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Rethinking U.S. International Energy Finance
Photo: RIZWAN TABASSUM/AFP/Getty Images
The growing demand for reliable and affordable energy in emerging markets now lies at the nexus of economic development and geopolitical competition. In this context, international energy finance has become an increasingly vital tool of economic statecraft. While multilateral institutions like the World Bank have traditionally led global development efforts, major powers—most notably China, and more recently the United States—are deepening their integration of energy-related development finance, commercial diplomacy, and strategic investment to advance broader policy objectives. As China recalibrates its approach, the United States must also modernize its international energy finance strategy to be able to offer an attractive alternative. Doing so requires a clear, coherent agenda that aligns U.S. national interest priorities with global development imperatives and capitalizes on its comparative advantages.
The Historical and Strategic Context
The United States has a longstanding tradition of leveraging strategic international finance to advance foreign policy, economic interests, and global development goals. In recent history, institutions including the Export-Import Bank of the United States (EXIM), the U.S. Trade and Development Agency (USTDA), the U.S. Agency for International Development (USAID), the Millenium Challenge Corporation (MCC), and the U.S. International Development Finance Corporation (DFC) have all provided important capabilities—though not always in a coordinated manner. Between 2000 and 2021, the United States provided an average of $32 billion in international development financing per year.
Meanwhile, China has employed a more coordinated and extensive approach. Over the past two decades, it has funneled about $1.4 trillion into more than 20,000 projects across 165 countries—primarily through debt financing for large-scale infrastructure in risky low- and middle-income markets—where Beijing has come to be viewed as both willing and able to contribute to ambitious development goals. Between 2000 and 2018, Chinese overseas finance supported 46 gigawatts (GW) of global power capacity, more than three times the amount financed by the United States during the same period.
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Enabling China’s global footprint is the breadth, scale, and versatility of its international finance toolkit. Anchored by a robust network of institutions—including the Export-Import Bank of China (CHEXIM), the China Development Bank (CDB), China Export and Credit Insurance Corporation (Sinosure), and China International Development Cooperation Agency (CIDCA)—China’s strategic capital ecosystem can deploy a diverse set of financial instruments across sectors and geographies. (See Table 1).
Together, these institutions manage trillions in assets. The CDB alone reported total assets of $2.6 trillion as of 2024, dwarfing the U.S. DFC’s $60 billion lending cap. Between the launch of China’s Belt and Road Initiative in 2013 and the creation of the U.S. DFC in 2019, CHEXIM and CDB lending commitments totaled $282 billion—far surpassing the $27 billion by the U.S. Overseas Private Investment Corporation (DFC’s predecessor) and $80 billion authorized by EXIM. Beyond the sheer volume of capital, China also often offers favorable financing structures and delivery terms, such as quicker disbursement, longer repayment timelines, fewer governance requirements, as well as greater access to Chinese technologies and service providers.
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China’s Evolving Approach
Amidst domestic fiscal tightening and borrower debt distress, China’s international finance has moved away from state-led, large-scale infrastructure lending toward a more cautious, targeted model dubbed “small and beautiful.” In recent years, Chinese overseas debt financing has declined significantly—both in absolute terms and relative to other instruments—as its capital shifts toward smaller, lower-risk projects and closer alignment with global sustainable development goals. Between 2000 and 2018, 67 percent of Chinese-financed overseas power capacity was coal, and 25 percent hydropower. Since 2018, however, Chinese DFIs have ceased issuing general-purpose loans to foreign hydrocarbon state-owned enterprises and public-private partnerships (PPPs). This shift was further reinforced by President Xi’s 2021 pledge to halt overseas coal financing, after which Chinese DFIs began focusing more exclusively on clean energy projects.
A key feature of China’s reorientation is the rise of cofinancing mechanisms, particularly syndicated loans led by state-owned commercial banks. Acting as bridges between commercial and development finance ecosystems, these structures enable risk-sharing and have helped maintain China’s international engagement despite a scale-back in direct bilateral lending. At the same time, Chinese foreign direct investment (FDI) in energy and private capital involvement in infrastructure have grown and underpinned much of China’s recent overseas renewable projects. Novel instruments, such as thematic bonds, have also expanded the pool of capital available for international investment. Nevertheless, China’s green pivot has been limited in scope. With lending volumes well below their mid-2010s peak, DFI and FDI funding for renewables continues to be modest—supporting less than 5 GW globally since 2021. Most syndicated loans are unsuitable for capital-intensive, long-duration energy projects, while market-driven commercial structures have also remained concentrated in middle- and high-income countries and sectors like mining.
Towards a Differentiated U.S. Strategy
China’s shifting international energy finance approach may present an opportunity for the United States to sharpen and reiterate its value proposition. A 2023 survey of leaders from 129 low- and middle-income countries found that while China’s financial offerings were welcomed, concerns over the transparency, capacity, and quality of Chinese international financing nevertheless persisted. Although U.S. international finance institutions may not currently match China’s balance sheet in capital-intensive energy and infrastructure sectors—where Beijing has built credibility through large projects like hydropower—they are often the preferred partners for development needs in environment, governance, and social sectors (See Figure 2).
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A competitive U.S. international energy finance strategy should therefore capitalize on, not discard, its traditional development capabilities, such as technical assistance and capacity building. These instruments remain vital to both advancing U.S. strategic interests and meeting the needs of partner countries—many of which may lack the institutional, regulatory, physical, and financial infrastructure necessary to derisk private capital and deploy innovative energy technologies at scale. Development finance helps build these enabling conditions while cultivating future trade opportunities for U.S. firms. By integrating traditional development functions into a broader strategic finance strategy, the United States can position itself as a trusted partner committed to high-quality, durable economic growth and energy security.
Building on this foundation, institutional specialization and interagency coordination can help coalesce relevant U.S. government capabilities into a coherent and effective international energy finance strategy. Clarifying and harmonizing the mandates and functions of key institutions can reinforce complementarity and increase efficiency. Entities such as the Department of State’s Bureau of Energy Resources, for instance, could leverage their expertise to develop project pipelines in priority geographies—enabling institutions like DFC or EXIM to step in with targeted financial support at later stages. Such coordination also helps identify critical capability gaps that can be addressed through statutory or operational reforms. Together, these measures would allow the United States to more nimbly support the full lifecycle of energy development in global markets and increase the appeal of its engagement.
Renewing U.S. Leadership
A shifting global energy and geoeconomic landscape presents both opportunities and challenges for the United States. Seizing the moment will require a modernized, coordinated approach that aligns U.S. strategic objectives with partner country needs and fully leverages its comparative strengths. With the reauthorization of key institutions such as the DFC on the horizon, U.S. policymakers have a timely opportunity to articulate and advance a compelling vision for renewed U.S. leadership in international energy finance.
Ray Cai is an associate fellow in the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C.
The author is thankful to Erin Murphy for providing feedback on this piece.