China’s green economy will boost growth in 2024 and 2025. In 2023 the clean energy sector emerged as a key driver of gross domestic product (GDP) growth, as government policy pivoted to making China the global powerhouse for green economy products.
The pivot was aimed at compensating for the downturn in real estate. The move meant that the green economy accounted for some 40% of 2023’s economic expansion. The green economy is now estimated to be a $1.6 trillion (R29trl) behemoth.
This pivot highlights that the green transition is not an obstacle, but a new engine for growth. President Xi Jinping has emphasised that green development is integral to the broad goal of “high-quality development,” positioning it as a core driver of China’s economic future and this policy directive was re-iterated at the 16th BRICS Summit in Kazan, Russia.
The China Daily newspaper said Xi told the summit that China was “willing to expand cooperation with BRICS countries in green industries, clean energy and green mining”.
“Green is the background colour of this era. BRICS countries should actively integrate into the global green and low-carbon transformation,” Xi said.
The benefits of moving to a green economy is not confined to China as a ministerial-level meeting on energy in the Belt and Road Initiative (BRI), convened in China by the National Energy Administration (NEA), resulted in an action plan for “green energy cooperation” between 2024 and 2029 that would involve BRI member countries. The action plan would enhance efforts of BRI countries’ ability to guarantee a secure supply of green energy, particularly through cooperation on hydrogen, new energy storage and advanced nuclear power, as China promotes small modular nuclear power plants.
China’s State Council approved 11 new nuclear reactors for construction in one session in August. The total power generating capacity of the approved projects is about 13 Gigawatts (GW) or just more than South Africa’s current total renewable energy capacity. With 10 reactors approved in both 2022 and 2023, the next batch of nuclear power capacity is getting off the ground and adding to China’s clean-energy growth and will provide clean energy base load secure electricity supply as China boosts investments in energy-intensive artificial intelligence (AI) and data centres.
The Chinese government set a growth target of around 5% for this year after a 5.2% increase in 2023. The government said it would stabilise the property sector and resolve the problems with local government debt. The Chinese government has a good track record of reaching the annual growth targets which gives comfort to the rest of the world, as China has consistently contributed around a third of global growth annually since the 2008 Global Financial Crisis.
More than 120 countries, or almost two-thirds of the world, count China as their major trading partner, so a strong Chinese economy lifts other countries such as South Africa. China is South Africa’s largest trading partner. In 2022, China accounted for 9.4% of South Africa’s exports and 20.2% of South Africa’s imports, according to the South African Revenue Service (Sars). In rand terms, exports to China totalled R188.4 billion, while South Africa imported R367.4bn. In the first half of this year, China imported $17.3bn of goods from South Africa, a year-on-year (y/y) increase of 10.7%.
Minister in the Presidency for Planning, Monitoring and Evaluation, Maropene Ramokgopa is leading a South African government delegation on a visit to the People’s Republic of China to see how China is using the pivot to a green economy to drive growth.
Investment in renewable energy is a major driver of fixed investment in South Africa and the delegation could learn lessons from Chinese institutions and enterprises as to how to achieve a Just Energy Transition.
Chinese industries associated with green economy growth include sectors like generative AI systems, semiconductors and renewable energy products such as solar panels and wind turbines.
The latest data from the NEA showed that solar generation rose by 44% y/y in the third quarter, while wind generation increased by 24%, with both power sources continuing to see record-breaking additions of new capacity. Hydropower generation was up 11% compared with last year’s drought-affected figures, while nuclear power grew by 4% y/y.
Helmo Preuss: Economist at Forecaster Ecosa.
BUSINESS REPORT