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1、C O R P O R AT I O NTOM LATOURRETTE,TODD C.HELMUS,IRINA A.CHINDEAChinas Role in the Global Development of Critical ResourcesCase Studies in Coal Power,Electricity Transmission,and Seabed MiningResearch ReportFor more information on this publication,visit www.rand.org/t/RRA2096-1.About RANDThe RAND C

2、orporation is a research organization that develops solutions to public policy challenges to help make communities throughout the world safer and more secure,healthier and more prosperous.RAND is nonprofit,nonpartisan,and committed to the public interest.To learn more about RAND,visit www.rand.org.R

3、esearch IntegrityOur mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior.To help ensure our research and analysis are rigorou

4、s,objective,and nonpartisan,we subject our research publications to a robust and exacting quality-assurance process;avoid both the appearance and reality of financial and other conflicts of interest through staff training,project screening,and a policy of mandatory disclosure;and pursue transparency

5、 in our research engagements through our commitment to the open publication of our research findings and recommendations,disclosure of the source of funding of published research,and policies to ensure intellectual independence.For more information,visit www.rand.org/about/research-integrity.RANDs p

6、ublications do not necessarily reflect the opinions of its research clients and sponsors.Published by the RAND Corporation,Santa Monica,Calif.2022 RAND Corporation is a registered trademark.Limited Print and Electronic Distribution RightsThis publication and trademark(s)contained herein are protecte

7、d by law.This representation of RAND intellectual property is provided for noncommercial use only.Unauthorized posting of this publication online is prohibited;linking directly to its webpage on rand.org is encouraged.Permission is required from RAND to reproduce,or reuse in another form,any of its

8、research products for commercial purposes.For information on reprint and reuse permissions,please visit www.rand.org/pubs/permissions.iii About This Report Chinas extensive and expanding foreign investment and financing activities over the past approximately 20 years have garnered substantial attent

9、ion and raised several concerns.The purpose of this report is to explore Chinese investment and financing activities in energy infrastructure and critical minerals.RAND National Security Research Division This research was sponsored by the U.S.Department of States Global Engagement Center and conduc

10、ted within the International Security and Defense Policy Center of the RAND National Security Research Division(NSRD).NSRD conducts research and analysis for the Office of the Secretary of Defense,the U.S.Intelligence Community,the U.S.State Department,allied foreign governments,and foundations.For

11、more information on the RAND International Security and Defense Policy Center,see www.rand.org/nsrd/isdp or contact the director(contact information is provided on the webpage).Acknowledgments We gratefully acknowledge Lev Navarre Chao for his assistance with the literature review and for reviewing

12、and analyzing the coal power plant database;we also thank Samantha Perez Davila and Isabelle Winston for their support with setting up and conducting the interviews for the Latin America chapter.We greatly appreciate the guidance,support,and facilitation of connections from the Global Engagement Cen

13、ter team.We are grateful to all the interview participants for taking the time to share their experiences and insights related to Chinese foreign investments and financing in critical resources.iv Contents About This Report.iiiFigures and Tables.viSummary.viiAbbreviations.xiChapter 1.Introduction.1B

14、ackground and Motivation.1Research Approach.2Organization of This Report.3Chapter 2.Chinese Support for Overseas Coal Power Plants.4Introduction.4A Downturn in Coal Power Development.6Chinese Regulatory Agencies Reduce Support for Overseas Coal.7What Is the Impact of President Xis Policy Statement?.

15、8South Africa.9Indonesia.12Pakistan.15Summary.18Chapter 3.Electricity Transmission and Distribution in Latin America.19Overview of GEI and GEIDCO.21GEI and GEIDCO in Latin America.24Brazil.27Chile.29Peru.32Argentina.34Mexico.36Summary.38Chapter 4.Seabed Mining.40Context for Seabed Mining.41Chinese G

16、overnment Positions and Statements About Seabed Mining.45Chinese Deep and Distant Ocean Exploration Technology and Activity.46Chinese Seabed Mining Activity.48Potential Areas of Concern Regarding China and Seabed Mining.51Summary.54Chapter 5.Recommendations.57Chinese Support for Overseas Coal Power

17、Plants.57Electricity Transmission and Distribution in Latin America.59Seabed Mining.61 v Appendix A.Advantages and Disadvantages of a Globally Integrated Grid Based on UHV Transmission Lines.63Appendix B.Chinese Attempts to Project Influence in the Informational Domain in Latin America.65References.

18、71 vi Figures and Tables Figures Figure 2.1.Total Operating Power from Chinese Supported Coal-Fired Power Plants,2022.5Figure 2.2.Changes in Status for Chinese-Supported Coal-Fired Power Plants,2022.9Figure 2.3.Chinese Support for South African Coal Power.10Figure 2.4.Potential Impact of the NDRC Gu

19、idelines on Chinese Support for South African Coal-Powered Energy.11Figure 2.5.Chinese Support for Indonesian Coal Power.12Figure 2.6.Potential Impact of the NDRC Guidelines on Chinese Support for Indonesian Coal-Powered Energy.14Figure 2.7.Chinese Support for Pakistani Coal Power.15Figure 2.8.Poten

20、tial Impact of the NDRC Guidelines on Chinese Support for Pakistani Coal-Powered Energy.17Figure 3.1.Diagram of the 9H-9V Grids Planned by 2070 for GEI Backbone Framework.23 Tables Table 1.1.Case Study Topics and Countries.2Table 1.2.Interview Statistics.3Table 3.1.Summary of Top Chinese Investments

21、 and Financing in Power Transmission and Distribution in Latin America and the Caribbean from 2010 to January 2022.20Table 4.1.ISA Exploration Contracts.43Table 4.2.ISA Exploration Contracts Sponsored by China.44Table 4.3.Cook Islands Seabed Minerals Authority Exploration Licenses.45 vii Summary Chi

22、nas extensive and expanding foreign investment and financing activities over the past two decades have garnered substantial attention and raised several concerns.Such concerns are diverse and include paying insufficient attention to internal politics,global relations,environmental regulations and co

23、ntrols,and human rights,worker safety,and health records of host nations engaging in unfair contracting practices using overseas investments and financing to attain access and influence in strategic locations using disinformation to influence markets.For this report,we examined Chinese foreign inves

24、tments and financing in critical resources and energy infrastructure for evidence of these types of behaviors.We used a case-study approach in which we examined investments and financing in coal power plants in Indonesia,Pakistan,and South Africa;electricity transmission and distribution infrastruct

25、ure associated with the global energy interconnection(GEI)initiative in Brazil,Chile,Argentina,Peru,and Mexico;and seabed mining globally.These case study topics and the regions of focus were selected at the behest of the sponsor.Our research did not turn up many clear examples of the behaviors note

26、d above but did identify some other topics of concern that have important implications for host nations.Chinese Support for Overseas Coal Power Plants By most measures,China appears to be moving away from its historical support for the development of overseas coal-fired power plants.Still,questions

27、persist regarding whether China intends to fully adhere to the pronouncement by President Xi Jinping and the established Belt and Road Initiative guidelines,which categorically assert that China will not build new coal plants abroad.Since Xis announcement in September 2021,China has initiated two ne

28、w coal plants supporting industrial parks in Indonesia.Further,since the time of Xis speech,several plants have moved forward in the development process,and it remains unclear exactly how China will follow through on its promulgated guidelines for plants in the very early stages of development.Under

29、 a strict interpretation,such plants should be canceled,though it is likely that some will move forward.Our research led to several recommendations for nations that have built or are considering building Chinese-financed coal power plants.First,it will be critical for industrial parks in Indonesia a

30、nd elsewhere to replace existing or planned coal plants with renewable energy sources.The international community will need to viii hold China accountable in following through on its promises to not build new coal plants abroad,and it will be critical to persuade host countries,such as Indonesia,tha

31、t further development of coal for such parks will undermine their net-zero commitments.Second,the international community should seek greater clarity from China on plans for continuing to support coal plants with financing and permits that have not yet begun construction.Although the Chinese Nationa

32、l Development and Reform Commission guidelines unambiguously call on Chinese firms to“completely stop new overseas coal power projects,”it seems that such firms are continuing to move forward on at least a selection of permitted and financed projects,which the Center for Research on Energy and Clean

33、 Air considers to fall within a gray area.The international community should consequently engage Chinese authorities to gain greater clarity on Chinas intention for such plants.Third,the international community should help host countries transition from coal.The international community(particularly,

34、China,with its dominance in solar panel and wind turbine manufacturing)should offer direct financial and construction support for the development of solar and wind energies.Diplomatic engagements and capacity-building initiatives should also be undertaken to help countries,such as Indonesia,address

35、significant bureaucratic impediments to renewable energy.Initiatives such as the Just Energy Transition Partnership in South Africa,in which the United States,Germany,the United Kingdom,and the European Union will contribute$8.5 billion to help South Africa retire coal plants early,support coal-depe

36、ndent regions,and turning to renewable energy may also be critical in helping such countries as Indonesia and Pakistan move away from coal.Electricity Transmission and Distribution in Latin America The GEI case study documented relatively few concerns associated with Chinese ownership or control ove

37、r power transmission and distribution companies in Brazil,Chile,Peru,and Argentina.1 Most of the concerns raised by those interviewed for this project addressed the nontransparent means in which such projects are financed and the fact that Chinese state-owned enterprises(SOEs)have a competitive adva

38、ntage over private competitors from other countries in terms of access to finance under nonmarket conditions.In our review of open-source data and in the interviews conducted for this case study,we did not uncover any major episodes involving Chinese government pressure or attempts at projecting inf

39、luence that were specifically tied to Chinese investments or financing in power transmission and generation.In the five Latin American countries we focused on for this report,Chinese companies did not appear to engage in predatory lending practices similar to those that have been associated with Chi

40、nese firms operating in African and Southeast Asian countries.Chinese investments and financing in Brazils,Chiles,and Perus power transmission and distribution sectors consisted 1 In Mexico,there are no Chinese investments in power transmission and distribution.ix of Chinese SOEs buying local compan

41、ies,with Argentina considering financing options from Chinese banks to expand the power transmission lines in the Buenos Aires area.In Mexico,Chinese companies established new and acquired existing companies in power generation.Neither the government in Beijing nor the Chinese SOEs and private compa

42、nies on the ground draw an explicit connection between GEI implementation and the investments and financing they conduct in these five Latin American countries.In line with these observations for this case study,we offer the following recommendations for countries in Latin America,as well as for tho

43、se in other regions of the world that consider Chinese investment and financing options in the power sector.First,it is important for such countries to develop regulatory frameworks for the integration of renewable energy into the overall power grid.Second,these countries should develop regulatory f

44、rameworks to address technological and informational components of smart grids.Third,there is a need for more-transparent public tenders.Having a transparent public tender system that meets international best practices and respects local laws may advance the free-market environment and encourage com

