In the high desert of northwestern Argentina sits a vast array of solar panels, surrounded by barren hills of gray-brown sand. Thanks to clear skies, clean, cool air, and a 4,000-meter altitude, the spot is among the best on Earth for harnessing solar power—it boasts about 15% more generating potential than North America’s Death Valley or the scorched Arabian Desert.
The Cauchari Solar Plant, which came online in 2019, can generate up to 300 megawatts of power at a time, making it the largest solar park in South America. The government of Jujuy, the Argentinian province that owns and operates Cauchari, wants to expand the park to add enough panels to generate an additional 200 megawatts, plus make enhancements to aging transmission lines. But the expansion of Cauchari has stalled because a government nearly 19,000 kilometers away has yet to commit the funding.
Most of the $540 million that it cost to build the initial stage of Cauchari came as a loan from China’s state-owned Export-Import Bank, with the rest covered by a bond issued by Jujuy. China’s two main power companies, PowerChina and Shanghai Electric, built the park. Chinese manufacturer Talesun Solar provided the panels.
China has emerged as a dominant force behind Argentina’s engineering infrastructure, partly because Western banks have been hesitant to support the country, whose ongoing macroeconomic crises have made it an unreliable debtor for decades. China, on the other hand, has poured more than $26 billion into Argentina’s infrastructure since 2005.
BRI projects could, in theory, provide a green path for developing countries to climb out of their economic craters and do it with clean energy.
It’s not just Argentina. China has backed or plans to back ambitious infrastructure projects in more than 150 countries, from ports to highways to power plants, as part of a foreign policy strategy designed, in part, to strengthen its global trade networks. In 2013, President Xi Jinping named this policy the Silk Road Economic Belt and 21st-Century Maritime Silk Road development strategy, nicknamed One Belt One Road in China and the Belt and Road Initiative (BRI) everywhere else. Eight years later, Xi announced that China would no longer build new coal power plants abroad, signaling a major shift to green infrastructure that could bend billions of dollars toward slowing climate change.
Argentina is a case study in the challenges both China and its partner countries face in pursuing sustainable development. As a signatory to the Paris Agreement, Argentina has vowed to reduce its carbon emissions by 19%, relative to its 2007 maximum, by 2030. But it has a long way to go; about 60% of the energy it generates still comes from fossil fuels. With runaway inflation and unemployment, poverty at 40%, and crushing debt, Argentina is also urgently in need of economic recovery.
BRI projects could, in theory, provide a green path for Argentina and other developing countries to climb out of their economic craters and—unlike China or any developed nation—to do it with clean energy.
But after a rightward swing in Argentina’s last election and a slowdown in Chinese lending to foreign governments, the fate of green infrastructure in the country and elsewhere in the Global South hangs in the balance.
Rise of the World’s Builder
China’s own growth from an unstable dynastic empire at the turn of the 20th century to an economic powerhouse at the turn of the 21st was meteoric. According to the World Bank, more than 800 million of its people have climbed out of poverty since 1978, with China’s gross domestic product growing an average of 9% every year. Chinese leaders understood that booming industry required reliable electricity; the country generated 5 times more power in 2020 than it did in 2000. That growth has been fueled mostly by coal, making China by far the largest emitter of greenhouse gases in the world.
As China’s domestic economy cooled in the mid-2010s, its government needed to drum up demand for products and services overseas. At the same time, the country enjoyed a strong trade surplus and needed an efficient way to spend foreign currency. The developing countries that were hungriest for such investment, however, didn’t have the infrastructure to support it. The Belt and Road Initiative was developed to serve all three needs, with more than $1 trillion invested in foreign infrastructure since the initiative began in 2013.
“China doesn’t want to draw an image of itself as a kind of new colonizer.”
For the first few years of the initiative, BRI projects were proposed and driven by partner countries; China’s approach was simply to provide the financial and industrial muscle. If a country had lots of coal, China helped it build a coal-fired power plant. (Many of these plants were constructed in coal-rich India, Indonesia, and Russia.) If there was a large river, they built a hydroelectric one. (Two power stations on the Nile in Uganda are an example of this strategy.) China’s construction companies offered lightning-fast completion timelines, making them the go-to building partners for many developing countries. And unlike loans from Western multilateral banks, Chinese loans, while high interest, rarely came with stringent requirements on how money was used or how projects were monitored.
