Electric cars (EV), lithium batteries, photovoltaic panels, wind turbines… the list of “green” industries in which China has achieved supremacy is long, controlling entire “supply chains”, i.e. all the phases that lead to a specific finished product, from the extraction of raw materials through the manufacturing of components.
The data is unequivocal: in 2023, 70 percent of global EV production was concentrated in China; six local companies were in the top ten in the battery sector (CATL and BYD first and second). 90 percent of the global production of solar panels, 70 percent of lithium batteries, and 65 percent of wind turbines are concentrated in the second largest economy on the planet.
The most advanced economies have opposed protectionism to the advance of Made in China in strategic sectors for the energy transition. On EVs, for example, the European Union has increased duties on imports from China up to 45.3 percent, while the North American market (USA and Canada) has armored itself with tariffs of 100 percent. The World Economic Forum underlined that «unilateral actions taken by the United States, the EU and Canada (…) should not be seen in isolation from the broader geopolitical context. While targeting Chinese industrial policy and subsidies, the West has introduced similar policies and subsidies, such as the US Inflation Reduction Act and various state aid programs in EU member countries.”
Since we are fighting on (almost) equal terms to conquer market shares, rather than subsidies, it is worth analyzing other neglected aspects of China’s industrial policy, a country in which the last decades of accelerated development have given rise to a real environmental crisis, which nevertheless committed itself before the United Nations to achieving carbon neutrality (i.e. the balance between carbon emissions and absorption) in 2060, only ten years after the EU.
The European objective is that, in the medium term (until Western players have caught up), the increase in the costs of green imports from China caused by the tariffs risks slowing down and, in any case, making them more expensive. The infamous subsidies – on which the European Commission’s “anti-subsidies” investigation into electric vehicles made in China focused – represent only one of the tools of an industrial policy aimed at encouraging the development of international industrial giants green.
Aggregation
What has received less attention are the so-called “clusters”, i.e. the aggregation in a specific territory of a large number of companies – in the same or similar sector – to encourage cost containment. An example of a district currently expanding is that of Lin-gang, 75 kilometers from the center of Shanghai, overlooking the East China Sea. The then local secretary of the Communist Party Li Qiang (who later became prime minister) attracted the Tesla Gigafactory inaugurated in 2019. Over the years, Lin-gang has become a “pilot free trade zone” where technology companies and innovative.
According to Anders Hove, the main difference between China and the West, the one that has allowed the former to accumulate such an advantage in the green economy in recent years, lies precisely in the clusters, on which we would not have focused sufficiently. The scholar from the Oxford Institute for Energy Studies found that the typical strategy of Western companies is rather to «specialize only on a few key skills, and then try to disaggregate production in places where labor taxes or logistics costs are low ».
But, Hove argued in an article published in Dialogue Earth, “the disaggregation of production hinders the development of manufacturing clusters that can develop rapidly thanks to the concentration of capital, a base of skilled workers and networks of knowledge exchange between suppliers”.
And precisely this Western approach would essentially render both protectionist measures against cars imported from China and state aid useless, such as, for example, the 902 million euros recently granted by the German government to build a Northvolt (batteries) plant in Germany. lithium). In fact – concludes Hove – «if highly manufacturing-intensive industries find themselves suffering from a deficit in innovation and speed due to disaggregated production, then protection and subsidies will have to remain in force forever, and the alarms about a high-intensity energy transition cost will probably prove to be well founded.”
Human capital
As regards EV production, China has created four clusters: the one in the Beijing-Tianjin-Hebei area; that of the Pearl River Delta, which includes Shanghai (Tesla), Hefei (Volkswagen, Nio) and the components concentrated in Suzhou; that of the Great Bay area centered on Guangzhou (Gac, Xiaopeng); finally the smaller one of Chongqing-Chengdu, in the south-west of the country. In the field of renewable energy, the largest clusters of companies are present on the east coast, in the traditionally most developed area of the country, with the provinces of Jiangsu and Zhejiang having established themselves as main hubs in the manufacturing of photovoltaic systems.
Innovation represents another fundamental element of China’s green technological-industrial rise. Last year, China made more than 5,000 applications for green and low-carbon technologies under its Patent Cooperation Treaty (PCT), giving it the top global position for the third consecutive year. According to Climate Energy Finance, in 2023 China was the country that invested the most in the energy transition: 676 billion dollars, 38 percent of global spending (1,800 billion dollars).
Matter Stem
Data that would require a more in-depth evaluation but which, in any case, overall demonstrate China’s push for the green economy. And which are the reflection of a more qualified human capital, with the constant increase in students graduating in STEM subjects (science, technology, engineering, mathematics) every year. Recent research by the Oxford Institute for Energy Studies found that, in addition to this “abundant and growing” specialized workforce, innovation was encouraged by policies for training and attracting so-called “talent” and by private companies in the sector. who have thrown themselves into the green economy sector, taking on the related business risks.
In 2022, the number of high-impact scientific articles by China-based scholars surpassed that of US-based researchers for the first time, and the country also topped the natural science index for the first time of the journal Nature. China’s score was only a third of that of the United States in 2015.
Clean energy innovation in China: fact and fiction, and implications for the future (this is the title of the research) recalls that in 2022, the number of “high impact” scientific articles by scholars resident in China exceeded that of researchers in the United States for the first time, and that again two years ago the Asian giant reached also ranked first in Nature magazine’s natural science index for the first time (in which, in 2015, its score was only a third of that of the United States).
Ultimately it is clear that what China’s success in the green economy mainly blames on subsidies and other forms of direct state support for companies is a distorted view. And that, rather than simply increasing duties, it could prove more sensible to “copy” China, favoring large green industrial districts and launching policies to massively support research.
