Bridging the energy divide. China energy loans and rural electrification in developing countries

This study investigates the impact of Chinese energy loans on rural electrification in 68 emerging countries from 2001 to 2023, addressing a critical gap in understanding the role of external financing in alleviating energy poverty. Using country fixed-effect and System Generalized Method of Moments (S-GMM) models, the findings provide robust evidence that a 1 % increase in Chinese energy loans leads to an average increase of approximately 0.10 percentage points in rural electricity access. However, corruption significantly attenuates this relationship, underscoring the importance of institutional quality in mediating the impact of infrastructure outcomes. Drawing on development economics theory, the analysis demonstrates that Chinese energy loans help address capital and infrastructural deficits in rural areas by facilitating the expansion of national grids, promoting off-grid renewable solutions, and supporting critical energy infrastructure. Illustrative examples, such as the Kafue Gorge Lower Hydropower Project in Zambia and the Karuma Hydropower Project in Uganda, underscore the transformative potential of such investments. The study offers novel empirical insights into how Chinese financing contributes to Sustainable Development Goal 7 (universal energy access). Policy implications suggest that while Chinese energy loans are effective in improving rural electrification, complementary reforms in governance and transparency are essential to maximise their developmental impact.