“Conditionality is out of the question,” according to Yixian Sun, a political scientist at the University of Bath who specializes in sustainability governance of the BRI. That’s not just because China wants to provide an alternative to the Western lending model but also because of its relatively recent roots as a poor country. “China doesn’t want to draw an image of itself as a kind of new colonizer,” Sun said.
That somewhat hands-off approach came with geopolitical benefits as well as economic ones, Sun explained. “The idea is to rebuild the global governance system to be less Western-centric and, to some extent, more [of a] China-centric network.”
Adapting the BRI to Global Market Trends
The BRI’s innovative approach has come with some setbacks.
It has complicated China’s role in the climate crisis, for instance: The country has been criticized for supporting carbon-intensive projects. In 2015, 45% of China’s investment in foreign energy projects was in coal-fired power plants, with another 27% going to oil and gas. (China has been investing in oil and gas projects in Argentina since 2010.) In recent years, however, China’s massive investment in renewables has led energy watchdogs to estimate that the country’s greenhouse gas emissions will peak years earlier than anticipated.
China’s buckshot approach to foreign investment also had mixed results in terms of the infrastructure itself. The Chinese-built Coca Codo Sinclair hydroelectric dam in Ecuador, for example, is only 7 years old but is visibly cracked, and rapid erosion threatens the facility.
Some underdeveloped countries (Sri Lanka and Zambia, notably) have defaulted on China’s BRI loans. Such defaults have led Chinese banks to shift their lending strategies and rethink their approach of saying yes to so many projects. “Now [the BRI’s] previous model is in trouble because many governments in the Global South are already [in] or on the verge of bankruptcy,” said political economist Wei Shen at the Institute of Development Studies at Sussex University. “[China] assumed these countries would grow rapidly, just like what China did. In most countries, it did not happen.”
“China always wants to position itself as a more kind of responsible player [on the] global stage, in particular in the climate governance area.”
These problematic developments have China concerned with protecting its reputation, both as an infrastructure builder and as an international climate leader, Shen added. “China always wants to position itself as a more kind of responsible player [on the] global stage, in particular in the climate governance area.”
China has largely been able to adapt to the shifting fortunes of the coal industry to pursue the goals of the BRI, however. Thanks to regulatory pressure in many countries and the dropping cost of wind and solar power, coal’s profitability plummeted in the 2010s and 2020s. According to Carbon Tracker, nearly all of the world’s coal power plants will be more expensive to run than building and operating renewable plants by 2026.
In 2021, President Xi announced that China would no longer finance the building of new coal-fired power plants abroad. It was a seismic, if vague, proclamation—it’s unclear whether China will fulfill agreements it’s already signed, convert some projects to renewables, or help partner countries to retire existing coal plants.
It remains to be seen how aggressively China will pursue renewable power, but more than 40% of the country’s investment in BRI energy projects was in wind and solar during the first half of 2023, up from only 20% in 2021. In November 2023, Xi and U.S. President Joe Biden agreed to triple global renewable energy capacity by 2030. “It’s a quite exciting time to see how China is going to fulfill these commitments,” Sun said. “To turn the word into practice—I think that’s the challenge.”
A Complicated Ground Game
As developing economies grow, so do their potential greenhouse gas emissions.
As developing economies grow, so do their potential greenhouse gas emissions. In 2021, lower-income non-OECD (Organization for Economic Co-operation and Development) nations, including China, were projected to increase energy-related carbon dioxide emissions 30% faster than OECD nations over the next 3 decades. In a recent report, the International Renewable Energy Agency recommended that renewable power capacity will need to increase faster in developing countries to meet their growing needs without pushing global climate targets out of reach.
But economic growth isn’t a given. In the near term, China’s promise to stop building coal-fired plants abroad may hurt the poorest BRI partner countries. Shen pointed out that the current potential for economic growth in such countries as Zimbabwe depends largely on using conventional energy resources to build an electrical grid capable of supporting new industry. Without new industries and the opportunities they provide, he said, they will have trouble improving economic conditions. “They will be just stuck there.”
Argentina has a more developed economy than many BRI partner nations and a load of untapped renewable resources. (In addition to its solar gold mine, it also has some of the world’s best wind fields, totaling as much as 3 terawatts of potential wind power both onshore and offshore.) But even with those advantages, Argentina’s path forward is fraught.
