CleanenergywastopdriverofChina’seconomicgrowthin2023Cleanenergycontributedarecord11.4tnyuan($1.6tn)toChina’seconomyin2023,accountingforallofthegrowthininvestmentandalargershareofeconomicgrowththananyothersector.Thenewsector-by-sectoranalysisforCarbonBrief,basedonofficialfigures,industrydataandanalystreports,illustratesthehugesurgeininvestmentinChinesecleanenergylastyear–inparticular,theso-called“newthree”industriesofsolarpower,electricvehicles(EVs)andbatteries.Solarpower,alongwithmanufacturingcapacityforsolarpanels,EVsandbatteries,werethemainfocusofChina’sclean-energyinvestmentsin2023,theanalysisshows.(Forthisanalysis,weusedabroaddefinitionof“cleanenergy”sectors,includingrenewables,nuclearpower,electricitygrids,energystorage,EVsandrailways.ThesearetechnologiesandinfrastructureneededtodecarboniseChina’sproductionanduseofenergy.)Otherkeyfindingsoftheanalysisinclude:•Clean-energyinvestmentrose40%year-on-yearto6.3tnyuan($890bn),withthegrowthaccountingforalloftheinvestmentgrowthacrosstheChineseeconomyin2023.•China’s$890bninvestmentinclean-energysectorsisalmostaslargeastotalglobalinvestmentsinfossilfuelsupplyin2023–andsimilartotheGDPofSwitzerlandorTurkey.•Includingthevalueofproduction,clean-energysectorscontributed11.4tnyuan($1.6tn)totheChineseeconomyin2023,up30%year-on-year.•Clean-energysectors,asaresult,werethelargestdriverofChina’economicgrowthoverall,accountingfor40%oftheexpansionofGDPin2023.•Withoutthegrowthfromclean-energysectors,China’sGDPwouldhavemissedthegovernment’sgrowthtargetof“around5%”,risingbyonly3.0%insteadof5.2%.1Thesurgeinclean-energyinvestmentcomesasChina’sreal-estatesectorshrankforthesecondyearinarow.Thisshiftpositionstheclean-energyindustryasakeypartnotonlyofChina’senergyandclimateefforts,butalsoofitsbroadereconomicandindustrialpolicy.However,thespectreofovercapacitymeansChina’sclean-energyinvestmentgrowth–anditsinvestment-driveneconomicmodel,ingeneral–cannotcontinueindefinitely.ThegrowingimportanceofthesenewindustriesgivesChinaasignificanteconomicstakeintheglobaltransitiontoclean-energytechnologies.Yetitalsoposesquestionsforoverseaspolicymakersattemptingtotietheirownclimatestrategiestodomesticindustrialgrowth.•CleanenergydrivesChina’sgrowthin2023•The‘newthree’dominateclean-energyinvestmentoSolarpoweroWindpoweroElectricvehiclesoEnergyefficiencyoElectricitystorageandhydrogenoRailwaysoNuclearpoweroElectricitygrids•Whycleanenergytookoffin2023•Whatclean-energygrowthmeansforChina–andtheworldCleanenergydrivesChina’sgrowthin2023China’sclean-energyinvestmentboommeansthesectoraccountedforallofthegrowthininvestmentacrossthecountry’seconomyin2023,withspendinginotherareasshrinking.Chinainvestedanestimated6.3tnyuan($890bn)inclean-energysectorsin2023,upfrom4.6tnyuanin2022,a1.7tnyuan(40%)year-on-yearincrease.Intotal,cleanenergymadeup13%ofthehugevolumeofinvestmentinfixedassetsinChinain2023,upfrom9%ayearearlier.WithChineseinvestmentgrowingbyjust1.5tnyuanin2023overall,theanalysisshowsthatcleanenergyaccountedforallofthegrowth,whileinvestmentinsectorssuchasrealestateshrank.2Thisisshowninthefigurebelow,whichalsohighlightstheconcentrationofclean-energyinvestmentintheso-called“newthree”ofsolar,energystorageandEVs.CleanenergywasalsothetopcontributortoChina’seconomicgrowthoverall,contributingaround40%oftheyear-on-yearincreaseinGDPacrossallsectors.ContributionstothegrowthinChineseinvestment(left)andGDPoverall(right)in2023bysector,trillionyuan.