Foreign money continues to flow into China’s coal industry

By Nora Sausmikat and Katrin Ganswindt
Nora Sausmikat und Katrin Ganswindt über Chinas Kohleindustrie
Nora Sausmikat, China Desk, and Katrin Ganswindt, expert for coal and divestment campaigns, both at Urgewald e.V.

COP 15, the United Nations Conference on Biodiversity, was due to take place on 17 May. Now it has been postponed until October. The digital venue will be Kunming in southern China. A success to protect the remaining biodiversity would be a “Global Deal for Nature”. In other words, everyone must pull together. The same applies to curbing climate change, as all parties reiterated at US President Joe Biden’s climate summit. At the national level, China seems to be playing its part: It has had a climate change law since 2007, and in 2020 President Xi Jinping announced that China would be carbon neutral by 2060.

But China’s coal industry is booming and the climate and biodiversity goals are receding into the distance. Producing and burning coal harms the environment and thus endangers biodiversity. Moreover, coal burning is still the largest source of carbon emission, responsible for about one-third of the temperature rise to date. However, coal accounts for about 60 percent of China’s electricity consumption to date, and at over 1000 gigawatts, China operates half of the world’s coal-fired power plants. In 2020, 38.4 gigawatts of new coal capacity also came online. A further 206 GW are under construction and in planning, representing 41 percent of global coal-fired power plants under development.

What is wrong is the popular belief that the West cannot change anything in China anyway and has nothing to do with the direction of China’s energy production. That China is the EU’s largest trading partner and, therefore, many of our goods are produced with Chinese coal-fired power is reasonably well known. Less obvious are the global financial flows: Even though Chinese coal companies are mainly funded domestically, foreign financiers also support China’s coal industry in the Middle Kingdom. According to Urgewald research, 467 international financial institutions have financed Chinese companies listed on the Global Coal Exit List (GCEL). This is according to Urgewald’s February 2021 financial research, which investigated the banks and investors behind the companies on the Global Coal Exit List (GCEL). Everyone is pulling in the same direction here, but unfortunately, in the wrong direction.

Money from all over the world

A tenth of the money that flowed into China’s coal sector in the last two years has come from abroad. 48 international banks have provided $21.7 billion for China’s coal industry. The lion’s share of this sum was provided in the form of underwriting, i.e., by issuing shares and bonds.

By far the largest financiers from abroad come from the UK and the US. British banks such as HSBC and Standard Chartered have lent $5 billion and US banks such as JPMorgan Chase and Citigroup are only just behind with $4.9 billion. Banks from Japan, Switzerland and France have also sunk over $2 billion each into the Chinese coal sector. Among the biggest recipients of foreign money is China Huaneng, with $1.2 billion. The company has installed more than 100 gigawatts of coal-fired capacity and plans to add another 32 gigawatts. 439 investors have invested $19.6 billion worth of stocks and bonds in Chinese GCEL companies as of January 2021. This exceeds the investments of country-owned financial institutions by $2 billion.

The ranking is headed by the largest private investors in the world: the American companies BlackRock, with $2.7 billion, and Vanguard with $2.2 billion. In third place is the Qatar Investment Authority with $1.7 billion. US investors also lead the way overall, with a total of $11.5 billion in bonds and stocks of Chinese GCEL firms. Far behind are investors from the UK, such as HSBC and Schroders, with $1.3 billion. Other large European investors include the Norwegian Pension Fund with $562 million and the Swiss investor Pictet ($219 million) and UBS ($192 million).

China Energy is one of the companies with the largest amount of investment from abroad ($1.8 billion). The company is one of China’s coal giants with about 160 gigawatts of installed coal capacity and 510 million tons of coal production. China Energy is developing new coal-fired power plants with a total capacity of 54 gigawatts, including 2.8 gigawatts in Indonesia, and is planning new mines in China and Australia.

The role of Germany

Allianz ranks 18th among international investors with $217 million. Europe’s largest asset manager has adopted a comprehensive carbon policy, but this does not apply to its subsidiaries and third-party investments. French rival AXA is further along in this regard, only ranking 73rd with just $39 million. In total, 16 German investors have invested $403 million.

Among them is Deutsche Bank, which, in addition to $94 million in investments, is also involved in financing China’s coal sector to the tune of $410 million and ranks 19th internationally. Although Deutsche Bank adopted its first coal policy in 2020, which also excludes coal at the corporate level, it does not go far enough. Hopefully, it will follow examples such as Italy’s UniCredit, which does not appear in the ranking at all.

The biggest carbon emitters finance the biggest climate polluter

Despite announcements to protect the environment and the climate, China continues to build coal-fired power plants, some of which will not go into operation until 2025 and will continue to emit carbon dioxide until 2065, with an average operating life of 40 years. Four of the five largest coal-fired power plant developers in the world are Chinese companies. They have a combined 121 gigawatts under construction and in planning: China Energy, China Datang, China Huaneng and China Huadian. This is no longer about power supply in China itself. No, China is now the world’s largest developer of coal-fired power plants abroad. In countries like Bangladesh and Pakistan, China is even the main driver of the expansion and establishment of the coal industry. International financiers can be found for all of China’s internationally operating coal companies.

China is being sanctioned and financed at the same time: The US and Europe stand out in both cases. The historically largest carbon emitters are thus financing the largest current climate polluter. And this does not only concern China’s coal industry: As Urgewald’s research shows, investments are also made in China’s oil and gas sector.

If we can limit global warming to 1.5 degrees and protect our planet’s biodiversity, the expansion of the fossil fuel industry must stop. In October, the indicators for implementing the Aichi Protocol on the Protection of Biodiversity are to be defined. A stop to the further financing of fossil companies, above all, the coal industry, should be included here.

Dr. Nora Sausmikat and Katrin Ganswindt work at the NGO Urgewald e.V. The sinologist Sausmikat is active at the China Desk and works on campaigns on multilateral financial institutions, especially the Asian Infrastructure Bank (AIIB). Ganswindt is dedicated to campaigns on coal exit and divestment and is involved in data research for the Global Coal Exit List, which breaks down the global coal industry.


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