The clean-energy investment boom in 2023 is the outcome of a major pivot in China’s macroeconomic strategy. As this analysis shows, investment flowed from real estate into manufacturing – primarily in the clean-energy sector.
Total investment in the manufacturing industry increased by 9% year-on-year in 2023, while investment in the power and heat sectors climbed 23%. These increases were entirely due to growth in investment in clean energy, with investment in other areas falling. Therefore, China’s pivot into manufacturing was, in reality, a pivot to cleantech manufacturing.
The reason for this pivot was the contraction in the real-estate sector, where investment fell by 10% year-on-year in 2022 and another 9% in 2023. While this drop was in line with the government’s aim to address financial risks and excess leverage in the sector, it left a major hole in aggregate investment demand and in the revenue of China’s local governments.
Local governments were under pressure to attract investment, meaning that they offered generous subsidies and helped arrange financing.
The central government, for its part, eased private-sector access to financial markets and bank loans during the Covid-19 pandemic, facilitating the growth of the clean-energy sector.
Unlike the state-owned firms dominating traditional industries, the low-carbon sector, largely composed of private companies, gained access to previously constrained credit. The significance of this economic shift is reflected not only in the figures revealed by this analysis but also in the language being used by Chinese media. The three largest of clean-energy sectors by value, namely solar, storage and EVs, are being referred to as the “new three”, in contrast to the “old three” – clothing, home appliances and furniture.