45、petition among foreign investors.There is also a need to implement screening mechanisms for foreign investments and financing.Local governments should be able to review the financing terms and conditions of foreign investment and financing activities,including asking foreign investors to disclose th

46、e source of their capital,and screen for offers that show a preference for including a local component(labor and materials)and for local laws governing the final contract.As part of such efforts,it will be critical for these countries to nurture the development of a professional and reputable public

47、 contracting officer corps in hopes that such professionals can be protected against political pressures.Likewise,it will be important to diversify investment and financing partners because overreliance on investors from one country increases the economic and political vulnerability of the host coun

48、try to foreign pressures.Seabed Mining China has quickly advanced its technology for deep-sea exploration and did so with little outside collaboration.Some observers emphasize the dual civilian-military use aspects of such capabilities and warn that Chinas involvement in seabed mining exploration se

49、rves as a means to legitimize various forms of deep-and distant-sea activity and cover for pursuing military objectives.However,we found no evidence to support the notion that Chinas seabed mining program is intended as cover for military purposes.Given the potential risks,however,we urge continued

50、monitoring of(1)Chinese seabed mining exploration technology development and use and(2)Chinese ship activity for signs of anomalous activity.China has shown a propensity to infringe on territory that belongs to other nations,which raises concerns for the security of seabed mining contract areas.It w

51、ill hence be critical to develop and implement methods to monitor contractors seabed mining activity.It may be x necessary,for example,for authorities to require operators to announce and describe seabed mining exploration cruises in advance and insist that all ships participating in seabed mining a

52、ctivities always use their automated identification system beacons.It may also be necessary to use sea-based patrols and inspection regimes to verify operators ships locations and activities.Over the past few decades,China has come to dominate the global market for the processing of several critical

53、 minerals.Given the start-up costs of developing mineral processing facilities,Chinas large processing capacity puts it at an advantage in securing processing contracts from commercial seabed mining operators.Non-Chinese operators recognize that partnering with China for such mineral processing will

54、 significantly undercut profits.Consequently,nations that sponsor seabed mining activities in their exclusive economic zones and home nations of mining operators should create incentives to develop their domestic processing capabilities.Examples of such incentives include financing for the construct

55、ion of processing facilities and revising environmental requirements for the permitting of such processing facilities.xi Abbreviations AIS automatic identification system BRI Belt and Road Initiative CCZ Clarion-Clipperton Zone COMRA China Ocean Mineral Resource Research and Development Association

56、COVID-19 coronavirus disease 2019 CPEC China-Pakistan Economic Corridor CREA Center for Research on Energy and Clean Air EEZ exclusive economic zone GCPT Global Coal Plant Tracker GEI Global Energy Interconnection GEIDCO Global Energy Interconnection Development and Cooperation Organization ISA Inte

57、rnational Seabed Authority MEE Ministry of Ecology and Environment MOFCOM Ministry of Commerce MoU memorandum of understanding NDRC National Development and Reform Commission SGCC State Grid Corporation of China SME subject-matter expert SOE state-owned enterprise UHV ultra-high voltage UN United Na

58、tions UNCLOS United Nations Convention on the Law of the Sea xii 1 Chapter 1.Introduction Background and Motivation Chinas explosive economic growth over the past two decades has been accompanied by extensive foreign investment and financing.According to the China Global Investment Tracker(American

59、Enterprise Institute and Heritage Foundation,2021),the total of Chinas foreign investment and construction from 2005 to 2021 is$2.2 trillion.Until about 2017,Chinese foreign investment and financing had been growing steadily and,in 2022,began increasing again.This foreign investment and financing is

60、 driven by a combination of demand for resources(China has the worlds largest population and has been the biggest energy consumer since 2009;U.S.Energy Information Administration,undated),desire to employ Chinese underutilized industrial capacity and workers,and deliberate policy decisions to expand

61、 Chinas global trade and influence.The two most important such policies are the 1999 Go Out Policy,or the Going Global Strategy,and the 2013 One Belt,One Road,or Belt and Road Initiative(BRI;Chatzky and McBride,2020;Page,2018).Chinas foreign investments and financing have raised concerns among Weste

62、rn nations for multiple reasons(Lew and Roughead,2021;Sutter,Schwarzenberg,and Sutherland,2021).One is China being relatively less discriminating about the internal politics,global relations,environmental regulations and controls,and human rights,worker safety,and health records of the countries it

63、invests in.Another is claims of unfair contracting practices:Many Chinese firms that bid on foreign investment and financing opportunities are state-owned enterprises that have the backing of the central government and can raise capital more cheaply and offer contract terms that are more competitive

64、 than nongovernment-backed firms from other countries.Still other concerns center on the belief that many Chinese investments and financing are driven less by direct economic returns than by attaining access and influence to wield strategic“soft power”or,in at least one case,establish military footh

65、olds.And,recently,evidence of China using disinformation campaigns to influence global critical resource markets has emerged(Mandiant,2022).The objective of our research was to characterize Chinese foreign investments and financing in critical resources and energy infrastructure,emphasizing the exte

66、nt to which Chinese investors engaged in any of the practices described above,and to develop recommendations to build capacity among host nations to diversify their sources of investment and financing in order to minimize the potential negative impacts of an overreliance on Chinese investments and f

67、inancing.Our research did not turn up many clear examples of such behaviors,but we did identify some other topics of concern that have important implications for host nations.2 Research Approach Our analysis involved a case study approach in which we examined Chinese foreign investments and financin

68、g in three subsectors.The subsectors we examined are coal-fired power plants,electricity transmission and distribution infrastructure associated with the Global Energy Interconnection(GEI)initiative,and seabed mining.These case study topics and the regions of focus were selected at the behest of the

69、 sponsor,the U.S.Department of States Global Engagement Center.The GEI and seabed mining case studies were selected as relatively understudied examples of Chinese investment and financing activities,whereas the coal case study was selected because China announced in 2021 that it would stop supportin

70、g overseas power plants abroad,raising questions about Chinas intention to follow through.The case study topics and countries are listed in Table 1.1.Table 1.1.Case Study Topics and Countries Investment Subsector Countries Coal power plants Indonesia,Pakistan,South Africa Electricity transmission an

71、d distribution infrastructure Brazil,Chile,Peru,Argentina,Mexico Seabed mining Global We used a multimethod approach that consisted of a review of relevant literature,an analysis of available databases on Chinese foreign investments,and in-depth interviews with representatives from a variety of type

72、s of stakeholder organizations.Interview participants were identified through various means,including referrals from State Department staff,identification from the literature,and referrals from interview participants.Given the sensitive topic of the analysis,all interviews were conducted on a not-fo

73、r-attribution basis to encourage candid responses.Consequently,we report interview statistics at an aggregated level among six stakeholder organization types(Table 1.2).3 Table 1.2.Interview Statistics Organization Type Coal Power Electricity Infrastructure Seabed Mining Total Intergovernmental 5 1

74、6 U.S.government 6 4 2 12 Other government 1 1 Industry 3 6 9 Experta 5 6 7 18 Watchdog/press 4 2 6 Total 15 18 19 52 a Expert=think tank,academic,consultant,trade group,non-watchdog/press nongovernmental organization.As part of our approach to select interview participants,we deliberately aimed to

75、include the Chinese perspective.As a result,we reached out to Chinese experts and stakeholders(including several Global Energy Interconnection Development and Cooperation Organization GEIDCO officials and Chinese investors in the energy sector in Latin America for Chapter 3),but they did not respond

76、 to our requests for interview.Organization of This Report Chapters 24 present our case studies.In Chapter 2,we present a review of Chinese foreign investment and financing in coal power plants and how those have changed since China announced a moratorium on such investment and financing.In Chapter

77、3,we present an overview of the GEI initiative overall and at the local level in Brazil,Chile,Argentina,Peru,and Mexico,followed by the main Chinese investments and financing in the power sector in these countries and concerns associated with them.In Chapter 4,we examine Chinas deep-and distant-sea

78、exploration and seabed mining activities and the concerns that these activities have raised.In Chapter 5,we provide our conclusions and recommendations.4 Chapter 2.Chinese Support for Overseas Coal Power Plants Introduction On September 21,2021,Chinese leader Xi Jinping,speaking before the United Na

79、tions(UN)General Assembly,promised that China would no longer build new coal plants abroad.Xi noted specifically,“China will step up support for other developing countries in developing green and low-carbon energy,and will not build new coal-fired power projects abroad”(Volcovici,Brunnstrom,and Nich

80、ols,2021).This pronouncement,reportedly hailed in Chinese state-funded media(Carbon Brief,2021),set the climate world abuzz because China had served as the worlds foremost financial backer and builder of coal plants abroad.At the time of this writing,China has helped build 382 coal-fired power plant

81、s,with a total of 124,196 MW(or 124 GW)of power(see Figure 2.1).Of these plants,231(representing 56,956 MW of power)were developed with subcritical technology,which provide the least amount of power per coal expenditure and produce the highest CO2 emissions when compared with supercritical or ultra-

82、supercritical plants(International Energy Agency,2020).5 Figure 2.1.Total Operating Power from Chinese Supported Coal-Fired Power Plants,2022 SOURCE:Center for Research on Energy and Clean Air(CREA)China Master List data set,which is based on the Global Energy Monitor Global Coal Plant Tracker(GCPT)

83、data set(Global Energy Monitor,undated).The GCPT catalogs every operating coal-fired generating unit,every new unit proposed since 2010,and every unit retired since 2000.NOTE:Countries with 300 MW of China-assisted coal power or less are not shown and include Bosnia and Herzegovina,Guatemala,Kyrgyzs

84、tan,Zambia,Nigeria,Chile,Brunei,Kazakhstan,Uzbekistan,Madagascar,Myanmar,Poland,and Mongolia.As major policy pronouncements often go,many details of the Chinese policy shift were absent from Xis speech,with many analysts speculating as to the meaning of the key words of the speech:“will not build ne

85、w coal-fired power projects abroad.”First,does the phrase“will not build”include financing coal-fired power projects as well as construction?Does“new”only include plants that that were not announced as of Xis speech,or does it include plants that were announced but are awaiting financing or permits(

86、Baxter,2021)?At the time of the pronouncement,an analysis of the Global Energy Monitors Global Coal Project Finance Tracker by Tom Baxter identified 44 coal-fired power plants across 20 countries that had not yet entered construction nor secured financial loans.2 These plants represented 42.2 GW of

87、capacity(Baxter,2021).2 As explained in Baxter,2021,In their analysis released this week,GEM Global Energy Monitor estimated that the cancellation of all 44 plants would see cumulative lifetime savings of over USD 130 billion,USD 50 billion of which would come from construction costs and over USD 80