“Newthree”referstosolar,EVsandstorage.Source:CentreforResearchonEnergyandCleanAir(CREA)analysisforCarbonBrief.ChartbyCarbonBrief.Includingthevalueofgoodsandservices,theclean-energysectorcontributedanestimated11.4tnyuan($1.6tn)toChina’seconomyin2023,anincreaseof30%year-on-year.Thismeanscleanenergyaccountedfor9.0%ofChina’sGDPin2023,upfrom7.2%in2022.Withoutthecontributionofclean-energysectorstoChina’seconomicgrowthin2023,thecountrywouldhaveseenitsGDPrisebyjust3.0%,insteadofthe5.2%actuallyrecorded.3Thiswouldhavemissedgovernmentgrowthtargetsatatimeofincreasingconcernsoverthenation’seconomicprospects,amidtheongoingreal-estatecrisisanddecliningpopulation.Themajorrolethatcleanenergyplayedinboostinggrowthin2023meanstheindustryisnowakeypartofChina’swidereconomicandindustrialdevelopment.ThisislikelytobolsterChina’sclimateandenergypolicies–aswellasits“dualcarbon”targetsfor2030and2060–byenhancingtheeconomicandpoliticalrelevanceofthesector.The‘newthree’dominateclean-energyinvestmentThisanalysisisbasedonacombinationofgovernmentreleases,industrydataandanalystreports,withtheexactmethodologyvaryingsector-by-sector,assetoutinthesectionsthatfollow.ThetablebelowliststheestimatedcontributionsofeachsectortoChineseinvestmentandGDPoverallin2023,aswellastheyear-on-yeargrowthsince2022.Theanalysisincludessolar,EVs,energyefficiency,rail,energystorage,electricitygrids,wind,nuclearandhydropowerwithinthebroadcategoryof“clean-energysectors”.AllofthesearetechnologiesandinfrastructureneededtodecarboniseChina’senergysupplyandconsumption.Theso-called“newthree”ofsolar,storageandEVsareallprominentinthetable–andallrecordedstronggrowth.Ouranalysisshowsthatinvestmentincleanpowergenerationandenergystoragecapacityreached1.7tnyuanin2023(up48%year-on-year),whileinvestmentinmanufacturingcapacityforsolar,EVsandbatteriesreached2.5tnyuan(+60%).Investmentinclean-energyinfrastructurereached1.4tnyuan(+9%,comprisinggrids,EVchargingpointsandrailways)andinvestmentinenergyefficiencywas600bnyuan(+15%).Meanwhile,ouranalysisshowsthevalueofproductionofgoodsandservicesintheclean-technologysectorsreached5.1tnyuanin2023,increasing26%year-on-year.Thisincludesthevalueofelectricitygeneration,EVsalesandsolarexports,aswellasthetransportofpassengersandgoodsviarail.SectorActivityValueinValueinYear-on-Solarpower2023,CNY2023,USDyeargrowthInvestment:powergenerationcapacityblnbln75510761%4SectorActivityValueinValueinYear-on-2023,CNY2023,USDyeargrowthblnbln922SolarpowerInvestment:manufacturing277131180%Solarpowercapacity533Solarpower1,2503945%ElectricitygenerationEVsExportsofcomponents1027542%Investment:manufacturing2,200EVs58517735%EVscapacityEnergyInvestment:charging7611433%efficiencyRailinfrastructure96431130%transportationProductionofvehicles334Rail888314%transportationInvestment:Industry317Energystorage1087%EnergystorageInvestment75Energystorage13639%Transportofpassengers540Energystorageandgoods4738%330PowergridInvestment:Pumpedhydro1285%Investment:Electrolyzers72Windpower45116%Investment:Battery363Windpowermanufacturing8711364%195WindpowerInvestment:Grid-80768%Nuclearpowerconnectedbatteries512NuclearpowerInvestment:transmission6,2974785%Hydropower5,082Hydropowercapacity11,3791017%Investment:powerTotalgenerationcapacity,5112%TotalTotalonshore1245%Investment:powergenerationcapacity,284%offshore11-1%Electricitygeneration72-6%Investment:powergenerationcapacity89139%ElectricitygenerationInvestment:power71926%generationcapacityElectricitygeneration1,61033%InvestmentsProductionofgoodsandservicesTotalGDPcontributionSolarpower5SolarwasthelargestcontributortogrowthinChina’sclean-technologyeconomyin2023.Itrecordedgrowthworthacombined1tnyuanofnewinvestment,goodsandservices,asitsvaluegrewfrom1.5tnyuanin2022to2.5tnyuanin2023,anincreaseof63%year