Vol. VII / No. 10 | June 2026

Authors:
Rizka Bunga Shafira – Junior Fellow of Global South Solidarity, Development, and Transformation of Global Justice Research Cluster, Department of International Relations, Universitas Indonesia.

Summary

China’s Green Belt and Road Initiative (Green BRI) has been promoted as a commitment to sustainable overseas investment, yet its implementation varies considerably across partner countries. This article compares the Green BRI’s energy sector outcomes in Indonesia and Vietnam—two largest Southeast Asian economies that both drew major Chinese investment and pledged to decarbonise, yet diverged sharply, making them a natural test of what actually drives Green BRI outcomes. In Indonesia, Chinese capital remains locked into coal, sustained by a powerful coal oligarchy, fragmented regulation, and subsidies that disadvantages renewables. In Vietnam, a pivot toward renewable energy has taken hold, driven by centralised governance and proactive policy. The article argues that this divergence is shaped less by Beijing’s strategic intentions than by the domestic political economy and governance capacity of each recipient. The Green BRI works mainly as a legitimacy-building mechanism whose real-world impact is decided at home: Vietnam shows how deliberate policy can steer Chinese capital toward clean energy, while Indonesia shows that, without structural reform, it will remain green in name only.

Keywords: Energy Politics, China Overseas Investment, Domestic Context, Green Belt and Road

The Green BRI as Soft Power, Not Hard Policy

The Green BRI emerged in response to mounting international criticism that Chinese-funded infrastructure projects were causing ecological damage across the Global South (Hughes, 2019) Policy documents such as the “Guidance on Promoting a Green Belt and Road” (2017) and the Green Investment Principles (GIP) signalled China’s commitment to low-carbon development overseas (MEE of PR China, 2017). The energy sector became the focal point, commanding nearly 40 per cent of total BRI investment, making it the obvious arena where green ambitions would be tested.

Yet the picture on the ground is far more complicated. China itself remain deeply reliant on coal domestically, and its energy governance is fragmented between central and local authorities. State-owned enterprises with entrenched interests in fossil fuels continue to seek profitable overseas markets, especially as China’s own carbon pricing regime raises the cost of doing business at home (Harlan, 2020). This domestic pressure incentivises Chinese energy companies to invest in countries with less stringent environmental governance, where compliance costs are lower and returns are more predictable (Nedopil, 2021). In this context, the Green BRI functions less as a coherent environmental strategy and more as a soft power instrument—a way for Beijing to project international legitimacy while its companies pursue commercial logic abroad.

Indonesia: Coal Lock-In and the Weight of Oligarchy

Indonesia illustrates how domestic structural conditions can neutralize the green aspirations of the BRI. Between 2006 and 2022, China invested roughly 35 billion USD in Indonesia, with a quarter flowing into the energy sector—overwhelmingly into coal ((Jiaying & Xinyue, 2025). Despite Xi Jinping’s 2021 pledge to stop financing overseas coal-fired power plants, Indonesia remains the world’s largest recipient of Chinese coal investment at 15.7 billion USD, with Chinese-backed coal plants exceeding 9 GW of installed capacity by 2024. Much of this infrastructure supports the metal processing industry, particularly nickel downstream for electric vehicle batteries (Gu, 2024)—creating a paradox where the clean energy supply chain depends on fossil fuel-powered production.

Indonesia’s coal lock-in is not an accident of the market, it is the product of domestic political capture, and tracing how that capture works explain why Chinese money keeps flowing to coal. Coal oligarchs—hold enormous sway over national energy policy, a grip underwritten by the sector’s sheer fiscal weight: coal delivered IDR 124.4 trillion in non-tax state revenue alone (Prihandono & Widiati, 2023). Government policy entrenches this dependence: the 2014 National Energy Policy (Kebijakan Energi Nasional or KEN), enacted through Government Regulation No. 79/2014, sets the country’s energy-mix targets through 2050 and locks coal in as a backbone of domestic electricity, while the Domestic Market Obligation (DMO) requires producers to reserve part of their output for the local market (Wijaya, 2021), together treating coal as both a strategic export commodity and a core energy source.

Structural barriers further hamper renewables: fossil fuel subsidies have historically outweighed clean-energy support by roughly 26 to 1, and PLN’s grid monopoly complicates tariff talks with independent producers. Even Indonesia’s flagship renewable rule Presidential Regulation No.112 of 2022, which bans most new coal plants and targets a coal phase-out by 2050, undercuts them by capping the tariffs producers can charge PLN, often below break-even, leaving little room for positive returns.

