There are no official data tracking expansion in China’s green investment. ANZ Research has estimated through to end 2025 based on proposals in China’s 14th FYP for energy and new infrastructure.
These calculations show green investment in the stated four areas could reach 13 trillion renminbi through 2025, with upside risks.
For clean energy, especially solar and wind, ANZ Research compared investment plans at the national, provincial and company levels through 2025 and uncovered the following:
• At the national level - according to China’s latest carbon neutral plans, total installed capacities of solar and wind power will reach 1,200GW by 2030. This implies a compound annual growth rate (CAGR) of 7.3 per cent on average until 2030.
Compared with 530GW of total installed capacity of renewables as of 2020, it implies a surge of nearly 60 per cent from 2020 or up 312GW to 842GW by 2025.
• At the provincial level - in compliance with the objectives of the 14th FYP on renewable energy, most governments have disclosed plans on renewables.
Based on available information from provincial government plans newly installed capacity of solar and wind could reach 754GW by 2025, more than double the newly installed capacity announced at the national level.
• At the company level - most large energy projects are executed by state-owned enterprises which dominate the electricity generation and distribution sectors.
ANZ Research compiled the five-year investment plans on renewables of major power investment and construction companies (on a best-effort basis) and estimates newly installed capacity of renewables could total 514.7GW by 2025.
Applying the average construction cost of solar and wind power during 2016 to 2020, total investment in renewables through 2025 could range from 2.2 trillion to 5.2 trillion renminbi with the average at 3.6 trillion.
For smart grids, according to the investment plans of two major grid providers, total investment is expected to reach 3.0 trillion by 2025.
For clean utilisation of coal power it is challenging to track total investment scale as neither official targets nor company-level investment information are available. One alternative is to refer to the PBoC’s 200 billion renminbi relending facility which was established in 2021 and aims to support the clean utilisation of coal power.
If it is assumed the central bank can leverage on 400 billion renminbi of capital investment on an annual basis, this implies a total of 1,600 billion renminbi investment over the next four years.
In EV charging stations, if it is assumed China will have 10 million EV charging stations by 2025 based on the country’s NEV sales target, total investment could reach 378 billion renminbi during the period.
For green investment in new infrastructure, it is quite difficult to decouple green investment from new infrastructure investment. As such, ANZ Research applied the total investment of telecommunications infrastructure of 3.7 trillion renminbi (as indicated in the 14th FYP for the telecommunications sector) as a proxy.
Summing all these, total green investment in China could reach 12.3 trillion renminbi throughout 2025.
International investment practices can be a reference for forecasts. According to estimates by the International Energy Agency, global clean energy investment currently stands at around $US2 trillion per year, or 2.5 per cent of global GDP, before rising to $US5 trillion, or 4.5 per cent of global GDP, by 2030 and maintaining the same pace to reach net zero carbon emissions by 2050.
Applying the share of 2.5 per cent of investment to ANZ Research’s estimates on China’s GDP size, total green investment in China will reach 13.5 trillion renminbi by 2025, which is very similar to ANZ Research’s estimate. By taking the average of these two figures, we expect China’s green investment to reach 13 trillion renminbi through 2025.
The Chinese government still considers infrastructure investment as a key stabiliser of growth. Despite the impression policymakers want to shift the economy from an investment-led to consumption-driven model, investment will still play a crucial role in China’s cyclical and structural growth. Green investment thus has more room to grow and reshape China’s infrastructure investment in the future.
China’s State Council has targeted 102 major projects under the 14th five-year plan. Some projects will be brought forward to this year in response to the negative growth shocks from COVID-19 lockdowns.
Over the first five months of this year, the NDRC approved 48 projects with investment totalling 654 billion renminbi, three times more than the same period in 2021 and nearly 50 per cent higher than 2019.
Based on data for between January and May 2022 when ANZ Research looked at China’s major projects at the provincial level it found 39.8 per cent of the annual investment plan has been executed, which is nearly 2.5 percentage points higher than the past few years.
For green investment, annual spend could reach 2.6 trillion renminbi in 2022 or around 16 per cent of total infrastructure investment based on the previous estimate of five-year investment horizon.
In the first quarter to 2022 new capacity installation of solar and wind power was double that during the same period in 2021, leading to a 20.0 per cent annual jump in accumulated total capacity.
This is nearly three times the compound growth of 7.3 per cent required to attain China’s national carbon emission goal through 2030. China’s policymakers recently allowed special local government bonds – a major funding tool - to be used to finance new infrastructure and renewable energy projects.
Fiscal funding could be channelled to new growth sectors with the possibility of improving future policy efficiency. Structurally, research suggests green investment and corporates’ financial performance has a positive correlation.
This justifies China’s push to ramp up green investment and new infrastructure. It could lift China’s total factor productivity – and hence potential growth over the medium to long term.
Betty Wang is a Senior China Economist & Soni Kumari is a Commodity Strategist at ANZ Institutional
This article was originally published on ANZ Institutional.