A decade ago, glancing at Beijing skies would likely reveal a thick, smoggy haze. Today, that image has drastically changed. Between 2013 and 2023, the city’s average annual PM2.5 pollution levels plummeted by nearly two-thirds, dropping from 101.56 to 38.98.
This remarkable achievement highlights the transformative path China has taken toward sustainable development. Once a laggard in the global green race, China has emerged as a leader, redefining green technological prowess and setting an example of continuous, unprecedented growth.
As the epicenter of green technology production, China’s green tech sector invites a deeper exploration to uncover what it offers for international companies interested in entering the Chinese market and doing business in China. This comprehensive article delves into the dynamics of this thriving market, including:
- Overview of China’s Green Technology Market
- Primary Growth Drivers
- Prominent three Sub-Markets in the Chinese Green Tech Industry
- Supportive Government Measures
- Opportunities for International Companies
“The Tech Is Always Greener on the Other Side” – Overview of China’s Green Technology Market
“No country has positioned itself better to become the world’s renewable energy superpower than China,” said the International Renewable Energy Agency (IRENA) back in 2019. Fast forward to today, and the numbers firmly support this prediction, whether evaluating China’s domestic economy or its role in the global green tech industry at scale.
In 2023, China’s clean energy sector emerged as the most significant driver of its GDP growth, contributing 40% (approximately $1.6 trillion) to its economic expansion. Without this growth from the clean energy sectors, China would have likely missed its GDP growth target of 5%.
Globally, China’s dominance in clean technology investment is unparalleled. According to the International Energy Agency (IEA), in 2023 China accounted for a staggering 75% of global investment in clean tech manufacturing, and this trend shows no signs of slowing down in the near future. In 2024, China is estimated to invest $676 billion in clean energy — more than double the U.S.’s projected $315 billion and significantly ahead of the EU’s $370 billion. Furthermore, China is poised to maintain its leadership in the renewable energy sector, with nearly 60% of new renewable capacity expected to be installed globally between 2023-2028.
Primary Growth Drivers
China’s remarkable growth in green technology resulted from long-term planning and dedicated and consistent government support. At the heart of this agenda lie two foundational objectives that fuel one another.
Addressing China’s Pollution Crisis
The year 2006 marked a critical turning point in China’s environmental policymaking, when the country became the world’s largest emitter of greenhouse gases, overtaking the United States. This disgraceful title prompted the enactment of China’s landmark Renewable Energy Law, which set ambitious national decarbonization targets, established favorable feed-in tariffs, and elevated renewable energy to a central role in China’s energy mix. Essentially, this legislation marked the beginning of China’s journey toward global leadership in the green tech industry, with early signs emerging as far back as 2012.
Driving the Economy
For Chinese policymakers, green technology development is not only an environmental imperative, but a driver of economic expansion. As highlighted earlier, the booming green tech sector has become a cornerstone of China’s GDP growth. Notably, this economic momentum is fueled by both domestic consumption and global exports. For instance, in 2022 China supplied nearly 60% of the world’s installed wind turbines, and as the article will demonstrate, China also leads in several other critical green technology sub-sectors.
“The New Three” – Prominent Sub-Markets in China’s Green Tech Industry
China’s green revolution has redefined its export priorities, shifting focus from the traditional “Old Three” export pillars (household appliances, furniture, and clothing) to the emerging “New Three.” This transition highlights the country’s evolving economic strategy and commitment to sustainable industries. Interestingly, while total exports declined by 5.7% YoY in the first 10 months of 2023, exports in the “New Three” sectors soared by an 30%, reaching $128 billion within the same period.
So, what are the New Three?
Electric Vehicles (EV)
The Chinese automotive industry deserves a separate discussion, but its EV sub-sector stands out as a pivotal force, leading the “New Three” in export value. Chinese EVs have achieved significant market penetration worldwide while also gaining popularity in the local market. According to the IEA, over 50% of EVs sold globally in 2023 were from Chinese manufacturing. Domestically, EVs now account for approximately one-third of total car sales in China, surpassing the country’s 2025 national target years ahead of schedule.
This success is largely attributed to supportive government policies. Between 2009-2022, the Chinese government allocated more than 200 billion RMB ($28 billion) to the EV industry through subsidies and tax incentives. Notably, the Chinese EV brand BYD is now recognized as the world’s largest EV manufacturer, solidifying the country’s position as a global EV market leader.
For deeper insights into China’s EV market size and revenue projections, explore our comprehensive review: “Driving Forward: Exploring China’s Dynamic Automotive Market.”
Lithium-Ion Batteries
EVs rely heavily on lithium-ion batteries, and in this sector too, China’s production capacity is unmatched. In 2021, China held the largest EV lithium-ion battery market share, producing about 80% of the world’s EV batteries. By 2023, China’s battery production alone was sufficient to meet the global demand for both EVs and stationary energy storage.
China’s leadership in lithium-ion battery development extends beyond EV applications. In 2023, its production capacity was over 10 times greater than that of the United States, the second-largest producer. As of 2024, China controls about 70% of the global manufacturing capacity for lithium-ion batteries, with its domestic market projected to reach 150 billion RMB by year-end. By 2030, China is expected to manufacture around 86% of the world’s lithium-ion batteries.
