The Role of China's Foreign Direct Investments in Energy Within the Belt and Road Initiative

Abstract

Since 2011, China has emerged as the world’s largest energy consumer, with its industrial sector accounting for approximately two-thirds of the country's total energy consumption. This heavy reliance on energy, especially oil, is largely due to China's status as a net importer of energy. The substantial investments in energy, particularly in foreign direct investment, are crucial not only for meeting domestic demands but also for ensuring the security of energy supplies. Among the key subjects of this paper is the role of Chinese foreign investments in the energy sector, which is the largest and most strategically important sector in China's global investment portfolio. To assess the scale and impact of these investments, the study employs bibliometric analysis using the WoS Viewer program, which helps in analyzing global trends, key authors, influential countries, and the most frequently used keywords related to FDI in the energy sector. This approach allows for a comprehensive understanding of the global landscape in which China’s investments are situated. The paper further relies on a combination of scientific methods such as observation, analysis, synthesis, comparison, exploration, and explanation to analyze Chinese investments from 2013 onward. The primary focus is on the Belt and Road Initiative (BRI), which has become a vehicle for China to expand its influence globally, particularly in sectors such as energy. Under the BRI, China has invested heavily in projects across various sectors, most notably in energy. These investments include oil, hydropower, alternative energy, natural gas, and coal. The nature of these investments often involves loans that come with certain geopolitical strings attached, sometimes creating what critics refer to as "debt traps." These situations allow China to gain control over valuable assets in participating countries if they fail to repay their debts. While these projects have significantly increased China’s geopolitical leverage, they have also raised concerns regarding the sustainability of such investments for both China and the recipient countries. The energy sector has remained the cornerstone of China’s investments within the BRI framework. However, there has been a noticeable diversification of Chinese capital since the late 2010s. While energy continues to dominate, Chinese investments have expanded into other sectors, including transportation, real estate, technology and innovation, and tourism. This diversification reflects China's broader strategy to increase its global footprint and influence in sectors that are critical for long-term economic development and sustainability. A major setback occurred after 2019, when Chinese investments in the BRI regions, particularly in the energy sector, experienced a sharp decline due to the COVID-19 pandemic. The global economic disruptions caused by the pandemic led to a slowdown in both new projects and the completion of ongoing investments, particularly in high-risk areas. While the energy sector remains the primary focus of Chinese investments under the BRI, the trend of diversification into other sectors signals a shift in China’s investment strategy. The next phase of China’s Belt and Road Initiative should consider a stronger emphasis on renewable energy sources as part of its broader commitment to sustainability and global climate goals. Such a pivot would not only help mitigate the environmental impact of China's investments but also align with global calls for sustainable development in the post-pandemic era.