A Peer-to-Peer Pivot in China’s Overseas Development Finance#

In 2024, China’s development finance institutions (DFIs), primarily the China Development Bank and Export-Import Bank of China, extended 6.1 billion across 20 public and publicly guaranteed (PPG) loan commitments, a significant decline from the Belt and Road Initiative’s (BRI) peak lending years exceeding 30 billion annually, according to the Boston University Global Development Policy Center’s CODF Database. More notably, Chinese DFIs have pivoted from energy and transportation to finance, with 44% of 2020–2024 lending directed to national and regional development banks (NDBs and RDBs), compared to just 10% for energy projects.

Shift in Lending Focus#

Historical Context: From 2008–2019, energy dominated Chinese DFI lending, with major commitments to projects like Brazil’s Petrobras and South Africa’s Kusile power plant. Transportation, including rail projects in Indonesia, Kenya, and Malaysia, was the second-largest sector.
Recent Trends: From 2020–2024, finance became the top sector, comprising 44% of commitments, while energy fell to 10%. This shift emphasizes lending to financial intermediaries like NDBs and RDBs, reducing direct project financing.

Risk-Management Benefits of Peer-to-Peer Lending#

Reduced Burden: Lending to local NDBs and RDBs shifts project selection and management from Chinese DFIs, which are geographically distant and institutionally stretched, to local partners better equipped for smaller-scale projects under the “small is beautiful” approach.
Environmental and Social Risk Management (ESRM): Chinese DFIs are still developing robust ESRM frameworks. The 2021 Green Finance Guidelines (GFGs) from the National Financial Regulatory Administration (NFRA) encourage community consultation and grievance mechanisms, but lack key performance indicators as of mid-2025. Lending through intermediaries mitigates risks from weak ESRM systems.
Environmental and Social Risks: CODF Database research shows Chinese DFI-financed projects pose higher risks to biodiversity and Indigenous communities than World Bank projects. From 2020–2024, two-thirds of direct project financing overlapped with sensitive territories (Indigenous lands, protected areas, or critical habitats), increasing risks of suspensions or cancellations.

Opportunities for Sustainable Development#

Green BRI Commitment: At the 2024 Forum on China-Africa Cooperation (FOCAC), China pledged support for clean energy projects, including solar developments in Namibia and Zambia, aligning with the Green BRI’s focus on global energy transitions.
Green Investment and Finance Partnership (GIFP): Launched at the 2023 Belt and Road Forum, the GIFP aims to serve as a project pre-feasibility facility to develop sustainable project pipelines, addressing the Global South’s shortage of green energy initiatives.

Challenges and Gaps#

ESRM Limitations: The absence of NFRA’s performance indicators hinders GFG implementation, leaving Chinese DFIs vulnerable to environmental and social risks in direct financing.
Project Pipeline Shortages: The Global South, particularly Africa, lacks sufficient project development facilities to create viable green energy projects, limiting the scale of sustainable lending.

Recommendations#

For Chinese DFIs: Continue leveraging NDBs and RDBs for project oversight until robust ESRM frameworks are established. Accelerate GIFP implementation to build sustainable project pipelines.
For Policymakers: NFRA should publish GFG performance indicators to strengthen ESRM practices, enhancing project viability and community trust.
For Global Partners: Collaborate with China on GIFP and similar initiatives to support green project development in the Global South, ensuring alignment with sustainable development goals.

Conclusion#

China’s pivot to finance-focused lending through local DFIs reflects a strategic move to mitigate risks while maintaining development impact. With 6.1 billion in 2024 commitments, the focus on intermediaries reduces exposure to environmental and social risks, but the lack of robust ESRM frameworks and green project pipelines remains a challenge. Initiatives like the GIFP and Green BRI signal potential for sustainable growth, particularly in Africa. Stakeholders should prioritize strengthening ESRM and project development facilities to ensure the Green BRI supports a sustainable future.