Global Macro Research
Global Macro ResearchChina’s green investment ‘bubble’ isn’t about to burst
The green investment surge continues to support growth, more than offsetting the drag from the beleaguered property sector. This pivot is essential to meet global climate targets. But it is also adding to geopolitical tensions, and there are looming headwinds from EV consolidation and excess battery capacity.
Authors
Robert Gilhooly
Senior Emerging Markets Economist
Alexandre Popa
Sustainable Investment Analyst
Duration: 1 min
Date: 13 May 2025
Key Takeaways
- China continues to lean hard on green investment, boosting the share of renewables in domestic power, and furthering its lead in green technology.
- China’s pivot to renewable energy is essential for global climate targets. Like with electric vehicles (EVs), strong investment in solar and battery manufacturing capacity is reducing the cost of the green transition.
- But it also has the potential to add to geopolitical tensions, particularly due to the economy’s sudden emergence as an EV manufacturing powerhouse.
- A green investment ‘bubble’ is not impossible, but there are reasons to expect it will remain a growth driver.
- Consolidation within the EV sector is likely to weigh on near-term growth, as is excess capacity within battery manufacturing, which is already dragging. The breakneck pace of solar expansion may also moderate.
- The need for additional grid capacity and ancillary infrastructure to embed renewables should maintain green investment as a driver of growth, even if investment in new generation capacity slows.
- Building up excess capacity may even be part of China’s long-run strategic aims. Power could be exported to neighbouring countries, which would help tie them to China politically.
- Pushing harder on the renewables’ rollout in the near-term also offers China a lever to offset the shock from US tariffs.
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