The winds of change: China, technology and the energy transition
As the energy transition gathers pace, China is increasingly embracing change rather than resisting it. Here’s how technology is helping to power that shift.
Duration: 4 Mins
Date: 21 Apr 2026
There’s a Chinese proverb that encapsulates the difference between resistance and adaptability. “When the winds of change blow,” it says, “some people build walls. Others build windmills.”
These words of wisdom seem particularly apt today, because no-one is building more windmills than China. The change in question is the energy transition, and the world’s second-largest economy is leading the way in embracing it.
Some investors still struggle to accept this reality. They associate China only with massive exploitation of fossil fuels, unparalleled greenhouse gas (GHG) emissions and limited compliance with ESG requirements.
Sure enough, these failings were once the norm. Some even persist today. Coal and oil still play a significant role in China’s energy mix, and the country’s GHG levels remain higher than those of any other nation.
Yet China is now also a major player in the sphere of renewable energy. Its pre-eminence in fields including electric vehicles (EVs), EV batteries, photovoltaic technology and, indeed, wind power is hard to dispute.
By contrast, it’s the US that could be accused of “building walls”. The Trump administration has withdrawn from the Paris Agreement (again), labelled climate change a “scam” and championed a policy of “Drill, baby, drill”.
Investors keen to tap into the energy transition might therefore wish to look East. The fallout from the US/Israel-Iran conflict, which has highlighted the extent of China’s energy independence, has further underlined the appeal of doing so. The challenge, of course, is knowing precisely where to look – and why.
The journey to the cutting edge
Let’s start with the bigger picture. Broadly speaking, there are three reasons why China has so rapidly moved to the forefront of the energy transition in recent years.
First, Beijing is fiercely determined to excel in all aspects of tech. This is nothing less than a strategic priority, as captured in a government pledge to “seize the commanding heights of science and technological development”.
The evidence of success in this regard continues to mount. For example, according to a study by the Australian Strategic Policy Institute (ASPI), China now heads the international pack in research into 66 out of 74 critical technologies.
Second, President Xi Jinping sees environmental awareness as a means of projecting China’s “soft power”. The US’s newfound weakness in this respect is unlikely to have gone unnoticed.
For several years now Xi has touted China’s ascendancy in “ecological conservation”. Tellingly, the concept of “green finance” is today officially enshrined in the CCP’s model of a modern financial system.
Third, although it has progressed from slow-out-of-the-blocks imitator to “fast follower” to genuine innovator, China hasn’t forgotten its long-held strengths in terms of commoditisation and industrialisation. It’s in many ways still the workshop of the world – but now for higher-end goods.
This has clearly been a factor in relation to solar and wind. Like so many industries, both have been able to expand at pace in China because of lower production costs.
Engines of positive change and long-term growth
Almost every commercial arena can be divided into what might be labelled “architects” and “enablers”. The former tends to earn most of the attention, yet it’s the latter that ultimately make things happen.
By way of illustration, take CATL. We invested it the company when it was still in the early stages of growth. Today, just 15 years after it was founded, it’s the number one producer of batteries for EVs and energy storage globally.
The same thinking that led us to CATL also led us to Zhejiang Shuanghuan Driveline. Established in 1980, it has a product range that includes parts for EVs and pinion shafts that can be used in wind turbines.
The first point that’s worth bearing in mind about these businesses is that they qualify as smaller companies – which is to say they were valued below £5 billion when we originally invested in them. As such, in our opinion, they have notable capacity for long-term growth.
The second is that they’re brand-agnostic. This is a common trait among classic “enablers”. It means they can produce components for whichever “architects” prevail in the face of ever-increasing competition.
Finding opportunities like these isn’t easy. Most investment analysts have little or nothing to do with Chinese smaller companies, which is why specialist teams with an on-the-ground presence can make a vital difference.
And so, another Chinese proverb springs to mind: “Seeing for oneself is a hundred times better than hearing from others.” In our experience, the search for the hidden gems of China’s energy sector – and those of every other sector across Asia – is likely to be most fruitful if in-depth research goes hand in hand with “being there” and direct engagement.
Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.
Important information
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