What will China’s upcoming Five-Year Plan Mean for Green Business?
A Closer Look at the opportunities in China’s 14th Five-Year Plan
China’s 14th Five Year Plan will be published this March and is extremely important to watch, especially for Europe’s clean tech companies, who may have a large role to play in China’s green transition. Some companies in the energy sector even expect 2021 to be a golden year .
Sustainability and improving the environment is expected to be one of the key priorities in the plan. As the single most important document on China’s future economic and social development, the plan will have a huge impact on the decisions of local governments and markets throughout China, and the plan will be central to China’s recently announced goal of becoming CO2-neutral by 2060.
As China has just overtaken US as Europe’s largest trading partner, it is ever more important that European companies are aware of the opportunities and challenges that the plan can offer.
The five-year plan means opportunities
While many analysts are sceptical about the prospects of China’s relationship to the outside world following developments such as the US-China trade war, the proposal of the 14th five-year plan (in Chinese) indicate something completely different.
From the published communiqué it is clear, that the Chinese economy will need know-how and investment from clean tech companies, whether that is renewable energy, water cleaning, air purification and green urbanization.
When the 14th five-year plan is released this March, the Chinese government will give every province and county specific key performance indicators (KPI’s) on China’s green transition that they will have to meet. Meeting the KPI’s is important to enhance one’s future career opportunities, and officials will thus be on the look for companies that can help them meet these KPI’s, which many European companies will be well-equipped to do.
fierce competition
The market with local Chinese companies in the green transition will be fierce and difficult. The local companies often have the means in terms of capital and relationships with local governments to win the projects in China. They also have access to an incredibly fast and dynamic supply chain.
While European market leader solutions may in some cases be superior, they may be too expensive, not be able to scale fast enough or not work in a local Chinese context. The companies that can really grasp the opportunities of China´s green transition are the ones who seize the opportunity to deliver components and form strategic alliances with local key players.
Watch water and wind
China has been the world´s largest emitter of CO2 since 2006, currently contributing 27 percent of total global emissions, and half the country´s energy still come from coal. The goal to become carbon-neutral by 2060 means that China has to ramp up in solutions within clean energy and environmentally friendly solutions fast. Among others, it will be relevant for companies in water and wind to look for the opportunities.
Offshore wind energy
China is gearing up its need for offshore wind solutions According to the Global Wind Energy Council, China will have the world’s largest offshore wind capacity by 2030, and currently has over 4,6 gigawatts of offshore wind power under construction (approximately 15% of all offshore wind that exists today). China’s rapid development requires an increased focus on quality and know-how, which is where European companies with long histories in the offshore wind sector, come into the picture.
The China-Britain Business Council, which is the UK’s national business network promoting trade and investment with China, expects that British companies can play a major role in China’s offshore wind industry. The UK built half of Europe’s offshore wind power in 2017, and with China expected to become the largest market for the offshore wind industry by the end of the decade, there are many opportunities for collaboration.
UK’s exports has seen a tripling in goods and service exports to China over the last ten years, and it is therefore not strange that UK has teamed up with China to establish the China Offshore Wind Industry Advisory Group which promotes commercial, innovation and policy exchanges between both countries on offshore wind. Following the proposal of the 14th five-year plan, more meetings between the UK and China side have been scheduled to discuss potential collaboration.
Other European companies likely to benefit from the plan, include Danish wind turbine manufacturer, Vestas, who have had smaller offshore projects in the highly competitive industry where local Chinese companies are dominating as well as the Dutch company, Shell, which provides lubricants for China’s largest turbine manufacturer, Goldwind .
Water solutions
China’s increasing urbanization also means the need for clean water and sanitation, and these developments continue to offer opportunities for European companies. For instance, the Danish multinational company Danfoss, which makes valves and fluid-handling products expects to see double-digit growth rates in China, not only next year, but many years ahead. Even during 2020, where corona has set back most companies, Danfoss saw a growth of 10% in China.
In a recent article (in Danish) about Danfoss’ expectations to the 14th five year plan, Lars Tveen, the President of the Heating Segment at Danfoss, said that “ (…) the five-year plan focuses on a green future, among other things: clean air, food security and urbanization. Here, Danfoss has solutions that match China's needs, and therefore we expect not just a golden year in 2021, but an outstanding number of golden years in China with double-digit growth rates” [Translated from Danish].
Read the blueprint in March to stay ahead
Companies that seek opportunities within the green aspects of the plan, need to look for the documents and interpretations that address the potential for their respective industry. Understanding China’s new economic and social direction will be extremely important to navigate successfully in China and understanding the 14th five-year plan is key . Stay tuned!
Learn more about the new five-year plan in our upcoming session on March 23 with China’s leading green pioneers Ma Jun.