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Paper short abstract

China dominates ASEAN green investment post-2021, yet "captive coal" loopholes and governance deficits persist. Defining China as a "distorted but essential catalyst," the paper concludes success hinges on closing policy gaps.

Paper long abstract

A closer relationship between China and countries in Southeast Asia has become an important modality for economic relations, especially amid geopolitical turbulence. However, China's engagement in the energy sector presents a contradictory picture, positioning it as both an indispensable enabler of renewable energy (RE) and a source of significant socio-environmental challenges. This paper analyses Chinese foreign direct investment (FDI) in green energy in ASEAN from 2013 to 2024, revealing a fundamental transformation in its role. The data shows China has become the region's dominant green investor, leading in nations like Indonesia, Vietnam, and Laos. A dramatic pivot occurred after President Xi Jinping’s 2021 pledge to end overseas coal financing, with investment shifting decisively to RE, causing the green share of China’s energy portfolio to surpass 60% by 2024.

However, this green momentum is undermined by two critical issues. First, the "captive coal" loophole allows new coal plants to be built for industrial parks, creating long-term carbon lock-in. Second, the combination of domestic governance deficit with policy instability in host countries often threatens the progress of green energy transition. Furthermore, the intensity of these investment flows is largely determined by commitments of ASEAN states. The paper concludes that China is a distorted but essential catalyst in which the sustainability of the relationship hinges on closing policy loopholes.