88、 billion from fuel and operational costs over the lifetime of the plants.They argue that the USD 130 billion saved should be redirected into renewable energy investments.Lastly,GEM estimated that cancellation of the plants would reduce global coal demand by 30 million tonnes per year.Over the plants

89、 lifetime that would equal 1,100 million tonnes,which would prevent an estimated 8,000 million tonnes of carbon dioxide being emitted into the earths atmosphere.Thats great news for the climate,but awful news for coal miners.00000400005000060000IndiaIndonesiaVietnamSouthAfricaTurkeyPakist

90、anGermanyPhilippinesMalaysiaLaosBangladeshBrazilAustraliaUAESriLankaBotswanaCambodiaTajikistanMoroccoMegawatts 6 In this case study,we seek to further explore this issue and examine how and to what extent China plans to follow through with Xis September 21 pledge.We examine the history of Chinese su

91、pport for coal-fired power plants and the potential future ramifications in three countries:Indonesia,Pakistan,and South Africa.The case study primarily draws on a review of the literature and on analyses of the Global Energy Monitor GCPT data set and a variation of this data set developed by CREA.W

92、e also interviewed 15 experts on Chinese support for overseas coal-fired power plants.These interviews helped provide direction for analysis,though(with a few exceptions)we supplanted citations of the interviews with citations of published documents.A Downturn in Coal Power Development Even before X

93、is announcement,a movement was afoot in China to limit support for overseas coal-powered energy.In 2021,although three overseas power plants were announced by the Chinese government before Xis speech,no new overseas coal projects received BRI financing or investment(Nedopil Wang,2022).And in 2020,Ch

94、ina did not make any new announcement for Chinese-financed coal projects(Nedopil Wang,2021).In addition,many of the coal-fired power plants backed by China had been subject to cancelations and delays.Energy analyst Christoph Nedopil Wang notes that from 2014 to 2020,there were about$160 billion of C

95、hinese-backed coal-fired power plants being planned or announced outside China;of those,however,more than$65 billion were shelved,mothballed,or canceled,with other projects seeing delays in construction(Nedopil Wang,2021).In addition,from 2017 to 2021,4.5 times as much coal-powered energy capacity w

96、as shelved or canceled than was entered into construction(Suarez,2021).On top of these reversals,2020 was the first year that saw a majority of Chinas energy investments and financing turn to renewable sectors of solar,wind,and hydro(Nedopil Wang,2021).These changing trends have been attributed to a

97、 variety of causes.According to Nedopil Wang,2021,solar power costs,for example,have dropped by 80 percent in ten years,while financing cost for coal has increased by 38 percent.In addition,the growth of carbon pricing initiatives has made coal financing even less competitive,and electricity from ne

98、w coal-fired power stations is 500 percent more expensive than that from new solar-powered plants(Nedopil Wang,2021).Nedopil Wang,2021,notes that“Institutions engaged in coal-related assets see themselves increasingly exposed to stranded asset risks:it simply becomes cheaper to produce electricity w

99、ith alternative sources and less competitive to produce it with coal”and that,in many cases,it is“cheaper to mothball existing coal-fired power plants and invest in new solar and wind energy,rather than burning more coal andwith itcash”(Nedopil Wang,2021,p.14).7 Chinese Regulatory Agencies Reduce Su

100、pport for Overseas Coal Chinese regulatory authorities have also steadily moved away from supporting the overseas development of coal-fired energy.On July 16,2021,the Chinese Ministry of Commerce(MOFCOM)and the Ministry of Ecology and Environment(MEE)issued the“Green Development Guidelines for Forei

101、gn Investment and Cooperation.”Both MOFCOM and the MEE reportedly play central roles in overseeing Chinese overseas projects,with the MOFCOM serving to regulate Chinese projects overseas and the MEE providing a supportive role to policy development.3 The guidelines stipulate,“We must stay committed

102、to the new development concept,striving for the strong awareness of green development,efficient use of resources,strict protection of the environment and effective control of carbon emissions”(Ministry of Commerce and Ministry of Ecology and Environment of the Peoples Republic of China,2021).4 The g

103、uidelines specifically encourage Chinese businesses to“embed the green development concept throughout the entire process of foreign direct investment and cooperation”(Nedopil Wang and Tang,2021).It also“encourages companies to adopt international or Chinese standards in investing activities where lo

104、cal laws and regulations are non-existent or too lenient”(Ministry of Commerce and Ministry of Ecology and Environment of the Peoples Republic of China,2021).This indicates a movement away from Chinese support for building high-polluting subcritical power plants,which are permitted in many of the ov

105、erseas countries that China supports but,notably,are not permitted in China,which has much stricter environmental standards.Six months later(in January 2022),MOFCOM and the MEE issued another set of recommendations,named the“Guidelines for Ecological and Environmental Protection of Foreign Investmen

106、t Cooperation and Construction Projects”(Ministry of Ecology and Environment of the Peoples Republic of China,2022).These guidelines further pushed Chinese companies to forgo overseas subcritical coal power,noting that“where local regulations are insufficient,companies are encouraged to apply intern

107、ational or Chinese environmental rules and standards”(Nedopil Wang,De Boer,and Danting,2022).5 On March 28,2022,the Chinese National Development and Reform Commission(NDRC),an economic planning agency in the Chinese government,issued a policy that offered the“first real clarity”regarding how the Chi

108、nese would implement Xis 2021 pledge(Boston University Global Development Policy Center,2022).The policy,titled“Opinions on the Joint Implementation of 3 The MEEs stated mission is to“improve environmental quality and build a beautiful China which enjoys blue skies,green land and clean water”(Minist

109、ry of Ecology and Environment of the Peoples Republic of China,undated).It provides what Nedopil Wang and Tang,2021,describes as“concepts and knowledge.”4 In characterizing“green”energy,the document specifically refers to“clean energy such as solar,wind,nuclear and biomass energy,”as well as“low-car

110、bon,secure and efficient energy mix.”5 These previous guidelines were entitled“Guidelines for environmental protection in foreign investment and cooperation,”issued by the ministries of commerce and of ecology and environment.8 Green Development in the Belt and Road Initiative,”was released by joint

111、 statement from the NDRC and the Chinese Ministry of Foreign Affairs,MEE,and MOFCOM on greening the BRI.The policy reinforces Xis September 2021 statement,emphasizing a goal to“completely stop new overseas coal power projects”(China Energy News,2022).It also encourages relevant enterprises to streng

112、then the clean and efficient utilization of coal,adopt advanced technologies such as efficient desulfurization,denitrification,dust removal,and carbon dioxide capture,utilization and storage,and upgrade energy-saving and environmental protection facilities.(China Energy News,2022)The policy also off

113、ers a broad and expansive goal of supporting overseas green energy infrastructure and development.Highlighting the importance of this new policy statement,Kevin Gallagher,director of the Boston University Global Development Policy Center,noted that the policy came“from the highest levels and is main

114、streamed across all the leading Chinese agencies engaged in overseas economic activity”(Boston University Global Development Policy Center,2022).Isabella Suarez at CREA observed that the NDRC Guidelines should signal the end of new overseas coal,and bring host countries and developers to the table t

115、o renegotiate.It marks another strong signal that the tide has fully turned on coal,and that the losses that could be associated with further developments are likely to outweigh the short term gains.(Suarez,2022)6What Is the Impact of President Xis Policy Statement?To understand the impact of Xis Se

116、ptember 2021 announcement,we analyzed the Global Energy Monitors GCPT,which tracks the development of individual coal plants and is updated biannually in January and July.This data set allows us to assess changes in the status of developing plants from the time Xi made his September statement.Findin

117、gs from this data set have been reported by Isabella Suarez and CREA(Suarez,2022).Figure 2.2 lists the change in status since Xis statement for coal plants that have not reached full operation.Note there are five phases that plants undergo in the development process.These are announced,pre-permitted

118、,permitted,construction,and operational.Further attesting to Chinas movement away from support for overseas coal,more than 16,110 MW of planned coal-fired power(from a total of 40 plants)had been shelved,canceled,or decommissioned.Most of this planned power was deducted from the planned inventories

119、of Vietnam,India,and Indonesia.In addition,3,739 MW of power from 17 plants transitioned from the construction phase to 6 The policy provides“the impetus for Chinese and host country financial institutions and developers to reexamine the 86 GW(81 plants)of Chinese-backed overseas coal that are curre

120、ntly in the construction and pre-construction pipeline”(Suarez,2022).9 operation.This is not surprising because it is accepted among many analysts interviewed for this study that Chinas pledge would not shutter plants in the construction phase.However,several other plants have continued to move forw

121、ard in the development phase despite Xis pledge.For example,7,200 MW of power(15 plants)entered the pre-permit phase,and 5,590 MW of power(13 plants)entered the construction phase.The vast majority of the newly pre-permitted power hailed from Bangladesh,while the vast majority of the new in-construc

122、tion power hailed from Bangladesh and Indonesia.Most significantly,China has initiated two new projects since Xis announcement.Both of these projects are taking place in Indonesia.Figure 2.2.Changes in Status for Chinese-Supported Coal-Fired Power Plants,2022 SOURCE:CREA China Master List data set,w

123、hich is based on the Global Energy Monitor GCPT data set.The GCPT catalogs every operating coal-fired generating unit,every new unit proposed since 2010,and every unit retired since 2000.South Africa China has helped develop more than 7,100 MW of supercritical coal-fired power in South Africa,with a

124、nother 2,380 MW currently under construction and 3,000 MW listed in the pre-permit phase,though this pre-permit project appears all but certain to be canceled(Figure 2.3).020004000600080001000012000BangladeshDjiboutiIndiaIndonesiaIranIvoryCoastKenyaLaosMongoliaMozambiqueSouthAfricaSriLankaTanzaniaTu

125、rkeyUkraineVietnamZimbabweNewlyshelvedNewprojectNewlypre-permittedNewlypermittedNewConstructionNewlyOperating 10 Figure 2.3.Chinese Support for South African Coal Power SOURCE:CREA China Master List data set,which is based on the Global Energy Monitor GCPT data set.The GCPT catalogs every operating

126、coal-fired generating unit,every new unit proposed since 2010,and every unit retired since 2000.South Africa ranks seventh in the world in terms of domestic consumption of coal.Although scholarship addressing the reasons for the high coal consumption rates in South Africa is limited,its large domest

127、ic coal reserves likely play a major factor.South Africa has the eighth largest coal reserves in the world,with 35 billion tons of coal reserves,as of 2016(Worldometer,undated).Close ties between the coal industry and South African political elites,as well as the influence of domestic unions,have he

128、lped limit coal phaseouts(Williams,2020;Yaowen,2021).South Africa has been described as the worlds 14th largest carbon polluter,drawing more than 80 percent of its electrical power from coal(Yaowen,2021).In a region of South Africa called Highveld,where many of the countrys coal plants are located,e

