China had a hold on the green tech industry last year, and “there is no end in sight” to its preeminence in the market.
A new report from BloombergNEF about energy transition supply chains found that 76% of clean tech factory investment was located in China last year, and that China houses 70% or more of clean tech equipment production in a majority of clean tech sectors including solar, batteries, and wind.
Antoine Vagneur-Jones, one of the report’s authors and the head of trade and supply chains at BloombergNEF, told Tech Brew that China’s lion’s share of the market comes down to two factors: its political and economic structure, and the fact that solar and battery manufacturing is always changing. As for the former, China’s “industrial strategy,” as Vagneur-Jones put it, is for the government to choose priority sectors that investors then financially support. And the country’s “political stability” ensures that investments will pay off in the future.
“There’s that level of long termism,” Vagneur-Jones said. “When you have a risk of everything flipping and flopping every four years [in the US], then that’s quite scary.”
And there are a lot of solar and battery manufacturing plants in China because of the nature of the sector, he said: As the technology changes and evolves, existing factories need to be updated and new ones get built. That does mean, however, that the green tech industry is in a state of overinvestment, where manufacturing supply far outweighs demand.
Keep up with the innovative tech transforming business
Tech Brew keeps business leaders up-to-date on the latest innovations, automation advances, policy shifts, and more, so they can make informed decisions about tech.
“The sheer levels of overinvestment mean that we’re probably going to be in this overcapacity situation [until] at least 2027, if not much further out,” Vagneur-Jones said.
In the face of high American tariffs on Chinese goods, Vagneur-Jones said Chinese manufacturers will probably turn to importing green tech into markets “they might have discounted before,” like Pakistan and Brazil. Doing so would be a continuation of a trend: Last year, 43% of China’s clean tech exports went to “emerging markets.”
As for clean tech investment in the US, things aren’t looking good. A quarter of all clean tech funds are “in jeopardy” due to Trump administration policies, according to the BloombergNEF report, and higher tariffs mean less investment in the US.
“The danger [in] the US, with all of this protectionism, there’s a lot of volatility,” Vagneur-Jones said. “No one’s investing in manufacturing in the US until we reach some sort of an equilibrium. When we reach that is really uncertain.”