As commercial actors, Chinese firms follow the incentives the host-country sets, and in Indonesia those incentives point to coal. China Huadian, one of China’s largest state-owned power producershas engaged  in Indonesia mainly through hydropower—its engineering arm built the 180 MW Asahan-1 plant in North Sumatera. Even so, major Chinese generators like it remain reluctant to enter solar and wind, citing unfavorable tariffs and regulatory uncertainty  (Liu et.al, 2023). PowerChina’s withdrawal from the 9GW Kayan hydropower project in North Kalimantan—initially valued at 27 billion USD (Satriastanti, 2025)—further illustrates that even large-scale renewable projects face serious implementation challenges. Coal investment, by contrast faces none of these obstacles, it plugs into guaranteed demand under the DMO and PLN’s long-term contracts, and benefits from politically connected concession-holders who can smooth permitting and land acquisition (Ordonez et.al, 2021). Where renewables must negotiate capped tariffs with a reluctant monopsony, coal offers certainty—and capital, Chinese or otherwise, follows certainty.

Vietnam: Centralized Governance and a Renewable Pivot

Vietnam presents a strikingly different trajectory. While Chinese investment in Vietnam’s coal sector once reached 20 billion USD by 2022, the trend has reversed sharply. The last Chinese-funded coal plant was completed in 2021, and Vietnam now holds the highest cancellation rate of Chinese-backed coal projects, having scrapped sic project totaling 600 MtCO2 (Do & Burke, 2024). From 2018 onward, renewable energy’s share in Chinese investment flows rose dramatically, with firms like Trina Solar and Power China Harbor building solar panel and wind turbine manufacturing facilities in the country (Wengel et.al, 2023). These investment position Vietnam not only as a market but as a regional hub for China’s green technology exports.

The policy architecture underpinning this shift is robust. Vietnam’s Power Development Plan 8 (PDP8)—its binding national electricity roadmap to 2030, commits to raising the renewable energy share to 28.5 percents by 2030 and reducing coal from 51 to 28 percent, with a net-zero target by 2050 (Socialist Republic of Vietnam, 2025). The Renewable Energy and Climate Change Law provides a legal foundation, while the Feed-in Tariff (FiT) mechanism—a guaranteed price the state pays renewable producers, introduced in 2014 and expanded in 2020, offers price certainty and long-term contracts that substantially reduce investment risk. Vietnam added 4,500 MW of solar photovoltaic capacity in 2019 alone, making it one of the fastest growing solar markets in Southeast Asia (Eeg, 2023).

The key differences lies in governance. Vietnam’s single-party system under the Communist Party allows greater policy consistency and centralized energy planning. There is no coal oligarchy of the kind that dominates Indonesian politics. The government can screen and direct foreign energy investments—including Chinese ones—to align with long term strategic goal, even amid South China Sea tensions (Hai, 2021). The Communist Party of Vietnam (CPV) leverages foreign investment to bolster economic performance and domestic legitimacy, creating conditions where Chinese companies must operate within the state’s framework rather than negotiating around entrenched private interests.

What the Comparison Reveals

Three conclusions emerge from this comparison. First, the Green BRI is not a monolithic policy applied uniformly across partner countries; its outcomes are shaped by each recipient’s governance capacity, political structure, and economic interests. Indonesia’s fragmented, oligarch-influenced regulation pulls Chinese investment toward fossil fuels, while Vietnam’s centralised governance steers it toward clean energy. Second, Chinese energy companies behave as commercial actors, investing in renewables where the conditions reward them and following the path of least resistance where they do not. Third, the Green BRI works more as a legitimacy-building badge for China’s international standing than as a binding environmental commitment.

The divergence is itself the proof. If Beijing’s intentions set the outcome, two countries drawing on the same Chinese capital, the same state-owned firms, and the same Green BRI rhetoric would not end up in opposite places—one deepening its coal fleet, the other building a solar and wind supply chain. They diverge precisely because the decisive variable sits on the recipient side: the domestic rules that decide whether coal or clean energy is the safer bet. Where Vietnam’s centralised state could set a feed-in tariff and a binding power plan and make them stick, Indonesia’s rules bend toward the incumbents who benefit from them. That is what it means to read the Green BRI as a mechanism rather than a master plan—its colour is mixed at home, in Jakarta and Hanoi, far more than in Beijing.

Conclusion

If that is right, a greener Belt and Road cannot be negotiated with Beijing alone, it depends on whether recipient governments build the rules that make clean energy the rational choice. For Indonesia, that leaves a practical agenda, and the divergence with Vietnam is not destiny: it reflects choices about rules, and rules can change. Curbing coal incumbents’ political influence, rationalising the subsidies that tilt the field 26-to-1, and building a bankable tariffs for clean-energy investment would alter the very risk calculation that now sends Chinese capital to coal. Until that happens, the Green BRI in Indonesia will remain green in name only, not because Beijing wills it, but because Jakarta’s own rules make coal the rational bet.