129、stimates suggest that the pollutants sulfur dioxide and nitrogen dioxide are ten times higher than what is considered safe by the World Health Organization(Andrew Gray,2019).The pollution reportedly causes hundreds of premature deaths a year(Williams,2020).Although the country has significant wind a

130、nd solar reserves,renewables accounted for only 16.1 percent of its energy development in 2020.One major international initiative may play a critical role in helping South Africa kick the coal habit.In November 2021,the United States,Germany,the United Kingdom,and the European Union announced the Ju

131、st Energy Transition Partnership,which would contribute$8.5 billion over the next three to five years to help South Africa reach the goals of the Paris Agreement.The plan would help South Africa retire coal plants early,support coal-dependent regions,and turn to renewable energy(Plumer,2021;Yaowen,2

132、021).0040005000600070008000AnnouncedPre-PermitPermittedConstructionOperatingMothballedCancelled,Shelved,orMegawattsSouthAfrica 11 Impact of Xis Statement and NDRC Guidelines for South Africa Figure 2.4 summarizes the potential impact of the NDRC guidelines on Chinese support for South Afr

133、ican coal-powered energy,as coded by CREA analysts.Nearly 2,400 MW of power is under construction in South Africa at Kusile Power Stations 4,5,and 6.It is unlikely that China will break its contract and cease production.However,the NDRC guidelines give Chinese firms the opportunity to withdraw from

134、projects if sufficient reason exists,and the guidelines could spur upgrades to the plants.The CREA data set also suggests that 3,000 MW of power at the Musina-Makhado power station should be stopped,according to the NCRC guidelines,and China appears to be doing so.The Musina-Makhado power station wa

135、s intended to serve the Musina-Makhado Special Economic Zone,which operates various heavy industries(Bega,2021).On November 9,2021,China indicated that it would withdraw funding for the new plant.The Chinese ambassador,in a letter to South African leadership,directly referenced Xis announcement of n

136、o new overseas coal projects at the UN General Assembly in announcing Chinas decision to withdraw funding from the plant.The ambassador also stated that China would“vigorously support African countries,including South Africa,in developing green and low-carbon energy”(Bega,2021).In late February 2022

137、,the plant was granted permits necessary for it to begin construction,but it remains presumed canceled and potentially will be replaced by solar power plants(Cronje,2022;Global Energy Monitor,2022;Sguazzin,2022).Figure 2.4.Potential Impact of the NDRC Guidelines on Chinese Support for South African

138、Coal-Powered Energy SOURCE:CREA China Master List data set,which is based on the Global Energy Monitor GCPT data set.NOTE:The x-axis categories are drawn from CREA analysis and are based on CREAS interpretation of Chinese policy.These data are based on an analysis of the status of Chinese-supported

139、power plants in January 2022.05000250030003500Construction,proceedcautiouslyGreyareaShouldbestoppedMegawattsSouthAfrica 12 Indonesia China has helped develop 21,657 MW(with 97 power plants)of coal-fired power in Indonesia,of which 12,376 MW is of the high-polluting subcritical technology.

140、Another 29 power plants offering 8,760 MW of power are under construction,31 plants(5,520 MW)are in the pre-permit phase,and another two(1,320 MW)are in the permitted stage.More than 12,500 MW have been canceled(Figure 2.5).Indonesia ranks as the eighth largest carbon emitter and has nearly 39 billi

141、on tons of coal reserves(Nangoy and Surroyo,2021).Less than 12 percent of Indonesias power generation comes from renewable resources.The National Electricity General Plan calls for Indonesia to reach 23 percent power generation from renewables by 2025,though the number is less than 12 percent now.Ac

142、cording to Indonesias ten-year energy plan,renewables will account for half of total power capacity,and coal will be reduced to 34 percent(Tam,Faroi,and Batih,2021).Figure 2.5.Chinese Support for Indonesian Coal Power SOURCE:CREA China Master List data set,which is based on the Global Energy Monitor

143、 GCPT data set.The GCPT catalogs every operating coal-fired generating unit,every new unit proposed since 2010,and every unit retired since 2000.Numerous factors contribute to this dependence on coal.Like South Africa,Indonesia has high reserves of coal,estimated at 30 billion tons.And the country h

144、as policies that favor coal over other forms of energy.7 One policy,for example,requires that coal miners provide one-7 Overall,these high domestic reserves of coal have helped protect the Indonesian energy market from high international prices of energy commodities,such as liquified natural gas and

145、 coal.However,high prices for oil,brought about partly by the Russian war in Ukraine and the resultant international sanctions,have hurt Indonesia(Made Raditya Margenta and Yusgiantoro,2022).05000000025000AnnouncedPre-PermitPermittedConstructionOperatingMothballedCancelled,Shelved,orMegaw

146、attsIndonesia 13 fourth of their annual production to the state utility provider,PLN,at below market rates(Nedopil Wang,Yue,and Volz,2022).Indonesia further requires that 40 percent of the materials and services for solar projects be made or produced in Indonesia.It also caps the purchase price for

147、renewable energy at 85 percent of the average cost of overall energy generation(which includes coal);hence,as Gallagher et al.,2021,Appendix C,p.4,notes,it will“never be possible for renewables to compete on a level playing field in the Indonesian electricity market.”China is seen as the ideal provi

148、der of loans and expertise.Chinas BRI has created willing Chinese investors(Tritto,2021),and China has been willing to provide the low-cost subcritical technology that is allowable under Indonesias lax environmental standards.China is also willing to provide Indonesia with what Indonesia asks for.As

149、 one Indonesian government official said to Gallagher et al.,“If we ask for coal,they China will sell us coal.If we ask for solar,they will sell us solar”(Gallagher et al.,2021,p.4).A similar observation has been made for Pakistan as well(see below)and suggests that Chinese support for coal is drive

150、n by host country demand rather than being pushed by China.The development of coal-powered energy in Indonesia has created several challenges.Coal power generation contributes to 35 percent of Indonesias 1,262 gigatons of CO2 emissions annually(Nangoy and Surroyo,2021).The rapid expansion of coal po

151、wer,particularly in Java,has created excess power capacity(Hamdi and Adhiguna,2021a),and the loans accrued to develop this energy resource have been described as a“financial straightjacket”(Hamdi and Adhiguna,2021b).Impact of Xis Statement and NDRC Guidelines for Indonesia Figure 2.6 summarizes the

152、potential impact of the NDRC guidelines on Chinese support for Indonesian coal-powered energy.Xis announcement that China will stop building new coal plants abroad,together with the new NDRC guidelines,provide a new opportunity for Indonesia to limit further expansion of coal-powered energy and turn

153、 to cheaper renewable energy.CREA has observed that this should result in the scrapping of 600 planned megawatts of power for two new plants associated with the Jambi power station that are in the early stages of planning and have neither the financing nor the necessary permits(Suarez,2022).There ar

154、e another 8,610 MW of power that are in construction.As noted,China is unlikely to break contract on these in-construction plants,though NDRC guidelines give Chinese firms the opportunity to withdraw from projects if sufficient reason exists,and the guidelines could spur upgrades to the plants.Such

155、guidelines,if enacted,could play a significant role in revising or potentially scrapping 11(1,930 MW)subcritical coal power plants currently under construction.There are another 9,850 MW of power that have received the appropriate permits and financing but have not entered construction.CREA refers t

156、o such projects as representing a“gray”category because it is unclear whether China will consider these projects to be“new.”Nearly 8,000 MW of power in this category represent captive coal plants that are tied to 14 industrial developments(Suarez,2022).Overall,the clouded status of these projects sh

157、ould provide an opportunity for the international community to seek clarity from the Chinese government and to urge that such projects do not go forward.Figure 2.6.Potential Impact of the NDRC Guidelines on Chinese Support for Indonesian Coal-Powered Energy SOURCE:CREA China Master List data set,whi

158、ch is based on the Global Energy Monitor GCPT data set.NOTE:The x-axis categories are drawn from CREA analysis and are based on CREAS interpretation of Chinese policy.These data are based on an analysis of the status of Chinese-supported power plants in January 2022.Two New Chinese-Supported Coal Pl

159、ants in Indonesia Critically,it appears that China is supporting two new projects for which no public record existed as of the time of Xis September UN speech.As Isabella Suarez notes,these projects“risk crossing the red line”of Xis pledge to not build new coal plants overseas(Suarez,2022).On Februa

160、ry 14,2022,Tianjin Electric Power Construction signed an agreement to build a 1,520 MW power plant on Indonesias Obi island that would support an industrial site focused on laterite nickel ore processing.In its analysis,CREA noted that specific information on the call for tenders or the submission o

161、f the bid was unavailable but that it typically takes only one to two months from the time of the submission to the selection of tenders.This would suggest that Energy Chinas bid was“submitted and accepted well after Xis announcement”(Suarez,2022).In addition,China Energy procured a tender for a ste

162、el and nickel processing site at Morawali Industrial Park in December 2021.This project,located at the Sulawesi Laporta Power Plant,would serve three plant units that each provide 380 MW of power.The project was limited to an engineering and equipment procurement,though CREA reporting suggests that

163、full engineering,procurement and contracting firm involvement may not be far off.020004000600080001000012000Construction,proceedcautiouslyGreyareaShouldbestoppedMegawattsIndonesia 15 One analysis by China Dialogue contributor Ian Morse notes that three major nickel industrial parksObi island,Morowal

164、i,and Weda Bayseek a total of 14 coal power plants with 71 turbines and will double the nickel-supporting coal power in the country.Such projects are often hailed as environmental,given the role of nickel and aluminum in supporting production of lithium-ion batteries and solar panels,respectively.Th

165、e financing for such projects often lack transparency because the produced electricity remains off the public electrical grid(Morse,2022).Further,although coal power is a preferred energy source for industrial plants because of its ability to provide consistent 24-hour-per-day power,the potential do

166、es exist to draw instead on a mix of solar and hydropower energy(Morse,2022).Pakistan In Pakistan,China has supported a total of 4,600 MW of coal power capacity from eight power plants,with another 7,200 MW of power from 14 plants in some form of development.More than 8,200 MW of Chinese-supported c

167、oal power from 18 plants have been canceled,shelved,or postponed.Only 600 MW of the in-capacity coal power come from subcritical technology,with the vast majority coming from supercritical technology(Figure 2.7).Figure 2.7.Chinese Support for Pakistani Coal Power SOURCE:CREA China Master List data s

168、et,which is based on the Global Energy Monitor GCPT data set.The GCPT catalogs every operating coal-fired generating unit,every new unit proposed since 2010,and every unit retired since 2000.Pakistan coal power has its roots in the 2013 national election.By 2013,Pakistan was suffering from a nationw

