Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Economy

China’s Old Economic Model Is Breaking. Its Replacement Might Be Green.

On the fall of Chinese real estate and the rise of Chinese renewables

Xi Jinping.
Heatmap Illustration/Getty Images

The news coming out of China is grim. A narrative is taking hold that China’s decades-long growth boom is imploding. Fascinating debates about why things have fallen apart are already emerging. Given China’s gargantuan presence in global emissions, what does this portend for the fight against climate change?

First, it’s important to right-size concerns about what is happening in China. For all the Sturm und Drang, most economists expect to see the country’s economy grow around 3% to 5% this year. China is far more likely to muddle through than implode, but the direction of that muddling is important. Will China retreat into some autarkic Mordor powered by coal or become something else, perhaps a beachhead of a clean electrified future?

What is happening?

China’s economy rise from utter destitution in the 1970s to global powerhouse is fascinating and complicated. One helpful, if oversimplified, way to understand it is that the country has relied on two growth models: exports and investment. Chinese workers made products for the world and built up the country’s cities and infrastructure.

However, as China has grown larger and richer, these models have sputtered. In terms of exports, growth can be hard to come by as lands unconquered by Chinese-made goods are few and far between.

Investments, similarly, have run into difficulties as a mechanism for growth. A common refrain is that there are now simply too many empty apartments in too many distant locales, too many bridges to nowhere, and too many airports that no one wants to fly to. But that goes a bit too far.

While there are certainly apartments ringing the outside of smaller cities in the country’s poorer interior provinces that will likely never be desirable locales in which to live, China’s problem isn’t that it's overbuilt, but that too many apartments are being held empty as speculative investments. As rich Chinese struggled to put their money on Wall Street (largely thanks to Beijing’s capital controls), they invested in what had been seen as the safest domestic investment available: real estate. The upshot is that now there are simultaneously populations desperate to acquire housing and empty apartments snapped up by the rich hoping that they’ll be able to sell them later at a profit.

This conundrum is well-known but difficult to resolve. Chinese President Xi Jinping has intoned for years that “housing is for living not for speculation,” and during COVID initiated policies – the three red lines – intentionally attempted a controlled, limited implosion of the sector. And the Chinese government appears to be following through.

Whether that suggests economic confidence or weakness remains to be seen. While the underlying policy decisions on real estate suggest the former, some others broadcast the latter, like the fact that China has started to hide data about youth unemployment. Other signals of weakness seem likely to continue — such as the decline of semiconductors in part due to pressure on the sector from U.S. policy actions.

Electrify everything

We can see more evidence of China muddling through in the key area of electricity, which is key to greening China and the world. China’s electricity data have shown reasonable if not robust growth over the course of the year at 5.2%.

It’s not all due to decarbonization. Some of the increased electricity usage is arising from additional residential and commercial air conditioning, as many people purchased AC units after last year’s heat waves and are finding that they enjoy its cool comforts.

Despite the slowdown of real estate construction, the steel and cement sectors — both heavy polluters — have also not shrunk as much as some may have predicted. Steel exports have surged to over 43.5 million tons, up 31% in the first half of the year compared with 2022. But steel is also used in other products that point to what looks like a new growth engine for the country: electric vehicles and renewable energy.

New energy vehicle production (including EVs but also plug-in hybrids) is up 33% from last year, to over 4.35 million vehicles through July. For reference, total EV sales in the U.S. last year were under one million. And while the overall export data from China looks grim, vehicle exports are positively booming, particularly to Southeast Asia and Latin America. In an act that might resonate in the decades to come as a symbol of the changing landscape, a global leader in EVs, China’s BYD, recently purchased an abandoned Ford factory in the Brazilian state of Bahia where it will produce EVs for that market.

But while the EV market is taking off, solar power and specifically Chinese solar is eating the world. The research group BNEF updated its expectations for global solar deployment to 392 GW for the year, fully 55% bigger than the previous record from last year (252 GW). More impressive is that over 200 GW of that number they expect to take place in China. Already in the first seven months of the year over 97 GW have been installed, including 19 GW in July alone. The production of solar panels is skyrocketing as well, at 276 GW through July, up a staggering 56% from last year.

Renewable energy investment is also reaching absurd heights. Like with many other records in the energy transition, there’s a category for China and one for the rest of the world. BNEF estimates $358 billion was invested in the first half of this year, of which China saw $177 billion in investments, with solar dominating.

The political scientist Deborah Seligsohn wrote a fascinating account of a recent visit to China, arguing that a vision of what our electrified future might look like is present in some Chinese cities today: electric high-speed rail, electric subways, electric two wheelers, electric delivery vehicles – all increasingly charged by renewable energy.

It’s clear that the China of the past is breaking, but far from auguring imminent collapse there are glimmers that what is emerging in its wake is green.

Read more about China:

China’s Solar Boom Is Big, Fast, and Unstable

You’re out of free articles.

Subscribe today to experience Heatmap’s expert analysis 
of climate change, clean energy, and sustainability.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Climate

AM Briefing: EPA Reportedly to Roll Back Power Plant Emission Regulations Today

On power plant emissions, Fervo, and a UK nuclear plant

EPA Will Reportedly Roll Back Power Plant Emission Regulations Today
Heatmap Illustration/Getty Images

Current conditions: A week into Atlantic hurricane season, development in the basin looks “unfavorable through JuneCanadian wildfires have already burned more land than the annual average, at over 3.1 million hectares so farRescue efforts resumed Wednesday in the search for a school bus swept away by flash floods in the Eastern Cape province of South Africa.

THE TOP FIVE

1. EPA to weaken Biden-era power plant pollution regulations today

EPA

Keep reading...Show less
Yellow
Politics

Big Tech Cares About Clean Energy Tax Credits — But Maybe Not Enough

Microsoft, Amazon, Google, and the rest only have so much political capital to spend.

Tech company heads.
Heatmap Illustration/Getty Images

When Donald Trump first became a serious Presidential candidate in 2015, many big tech leaders sounded the alarm. When the U.S. threatened to exit the Paris Agreement for the first time, companies including Google, Microsoft, Apple, and Facebook (now Meta) took out full page ads in The New York Times and The Wall Street Journal urging Trump to stay in. He didn’t — and Elon Musk, in particular, was incensed.

But by the time specific climate legislation — namely the Inflation Reduction Act — was up for debate in 2022, these companies had largely clammed up. When Trump exited Paris once more, the response was markedly muted.

Keep reading...Show less
Climate Tech

Fervo Snags $206 Million for Cape Station Geothermal

The new funding comes as tax credits for geothermal hang in the balance.

Fervo geothermal.
Heatmap Illustration/Fervo

The good news is pouring in for the next-generation geothermal developer Fervo Energy. On Tuesday the company reported that it was able to drill its deepest and hottest geothermal well to date in a mere 16 days. Now on Wednesday, the company is announcing an additional $206 million in financing for its Cape Station project in Utah.

With this latest tranche of funding, the firm’s 500-megawatt development in rural Beaver County is on track to deliver 24/7 clean power to the grid beginning in 2026, reaching full operation in 2028. The development is shaping up to be an all-too-rare phenomenon: A first-of-a-kind clean energy project that has remained on track to hit its deadlines while securing the trust of institutional investors, who are often wary of betting on novel infrastructure projects.

Keep reading...Show less
Green