Go to top
China Market Updates

A closer look at China’s Political and Economic Environment and what this means for Renewable Energy development

The 20th National Congress of the Communist Party of China (CPC) commenced on October 16th, 2022, with more than 2,000 delegates participating. President Xi Jinping delivered a work report, describing the Party’s accomplishments since the previous Congress in 2017 and giving general guidelines for the next five years. The congress concluded with the announcement of the new central leadership for the next five years.

Green development is one of the top priorities for the next 5 years in President Xi’s speech. This means accelerated green development transition, setting the goals of cleaning up air, soil, and water pollution, and changing economic and energy structure. Establishing new energy capacity first before gradually controlling total carbon emission and fossil fuel consumption

New Shanghai party secretary Chen Jining was appointed. Chen is the ex-Beijing Mayor who has served as the president of Tsinghua university and Minister of China Environmental protection. Appointing someone with academic and environmental engineering background as the party secretary of China’s financial hub signals the importance of environmental focus business and financial growth.

China has now commissioned several committees to develop Sustainability Standards fit for China such as the Zero Carbon China Standards, China ESG standards, Low carbon factory standards, Low carbon data center standards and low carbon science park standards, to name a few. These standards are planned to pilot in 2023 and 2024 in selected provinces and exchanges before a rolling out a wider adoption nationally.

How do we see the China RE market develop in the next 5 years?

We anticipate a faster growth period over the next 5 years in transitioning to renewable energy, for the following reasons:

  1. Green Development is one of the top 5 priorities in the CPC’s 14th 5-year plan. Government focuses help drive the policy, and market supports in its development and implementation.
  2. Consolidated power at the party politburo level will allow the central government to move faster than before. Hence, we expect to see more green development-related policies drafted and issued at a faster rate compared to the past few years.
  3. China has been experiencing periodic power shortages. To support its ambition in GDP growth, a transition to renewables is inevitable. And the faster to reduce the dependency to fossil fuel the better to ensure energy supply stability. This is also taking on the lessons learnt from its western peers.
  4. GDP growth is still China’s number 1 priority. Over the next 5 years, the government is looking for a faster economic construct transition from being more labor intensive and low-cost manufacturer to being the supplier of high-tech and highly skilled workers, manufactures, or services. To achieve this, green technology will be one of its major focuses. It is already the largest solar panel exporter in the world. We expect to see focus on developing deep competencies in other green technology manufacturing and technology development, and advancement related to Green Energy or sustainability in general.
China leading the race towards renewables

Any rapid and accelerated growth will come with its challenges. Fluctuating green energy pricing, uncertainty on whether some policies will be short or long term, are few obvious challenges China is, or will, be facing. Further challenges include:

1. Geopolitical Stability: Relating to Taiwan, regarding foreign companies’ appetite for long term and larger scale investments.

2. Human Rights: Issue in its border regions and territories

3. Exchange Rate: Fluctuations making payback on large scale investments a challenge to forecast.

What are the general policy trends? How will they impact investment and options available in the market?

We see a trend to centralize major directional policies for a period before regional and provincial policy details are issued or clarified.

Disclaimer – Please note, this article is developed based on analysts’ observations and opinions. It does not necessarily reflect the opinion of Act Renewable and RESETcarbon boards, management teams and their investors.