169、ide energy crisis(Kazmi,2013),and Nawaz Sharif and his Pakistan Muslim LeagueNawaz party won that years national election with a campaign heavily grounded on promises to deliver badly needed electrical power to the general populace(Pakistan 00400050006000700080009000AnnouncedPre-PermitPer

170、mittedConstructionOperatingMothballedCancelled,Shelved,orMegawattsPakistan 16 Muslim League Central Secretariat,2013).Coal was considered an ideal way to deliver on these campaign promises.Pakistan holds the 16th largest repository of coal in the world and was even heralded as an energy source of ch

171、oice by the U.S.Agency for International Development,which helped discover the coal deposits(Advanced Engineering Associates International,2010;Weynand,2007).When Chinas BRI reached Pakistan through the China-Pakistan Economic Corridor(CPEC)initiative,coal-powered energy was at the top of the Sharif

172、 administrations wish list.China offered funding,engineering know-how,labor,and ongoing technical support,and coal provided a way to quickly deliver on Sharifs campaign promises(Bhandary and Gallagher,2022).8 One challenge confronting Pakistans use of coal is the quality of the coal itself.Feasibili

173、ty studies for the first CPEC-supported coal power plant showed that the coal reserves for the planned 1,320-MW supercritical plant were too polluted with sulfur and lime.This has required Pakistan to import coal from Indonesia,South Africa,or Australia and to develop new plans for subcritical power

174、 plants that can make use of the lignite coal(Port Qasim Electric Power Company,2014).As of 2020,wind and solar contributed to only 4 percent of Pakistans total energy capacity.Initial CPEC support for renewable energy has suffered some challenges,such as desert sands coating the solar panels of a 4

175、00-MW plant in Bahawalpur,Pakistan.However,feasibility studies conducted by the World Bank suggest that Pakistani access to sun and wind make the country ripe for expanded renewable energy(Reuters,2016;World Bank,2020a).The report concluded that solar and wind power should make up 30 percent of Paki

176、stans power supply by 2030 and that doing so could save Pakistan$5 billion over the next 20 years(World Bank,2020b).The Pakistani reliance on Chinese-supported coal has produced several challenges.First,Chinese lenders,in an effort to mitigate the financial risk of the loans,included special terms t

177、hat increased cost(Bhandary and Gallagher,2022).As of April 2021,Pakistans debt to China has ballooned to$24.7 billion,with the debt accounting for more than one-quarter of its overall debt load(Younus,2021).The growing coal-related debt has been described as an“economic disaster”(Nicholas,2022),and

178、 Pakistan has asked China for debt relief(Rana,2021).In addition,coal accounts for 19 percent of Pakistans carbon emissions,which is a challenge because Pakistan has been ranked as the fifth most affected country by climate change(Butt,Myllyvirta,and Dahiya,2021).Amid these factors,Pakistan is exper

179、iencing an energy crisis.Partly influenced by the war in Ukraine,prices for imported oil,coal,and liquified natural gas have risen significantly.These price hikes,combined with currency lows(compared to the dollar)and rising debt have resulted in a significant gap between energy supplies and demand,

180、with daily power outages in urban areas last four to six hours(Rana,2022;Shahzad,2022).Such a crisis,if it continues,may 8 Interview with academic expert,March 31,2022.17 incentivize Pakistan to continue development of subcritical coal power plants that can feed off Pakistans abundant resource of li

181、gnite coal.Impact of Xis Statement and NDRC Guidelines for Pakistan Figure 2.8 characterizes the standing of Pakistans in-development coal plants.Six plant units representing 3,300 MW of coal are under construction and will likely be completed,though new NDRC guidelines leave open the possibility th

182、at China can take steps to improve the emissions quality of these plants.Another 1,290 MW of power from four power stations is in the gray area category.These plants,though not yet under construction,have the appropriate permits and financing and could presumably go forward.Finally,2,640 MW of power

183、 from four plants should be stopped.These projects are in the early phases of development and appear to meet the NDRC criteria for China to cease development.These include two plants associated with the Keti Bandar power station and two plants associated with the Thar Block VI power station.Figure 2

184、.8.Potential Impact of the NDRC Guidelines on Chinese Support for Pakistani Coal-Powered Energy SOURCE:CREA China Master List data set,which is based on the Global Energy Monitor GCPT data set.NOTE:The x-axis categories are drawn from CREA analysis and are based on CREAS interpretation of Chinese po

185、licy.These data are based on an analysis of the status of Chinese-supported power plants in January 2022.Nine months before Xi announced the withdrawal of Chinese support for new coal power plants,Pakistani Prime Minister Imran Khan made his own no new coal pledge.Speaking before the Climate Ambitio

186、n Summit 2020,Khan stated,“We have decided we will not have any more power based on coal”(Gul,2020).05000250030003500Construction,proceedcautiouslyGreyareaShouldbestoppedMegawattsPakistan 18 Two power plants are worth watching to determine the seriousness of the Pakistani and Chinese pled

187、ges.The first is the 300-MW subcritical Gwadar power plant situated on a peninsula of the Gwadar Port in Pakistans Balochistan province.The project,which would rely on imported coal,has reached the permit phase,though it has reportedly not achieved financial closure(Pei-Hua Yu,2021).The second is tw

188、o units of the Thar Block VI power station,which is a planned supercritical 1,320-MW coal power plant in Sindh Province and which will accompany another 1,320-MW Thar Block 1,which is under construction(Gul,2020).Thar Block VI is in the pre-permit phase and is labeled as“should be stopped”by CREA.It

189、 appears,however,that the Gwadar plant may move forward:Imran Khan traveled to China in February 2022,and it is reported that he received assurances from the Chinese government that the plant would continue(Rana,2021).Continued development of the plant and its imported coal also reportedly goes agai

190、nst Pakistans National Electricity Policy plan,which has signaled an intent to shift Pakistans energy power supply to more domestic resources(Nicholas,2022).There are also suggestions that the Thar Block VI station will move forward,though there is limited reporting to confirm this(Nicholas,2022).Su

191、mmary Overall,China appears to have continued to reduce its support for overseas coal-fired power plants.In addition to its cessation of financing new coal projects in 2020 and the high rate of project cancelations from 2017 to 2021,over 16,000 MW of planned coal-fired power were shelved,canceled,or

192、 decommissioned in the months following Xis September 2021 announcement.Chinas new NDRC guidelines released in spring 2022 provided further evidence that China intends to cease support for new overseas coal power,improve and upgrade existing plants,and shift to a greater reliance on renewable energy

193、.Such policies appear to be in line with the basic economics of coal-powered energy,which has not been able to compete with the dropping prices of renewable energy.Still,areas of concern remain.First,even after Xis September statement,Chinese firms initiated support for two new coal-fired power plan

194、ts in support of industrial plants in Indonesia.Such efforts appear to directly violate even liberal interpretations of Chinas pledge to not build new overseas coal plants.Second,since Xis speech,several plants have moved forward in the development process,with nearly 2,000 MW of worldwide power mov

195、ing into the pre-permit phase and nearly 3,000 MW moving into the construction phase.It is also remains unclear exactly how China will follow through on its promulgated guidelines.For example,data from CREA identified 11,140 MW of power in Indonesia,Pakistan,and South Africa that have permits and fi

196、nancing but have not yet begun construction.Under a strict interpretation,such plants should also be canceled,though it is likely that some will move forward.19 Chapter 3.Electricity Transmission and Distribution in Latin America From 2010 to 2020,the number of Chinese high-level visits to countries

197、 in Latin America more than doubled when compared with the previous decade,rising from 105 to 229.9 Chinese economic presence in the region also deepened,with China becoming the number one foreign investor in Brazil and the main foreign trade partner for Brazil,Peru,and Chile,replacing the United St

198、ates(Cariello,2021).10 The increased Chinese diplomatic and economic presence in the region over the past decade has raised concerns regarding Chinas attempts to gain influence in the region across all four domains of national power:informational,military,diplomatic,and economic.In this case study,w

199、e examine where Chinese enterprises have a presence in Latin America and the Caribbean in power transmission and distribution companies that are relevant to the GEI initiative that Beijing proposed in 2015 to interconnect independent national grids into a global web of power transmission systems(Cor

200、nell,2019;Delina,2021,p.1).We also examine how Chinese companies(particularly,state-owned enterprises SOEs)have established their presence in the respective countries energy sectors(e.g.,acquisition of companies,new or greenfield investments,and loans)and identify any concerns associated with the pr

201、esence of Chinese companies and how they might support the implementation of GEI in Latin America and the Caribbean.We conducted a review of open-source documents related to GEI,GEIDCO,and Chinese companies that have a presence through investments or loans in power transmission and distribution in L

202、atin America and the Caribbean.During this mapping exercise,we identified Brazil,Chile,Peru,and Argentina as the countries where Chinese companies made and pledged some of the largest investments and financing in power transmission and distribution,as shown in Table 3.1.9 For details,see Table 2.1 i

203、n Chindea et al.,forthcoming.10 For Brazil,see“China Confirms Its Position as the Main Trade Partner of Brazil,”2021;for Peru,see McDonnell and Len,2021;and for Chile,see Magnet,2021.20 Table 3.1.Summary of Top Chinese Investments and Financing in Power Transmission and Distribution in Latin America

204、 and the Caribbean from 2010 to January 2022 Investment Brazil Chile Peru Argentina Power transmission$4.7 bln$1.3 bln-$1.1 blna Power distribution-$2.2 bln-Combined power transmission and distribution-$3 bln-Combined power generation,transmission,and distributionb 12.2 bln-$3.6 bln-Total value$16.9

205、 bln$6.5 bln$3.6 bln$1.1 blna SOURCES:For Brazil power transmission,see Plena Transmissora acquisition for$1.72 billion(Global Times,2010);Xingu Rio Transmissora de Energia,a subsidiary of Chinese state-owned State Grid Corporation of China,construction of Belo Monte II for$2.14 billion(NS Energy Bu

206、siness,undated);and the purchase of 14 transmission lines from the Spanish group Actividades de Construccion y Servicios for$945 million(Batista Barbosa,2020,p.27).For Brazil combined power generation,transmission,and distribution,see CPFL acquisition in Batista Barbosa,2020,p.7.For Chile,see Ellis,

207、2021a:China Southern Power Grid purchase of Transelec for$1.3 billion for power transmission,State Grid purchase of Chilquinta Energia for$2.23 billion for power distribution,and State Grid purchase of Compaa General de Electricidad for$3 billion for combined power transmission and distribution.For

208、Peru,China Yangtze Power International purchase of Luz del Sur for$3.59 billion for combined power generation,transmission,and distribution(Sempra Energy,2020).For Argentina,see BNamericas,2022.a Under discussion as of January 2022.b Acquisition included a power generation component.Furthermore,a re

