Rich democracies felt a collective shiver last week at the sight of Chinese President Xi Jinping (習近平), Russian President Vladimir Putin and North Korean leader Kim Jong-un exchanging pleasantries and tips on how to live to 150 at China’s military parade. They should be much more concerned about the ties Beijing is forging elsewhere in the world.
That is because the country’s clean energy industry is making connections across a swath of the global south with far more collective significance than the crumbling nuclear-armed autocracies in Moscow and Pyongyang.
Foreign direct investment by China’s green technology industry since 2022 has hit between US$227 billion and US$250 billion. That is roughly the size, adjusted for inflation, of the post-World War II Marshall Plan that cemented the alliance between the US and Europe.
Illustration: Constance Chou
In the late 2010s, when concerns over the scale of China’s Belt and Road Initiative were at fever pitch, annual spending on all overseas infrastructure projects was running at between US$80 billion and US$120 billion a year.
In 2023 and last year, green manufacturing investments alone came to US$66 billion and US$72 billion respectively, according to data from the China Low-Carbon Technology FDI Database, hosted by Johns Hopkins University and Boston University. Last year’s figure was equivalent to about 40 percent of China’s total outbound foreign direct investment.
This could be seen as the second stage of the China-led global energy transition. The first, which is still only a few years old, came from exports of finished products — solar panels, electric vehicles (EVs) and batteries.
Thanks to that trade, about two-thirds of emerging markets have a larger share of solar power in their grids than the roughly 9 percent in the US, a separate study from pro-transition think tank Ember showed. One in four are electrifying their entire economies more rapidly. EVs are being adopted in Turkey, Indonesia, Malaysia and the United Arab Emirates at a pace to match or even exceed developed markets. The US is increasingly resembling a steampunk relic still dependent on 19th century furnace-and-turbine technology to fuel its dreams of artificial intelligence.
This commerce is already affecting demand for fossil fuels. China’s solar exports last year alone were sufficient to cut long-run global carbon emissions by 4 billion metric tonnes, equivalent to about 40 days of emissions. Pakistan, which has for years treated gas generation as the backbone of its power network, has been asking suppliers to defer shipments of liquefied natural gas after a surge of solar imports suppressed grid demand. Saudi Arabia is facing one of the fastest declines in petroleum usage anywhere, as photovoltaic farms replace fuel oil generators.
However, these exports have raised hackles and trade restrictions due to their sheer scale. What is different about the second stage of this transition is that foreign direct investment is building physical factories, ports and facilities that would generate jobs and investments for decades to come, cementing host countries’ commitment to clean technology.
Such greenfield spending is like planting a seed: You do not see its full impact until years later.
Take Cobco, a US$2 billion factory for lithium-ion battery cathodes opened southwest of Morocco’s Port of Casablanca in June. With capacity to supply 70 gigawatt (GW)-hours of batteries per year once at full operation, it would be large enough on its own to power about 1.2 million EVs annually — sufficient to supply about a third of Europe’s market at present.
A solar panel factory established the same month east of Jakarta could churn out 1.6 GW of modules each year, enough to provide nearly all the additional 17.1 GW of photovoltaic generation Indonesia had been forecasting up to 2035. With capacity growing so fast, ambitions are accelerating, too: Last month, the government announced it was working on increasing its solar target sixfold to 100 GW.
These projects are rewriting the rules of energy, trade and international relations as dramatically as any development since the 1973 oil crisis. That emergency caused developed countries to shun fuel oil from the Middle East as their key source of grid power, and switch to nuclear and coal that was easier to secure domestically. The arrival of a clean energy supply chain that is more affordable, abundant and secure than the remaining fossil fuel trade is repeating the trick for developing countries.
Rich nations who view this shift with trepidation should instead use their own expertise in finance and project management to join it. What China is extending to the global south right now is a path to advancement: jobs, energy independence, economic growth, clean air and a chance to break free from the looming threat of climate change. Foreign investments of this sort have been a potent tool of soft power ever since the Marshall Plan.
Right now, Beijing is offering cheap clean power, employment, trade and a route to prosperity. Washington is offering tariffs, policy chaos, White nationalist memes and South Korean workers in shackles after a raid on an EV battery factory. This is no way to win the grand strategic contest of the 21st century.
David Fickling is a Bloomberg Opinion columnist covering climate change and energy. Previously, he worked for Bloomberg News, the Wall Street Journal and the Financial Times.
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