China has kept its promise to stop funding overseas coal, but loopholes are helping coal expand

China has kept its promise to stop funding overseas coal, but loopholes are helping coal expand By Li Wei, BBC News – September 26, 2026 It has been five years since China pledged to the United Nations that it would cease financing overseas coal projects, a commitment made at the 2021 UN Climate Change Conference in Glasgow. The promise was heralded as a watershed moment for global climate policy, signalling that the world’s biggest coal consumer would stop propping up new carbon‑intensive power plants abroad. Recent data released by the Climate Policy Initiative confirms that direct state‑controlled loans to new coal mines and power stations have indeed dropped to near‑zero levels, suggesting the pledge is being honoured in its most literal sense..

Yet the picture on the ground tells a more nuanced story. While Chinese state banks have largely withdrawn from financing fresh coal capacity, a web of private lenders, sovereign wealth funds and state‑owned enterprises have stepped into the void. These entities operate under looser regulatory oversight and often mask their involvement through joint‑venture structures or “green” financing labels..

Analysts at the International Energy Agency warn that such indirect channels could add up to as much as 30 % of the total overseas coal financing in 2025, undermining the spirit of the original promise. The shift in financing patterns is most evident in Southeast Asia and Sub‑Saharan Africa, regions where energy demand is rising rapidly and where Chinese companies have long been major infrastructure partners. In Indonesia, for example, a consortium led by a Chinese private equity firm is backing a 2‑gigawatt coal plant slated for completion in 2029..

Although the project does not receive a direct loan from the China Development Bank, it is underwritten by a blend of offshore bond issuance and guarantees from the China Export-Import Bank, blurring the line between “state‑backed” and “private” financing. Similarly, in Kenya, a Chinese‑owned renewable‑energy developer has secured a $500 million loan from a European bank to build a hybrid solar‑coal plant. The arrangement is marketed as a transition project, but critics argue that the coal component—planned to provide baseload power for the next two decades—contradicts Kenya’s own climate commitments..

The loan documents reference “strategic partnership” with a Chinese state‑owned enterprise, effectively leveraging political goodwill while sidestepping the formal ban on new overseas coal funding. These loopholes have drawn scrutiny from both civil society and Western governments. In March 2026, the United Kingdom’s Department for Business, Energy and Industrial Strategy released a report accusing China of “strategic financing gymnastics” that allow the country to maintain influence over the global coal market..

The report called for tighter definitions of “state‑controlled financing” in UN climate agreements, suggesting that future pledges should encompass indirect funding routes and joint‑venture arrangements. China’s own ministries have responded with a mixture of acknowledgement and deflection. A spokesperson for the National Development and Reform Commission (NDRC) told reporters that the country remains “firmly committed to the Paris Agreement” and that any financing “aligned with the Belt and Road Initiative’s green transformation” will be scrutinised..

However, the NDRC stopped short of extending the 2021 pledge to cover private-sector investments, citing the need to protect Chinese enterprises’ competitiveness in global markets. Experts say the policy gap stems from the way China’s financial architecture is organized. While the People’s Bank of China sets macro‑policy, the state‑owned banks operate with a degree of autonomy, and private banks answer primarily to shareholders..

This fragmented system makes it difficult for a single agency to monitor every flow of capital, especially when funds are routed through offshore subsidiaries or mixed‑ownership vehicles. As a result, coal projects can receive financing that, on paper, appears to be “non‑state” even though the ultimate risk is underwritten by Chinese capital. The environmental consequences of these financing tricks are already becoming apparent..

Satellite imagery released by the European Space Agency in July 2026 shows a surge in night‑time light intensity around new coal‑fired plants in Myanmar and Vietnam, indicating that they are operating at higher capacities than initially projected. Local NGOs report increased air‑quality alerts, with particulate matter (PM2.5) levels exceeding World Health Organization guidelines by up to 40 % in communities adjacent to the plants. On the diplomatic front, the loopholes are reshaping China’s relationships with its partners..

Countries that have welcomed Chinese investment for its speed and scale are now facing pressure from the European Union and the United States to re‑evaluate projects that could lock them into a high‑carbon pathway. In a recent summit in Brussels, EU climate chief Frans Timmermans warned that “green finance cannot be a pretext for new coal.” The message resonated with several African leaders, who have begun to request more transparent financing terms from Chinese firms. In response, some Chinese companies are experimenting with “dual‑fuel” technologies that allow plants to switch between coal and renewable gas, claiming this offers a bridge to cleaner energy..

While the technology may reduce emissions in the short term, critics argue that it prolongs coal’s relevance and creates a false sense of progress. A study by the World Resources Institute estimates that dual‑fuel plants could emit 15 % more CO₂ over their lifetime compared with a direct shift to renewable‑only facilities. The debate has also sparked a wave of activism within China itself..

Environmental groups such as Friends of the Earth China have launched campaigns urging the government to close the loopholes and extend the overseas coal funding ban.