China’s role in supplying the clean energy transition
Key takeaways
As China's clean energy sector expands globally, investment returns will depend more on company-specific technology and positioning than on industry-wide growth.
- Companies that solve system bottlenecks, such as grid equipment, power electronics, energy-management systems, and storage integration, may be better positioned than those competing primarily on manufacturing volume.
- Chinese EV and battery manufacturers are increasingly building factories overseas to serve local markets and navigate trade barriers, while China also finances and builds clean energy projects globally through its Belt and Road Initiative.
- All-solid-state batteries are expected to be the next major technology step, with small-volume road testing in EVs potentially beginning as early as 2027 and mass production around 2030.
China has built the world’s dominant clean energy manufacturing machine - driving down costs and accelerating the global transition. But questions about supply and demand, trade barriers and geopolitical friction mean that investors need to think carefully about how they approach the opportunity.
China’s commitment to clean energy is hardly a recent pivot. Its landmark Renewable Energy Law has now been active for more than two decades, and the industrial ecosystem built around it has reshaped global energy economics.
“Green economy, green finance, green technology – it is a certainty in China,” said Zhipeng Yan, CFA, Professor at Shanghai Advanced Institute of Finance (SAIF). “It’s a certainty China can offer the world.”
How dominant is China in clean energy technology supply chains?
Chinese manufacturers account for around 85% of solar and 80% of lithium-ion battery supply chain production capacity and supplied nearly 80% of global wind capacity additions in 2025.
China’s scale has driven dramatic cost reductions and accelerated deployment worldwide. According to China's National Energy Administration, its clean energy exports reached USD222 billion in 2025 (see Figure 1), putting low-cost renewable energy within reach for much of the rest of the world.
But China’s advantage is no longer simply about producing equipment cheaply. Chinese companies are also at the forefront of innovation in many parts of the sector, now accounting for the vast majority of global clean energy patent applications.
As Yan put it, Chinese manufacturers are “a critical supplier, cost reducer, and technology contributor to the global energy transition.”
China’s dominance has not been without controversy. Critics in the US and Europe have argued that Chinese manufacturers are flooding global markets with artificially cheap clean-energy technologies, undermining local producers.
Chi Xiang Wong, CFA, Senior Market Analyst at the Institute of Finance and Sustainability, pushed back on that framing.
“What others may perceive as dumping, I view as measures to address a domestic issue because cities in China - at one point, even its capital, Beijing - had a serious pollution problem,” he said.
The push to solve that domestic problem helped drive the development and deployment of technologies that Chinese companies can now sell globally.
How much clean energy capacity is being utilized?
According to BloombergNEF, global clean-energy manufacturing capacity in solar, wind and batteries far outpaces current demand - a situation it expects to persist for years.
Arthur Li, CFA, Strategic Operation Manager at one of China’s largest lithium-ion battery manufacturers, said that the picture is more nuanced. In his assessment, electric vehicle (EV) battery-cell production lines are operating at around 70% utilization, while lines producing battery energy storage systems (BESS) are running at 90%–100%, reflecting surging demand for BESS.
Furthermore, Li noted that the Chinese government has moved to limit capacity expansion in lithium-ion batteries - a signal that policymakers are monitoring the balance actively.
Mei Bai, CFA, Senior Governance Manager at Tianqi Lithium, one of the world’s largest lithium producers and processors, pointed out that lithium prices have fluctuated significantly in recent years.
“The widespread use of lithium in EVs is relatively recent compared with more established metals such as copper and iron,” she said. “There is inherent demand for new energy - balance needs to be achieved between supply and demand before it stabilizes.”
While Bai believes that demand for clean energy remains solid over the long term, she said the ecosystem needs time to bring supply and demand into balance.
Professor Jiajing Sun, CFA, a finance academic, said the most likely route to achieving that balance “will involve four linked processes: continued growth in global deployment; consolidation and the market-oriented exit of less efficient capacity; stronger capacity discipline and technological upgrading; and greater overseas localization by competitive companies.”
