Green capital tsunami: China’s >$100 billion outbound cleantech investment since 2023 turbocharges global energy transition
Treasurer’s visit ignites potential for new green partnership with China
Australia is at a cross roads in the global energy transition. As nations race to secure critical minerals – the lifeblood of clean energy technologies –alliances are forming, and supply chains are shifting. For Australia to lead in this decarbonising world, it’s not just about joining new coalitions; it’s about partnering with the global cleantech powerhouse, China.
China’s dominance in decarbonisation isn’t just a reality; it’s an opportunity. With its unmatched leadership in clean energy, Australia’s path to a green future can thrive by strengthening its climate partnership with China.
China leads the world in almost every aspect of decarbonisation – in R&D, investment, innovation, manufacturing, installation and exports of key clean energy technologies spanning solar, wind, batteries, new energy vehicles (NEVs), critical minerals refining, grids, hydro and green hydrogen. Its domestic cleantech investment is double that of the EU and the US.
A new report by Climate Energy Finance (CEF), an Australian think-tank, highlights how China is also increasing its outbound foreign direct investment (ODI) into cleantech globally. This capital is flowing into Europe, Asia, Africa, and the Americas, leveraging China’s financial strength and technical expertise in energy transition materials supply chain, clean energy manufacturing and generation, and NEVs. CEF identifies that since 2023, Chinese outbound cleantech ODI reached an astounding US$100 billion.
This growing investment offers Australia a unique chance to partner with the world’s cleantech giant while boosting its own sovereign capabilities in the moving up the supply chain and capturing more value onshore. But to unlock this potential, we need investment capital.
Despite the global surge, Chinese ODI into Australia was at a multi-decade low at only US$613m in 2023. While 2024 has seen a rise in proposed and underway Chinese corporate investments in greenfield renewable energy and battery projects in Australia, there is much more potential waiting to be unlocked.
Australia’s relationship with China is key here. Encouragingly, during his trip last week to Beijing, Australia’s Treasurer Jim Chalmers acknowledged this mutual interest in green steel production – a sector with significant mutual benefit. As the world’s top iron ore exporter, Australia could use its abundant renewable energy to before exporting it to China, the world’s top steel producer. This would secure long-term revenue for Australia, while helping China decarbonise its steel supply chain.
In addition to iron and steel, there is also great potential for co-investment in clean energy infrastructure, onshore value-adding of energy transition materials such as critical minerals, and cleantech supply chain manufacture, with appropriate safeguards such as foreign ownership limits to mitigate risks.
China’s leadership in cleantech offers Australia a chance not only to secure investment but to work together to address the climate challenge, benefitting both nations and the world.
The time to act is now. Australia has the resources and capability, but without the right environment to attract these technologies and solutions, those investments will go elsewhere.
The CEF report makes a number of recommendations key to incentivising Chinese private investment in partnership with Australian firms here, while protecting and securing our national strategic interests.
It suggests that, as strategic national-interest priority, Australia clarify the rules of engagement with the Foreign Investment Review Board, so that Chinese firms looking to co-invest have transparent, stable, welcoming investment policy frameworks and guidelines to work with; and that the federal government task federal and state investment bodies to communicate FIRB rules to prospective Chinese investors, assisting them with market entry strategies.
In addition, it calls for the establishment of a strategic critical minerals reserve trading fund to underwrite new investment in mining and extraction onshore. This would complement Australia’s participation in international alliances focused on securing critical minerals supply chains, while ensuring Australia captures greater value domestically.
The report also calls for the establishment of an Asian Carbon Border Adjustment Mechanism (CBAM), which would incentivise renewable-powered production processes, such as green iron. A ‘green premium’ pricing mechanism could accelerate investment into decarbonising industries and, fostering collaboration with China and speeding up Australia’s pivot from its historic “dig-and-ship” based economic model towards future-facing industries.
China’s cleantech leadership offers Australia an unparalleled opportunity– not just to attract investment, but to work together to address the shared challenge of climate change. By aligning our strengths in cleantech and renewable energy, we can confront the climate crisis and unlock vast opportunities, securing Australia’s prosperity in a decarbonising world.