209、cent analysis identified Brazil,Chile,Peru,and Argentina as the locus of strategic competition among the United States,China,and Russia in Latin America(Chindea et al.,forthcoming).11 As a result,we focused our analysis on these four countries and Mexico,which we added because of the relevance of th

210、e Mexican power grid to the interconnection of North American and Central American power grids in the context of GEI(Lei and Qiankun,2020).Moreover,in the context of developing GEI,Mexico together with Northern Chile is one of the planned large-scale solar generation bases,with an estimated generati

211、on capacity of 250 GW by 2050(GEIDCO,2020,p.5;India Smart Grid Forum,undated,p.3);in 2020,Beijing stood up a national committee in Mexico to advance GEI implementation(GEIDCO,undated b;National Institute of Electricity and Clean Energies,2021).Although we focus our analysis on these five countries w

212、here Chinese investments and financing in power transmission and distribution are concentrated,the five countries do not represent independent case studies.This chapter represents a self-standing case study that our sponsor selected based on its interest.Although Chinese presence in the energy secto

213、r in Latin America includes power generation as well,we focused primarily on power transmission and distribution at our sponsors request.12 However,because of the importance of renewable energy 11 For details,see Table 2.1 in Chindea et al.,forthcoming.12 The exception is the inclusion of a power ge

214、neration component associated with the State Grid Corporation of Chinas acquisition of Brazilian CPFL,for which it is difficult to untangle the value of individual generation,transmission,and distribution components in the context of the acquisition.21 for GEI implementation,we included some referen

215、ces to renewable power generation projects for which Chinese SOEs and private companies have ownership.In this chapter,we introduce GEI and GEIDCO and then discuss GEIDCOs presence in Latin America and in Brazil,Chile,Peru,Argentina,and Mexico in particular,including a description of Chinese compani

216、es presence in power transmission and distribution and the concerns associated with Chinese investments and financing in the energy sector.In the last section,we present our conclusions and recommendations for areas of opportunity for capacity-building initiatives that the U.S.State Department can i

217、mplement in countries in Latin America that either have hosted or are considering hosting Chinese investments and financing in the energy sector and beyond.Although our findings and recommendations are rooted in research focused on Chinese SOE investments and financing in the energy sector in five k

218、ey Latin American countries,they are likely to provide useful lessons and insights for other countries in the region and across the world that have or are considering Chinese SOE investments and financing,especially in the power sector.Overview of GEI and GEIDCO Beijing announced the GEI initiative

219、in September 2015,followed by the establishment of GEIDCO in March 2016.GEIDCO is an international organization whose main mission is to promote GEI(Cheng,2018,p.15;Yang,2019,p.8).GEI was incorporated into Chinas BRI(Downie,2020,p.14;Delina,2021,p.2),and it is considered to be a very ambitious Chine

220、se initiative“to bring currently fragmented national grids into a regional-to-global webs sic of interconnected electricity transmission systems over the next five decades”and to facilitate“a global energy transition from fossil fuels to a largely sustainable energy system”(Delina,2021,p.1).GEIs vis

221、ion is that electricity“can be generated,transmitted and consumed anywhere in the world;for example,solar energy can be generated in the Sahara Desert and contribute to the energy mix in Europe,Asia,South America or even Australasia”(Aubertin,2018,p.34).Beijing anchored GEI and the standing up of GE

222、IDCO into some of the major challenges that the world faces today,“such as resource constraints,environmental pollution,climate change,population without electricity access,health and poverty,”with“the massive consumption of and excessive dependence on fossil energy”being identified as the root caus

223、e behind these challenges(Bo,2019,p.2).In this context,GEI aims to bring together three key elements:a smart grid,an ultra-high voltage(UHV)grid,and clean energy.The main function of the smart grid is to integrate“modern smart technologies with respect to advanced transmission,smart control,new ener

224、gy integration and new energy storage”and to carry out“the intelligent allocation of power resources”(Bo,2019,p.6;Yang,2019,p.7).It is considered to represent the foundation of GEI(Bo,2019,p.6).UHV power transmission,which is considered to be“a specialty of Chinese utilities”(Downie,2020,p.7),repres

225、ents the“backbone framework”and is considered to be key 22 to GEI(Bo,2019,p.7).Last,clean energy is labeled as a GEI priority,with GEI envisioned to be“a major transmission strategy in the future for wind power in the Arctic,solar power in the equatorial region,and centralized and distributed clean

226、power generated from across different countries,continents”(Bo,2019,p.8).According to various GEIDCO presentations,because solar and wind power are intermittent and unevenly distributed geographically,they can be better exploited by integrating them into a large-scale,globally interconnected power g

227、rid(Cheng,2018,p.10;GEIDCO,2020,p.3).In addition,because key renewable energy resources are often far away from load centers(e.g.,hydro resources in Patagonia and the Amazon basin are far away from the densely populated areas of Chile and Brazil)and because increasing the line voltage reduces losses

228、 across long distances,UHV systems that deliver current at 800 kV1,100 kV are highly sought after and have been increasingly deployed in recent years(Downie,2020,p.12;International Energy Agency,2016,p.6;Jun et al.,2020,p.2).For these reasons,GEI proposes wind,solar,and hydropower generation with tr

229、ansmission across long distances by way of UHV lines interconnected in a grid spanning the entire globe(Bo,2019,p.11).Beijings vision regarding the implementation of GEI is a long term and very costly one.Estimated to exceed$50 trillion,GEI implementation is divided into three stages spanning three

230、decades:promoting,by 2035,domestic and intracontinental interconnection;by 2050,intercontinental interconnection;and by 2070,global interconnection(Bo,2019,pp.2122;GEIDCO and Research Center for Sustainable Development,undated,p.6;Yang,2019,pp.1314).By 2070,all power grids of all countries in the wo

231、rld would be integrated,forming the backbone grid for GEI(see Figure 3.1),which will have nine horizontal and nine vertical(or“9H-9V”)main grids that integrate“large scale clean energy bases and load centers to achieve global allocation of clean energy resource across different time zones and season

232、s”(GEIDCO,2020,p.9)and that draw on the differences in clean resource availability and electricity prices of different regions of the world(GEIDCO and Research Center for Sustainable Development,undated,p.2).23Figure 3.1.Diagram of the 9H-9V Grids Planned by 2070 for GEI Backbone FrameworkSOURCE:GEI

233、DCO and Research Center for Sustainable Development,undated,p.6.Some of the benefits associated with GEI include cost efficiencies for the consumer caused by economies of scale;13resolution of issues traditionally associated with renewable sources,such as volatility,intermittency,temporary power sho

234、rtages,and surplus power offering(Cheng,2018,p.13);economic growth;and promotion of clean energy,reducing global warming.Some of the downsides of GEI include a decrease in energy self-sufficiency and an increase in dependency and risk of disruptions for countries that rely on electricity imported fr

235、om unstable regions of the world(Aubertin,2018,p.36).Especially in light of the Russo-Ukrainian War,there are increasing reservations about becoming dependent on power generation from other countries,which poses problems for cross-border interconnectivity.Although Beijings GEI vision is attractive a

236、nd has obvious advantages,it becomes less attractive when considering its implementation,and some energy sector experts perceive it as too risky.14More details of the advantages and disadvantages of having a globally integrated grid based on UHV transmission lines are provided in Appendix A.Although

237、 Chinas efforts to promote GEI have been very active,GEI implementation has been more modest than what Chinas promotional efforts might suggest.More political coordination across various regions of the world is needed to advance plans for regional and global interconnection.Such coordination would r

238、equire a significant change in governments,utility companies,and civilian societies view of the cross-border trade in electricity to“a means 13Interview with U.S.government official,February 25,2022.14Interview with energy sector experts,May 6,2022.24 of improving energy security by expanding source

239、s of supply rather than a threat to their control over a key piece of national infrastructure”(Downie,2020,p.30).Additional challenges that China is likely to face in the context of GEI implementation are related to individual countries comfort with(1)allowing China to invest in building UHV power t

240、ransmission lines and bring the expertise and(2)how the bidding processes are structured.Chinese SOEs that have their governments backing are able to access capital at nonmarket rates(which are very low or zero)and are likely to feel less pressure than private companies do to make a profit(Sanchez-B

241、adin,Ratton,and Morosini,2021,p.124).This government backing allows Chinese SOEs to make bids at lower prices than those of other international competitors,which access capital at market rates and are accountable to shareholders who expect a profit;ultimately,Chinese SOEs end up controlling large pa

242、rts of some countries energy sectors.In the case of large Chinese SOEs that are considered to be“national champions”and too big to fail(e.g.,State Grid Corporation of China SGCC,Huawei,Alibaba),the government in Beijing is more likely to intervene on their behalf with loans and other forms of financ

243、ial support when needed.In this way,the bidding process often ends up skewed in favor of Chinese governmentbacked SOEs,with some of the core principles of free market competition eluding some bidding processes.15 Also,when Chinese SOEs outbid repeatedly other international competitors,they are likel

244、y to end up establishing a de facto monopoly in some countries economic sectors,further eroding the principles of free market competition and narrowing the pool of foreign investors in the respective countries.16 GEI and GEIDCO in Latin America GEIDCO signed several memoranda of understanding(MoUs)a

245、nd cooperation agreements with UN agencies(e.g.,the UN Economic Commission for Latin America and the Caribbean),other international and regional organizations(e.g.,the Latin American Energy Organization,also known as OLADE),governments(e.g.,Brazil and Chile),and corporate entities,including major ut

246、ility providers,such as Brazils main utility company,Electrobras(Bo,2019,p.20;Delina,2021,p.2).According to one of the presentations made to introduce GEI and GEIDCO,Electrobras and the Chinese SOE SGCC are among the founding members of GEIDCO(Yang,2019,p.8).SGCC is“the largest utility company in th

247、e world”and is“a leading player in energy interconnection promotion and international cooperation,”with the largest network of UHV lines in the world(Cheng,2018,p.1;Yang,2019,p.19).According to the documents and literature we reviewed and the interviews we conducted in the region with subject-matter

248、 experts(SMEs)in the energy sector,Chinese ownership or presence in power generation,transmission,and distribution in Latin American countries is 15 Interview with U.S.government official,April 20,2022.16 For a brief overview on how monopolies erode free market competition,see Amadeo,2021.25 rarely

249、directly associated with GEI or GEIDCO.Although Chinese ownership and involvement in power generation,transmission,and distribution companies can advance Beijings GEI agenda in Latin America,the connection between the two is rarely,if ever,made explicit in the context of the public statements that G

250、EIDCO and Chinese officials and investors make.17 The overall impression among many of the SMEs with whom we spoke for this study is that few local experts and industry professionals in the energy sector in Latin America are aware of GEI and GEIDCOs existence and activities and that no overt connect