The country’s largest alternative energy project built with Chinese help to date is a $4.7 billion hydroelectric dam complex on the Santa Cruz River in Patagonia. For years, China has found that hydroelectric dams are the easiest alternative energy projects to invest in because the required technology and project management practices to bring them to fruition have existed for a century. But dams don’t always provide truly clean energy, as decomposing biomass in their reservoirs can create an often-overlooked source of greenhouse gas emissions.
The Santa Cruz project is a joint venture between the Gezhouba Group, a Chinese builder that owns the majority of shares in the complex, and two Argentinian companies. It is financed with a loan from three state-owned Chinese banks.
The complex, comprising the Néstor Kirchner and Jorge Cepernic dams just 65 kilometers apart, was a political football in Argentina from the jump. Construction on the project began in 2015 under then president Cristina Fernández de Kirchner.
“The environmental impact assessment was a joke,” said Juan Uriburu Quintana, an Argentinian lawyer who has facilitated relations with China on several joint infrastructure projects. The report, he explained, addressed impacts in disjointed segments and failed to notify the public. In addition, environmental advocates have said the dams’ potential damage to glaciers at Los Glaciares National Park, a UNESCO World Heritage Site, as well as to a population of endangered hooded grebes in the Santa Cruz estuary, was not sufficiently studied.
Fernández de Kirchner was succeeded in 2015 by center-right reformist Mauricio Macri, who supported investment in renewables but was critical of Argentina’s dependence on China. With backing from the World Bank, Macri created Argentina’s first renewable energy auction to attract a range of new foreign investment in green power projects. The program, RenovAr, awarded more than 2,400 megawatts’ worth of renewable energy contracts through an internationally competitive bidding process.
The different administrations and different branches of government working independently was “unthinkable in the Chinese mindset.”
Once Macri took office, he put the Santa Cruz hydro project on hold. Even after his administration finally approved the project, environmentalists sued. The Supreme Court of Argentina ruled that before dam construction could move forward, the environmental impact assessment had to be done again and the government had to hold public hearings.
Chinese investors and builders, who ultimately answer to China’s centralized government, found themselves on unfamiliar ground. Argentina’s different administrations and different branches of government working independently, effectively stymieing a project that had already been green-lighted, was, Uriburu said, “unthinkable in the Chinese mindset.”
Ultimately, the Santa Cruz project was downscaled to use fewer turbines to meet environmental standards and now is projected to generate 25% less electricity than originally planned.
To avoid this kind of quagmire, China went directly to the provincial level for its next project in Argentina, funding the government of Jujuy to build the solar park at Cauchari.
Push and Pull
China has found itself in tension with BRI host countries such as Argentina partly because of its focus on its own globalization goals. BRI contracts for projects such as Cauchari often stipulate that Chinese construction materials, technology, and even workers be used; in China’s view, that’s to streamline the project and maximize efficiency, as well as to achieve its goal to expand the reach of its companies.
Rebecca Ray, an economist with the Global China Initiative at the Boston University Global Development Policy Center, said China’s overseas projects are efficient partly because they’re centrally controlled by the Chinese government. “The fact that China’s able to easily coordinate between creditors and investors, contractors and insurers, [makes it] able to pull together a package much more easily than a market economy where each of these are separate sets of actors that you have to convince to be part of a project.”
Perhaps more important, said Qi Qi, a postdoctoral scholar at Tufts University who studies Chinese renewable energy technologies, China has mastered the development and mass production of renewable energy technologies.
In the 2000s, as the European Union (EU) in particular began subsidizing renewable energy, China increased its market share there simply by selling cheaper solar panels than its European competitors, made possible largely by the lower labor costs in China and domestic subsidies from the Chinese government. After the EU objected to what it saw as unfair competition in a 2012 trade dispute, China poured resources into research and development to cultivate its role as a supplier of high-quality solar components. Because China also brought its considerable manufacturing might to bear on scaling up the industry, streamlining the mass production of renewable technology from solar cells to wind turbines, it was able to set a globally competitive price for its products. Chinese companies acquired every link in the supply chain, including mining raw materials, shipping, and construction, while locating each link near the others to cut transportation costs.
As a result, China dominates the global market, supplying more than 80% of solar power equipment worldwide. Its investments in research and development have made solar cells both cheaper and more efficient. It has also pioneered the building of ultrahigh-voltage transmission lines, which are crucial to connecting remote renewable plants with population centers. (Brazil recently awarded Chinese utility State Grid a contract to build 1,500 kilometers of transmission lines connecting plants in the country’s northeast with its southern cities after few other companies had the investment might or expertise to even bid.)