She added: “Chinese policy has recognized the need to address supply-demand imbalances and disorderly low-price competition, strengthen standards, encourage innovation and promote the law-based, market-oriented exit of outdated or inefficient capacity.”
Can growing global demand absorb China’s clean energy output?
Wong expressed confidence that market forces would do their work: “Eventually the pricing will come to an equilibrium,” he said.
Yan said that the speed of global electrification and AI-driven energy demand will be the key determinants of how quickly supply and demand come into balance.
He also suggested that China could export its clean energy in an entirely new form. When Chinese data centers — powered by clean energy — process AI workloads for global users, the energy is in effect exported as a digital service, measured in the computational tokens generated by AI models.
“Ten years ago, you couldn’t imagine how China could export electricity,” he said. “Now we can export electricity through tokens.”
Demand for clean energy products could also spike on the back of improved technical capabilities.
Li expects all-solid-state batteries to represent the next major technology step. Unlike the lithium-ion batteries currently used in electric vehicles, which rely on a liquid electrolyte, all-solid-state batteries use a solid material. This makes them safer, more stable and capable of storing significantly more energy.
In Li’s assessment, small-volume road testing in EVs could begin as early as 2027, with mass production potentially around 2030. The higher energy density of solid-state batteries — the amount of energy stored relative to weight and volume — could make a 1,000-kilometer EV range relatively easy to achieve, he said.
But Sun cautioned against assuming that industry growth will automatically translate into attractive investment returns.
“The most important conceptual risk is to confuse industry growth with shareholder returns,” she said. “Clean-energy technologies can experience rapid deployment while manufacturers earn weak returns if capacity expands faster than demand, competition drives down prices or technological change makes existing facilities obsolete.”
How else could China’s clean energy sector expand?
The next stage of China’s clean-energy story will not just involve exporting products, but also setting up clean-energy installations and manufacturing capacity around the world.
Chinese EV manufacturers and battery companies are increasingly establishing factories overseas, partly to better serve local markets and partly to navigate trade barriers.
China also actively finances, builds, and runs clean energy projects globally, particularly through its shift in the Belt and Road Initiative toward green infrastructure.
Wong pointed to China’s experience with green finance pilot zones as an example of an integrated approach to the energy transition, bringing together cleaner transport, energy infrastructure and the financing needed for adoption. Such approaches could potentially be adopted by and adapted to cities elsewhere in Asia.
The challenge is translating that model overseas. Wong said investors need to understand the political, regulatory and economic conditions of each market. Some may require local manufacturing or favor domestic production, while changes in government can alter climate policy. A model that works in China cannot simply be transplanted elsewhere, he added: investors need to understand local conditions and adapt to them.
Which companies will endure?
Whatever happens abroad, China’s clean energy sector can, at least, depend on durable demand at home.
However, Sun stressed that policy priority is not the same as an investment guarantee.
“A company may operate in a strategically important industry, but shareholder returns will still depend on its technology, management, governance, competitive position, cash flow and entry valuation. Stability does not mean eliminating normal market volatility, and policy support does not remove commercial risk,” she said.
Moreover, Sun said that investors should distinguish between commoditized capacity and differentiated capability. Companies that solve system bottlenecks - through grid equipment, power electronics, energy-management systems, storage integration or other specialized technologies - may be better positioned than those competing primarily on manufacturing volume.
The companies that emerge stronger from the current period of competitive upheaval and margin pressure are likely to be those who can combine scale with technology, efficient production, access to raw materials and the ability to operate in increasingly localized global markets, said Sun.
Aside from that, Li encouraged investors to make an effort to better understand the industry.
“Please make sure that you know the technology,” he said. That means looking beyond battery chemistry to the manufacturing equipment and plant design that determine whether a project can deliver on its promises.
To learn more about China investment trends, explore these stories:
Where AI meets manufacturing: China’s next investment frontier
Unpacking China’s vision for its capital markets
Investing in the next phase of China’s global expansion
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