocation. Our empirical analysis uncovers that power project developers and to a less extent coal power plant manufacturers proactively increased contracts and investments in foreign coal power projects. They perceive the shrinking Chinese market and seek profit opportunities in foreign countries. The regulated grid companies take advantage of crises to purchase shares and assets of foreign utilities, increasing influence in the direction of power development. By contrast, the regulated power generators have used foreign power projects as a minor option at best and are less innovative and competitive than the project developers and incumbent manufacturers. These results suggest that Chinese climate–energy–air pollution control policies, coupled with the going global strategy and the BRI, cause a partial relocation of carbon-intensive processes in the electricity sector. The electricity supply system is more likely to be reconfigured toward a coal-centered system in host countries with weak grid governance and investment framework agreements with China.