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Macro & Investment Insights

China: Decarbonizing the economy

  • 08 April 2021
  • 5 min read

Key points

  • A successful transition to carbon neutrality will require China to undertake transformational changes in its economic and energy systems over the coming decades
  • Slower economic growth won’t be enough to curb carbon additions. Instead, China needs to rebalance its economy towards the energy-lite services sector and shift its energy use away from fossil fuels
  • Overhauling the world’s largest energy system will require trillions in investment. While China has led the world in building renewable power capacity, significantly more investments are needed to meet the net-zero goal
  • The green transformation will create winners and losers. The renewable energy and electric vehicle industries will benefit from a strong influx of capital and favourable regulatory changes. However, traditional industries that rely on fossil fuels will face a grim future, suffering concentrated, as opposed to systematic damages
  • The net effect of China’s decarbonisation drive is hard to quantify, although both positive and negative impacts will discernibly be large and long lasting. Beyond the domestic implications, the changing needs of the world’s largest energy user will have far-reaching ramifications for the rest of the world
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