-on-year.WhileChinahasdominatedthemanufacturingandinstallationsofsolarpanelsforyears,thegrowthoftheindustryin2023wasunprecedented.Ontheinstallationside,twomajorcentralgovernmentinitiativesdroveincreasedvolumes,namelythe“whole-countydistributedsolar”andthe“cleanenergybase”programmes.Inaddition,inresponsetotheslowdowninthereal-estatesector,thecentralgovernmentintroducedanewpolicyatthestartof2023,toencouragethedevelopmentofsolarpowerindustriesonunusedandexistingconstructionlands.Meanwhile,duringtheannuallegislativemeetingsinthespringof2023,15provincesprioritisedsolarindustrydevelopmentintheirgovernmentworkagendas.DetaileddataonthegrowthinChina’ssolarinstallationsinthefirst11monthsoftheyearisshowninthefigurebelow.(Anestimated200GWwasaddedacrossthecountryduring2023asawhole,morethandoublingfromtherecordof87GWsetin2022.)6SolarcapacitynewlyinstalledinChinainJanuarytoNovembereachyear,gigawatts.Source:NationalEnergyAdministration.ChartbyCarbonBrief.Atthesametime,China’ssolarmanufacturingindustryrecordedevenstrongergrowthin2023.Chinaadded340gigawatts(GW)ofpolysiliconproductioncapacityand300GWofwafer,cellandmoduleproductioncapacityin2023,accordingtotheInternationalEnergyAgency(IEA).Chinaexperiencedasignificantincreaseinsolarproductexportsin2023.Itexported56GWofsolarwafers,32GWofcellsand178GWofmodulesinthefirst10monthsoftheyear,up90%,72%and34%year-on-yearrespectively,accordingtotheChinaPhotovoltaicIndustryAssociation.However,duetofallingcosts,theexportvalueofthesesolarproductsonlyincreasedby3%.WithintheoverallexportgrowththerewerenotableincreasesinChina’ssolarexportstocountriesalongthe“beltandroad”,tosoutheastAsiannationsandtoseveralAfricancountries.Forthisanalysis,thevalueofinvestmentsinnewsolarmanufacturingcapacitywasestimatedfromtheaveragecapitalcostsofeachstepinthesupplychain,takenfromacompilationofreportedprojectcosts.Thisgaveasignificantlylowercostlevelthanreportedinotherliterature.7Theanalysisassumesthatlocalgovernmentinvestmentinfacilitiesandinfrastructure,aswellasdirectsubsidies,added30%tothereportedprivateinvestment.InvestmentinsolarpowerwasestimatedbymultiplyingthenewlyaddedcapacityfromBloombergNewEnergyFinancebytheunitinvestmentcostsforrooftopandutility-scalesystemsfromChinaPhotovoltaicIndustryAssociation.ThevalueofexportedsolarpowerequipmentwasbasedonChinaPhotovoltaicIndustryAssociationdatafor2022andreportedexportgrowthfor2023.Thevalueofsolarpowerequipmentproducedfordomesticinstallationwasnotincludedinouranalysis,toavoidoverlapwiththealready-estimatedinvestmentcostsfordomesticsolarprojects.WindpowerChinainstalled41GWofwindpowercapacityinthefirst11monthsof2023,anincreaseof84%year-on-yearinnewadditions.Some60GWofonshorewindalonewasduetobeaddedacross2023,accordingtoChinaGalaxySecurities,basedontrendsinpreviousyears.Inaddition,offshorewindcapacityincreasedby6GWacrossthewholeof2023.Windcapacityaddedinthefirst11monthsofeachyearisshowninthefigurebelow.8WindcapacitynewlyinstalledinChinainJanuarytoNovembereachyear,gigawatts.Source:NationalEnergyAdministration.ChartbyCarbonBrief.Bytheendof2023,thefirstbatchof“clean-energybases”wereexpectedtohavebeenconnectedtothegrid,contributingtothegrowthofonshorewindpower,particularlyinregionssuchasInnerMongoliaandothernorthwesternprovinces.Thesecondandthirdbatchesofclean-energybasesaresettocontinuedrivingthegrowthinonshorewindinstallations.Themarketisalsobeingdrivenbythe“repowering”ofolderwindfarms,supportedbycentralgovernmentpoliciespromotingthemodelofreplacingsmaller,olderturbineswithlargerones.Thepotentialfordistributedwindpowerisalsobeingexplored,withinitiativessuchasthe“villageswindutilisationaction”beingplannedforactiveimplementation.Progressonoffshorewindpowerconstructionin2023gotofftoaslowstart.Thisisareflectionofashiftfromnearshoretodeeperoffshoreprojectsandfromsingleprojectstolargerbases.Offshorewindprojectsarealsofacingcomplexapprovalprocesses,involvingmultipleregulatoryaspects,leadingtouncertaintiesandslower-than-expectedinstallations.9However,theseissuesarebeingaddressedandthefourthquarterof2023sawareboundinoffshorewindconstruction,with2024expectedtobeasignificantyearforprojectdeliveries.Since2021,newwindprojectsinChinanolongerreceivesubsidiesfromthecentralgovernment.Despitetechnologicaladvancementsreducingcosts,increasesinrawmaterialpriceshaveresultedinlowerprofitmarginscomparedtothesolarindustry,leadingtoasmalleroverallinvestmentinwindpowerrelativetosolarpower.ElectricvehiclesChina’sproductionofelectricvehiclesgrew36%year-on-yearin2023toreach9.6munits,anotable32%ofallvehiclesproducedinthecountry.ThevastmajorityofEVsproducedinChinaaresolddomestically,withsalesgrowingstronglydespitethephase-outofpurchasesubsidiesannouncedin2020andcompletedattheendof2022.ThenationalpurchasesubsidyforEVswasacentralgovernmentfinanceinstrumentthathadbeenfosteringtheEVmarketfor13years.Itsdemisehighlightsagradualshiftfrompolicy-driventomarket-drivendemand,makinggrowthmorelikelytobesustained.SalesofEVsmadeinChinareached9.5munitsin2023,a38%year-on-yearincrease.Ofthistotal,8.3mweresolddomestically,accountingforone-thirdofChinesevehiclesalesoverall,while1.2mEVswereexported,a78%year-on-yearincrease.Thegrowthof“newenergyvehicle”(NEV,mainlyEVs)productionandsalesisshowninthefigurebelow,whichalsoshowstheirrisingshareofallvehiclessold.10Productionandsalesofallvehiclesand“newenergyvehicles”(NEVs)inChina,fromNationalBureauofStatisticsandChinaAssociationofAutomobileManufacturersdataviaWindFinancialTerminal.NEVsincludebatteryelectricvehiclesandplug-inhybrids.Theright-handsideshowstheshareofNEVsoutofallnewvehiclessold,andthecumulativeshareoverthepreceding10years,asanindicatoroftheshareofNEVsoutofvehiclesontheroad.ChartbyCarbonBrief.China’sEVmarketishighlycompetitive,withatleast94brandsofferingmorethan300models.Domesticbrandsaccountfor81%oftheEVmarket,withBYD,Wuling,Chery,ChanganandGACamongthetopplayers.Sustainingthisgrowthhasrequiredmajorinvestmentinmanufacturingcapacity.ThisanalysisestimatesinvestmentsinEVmanufacturingcapacitybasedonastudybyChinaInternationalAssociationforPromotionofScienceandTechnology(CIAPST),whichputinvestmentinEVmanufacturingat0.7tnyuanin2021.TheanalysisassumesthatEVsaccountedforallofthegrowthininvestmentinvehiclemanufacturingcapacityreportedbyChina’snationalbureauofstatistics(NBS)in2022and2023,whileinvestmentinconventionalvehicleswasstableThisimpliesthatinvestmentinEVmanufacturingreachedCNY1.2tnyuanin2023.Thisislikelytobeconservative,becauseproductionvolumesforcombustionenginevehiclesarefalling,implyingacorrespondingfallininvestment.Thisanalysisaccountsfortheexpansionofbatterymanufacturingcapacityseparately–alongsideelectricitystorage–eventhoughitisbeingdrivenbythegrowthinEVproduction.11TheanalysisestimatesthevalueofEVproduction,includingbothdomesticsalesandexports,basedonvehicleproductionvolumesfromNBSandthereportedaverageEVprice.TheseEVpricesincludethevalueofbatteriesproducedforEVs,sothevalueofbatteryproductionisnotincludedseparately.Meanwhile,EVcharginginfrastructureisexpandingrapidly,enablingthegrowthoftheEVmarket.In2022,morethan80%ofthedowntownareasof“first-tier”cities–megacitiessuchasBeijing,ShanghaiandGuangzhou–hadinstalledchargingstations,while65%ofthehighwayservicezonesnationwideprovidedchargingpoints.Morethan3mnewchargingpointswereputintoserviceduring2023,including0.93mpublicand2.45mprivatechargers.TheaccumulatedtotalbyNovember2023reached8.6mchargingpoints.ThisanalysisputsinvestmentinEVcharginginfrastructureat0.1tnyuanin2023,basedonanestimatedaveragecostof30,000yuanperchargingpoint.EnergyefficiencyChina’senergyintensityreductiontargetshaveputpressureonindustriestoreducetheirenergyuseperunitofoutput,spurringinvestmentinmoreefficientprocesses.Forthisanalysis,thesizeofthemarketforenergyservicecompaniesisusedasaproxyforinvestmentinenergyefficiencyinindustriesandbuildings.Thismarketgrewtoanestimated0.6tnyuanin2023,upfrom0.5tnyuanin2022,basedontherevenuegrowthofthetop10listedenergyservicecompaniesrankedbymarketcapitalization,forthefirsttwoorthreequartersof2023.Overthepasttwodecades,China’senergyservicesectorhasexperiencedrapidexpansion,growingfrom1.8bnyuanin2003to607bnyuanin2021.Investmentintheindustrialservicesectorhasbeenakeydriver,accountingforabout60%ofthetotalinvestment.However,2022sawasignificantdownturnintheindustrialenergyserviceoutput,influencedbypoorindustrialgrowth,eventhoughthebuildingservicesectorcontinuedexpanding.ThisanalysisputsChina’sinvestmentinbuildingenergyefficiencyat80bnyuanperyear.Thecountry’s14thfive-yearplanforenergysavingsinbuildingsand12developmentof“greenbuildings”targets80msquaremetresperyearofrenovatedandnewlybuiltgreenbuildings.Comparedwiththealmost1,000msquaremetresofbuildingspacecompletedannually,thisisasmallpercentage,andaccordingly,theestimatedvalueoftotalinvestmentsismodest.ElectricitystorageandhydrogenChinaisrapidlyscalingupelectricitystoragecapacity.ThishasthepotentialtosignificantlyreduceChina’srelianceoncoal-andgas-firedpowerplantstomeetpeaksinelectricitydemandandtofacilitatetheintegrationoflargeramountsofvariablewindandsolarpowerintothegrid.Theconstructionofpumpedhydrostoragecapacityincreaseddramaticallyinthelastyear,withcapacityunderconstructionreaching167GW,upfrom120GWayearearlier.Thisgrowthisillustratedinthefigurebelow,whichshowspumpedhydrocapacityunderconstructionorinearlierstagesofdevelopmentattheendof2023.Capacityofpumpedhydrostorageprojectsunderconstructionorinearlierstagesofdevelopmentattheendof2023,GW.Source:GlobalEnergyMonitorglobalhydropowertracker.13DatafromGlobalEnergyMonitoridentifiesanother250GWinpre-constructionstages,indicatingthatthereispotentialforthecurrentsurgeincapacitytocontinue.Forthisanalysis,estimatedannualinvestmentsinpumpedstorageareassumedtobeproportionaltothecapacityunderconstruction,whilethereportedconstructioncostof6yuanperwattisspreadoverthreeyears.Thisimpliesthatinvestmentin2023amountedto0.3tnyuan.Constructionofnewbatterymanufacturingcapacitywasanothermajordriverofinvestments,estimatedat0.3tn.ThisisbasedontheaddedcapacityreportedbytheChinaAutomotivePowerBatteryIndustryInnovationAllianceandestimatedaverageinvestmentcostsperunitofproductioncapacity,takenfromacompilationofpubliclyreportedprojectcosts.Investmentinelectrolysersfor“green”hydrogenproductionalmostdoubledyear-on-yearin2023,reachingapproximately90bnyuan,basedonestimatesforthefirsthalfoftheyearfromSWSResearch.AnalystreportsandcompilationsofprojectspublishedinnewsmediaputfarlargernumbersonChina’sinvestmentsingreenhydrogen,butthesegenerallyincludethespendingonelectricitygeneration,whichinthisanalysisisaccountedforseparately.Investmentin“newenergystoragetechnologies”–aclassificationdominatedbybatteries–morethandoubledin2023,reaching75bnyuan.Thisestimateisbasedonnewlyaddedcapacityin2023reportedbyChinaEnergyStorageAllianceandaverageinvestmentcostscalculatedfromNationalEnergyAdministrationdata.RailwaysChina’sministryoftransportationreportedthatinvestmentinrailwayconstructionincreased7%inJanuary–November2023,implyinginvestmentof0.8tnforthefullyear.Thisincludesmajorinvestmentsinbothpassengerandfreighttransport.Investmentinroadsfellslightly,whileinvestmentinrailwaysoverallgrewby22%.TheshareoffreightvolumestransportedbyrailinChinahasincreasedfrom7.8%in2017to9.2%in2021,thankstotherapiddevelopmentoftherailwaynetwork.In2022,some155,000kmofraillineswereinoperation,ofwhich42,000kmwerehigh-speed.Thisisupfrom146,000kmofwhich38,000kmwerehigh-speedin2020.ThevalueofpassengerandfreighttransportationonChina’srailwaysincreasedby39%year-on-yearin2023,reachingnearly1tnyuan.Nuclearpower14In2023,10nuclearpowerunitswereapprovedinChina,exceedingtheanticipatedrateof6-8unitsperyearsetbytheChinaNuclearEnergyAssociationin2020forthesecondyearinarow.Thereare77nuclearpowerunitsthatarecurrentlyoperatingorunderconstructioninChina,thesecond-largesttotalintheworld.Thetotalyearlyinvestmentin2023wasestimatedforthisanalysisat87bnyuan,anincreaseof45%year-on-year,basedondataforJanuary–NovemberfromtheNationalEnergyAdministration.Thehighestnumbersofnuclearprojectsarelocatedincoastalprovinceswithlargeconcentrationsofheavyindustry,suchasGuangdong,FujianandZhejiang,asthedevelopmentofinlandnuclearpowerprojectsremainsstalled.Theseprovincesgetaround20%oftheirelectricityfromnuclearpowerandcontinuetoexpandthetechnologyaspartoftheireffortstocutemissionsfromtheirpowersectors.ElectricitygridsChina’spower-sectordevelopmentplansincludeamajorincreaseininter-provincialelectricitytransmissioncapacityandnumerouslong-distancetransmissionlinesfromwesttoeast.StateGrid,thegovernment-ownedoperatorthatrunsthemajorityofthecountry’selectricitytransmissionnetwork,hasatargettoraiseinter-provincialpowertransmissioncapacityto300GWby2025and370GWby2030,from230GWin2021.TheseplansplayamajorroleinenablingthedevelopmentofcleanenergybasesinwesternChina.ChinaElectricityCouncilreportedinvestmentsinelectricitytransmissionat0.5tnyuanin2023,up8%onyear–justaheadoftheleveltargetedbyStateGrid.Whycleanenergytookoffin2023Theclean-energyinvestmentboomin2023istheoutcomeofamajorpivotinChina’smacroeconomicstrategy.Asthisanalysisshows,investmentflowedfromrealestateintomanufacturing–primarilyintheclean-energysector.Totalinvestmentinthemanufacturingindustryincreasedby9%year-on-yearin2023,whileinvestmentinthepowerandheatsectorsclimbed23%.Theseincreaseswereentirelyduetogrowthininvestmentincleanenergy,withinvestmentinotherareasfalling.Therefore,China’spivotintomanufacturingwas,inreality,apivottocleantechmanufacturing.15Thereasonforthispivotwasthecontractioninthereal-estatesector,whereinvestmentfellby10%year-on-yearin2022andanother9%in2023.Whilethisdropwasinlinewiththegovernment’saimtoaddressfinancialrisksandexcessleverageinthesector,itleftamajorholeinaggregateinvestmentdemandandintherevenueofChina’slocalgovernments.Localgovernmentswereunderpressuretoattractinvestment,meaningthattheyofferedgeneroussubsidiesandhelpedarrangefinancing.Thecentralgovernment,foritspart,easedprivate-sectoraccesstofinancialmarketsandbankloansduringtheCovid-19pandemic,facilitatingthegrowthoftheclean-energysector.Unlikethestate-ownedfirmsdominatingtraditionalindustries,thelow-carbonsector,largelycomposedofprivatecompanies,gainedaccesstopreviouslyconstrainedcredit.ThesignificanceofthiseconomicshiftisreflectednotonlyinthefiguresrevealedbythisanalysisbutalsointhelanguagebeingusedbyChinesemedia.Thethreelargestofclean-energysectorsbyvalue,namelysolar,storageandEVs,arebeingreferredtoasthe“newthree”,incontrasttothe“oldthree”–clothing,homeappliancesandfurniture.ThispivotwasonlypossiblebecauseChina’sclean-energypoliciesandwiderindustrialpolicyhadbuiltthefoundationandscaledupthesesectorssothattheywereprimedforrapidgrowth.Thepost-Covidcredit“push”forcleanenergygrowthalsocoincidedwithademand“pull”,drivenbyfallingcostsandtheincreasedcompetitivenessoflow-carbontechnologiesagainstfossilfuelsduetotechnologicaladvancements.Moreover,theannouncementin2020ofthe2060carbonneutralitytargethadraisedexpectationsandprovidedthepoliticalsignalforthescale-up.Whatclean-energygrowthmeansforChina–andtheworldCleantechnologyhasbeenanimportantpartofChina’senergypolicy,industrialstrategyandclimatechangeeffortsforalongtime.Lastyearmarkedthefirsttimethatthesectoralsobecameakeyeconomicdriverforthecountry.Thishasimportantimplications.China’srelianceontheclean-technologysectorstodrivegrowthandachievekeyeconomictargetsbooststheireconomicandpoliticalimportance.Itcouldalsosupportanacceleratedenergytransition.16ThemassiveinvestmentincleantechnologymanufacturingcapacityandexportslastyearmeansthatChinahasamajorstakeinthesuccessofcleanenergyintherestoftheworldandinbuildingupexportmarkets.Forexample,China’sleadclimatenegotiatorSuWeirecentlyhighlightedthatthegoaloftriplingrenewableenergycapacityglobally,agreedintheCOP28UNclimatesummitinDecember,isamajorbenefittoChina’snewenergyindustry.ThiswilllikelyalsomeanthatChina’seffortstofinanceanddevelopcleanenergyprojectsoverseaswillintensify.Globally,China’sunprecedentedclean-energymanufacturingboomhaspusheddownprices,withthecostofsolarpanelsfalling42%year-on-year–adramaticdropevencomparedtothehistoricalaverageofaround17%peryear,whilebatterypricesfellbyanevensteeper50%.This,inturn,hasencouragedmuchfastertake-upofclean-energytechnologies.Projectionsofsolarpowerdeployment,inparticular,havebeenupended.TheIEA’slatestWorldEnergyOutlookintroducedanadditionalglobalenergyscenariojusttolookattheimplications,projectingthatifglobaldeploymentofsolarpowerandgrid-connectedbatteriesfollowstheexpansionofmanufacturingcapacity,thenglobalpower-sectorcoaluseandcarbondioxideemissionscouldbeasizable15%lowerthaninthebasecaseby2030.MostoftheadditionaldeploymentofsolarintheIEA’srevisedprojectionsisinChina.Evenwiththeincreaseddeployment,however,thereisalimittohowmuchsolarpower,batteriesandothercleantechnologycanbeabsorbed,asthemanufacturingexpansionhasalreadysaturatedmostoftheglobalmarket.Thismeansthattheexpansionwillrunintoovercapacity,ifmaintained.Ontheotherhand,inordertokeepdrivinggrowthininvestment,clean-technologymanufacturingwouldneedtonotonlyabsorbasmuchcapitalasitdidin2023,butkeepincreasinginvestmentyearafteryear.Theclean-technologyinvestmentboomhasprovidedanewleaseoflifetoChina’sinvestment-ledeconomicmodel.Therearenewclean-energytechnologieswherethereisscopeforexpansion,suchaselectrolysers.Eventually,however,entirelynewsectorswillhavetobefoundforinvestment–orChina’seconomicmodelwillhavetobetransformedoncethereisnowhereleftforinvestmenttoflow.17ThemanufacturingboomalsocementsChina’sdominantpositioninclean-energysupplychains.Othercountriesthereforefaceachoiceofwhethertheywanttobenefitfromthelow-costsupplyofsolarpanels,batteries,EVsandotherclean-energytechnologyfromChina.Thealternativeisdiversifyingtheirsupplyandpayingthecostofbuildingnewsupplychains,intheformofsubsidiesandimporttariffsrequiredtoenabledomesticproducersorproducersinthirdcountriestocompeteagainstChinesesuppliers.Sucheffortswouldfurtherincreasesupplyandpushdownglobalpricesevenfurther.18
VIP
