SINGAPORE – China’s global dominance of clean-energy technologies has raised the hackles of some nations and led to tariffs and trade spats, but the industry has proved a boon for the world’s second-largest economy, which has struggled to boost sluggish growth.
While some economic sectors in China, such as the property market, have slumped on falling demand, clean-energy technologies are on a roll, contributing to a record 10 per cent of the nation’s gross domestic product (GDP) in 2024 – and this could rise further in 2025, an analysis released on Feb 19 shows.
Electric vehicles (EVs), batteries and solar continued to dominate the economic contribution of clean energy in China, attracting more than half of all investment in clean-energy technologies, according to an analysis by the Centre for Research on Energy and Clean Air (Crea) for Carbon Brief, a British climate and energy policy news site.
In 2023, clean energy accounted for 9 per cent of China’s GDP; the figure was 7.2 per cent in 2022, Crea said.
Overall, clean-energy technology sectors, which also include nuclear, wind, hydropower and railways, accounted for 26 per cent of overall China GDP growth in 2024, the analysis found.
“The finding is significant because it shows that clean-energy investment can be a major driver of economic growth and investment,” said co-author Lauri Myllyvirta, lead analyst at Crea and a senior fellow at Asia Society Policy Institute.
And it stands in stark contrast to the Trump administration’s efforts to roll back support for renewable energy and EVs as well as slash funding for climate research.
“It also matters for the world and for the global climate effort that clean energy is so central to China’s economic growth, because it provides a strong motivation for the country’s leadership to sustain the rapid growth of the sector,” Mr Myllyvirta said.
This would help China peak and then decline its carbon dioxide (CO2) emissions, which are the largest of any nation, he added. CO2 is the main greenhouse gas driving climate change.
China’s economy grew 5 per cent in 2024. Without the contribution from the clean-energy sectors, growth would have been 3.6 per cent, according to the analysis.
Clean-energy sectors contributed 13.6 trillion yuan (S$2.5 trillion) to China’s economy, or just above 10 per cent of total GDP. The authors included the value of production of green goods, investment in new manufacturing plants, clean-energy power generation and the value of export in their calculations.
But there are risks ahead, including whether the current levels of production and investment will continue when the current 14th five-year plan for 2021 to 2025 ends. Another is the low profitability and overcapacity of clean-energy manufacturing in China.
China dominates the global clean-energy technology arena and is by far the world’s largest investor in renewable energy, as well as the top EV and battery maker. The nation produces about 80 per cent of all solar panels made globally, 70 per cent of wind turbines and more than 60 per cent of EVs sold.
This huge level of production, both for domestic consumption and export, has dramatically cut the price of green technology, with the clear climate benefit of poorer nations being able to afford them. But it has also triggered trade tensions with the US and European Union.
Intense competition at home, helped by government support to boost the industry, has led to huge investment in production capacity. This has caused prices to plunge, especially for solar panels, and overcapacity, hurting the profitability of some Chinese manufacturers, the analysis said.
Returning the sectors to profitability means maintaining strong domestic demand and measures to address overcapacity. Overcoming electricity grid constraints, such as boosting capacity to distribute large amounts of green energy like solar, is also needed to sustain demand, the analysis said.
Still, the sector has been racing ahead, with China adding a record 356 gigawatts of wind and solar capacity in 2024. Green tech exports and growing investment in power generation and manufacturing projects overseas also bolstered GDP at home.
“It is likely that 2025 will see an even larger economic contribution from the clean-energy sectors,” said Mr Myllyvirta. The last year of the five-year plan period always comes with an acceleration of investment spending, he said.
What’s driving the investment?
A key focus is energy security. Others include cutting emissions to achieve President Xi Jinping’s pledge to reach carbon neutrality before 2060, targets to improve energy efficiency and dial back the carbon intensity of economic activity, plus efforts to curb air pollution.
Beyond 2025, development of the clean-energy sectors depends strongly on the new targets and policies in the next five-year plan, which is being finalised in 2025, the authors said.
And those targets need to keep pace with growing energy demand in the economy, with electricity demand growth remaining strong.
This highlights the need for careful management of the green technology industry.
“The logic is that in order for investments to drive GDP growth, more needs to be invested every year than the preceding year, which cannot be sustained for too long. But if investments continue at the current level, that will drive output growth,” Mr Myllyvirta said.
“There is a lot of space for the value of output to grow, especially in the power sector where two-thirds of electricity still comes from fossil fuels,” he said.
Polluting coal is used to generate about 60 per cent of China’s electricity, and record renewable energy additions are expected to progressively reduce coal consumption.
“The fact that the clean-energy sectors are now more valuable than real estate sales is going to weigh on decision-makers’ minds. If investment in clean energy slowed down, it would make it much harder to meet the leadership’s target of shoring up economic growth,” Mr Myllyvirta said.
- David Fogarty is deputy foreign editor at The Straits Times and senior climate writer. He also covers the environment, in areas ranging from biodiversity to plastic pollution.
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