China’s Clean Energy Sector Propels 2023 Economic Growth
China experienced a significant boost in its clean energy sector in 2023, with an unprecedented injection of 11.4 trillion yuan (US$1.6 trillion), according to a new analysis by the Helsinki-based Centre for Research on Energy and Clean Air (CREA). This surge accounted for the country’s entire investment growth, surpassing all other sectors and driving China’s economic expansion.
The analysis by CREA revealed that the clean energy industry contributed 9% to China’s GDP in 2023, which reached a total of 126 trillion yuan ($17.8 trillion). Without the substantial growth in the clean energy sector, the country’s GDP growth would have been approximately 3%, falling short of government targets. This surge in clean energy investment comes at a crucial time when concerns are rising about the nation’s economic prospects amid a real estate crisis and a declining population.
China’s clean energy investment primarily focused on the new three industries: solar power, electric vehicles, and batteries. The country holds a dominant position in these key green technologies, with over 80% of solar exports, half of lithium-ion battery production, and more than 20% of electric vehicle manufacturing.
The clean energy sector played a significant role in China’s economic growth overall, accounting for 40% of the expansion of GDP in 2023, as stated by CREA. Investment in the sector increased by 40% to reach 6.3 trillion yuan ($887 billion) in 2023, which is equivalent to the GDP of Switzerland or Turkey. Solar power led this surge, with its value soaring by 63% to 2.5 trillion yuan. Additionally, China produced 9.6 million electric vehicles, representing one-third of all vehicles manufactured in the country.
Comparatively, the total investment in clean energy industries accounted for 13% of China’s reported total investment in fixed assets, amounting to 50 trillion yuan ($7.1 trillion) in 2023. This increase in clean energy investment compensated for the decline in real estate investment, which decreased by 9.4% from January to November.
The rise of China’s clean energy sector highlights its crucial role in the country’s energy and climate initiatives, as well as its broader economic and industrial strategies. However, integrating these new renewables into the existing power system and effectively managing the electric grid pose significant challenges in China. Rationalizing and consolidating manufacturing sectors with overcapacity due to the major wave of investment is another key challenge that needs to be addressed.
While China has made remarkable progress in clean energy, coal remains a major challenge. According to the International Energy Agency, global coal use reached a record high in 2023, exceeding 8.5 billion tons for the first time. China heavily relies on coal, which accounts for 65% of its electricity generation and more than half of the world’s coal-fired generation.
Tackling coal is crucial for significantly reducing global carbon emissions and combating climate change. Despite the country’s current all of the above energy strategy, including investments in coal mining, coal-fired power, domestic oil, and gas production, clean energy investments have surpassed those in fossil fuels in terms of volume.
China needs to shift from investing in new coal power plants to decommissioning existing ones to meet its climate goals. By maintaining the current level of investment in clean energy, China can expect to witness a decline in the use of coal and other fossil fuels over time.
The exceptional growth in China’s clean energy sector not only bolsters the country’s economic growth but also underscores the importance of transitioning to sustainable energy sources. As the largest emitter globally, China’s commitment to clean energy serves as a crucial step toward a greener future, while addressing the urgent challenge of climate change.