251、ion is being made with Chinese investments and financing in power generation,transmission,and distribution.In Latin America,similar to other regions of the world where it has a presence,GEIDCO has a regional committee that oversees several country-based committees(GEIDCO,undated b).18 The regional c

252、ommittee is located in Santiago,Chile,and the national committees are in Argentina,Brazil,and Mexico(GEIDCO,undated a;GEIDCO,undated b).19 According to the interviews we conducted and the information available in English on GEIDCOs website,the national committees promote technical cooperation and th

253、e exchange of knowledge and expertise among“leading organizations,enterprises,universities,and research institutions of energy and power sector”(GEDICO,undated b),with GEIDCO producing many technical studies about interconnectivity but not actually playing a direct role in implementing those project

254、s.Overall,GEIDCO seems to be nothing more than a high-level dialogue platform,with the implementation on the ground left to such companies as SGCC and other Chinese SOEs.Many of the Chinese SOEs in Latin America engage with the respective countries independently of GEIDCO;although GEIDCO is,at times

255、,perceived as potentially paving the way for Chinese SOEs,this is not always the case.20 One of the SMEs we interviewed raised the concern that GEIDCO was not just interested in sharing information but actually was more interested in accessing technological information from the various actors it has

256、 associated with in Latin America and other regions of the world,using such information to Chinas benefit.21 According to the interviews we conducted,even if Chinese investments and financing in the region were not directly connected to GEI and GEIDCO,GEIDCO was active in Latin America from its ince

257、ption in 2016 until around 2020,when its engagement with the region seemed to stall.22 The reasons behind the slowdown in engagement are unclear,but they could be related to the outbreak of the coronavirus disease 2019(COVID-19)pandemic;a change in Chinese 17 Interview with Brazil energy sector expe

258、rt,April 13,2022;interview with U.S.government official,March 1,2022;and interview with U.S.government official,February 25,2022.18 Interview A with Latin America energy sector SME,March 4,2022.19 Interview with U.S.government officials,March 18,2022.20 Interview with energy sector experts,May 6,202

259、2;and interview with regional energy sector SME,March 8,2022.21 Interview with regional energy sector SME,March 8,2022.22 Interview A with energy sector expert,March 4,2022;and interview with energy sector experts,May 6,2022.26 priorities vis-vis investments and financing in Latin America(especially

260、 in the context of domestic pushback against foreign investments and loans at a time when some regions of China are still underdeveloped;Soutar,2022);23 potential lack of attractive investment opportunities in power transmission and distribution beyond those companies that have already come under Ch

261、inese control;and potential pushback from some countries in the region.Some of the challenges that Beijing is likely to face in the implementation of GEI in Latin America concern the extremely ambitious goals and the high level of financial investment needed the fact that the interconnection of the

262、South American grid to the global one is projected to happen through its connection to the Central and North American grids24 at a regional level,the fact that political divisions and long-standing local rivalries among countries(e.g.,Chile,Peru,and Argentina)are unlikely to allow for a smooth trans

263、ition to an interconnected regional grid25 the strong determination of countries in the region to defend their national sovereignty and to remain independent.Although there is value in creating an interconnected grid at a regional level that allows countries such as Chile to export the excess renewa

264、ble energy to countries such as Argentina,26 and there have been some attempts in South America for bilateral and regional electric grid interconnection efforts,such as SIESUR(La Integracin Energtica Regional Del Cono Sur;Yepez and Malagn,2018),they have been pretty modest and are advancing slowly.2

265、7 So far,only SIEPAC(Central American Electrical Interconnection System),which connects the electric grids of six Central American countries,has been successfully implemented and extended to connect its Central American participants to Mexico to the north and Colombia to the south.28 The Commission

266、for Regional Energy Integration based in Uruguay is a nongovernmental organizational that works in favor of energy sector interconnection at the regional level and promotes technical cooperation among member states(Comisin de Integracin Energtica Regional,undated),along similar lines to GEIDCO.In re

267、cent years,the Commission for Regional Energy Integration has started to perceive GEIDCO as a rival that is interfering in its 23 Interview with energy sector experts,May 6,2022;and interview with expert on Chinese financing activities in Latin America,June 6,2022.24 Interview with Chile foreign and

268、 economic policy SME,May 9,2022.25 Interview with U.S.government official,March 1,2022;and interview with U.S.government official,February 25,2022.26 Interview with regional energy sector SME,March 8,2022.27 Interview A with Latin America energy sector SME,March 4,2022.28 According to the Internatio

269、nal Energy Agency,SIEPAC is a supranational initiative developed by six Central American nations(Panama,Costa Rica,Honduras,Nicaragua,El Salvador and Guatemala)that resulted in the development of a regional electricity market(MER)and the construction of nearly 1800 km of transmission infrastructure

270、to increase transfer capacity at all borders in the region.(International Energy Agency,2016,p.16)27 area of operations.29 According to Latin America energy sector experts,political resistance from many of the countries that GEIDCO is interested in engaging with represents a key problem for the adva

271、ncement of the organization.30 Some concerns related to GEI,GEIDCO,and the presence of Chinese SOEs and private companies in Latin America that some interviewees expressed are related to the fact that,if the GEI initiative were to proceed,it would provide an economic opportunity for Chinese business

272、es,most likely at the expense of local ones.According to one SME,GEI is perceived to represent an economic strategy for China to position its companies that would build the infrastructure underlying GEI with Chinese equipment;31 for another SME,GEI is a grandiloquent idea,with China aiming to projec

273、t influence at the global level through its energy companies.32 However,one expert who focuses on Chinas energy sector observed that Chinese SOEs and energy sector companies act less monolithically and in a manner less orchestrated by the government in Beijing than what is generally believed in the

274、West.According to this SME,there is much more fragmentation and less coordination between the aims of the government in Beijing and what the Chinese SOEs are doing on the ground in Latin America and other regions of the world,with Beijings political leverage usually being overestimated.33 Brazil GEI

275、 and GEIDCO in Brazil Brazil is one of the three countries in Latin America where GEIDCO has a national committee,and it was one of the organizations first associates(GEIDCO,undated b).GEIDCO and Brazils Ministry of Mines and Energy have signed an MoU,but there is very little information available a

276、bout the most recent GEIDCO activities in Brazil.It is unclear,for example,what concrete progress GEIDCO has made toward reaching the GEI goal stated in its global power flow map,according to which Peru,Chile,Bolivia,and Argentina are expected to deliver 50 GW to Brazil by 2050(GEIDCO,2020,p.8).Also

277、,in the context of GEI,the Amazon basin is one of the areas Beijing identified as the main location for large-scale hydropower base generation(GEIDCO,2020,p.7).Similar to experts in the other four countries in this case study,SMEs in Brazils energy sector had little awareness of GEIDCOs activities i

278、n the country or the region.34 According to 29 Interview with energy sector SME in Latin America,March 8,2022;and interview with Brazilian energy sector expert,April 13,2022.30 Interview with energy sector experts,May 6,2022.31 Interview A with Latin America energy sector SME,March 4,2022.32 Intervi

279、ew B with Latin America energy sector SME,March 4,2022.33 Interview with energy sector experts,May 6,2022.34 Interview with Brazilian energy sector expert,April 13,2022.28 one SME,although Electrobras,a major Brazilian electric utilities company,has been participating in working groups with GEIDCO,t

280、he Brazilian government has chosen not to be directly involved with GEIDCO;in recent years,interactions were mostly governed by SGCC rather than by GEIDCO.35 Chinese Presence in the Energy Sector in Brazil In Brazil,Chinese SOEs are present in all three areas of the power sector:generation,transmiss

281、ion,and distribution(Batista Barbosa,2020).China gained a presence in power transmission and distribution through greenfield investments and acquisitions.36 In power transmission,SGCC acquired Spanish Plena Transmissora in 2010 for$1.7 billion.In 2012,SGCC also acquired electricity transmission asse

282、ts(14 lines)in the company Actividades de Construccion y Servicios for$945 million(Batista Barbosa,2020,p.27).In February 2014,a consortium led by SGCC was awarded the contract to build a$2.14 billion 800-kV UHV transmission line that links the Belo Monte hydroelectric power station in the north of

283、the country to the southeast region(Branford,2016;NS Energy Business,undated;Rapoza,2014),where the major consumption centers are(BNamericas,2014;GEIDCO and Research Center for Sustainable Development,undated,p.3).The project has two bipoles:Bipole I,or Belo Monte Power Transmitter,which was commiss

284、ioned in December 2017,and Bipole II,or Xingu Rio Transmissora de Energia(Xingu River Transmitter of Energy),was completed in MarchApril 2019(NS Energy Business,undated).This transmission project used Chinese developers to build both bipoles(Downie,2020,p.12;Yang,2019,pp.2122).In 2016,SGCC initially

285、 acquired a 23 percent controlling stake in CPFL Energia for$1.8 billion,which has assets in power transmission and distribution,as well as in power generation(Teixeira,2016).SGCC extended to other CPFL stakeholders the option to sell their shares,and SGCC ultimately took control in 2017 of some 94.

286、75 percent of CPFL for$12.2 billion(Batista Barbosa,2020,p.7;Sanchez-Badin,Ratton,and Morosini,2021,p.109).Chinas presence in power generation in Brazil is mainly focused on renewables,with hydro,wind,and solar representing some 91 percent of Chinese companies installed capacity in Brazil.37 Concern

287、s Associated with Chinese Investments and Financing in Brazil So far,the local concerns associated with Chinese SOEs investments and financing in Brazils power transmission and distribution have been minimal,mainly because the countrys power sector is heavily regulated,especially when comparing it w

288、ith other emerging markets.35 Interview with U.S.government officials,March 15,2022.36 Greenfield investments refer to new projects,whereas brownfield investments are made through mergers and acquisitions(Batista Barbosa,2020,pp.5,8,11).37 Interview with Brazilian energy sector expert,April 13,2022;

289、and Batista Barbosa,2020,p.14.29 Brazil has an active federal electricity regulator,the Brazilian Energy Regulatory Agency(or Agncia Nacional de Energia Eltrica),that oversees power generation,transmission,and distribution(BNamericas,2021;Organisation for Economic Co-operation and Development,2021).

