"We are now investing in ethanol, photovoltaic power, wind power storage and other energy sources and acquiring assets overseas."

A SDIC spokesperson confirmed his comments, which have not previously been reported outside China, when contacted by The Australian Financial Review. SDIC's investment focus was now on healthcare, water, the environment, poverty alleviation, manufacturing and artificial intelligence.

The move reflects growing recognition in Beijing about the ruling Communist Party's desire to diversify away from coal as it comes under increasing pressure to tackle pollution in its major cities. Mr Wang is also an NPC delegate.

China is the world’s largest coal producer but it has been consolidating and shutting inefficient mines for the last four years. While officially China is winding back new coal projects, environmental activists say there has been a surge in new mines at local government level.

While China's political leaders want to be seen to be supporting the shift away from fossil fuels, some analysts said the SDIC's coal investments were being moved to asset management giant, Guoyuan, another state-owned entity. Unlike countries like Australia which have a single sovereign wealth fund, in China, myriad state-run investment vehicles are responsible for funding projects and funds can be transferred between them.

The Loy Yang B power station has changed hands over the last year, but it remains in the top 10 emitters. Caria Gottgens

"China is still increasing its coal production because clean energy is too small to meet with energy demands," Lin Boqiang, an energy economist at Xiamen University, said. "Although many people oppose fossil fuels, we still have to use it because clean energy cannot meet the demand and there is nothing to replace coal at the moment."

Still, anti-coal campaigners will seize on the move as a major step in the redirection of capital away from coal. Coal was the SDIC's biggest profit generator for a decade and the shift highlights a change in the body's investment priorities. Coal made up 59 per cent of China's energy input last year, a reduction from 68.5 per cent in 2012, but the government said last week this remained too high.


"This is the first significant divestment by a major Chinese company and it follows a growing number of significant financial institutions around the world making similar formal policies to exit thermal coal and coal fired power plants," Tim Buckley, the director of energy finance studies at the Institute of Energy Economics and Financial Analysis, said.

Glencore, Australia's biggest coal producer, in February said it would cap coal production at 2019 levels. The move was seen as a major victory for the anti-coal lobby. The move came despite having spent $US2.7 billion over the past two years adding critical mass to its Australian thermal coal business. A growing number of asset managers and sovereign wealth funds globally are pressuring big miners to exit coal and stepping up pressure on climate change.

Coal is also shaping up as a key election issue in Australia, with the National Party and the Liberals split over funding for new coal-fired power stations. China has also been restricting Australian coal imports as it seeks to shore up domestic supply.

The Australian government is concerned about restrictions on Australian coal imports into China following reports the commodity was being banned altogether, something Canberra and Beijing denied. An analysis published by Reuters this week of China’s imports of Australian coal for the first two months of 2019 did not show any dramatic changes in volumes from the same period last year.

Energy analyst Han Xiaoping said the SDIC and other investment vehicles in China were quitting coal because China's demand for the fuel had stabilised and the industry did not have a promising future. "For SOEs, the top mission is to generate value," he said. He noted other big Chinese utilities like Huaneng Group and China Shenhua were also shifting more of their business to low-emission alternatives.

"The energy transition is an irreversible trend," Huaneng chairman Shu Yingbiao said in an interview with a Chinese business newspaper.

"Huaneng will continue to increase its proportion of renewable energy capacity. Some new energy products have made good yields already and it has accumulated expertise in the offshore wind power development," he said.

China in January announced plans to create a number of mega coal companies by the end of 2020 under plans to weed out under-performing players and cut outdated capacity.

Each of the conglomerates would have an annual production capacity of more than 100 million tonnes. The number of coal mines in China fell from 10,800 in 2015 to 7,000 by the end of 2017. There are around 3500 small mines with less than 300,000 tonnes of annual capacity.