Green transition boosts global investment prospects

A key priority for China's two sessions, the annual meetings of the nation's top legislative and political advisory bodies, is the continued progress of the country's economy, especially for the next era of high-quality development.

Beyond the discussion at these meetings, the sessions' outcomes are crucial guideposts for international investors. Notably, deliberation on the renewable energy sector will have drawn close attention, as it will have an impact on global business participation in the immediate future.

As the United States doubles down on fossil fuel production and rolls back its clean-energy agenda, China is quietly establishing itself as a global leader in sustainable energy, particularly through renewable power sources.

The new reframing by China is based on new quality productive forces, as articulated in the latest 15th Five-Year Plan (2026-30). Among green initiatives across multiple industries, the renewable energy sector, in particular, stands out as a core defining pillar for China's next phase of economic advancement.

The production of such energy by China, which is already a foremost player in renewable energy, has driven down costs and accelerated global deployment. The nation has assumed a pivotal role in the global clean energy supply chain, especially in solar and related products. Furthermore, its technological leadership in energy storage systems like batteries has significantly spearheaded the overall green energy transition.

The clean energy emphasis has also led to corresponding benefits to the economy by adding green jobs, as China accounted for half of the world's renewable energy jobs in 2024. So it is not just about industrialization and investment, but also about bringing the real, direct benefits of employment to the people.

At the same time, the energy transition has motivated developments in sustainable finance through global alignment of regulations and standards, thus offering more opportunities throughout the global economy. The harmonization of finance will invigorate options for cross-border business collaborations.

China is rapidly building itself as a renewable-energy-driven economy in which electricity is increasingly generated from renewable sources such as solar, wind and hydro power. It has already built more wind and solar capacity than any other country. Each year, China contributes more than half of the world's newly added renewable capacity. In addition, renewable resources now provide approximately one-third of the country's electricity production, and this will rise even more rapidly in the coming years.

Renewable energy will thus be a formidable engine of economic growth, having contributed roughly 11.4 percent of China's GDP in 2025, overtaking real estate as a key growth engine. Furthermore, the green energy sector drove more than 90 percent of China's investment growth last year. In fact, the "new three" sectors — electric vehicles, lithium-ion batteries and solar energy — drive substantial investment, job creation and export revenue.

For international investors, the renewable sector presents real opportunities for participation and opens concrete channels of involvement in this next productivity engine.

One route is direct investment in the hardware of the transition — high-end components, storage systems, grid technologies and industrial digitalization tools.

Another is partnering with Chinese enterprises through joint ventures and R&D centers, marrying foreign know-how in areas such as power electronics or system integration with China's scale and manufacturing depth.

Financial investors can also gain exposure through listed equipment makers and project developers, as well as a growing stock of green and sustainability-linked bonds funding renewable and grid upgrades.

Naturally, investors may be worried about any potential risks that accompany investments in the renewable energy sector.

From the regulatory perspective, much has been rationalized and harmonized in terms of the legal framework for foreign investments. Restrictions have been significantly reduced. For example, the approach has shifted away from a "positive list" to a "negative list" — which is based on the principle that any sector not explicitly listed is open to foreign investment without restrictions — so fewer sectors face prohibitions. Renewable energy investment is generally not on China's negative list for foreign investment, but instead is heavily encouraged, and there are no foreign ownership restrictions since the new foreign investment law of 2020.

The rationale behind anchoring new quality productive forces in renewables and electrification is rooted in hard domestic imperatives — cutting urban air pollution, reducing dependence on imported fossil fuels, and building exportable industries that can thrive in a sustainable world. These drivers will outlast cyclical downturns in product prices or even the latest global tariff tensions.

The real question for global investors is how to position effectively within China's context and plans. The old era of undifferentiated restrictions for foreign participation has ended. The next phase will reward those who can navigate China's regulatory and market transitions and focus on niches where technological synergies can be achieved.

In a world where one superpower is re-entrenching fossil interests and the other is trying to turn green electrons into a new growth engine, international capital will have to decide which model is better aligned with the future that it is ultimately financing.

The author is director of the Centre for Governance and Sustainability at National University of Singapore's Business School.

The views do not necessarily reflect those of China Daily.