290、For power generation and transmission,the regulations focus mainly on quality and less on economic aspects,which are limited to regulating aspects that occur at the beginning of the concession,such as the procurement and tenders during which the investors are selected.38 According to one of the conv

291、ersations we had with SMEs in Brazils energy sector,the strong regulatory system and the diversification of the electricity market do not seem to pose a risk of market control or of China leveraging its presence in power transmission to achieve other foreign policy goals(Sanchez-Badin,Ratton,and Mor

292、osini,2021,pp.125126).39 One aspect that surfaced during our interviews concerned the fact that,at times,China signals a very strong interest in Brazils economy and energy sector and that some of the announcements made about future investments and financing do not always materialize or do not measur

293、e up to the actual level of investments made.For instance,the Brazil-China Fund was announced with great fanfare in 2015.Its aim was to finance infrastructure development in Brazil,but it has been inactive and does not seem to be an actual investment fund(Maia,2021).According to one of the SMEs we i

294、nterviewed,this is an example of China talking big and not delivering much,as well as an example of Chinas attempts to project soft power and public diplomacy based on claims of China having achieved more than what it actually has.40 There is,however,the perception in Brazil that China could withhol

295、d support or discontinue trade ties if the Brazilian government or other Brazilian actors criticize China,with Brazil not realizing that it has much more leverage in the overall trade relationship with China than it thinks.According to one interviewee,there is a misperception in Brazil that Brazil n

296、eeds China more than China needs Brazil,when in reality the opposite is true.41 Chile GEI and GEIDCO in Chile Chile has a tremendous amount of renewable energy available but has modest transmission capacity,making the country a good candidate for implementation of a GEI-like vision.The Chilean Minis

297、try of Energy and GEIDCO have a signed MoU,but the document is not public(Bo,2019,p.20).As in the other countries examined in this chapter,there was little awareness among Chilean energy sector SMEs regarding GEIDCOs activities.Most Chinese investment 38 Interview with Brazil energy sector expert,Ap

298、ril 13,2022.39 Interview with Brazil energy sector expert,April 13,2022.40 Interview with U.S.government officials,March 15,2022.41 Interview with U.S.government officials,March 15,2022.30 and financing activities in Chiles power transmission and distribution sectors occur through SGCC and are not d

299、irectly connected to GEIDCO.According to one interviewee,many of the statements GEIDCO put forward in Chile and the region are only aspirational and for window-dressing purposes,with very little coming out of them.42 Chinese Presence in the Energy Sector in Chile In Chiles energy sector,Chinese comp

300、anies have gained a stronger presence in the past five to seven years,43 as the following investments show.In 2016,Chinese State Power Investment Corporation purchased$1 billion in power generation assets in Chile from Pacific Hydro(Danning,2017;Heine,2021).In 2018,China Southern Power Grid purchase

301、d 27.7 percent of Chiles largest power transmission company,Transelec,for some$1.3 billion(Ellis,2021a).In 2020,SGCC purchased the third largest power distribution company in Chile,Chilquinta Energa,for$2.23 billion(Ellis,2021a;Nikolewski,2020),and SGCC purchased Compaia General de Electricidad,whic

302、h does both power transmission and distribution,for$3 billion in December 2020.In this way,Chinese SOEs gained control of 57 percent of Chiles power distribution sector(Ellis,2021a).China also has a strong presence in Chiles renewable energy sector,especially in solar and wind,with Chinese firms pro

303、posing projects and Chinese government banks offering financing options for the respective projects(Koop,2016).44 For instance,China Three Gorges purchased the energy company Atiaia Energa in 2019 and gained control over several renewable energy projects,including a 90-MW hydropower dam proposed in

304、the BioBio region(Ellis,2021a).For the companies we identified in this section,Chinese SOEs gained a presence in power generation,transmission,and distribution through public tenders and mergers and acquisition transactions.45 Concerns Associated with Chinese Investments and Financing in Chile Our r

305、eview of open-source data and the interviews we conducted,which included Chilean SMEs who were worried about Chinese presence and activities in the country,turned out few concerns in relation to Chinese investments and financing in power transmission and distribution or in relation to power generati

306、on,similar to Brazil and the other countries examined in this chapter.46 Transparency and strong institutions and regulatory frameworks in Chile are the main reasons why Chiles energy sector has experienced limited problems associated with the 42 Interview with U.S.government official,March 1,2022.4

307、3 Interview with Chile energy sector SME,April 21,2022.44 Interview with U.S.government official,March 1,2022.45 Interview with U.S.government official,March 1,2022.46 Environmental and corruption concerns are present in the mining sector,which is outside of the scope of this report(interview with C

308、hile foreign and economic policy SME,May 9,2022;and interview with Chile energy sector SME,April 21,2022).31 presence of and investments by Chinese SOEs(Ellis,2021a).47 One of the concerns voiced by former Chilean officials was very similar to what we heard from other interviewees in other countries

309、 regarding the fact that Chinese SOEs that operate in Chile receive loans from Chinese government banks and,because of the nonmarket conditions for financing,48 can make more-attractive bids than Western investors can.49 By repeatedly wining tenders because of lower bidding prices,Chinese SOEs end u

310、p controlling a higher share of the local assets in some critical sectors(Lew and Roughead,2021;Sutter,Schwarzenberg,and Sutherland,2021),which de facto concentrates control over Chiles critical infrastructure in the hands of the Chinese government,increases Beijings economic leverage,and obstructs

311、free market competition.50 For instance,Chinese SOEs currently have control over almost 60 percent of Chiles energy sector,creating a de facto monopoly for the government in Beijing(Ellis,2021b;Ellis,2021c).A concentration of Chinese government control over local critical infrastructure assets could

312、 grant Beijing(1)more leeway in terms of setting the price and determining the quality of the services provided and(2)the ability to establish barriers to entry to keep new companies out,hence restricting competition and the way in which the free market operates while advancing Beijings political an

313、d economic goals at the expense of the host country(Lew and Roughead,2021;Sutter,Schwarzenberg,and Sutherland,2021).Chile,by law,has a fragmented energy sector.Under the existing legal framework,power generation,transmission,and distribution companies were deliberately established as separate entiti

314、es to avoid the creation of a conglomerate with a monopoly over the power sector.51 However,the Chilean Public Prosecutors Office,which reviewed the acquisition deals by Chinese SOEs for any potential interferences with the“promotion,defence and protection of free competition,”deemed the deals accep

315、table because the Chinese companies involved in power 47 Interview with Chile energy sector SME,April 21,2022.48 According to several of our interviewees,including an expert in Chinese financing in Latin America(June 6,2022),the Chinese government provides loans to Chinese SOEs through Chinese polic

316、y banks at interest rates that allegedly are below market rates and different from the rates for foreign lending,which tend to be close to or at market rate(see Morris,Parks,and Gardner,2020;and Sutter,Schwarzenberg and Sutherland,2021).According to our interview with an expert in Chinese financing

317、in Latin America(June 6,2022),the actual rate at which Chinese policy banks lend to SOEs is unknown and is speculated to be around 1 percent,with hard evidence being difficult to come by because of a lack of official transparency.49 Interview with U.S.government official,March 1,2022;and interview w

318、ith Chile foreign and economic policy SME,May 9,2022.50 Chinese SOEs have the support of the Chinese government in ways that the foreign private companies they compete with in Latin America(and in other markets)do not.It is likely that,without subsidized loans or capital injections from the Chinese

319、government,many Chinese SOEs would not be as competitive as they are in various markets,including in Latin America;the backing they receive from the Chinese government gives the SOEs an unfair advantage in terms of price vis-vis foreign private companies,which rely entirely on their own forces and t

320、he quality of their product or service without receiving any government backing.See Lew and Roughead,2021;and Sutter,Schwarzenberg and Sutherland,2021.51 Interview with U.S.government official,March 1,2022.On the evolution of Chiles electricity market,see Serra,2022.32 generation,transmission,and di

321、stribution technically are different entities involved in different areas of the power sector(Guzmn,2021).52 This technicality seems to overlook the fact that the Chinese government is the main entity behind the SOEs in question.However,the common Chinese government ownership of all SOEs that invest

322、ed in Chiles energy sector represents an issue that should not be neglected,and concerns in this regard have prompted Chilean legislators to introduce a bill that limits foreign investments in critical infrastructure sectors(Urdinez,2021,p.12).53 In some cases,such as tenders for solar parks,the off

323、ers China makes come attached with loans.The fact that Chinese investors provide financing options makes their offers more attractive than those received from German or South Korean companies that are bidding on the project but that do not offer financing options.54 Concerns over Chinese violation o

324、f environmental regulations are also present.For instance,local populations have been very critical of Chinas Three Gorges company building a hydroelectric dam in the BioBio region of Chile.The dam threatens the existence of local animal species that inhabit the river(Durante,2021;Ellis,2021a).Also,

325、because of environmental concerns and popular resistance related to damage to the local habitat and population displacement caused by the flooding of the Baker and Pascua rivers,the Hidroaysen project was halted in 2014(Hance,2014).This was a project planned for Southern Chile and China National Wat

326、er Resources.The Hydropower Corporation was expected to contribute to building five hydroelectric plants on the Baker and Pascua rivers in Patagonia,and SGCC was to build the transmission lines(Ellis,2021a;Global Transmission Report,2012).However,according to one SME,most Chinese companies investing

327、 in Chile seem to play by the rules when held to a strict standard and demanded to do so,with local governments actively controlling and monitoring their investment and financing activities and not providing opportunities for Chinese companies to misbehave.55 Peru GEI and GEIDCO in Peru As opposed t

328、o Argentina,Brazil,and Chile,there is no GEIDCO national committee in Peru.The SMEs we spoke with in Perus energy sector did not witness GEIDCO being very active in 52 Interview with Chile foreign and economic policy SME,May 9,2022.53 Interview with U.S.government official,March 1,2022.54 Interview

329、with Chile foreign and economic policy SME,May 9,2022.55 Interview with Chile foreign and economic policy SME,May 9,2022.33 the country beyond the organizations successful recruitment of some industry actors to become GEIDCO associates.56 Chinese Presence in the Energy Sector in Peru In 2020,Yangtze

330、 Power International,a subsidiary of China Three Gorges Corporation,purchased from the U.S.company Sempra Energia a share in Luz del Sur for$3.59 billion(Nikolewski,2020).This transaction provided China with access to power generation,distribution,and transmission infrastructure.Other major Chinese

331、investments and financing in Peru took place in power generation.In 2019,Odebrecht divested from Chaglla hydroelectric plant,which was transferred to China Three Gorges Corporation for$1.4 billion;in 2017,China Development Bank decided to inject some$365 million in Perus San Gaban III project,which

332、is a joint venture between China Three Gorges and Energias de Portugal(Harris,2017).Most Chinese companies in Peru have acquired control over companies in power transmission and distribution through mergers and acquisitions,whereas greenfield investments and loans seem to prevail when it comes to po

333、wer generation.Concerns Associated with Chinese Investments and Financing in Peru In our review of open-source documents and the interviews we conducted,we identified relatively few concerns related to Chinese SOE control over Peruvian power transmission and distribution assets,similar to the situation in Chile.57 The concerns that interviewees voiced are more general in nature and are related to