By Haley Zaremba – Jan 10, 2025, 6:00 PM CST
- China’s dominance in clean energy manufacturing is fueled by favorable policies, low production costs, and substantial government investment.
- The U.S. is attempting to compete with China through initiatives like the Inflation Reduction Act, but faces challenges due to political changes and the sheer scale of China’s spending.
- Reliance on Chinese clean energy technology presents geopolitical risks and potential economic disruptions due to overproduction and trade tensions.
China is blowing the competition away when it comes to clean energy buildout. In 2023, China alone spent more money on clean energy technologies than the next 10 biggest investors combined. On top of controlling supply chains for widely used technologies like solar panels and electric vehicle batteries, as well as the components critical to their manufacturing, China is also at the cutting edge of development for innovative and disruptive clean energy tech like clean hydrogen and energy storage. This means that China, which already dominates global clean energy tech markets, is only going to solidify its competitive edge going forward.
An extremely favorable policy climate and low production costs have turned China into a global clean energy manufacturing powerhouse. The International Energy Agency estimates that China’s clean technology exports will exceed $340 billion in 2035, if current policy trends endure. To put this massive sum in perspective, it’s roughly as much as the 2024 oil export revenues of Saudi Arabia and the United Arab Emirates combined.
The Biden administration has made major inroads to transitioning away from reliance on Chinese imports and has even made attempts to become competitive with China on global markets, most notably through the sweeping Inflation Reduction Act. However, the billions of dollars channelled into the United States clean energy sector through the act are just a drop in the bucket compared to Chinese spending. What is more, the U.S. political climate is about to change dramatically, and domestic clean energy spending will almost certainly take a tumble in the coming years.
While the United States is set to impose major tariffs on Chinese imports, it’s unlikely to make too much of a dent in China’s prodigious global market presence. According to the World Economic Forum, China is the cheapest location in the world today for manufacturing key clean energy technologies. “It costs up to 40% more on average to produce solar PV modules, wind turbines, and battery technologies in the US, up to 45% more in the EU, and up to 25% more in India,” the WEF report states.
On top of cheap manufacturing costs, China is flooding the market with its goods, and many world powers have accused Beijing of overproduction, to the detriment of the global economy. While China’s own economy is slowing down, Beijing’s strategic response has been to double down on manufacturing and ramping up export potential as the domestic market becomes saturated.