China's Coal Promise Frays as Private Companies Exploit Loopholes

Five years ago, Xi Jinping stood before the United Nations and made a promise: China would stop financing coal power plants abroad. It was a significant moment for a country that had been the world's largest overseas coal financier, and it signaled something new—a willingness to extend climate ambition beyond its own borders. This week, as the General Assembly convenes again in New York, the world is taking stock of whether that promise has held.

The numbers suggest a partial success. China has canceled 67 percent of the coal projects it had planned to build overseas since 2021, according to a new report released this week by the Centre for Research on Energy and Clean Air and the People of Asia for Climate Solutions. That amounts to 61.5 gigawatts of capacity that will not be built—enough to avoid an estimated 6.4 billion tons of lifetime carbon dioxide emissions. By any measure, this is substantial. It represents the first time Beijing extended its emerging climate ambition across borders, and it comes as China has simultaneously become the world's dominant manufacturer of solar panels, wind turbines, and electric vehicles, setting records for renewable energy deployment at home.

But the story is more complicated than the headline numbers suggest. Private Chinese companies have discovered regulatory gaps in Xi's pledge and are exploiting them systematically. The moratorium applies to state-backed financing, but it does not prevent private firms from investing in coal projects abroad. In Indonesia, which has become the epicenter of this loophole, Chinese companies are funding what is known as "captive coal"—plants that power industrial operations like nickel and aluminum smelting without connecting to the national power grid. Indonesia alone accounts for 17.1 gigawatts of China-backed coal capacity still in the pipeline, far exceeding Vietnam and Pakistan, which rank second and third with less than 4 gigawatts each.

The energy landscape in Southeast Asia has shifted dramatically in recent years, making the stakes of China's commitment even higher. The region accounts for nearly a fifth of global energy demand growth through 2035, according to the International Energy Agency. Two geopolitical shocks—the Russia-Ukraine War and the Iran war—have sent energy-hungry nations scrambling for security. When the Strait of Hormuz faced closure threats, Southeast Asia, which had depended heavily on Middle Eastern fossil fuel imports, went into what officials described as energy triage. The Philippines, Thailand, Indonesia, and Vietnam all increased coal consumption in response. The crisis has prompted governments to reassess their energy strategies, and while many are investing in rooftop solar, electric vehicles, and nuclear power, coal remains indispensable in the near term.

This tension sits at the heart of the current moment. China is simultaneously the world's largest annual emitter of carbon dioxide and the global leader in clean energy manufacturing. It has dramatically reduced its own coal use and is building renewable capacity at an unprecedented scale. Yet its companies continue to fund coal projects in the very region where China's influence is greatest. Syahdiva Moezbar, an industry analyst based in Jakarta, acknowledged that China's cancellation of 67 percent of planned projects is positive, but noted that "coal expansion hasn't stopped because of the nature of the pledge itself, which still allows private Chinese companies to invest overseas."

Experts stress that the energy transition in Asia requires commitment from both sides. Li Shuo, director of the Asia Society Policy Institute's China Climate Hub, described it as "a two-party tango," emphasizing that both China and its regional partners must be equally dedicated to phasing down coal. He warned that "the growing desire among countries in Southeast Asia to secure reliable energy supplies could bring about another round of coal fever," which will continue to test whether Beijing's climate moratorium can withstand the pressures of regional energy demand.

Xi Jinping did not attend this week's General Assembly, choosing instead to meet with U.S. President Donald Trump. Vice President Han Zheng addressed the assembly on Saturday in his place. The absence underscores a broader question: as geopolitical tensions reshape energy markets and private companies find new ways around climate commitments, how durable is the promise that was made five years ago? The answer, Li suggested, will not come quickly. "This saga is far from over."