“Climate change is about inequality. Also, the energy transition is about inequality.”
The streamlined approach can leave a technological and economic gap between China and its BRI partner countries, however. “Who benefits from that is not Argentinian solar power companies,” said Uriburu. “So what is the incentive for the private sector to be involved in this?”
Juliana González Jáuregui, an international relations researcher at the Latin American Faculty of Social Sciences in Argentina, pointed out that when China was dependent on foreign investment to fuel its own development, it negotiated the transfer of technological knowledge that would allow it to rapidly build its own capacity for innovation. Without similar technology sharing between China and developing countries under the BRI, she said, “the worst scenario is Argentina becoming more dependent in terms of the provision of technologies, and also of financing.”
China can supply affordable, quality technology to developing nations, but how it shares that technology and supports the institutional framework to make it work could determine whether those countries can make the transition to renewable energy in a way that’s sustainable and profitable for them. These nations “need capacity building,” said Qi. “They need outside help.”
“Climate change is about inequality,” Qi said. “Also, the energy transition is about inequality.”
A New Administration
But Qi’s research has found that the policy framework in partner countries, including political will, is often the major determining factor in the success of BRI projects.
In November 2023, Argentina’s relationship with the BRI and its green energy projects were put on hold by a heated presidential election. Though China did not take a public stance, both Uriburu and González Jáuregui said they believe Chinese companies stopped moving forward on projects such as the Cauchari expansion while they waited for the outcome of the election.
Ultimately, Argentines elected Javier Milei, a climate change–denying economist who campaigned on a platform of cutting off long-standing government funding of the sciences and severing all ties with China.
Even Milei’s own staff have tried to soften his comments on China, which Milei has called an “assassin,” and analysts largely dismiss his promises to cut ties with the country as political grandstanding. China is Argentina’s second-largest trade partner after Brazil—in 2022, over 90% of Argentina’s soybean exports and more than half its meat exports went there. At least for now, the relationship is of existential importance to Argentina, and China knows it. After Milei’s foreign minister allegedly met with a Taiwanese official in December, China, which does not recognize Taiwan’s independence, threatened to begin buying both soybeans and meat elsewhere.
Infrastructure funding hangs in the balance, too. “China is our creditor of last resort,” Uriburu said, largely because Western multilateral banks are wary of lending Argentina any more money. The country is the largest debtor to the International Monetary Fund, to which it owes $46 billion.
While Milei’s administration may reconfigure the terms, said González Jáuregui, “the long trajectory of Argentina’s relationship with China includes trade and investments, as well as the provision of financing and swap agreements, no matter who has been in power.” Still, she said, “since Milei has publicly denied the existence and effects of climate change, we can expect efforts [to counter] climate change not to be a priority.”
Shortly after Milei’s election, construction of the Santa Cruz hydroelectric dams was halted yet again as his government raised objections over the work agreement. If the project folds, Argentina will still have to repay the Chinese loans.
An Uncertain Future
Both the Group of Seven (G7), led by the United States, and the European Union have proposed their own answers to the BRI, pledging to spend billions on sustainable infrastructure in poorer nations. But these efforts, nicknamed Build Back Better World and Global Gateway, are just getting started. Ideally, developing nations would only benefit from having more choices in whom to partner with, Ray pointed out, “but it may be a bit Pollyannaish at this point to set expectations that we will see such a positive scenario unfold soon.”
A new approach to the BRI may include allowing more time and flexibility for host countries to contribute their own materials and labor.
A downturn in China’s own economy, especially following the COVID-19 pandemic, has led Chinese firms to pour more equity into foreign infrastructure projects, hoping to turn a better profit abroad than at home. Chinese banks continue to slow lending directly to foreign governments, but President Xi announced at a 2023 BRI forum that the initiative is pivoting to “small yet smart” projects that yield strong development results, as well as increasing its focus on low-carbon industries and renewable energy and creating more training opportunities for partner countries. “That indicates an intention for lending to rebound, but in a way that is more sustainable financially as well as environmentally and socially,” said Ray.
Going forward, a new approach to the BRI may include allowing more time and flexibility for host countries to contribute their own materials and labor, Shen said. That would be “quite a significant institutional, even mindset, change” for Chinese companies.
And the world is watching because a trillion dollars of Chinese funding may be a determining factor in whether the global community can meet its emissions reduction goals.
—Mark Betancourt (@markbetancourt), Science Writer