Given this incomparable manufacturing capability, it’s no surprise that lithium-ion batteries have become a key export for China. In 2023, the country’s global exports of lithium-ion batteries reached $65 billion, an increase of nearly 400% compared to pre-COVID levels in 2019. More than half of these exports went to the European Union and the United States-Mexico-Canada (USMCA) trade zone, accounting for 70% of all U.S. lithium-ion battery imports that year.
Solar Panels (Photovoltaics)
Solar energy emerged as the largest driver of China’s clean-energy growth in 2023, with its total market value surging by 63% YoY, rising from 1.5 trillion RMB ($207.01 billion) in 2022 to 2.5 trillion RMB ($345.03 billion) in 2023. This remarkable growth was powered by a myriad of government-led initiatives alongside consistent and generous government investment. Specifically, over the past decade, China has poured more than $50 billion into photovoltaics (PV) supply chain capacity — ten times the investment made by all of Europe.
With substantial government support, abundant solar energy resources, and low production costs, China has solidified its position as the world’s leading producer of solar PV cells, commanding over 80% of all manufacturing stages, from polysilicon production to module assembly. The IEA highlights China as the most cost-competitive market for solar PV manufacturing, with production costs 10% lower than India, 20% lower than the United States, and 35% lower than Europe.
On the export front, Chinese companies captured over 80% of the global PV export market in 2023. The IEA projects that by 2025, China will supply nearly all critical components required for global PV module production.
Source: IEA / The Diplomat
Source: Solar Power Europe via China Briefing
Supportive Government Measures
As emphasized throughout this article, China’s remarkable growth in green technology owes much to robust government support. This backing spans both national and local levels to ensure the realization of China’s economic and environmental objectives. The frequent and increasing inclusion of green tech in government documents and policy debates only underscores its critical priority in China’s development agenda.
Source: The Mercator Institute for China Studies (MERICS)
The Renewable Energy Law mentioned earlier set the stage for China’s clean energy trajectory, complemented by targeted initiatives like the “New Energy Vehicle Industry Development Plan (2021-2035),” the “Whole-County Distributed Solar” program, and the “Clean Energy Base” strategy, which promotes nationwide solar panel installations. Local governments reinforce these efforts with region-specific measures, such as Shenzhen’s financial support for the new energy vehicle supply chain and Shanghai’s roadmap to accelerate regional new energy vehicle growth.
The government support extends beyond increasing green tech development capacity, to actively fostering systemic demand. Recent plans, such as the 2024 Renewable Energy Substitution Initiative, introduce measures like peak pricing and market adjustments to encourage more efficient energy use. In addition, generous tax breaks and purchase subsidies aim to make green technologies more financially attractive to a larger consumer base. For example, a 520 billion RMB ($72.3 billion) tax incentive package offers purchase tax exemptions for new energy vehicles through 2027.
Opportunities for International Companies
While China’s green tech market may appear mostly dominated by domestic players, international companies should not be discouraged from tapping into this expansive and diverse landscape. Foreign companies can effectively participate in the Chinese market through two primary approaches.
One viable strategy is collaborating with Chinese companies by offering complementary specialized technologies (rather than competing directly), particularly in areas where China may lack expertise or face gaps between supply and demand. For instance, foreign companies could support the expansion of China’s EV charging network by providing advanced solutions such as wireless and mobile charging technologies or by enhancing operational capabilities through station management systems and smart charging infrastructure.
The second strategy involves establishing a local entity in China (Wholly Foreign-Owned Enterprise – WFOE), which can directly benefit from the advantages of manufacturing in China. Setting up a WFOE in China allows businesses to leverage preferential policies, access a large pool of skilled labor, gain greater control over supply chains, and scale production fast to meet high demand. Additionally, this approach provides rapid access to both local customers and global markets, ensuring long-term competitive advantages in one of the world’s fastest-growing green technology sectors.
It’s noteworthy that the 2022 Catalogue of Encouraged Industries for Foreign Investment explicitly highlights opportunities in areas such as wireless charging technologies, charging station construction, and integrated solar power generation solutions.
So, What Does the Chinese Green Technology Market Have to Offer?
China’s green technology sector is more than a market—it’s an ecosystem. This ecosystem comprises individual sub-markets, each a powerhouse in its own right, driven by strategic planning, a forward-looking vision, and robust implementation. Despite the market’s competitive nature and potential political tensions, international companies with relevant solutions that align with China’s green ambitions can capitalize on advantageous market conditions:
- Immense size
- Access to a vast consumer base
- Strategic access to critical rare minerals essential for clean tech manufacturing
- Optimistic market and sub-market growth forecast
- Low production costs
- Favorable government policies
- Additional incentives for companies relocating manufacturing to China
Success in this dynamic market can be achievable through multiple operational strategies, depending on the company’s specific goals and resources, and provided they are carefully planned and executed.
At PTL Group, we are here to help. With 25+ years of experience assisting global firms in establishing presence in China, and empowered by professional global and China-based teams, we have the resources to support your business endeavors in the country. Get in touch today to explore how we can facilitate your entry and growth in the prosperous Chinese green tech market.
