China, a dominant industry in the low-carbon energy sector

Washington is particularly concerned about production "overcapacity" in China, where large subsidies go to solar, electric vehicles and batteries, jeopardizing the viability of these sectors among competitors.

US Treasury Secretary Janet Yellen plans to raise the issue in her talks with senior Chinese officials this week.

Here is an overview of Chinese power in low-carbon energy:

Solar Domination

China is the largest emitter of greenhouse gases responsible for global warming, such as carbon dioxide.

But it is also pumping billions into less polluting energy and will one day dominate solar supply chains, according to specialist data provider Wood Mackenzie.

According to a report from this analysis group, China will invest more than $130 billion in the solar industry in 2023.

With these funds, “China will represent 80% of global production capacities for polysilicon, wafer (wafer of semiconductor material), photovoltaic cells and modules from 2023 to 2026,” adds Wood Mackenzie, citing the components- keys in the manufacturing of solar panels.

And this worries the United States, which is trying to increase its own production capacities to be less dependent on China and to be able to lead its energy transition.

On Wednesday, Yellen told reporters that Washington was not ruling out imposing trade barriers to protect itself.

Electric vehicles

Chinese vehicle exports increased 57,9% over the past year, reaching a record 4,9 million units in 2023.

This boom is due in particular to a 77,6% jump in the so-called “new energy vehicles” (NEV) sector, which includes 100% electric automobiles and plug-in hybrids, with more than 1,2 million units, according to state media citing data from the China Association of Automobile Manufacturers (CAAM).

In 2023, according to official media, China accounted for more than 60% of global NEV sales and, that same year, production of these vehicles increased by 36% year-on-year to exceed 9,6 million. vehicles.

Expanding Batteries

The lithium-ion battery sector also saw expansion in 2023, with growth of 25% over the year, according to Chinese official media.

Exports of these products increased by 33% in 2023, also over one year, according to the press.

The analysis firm Economist Intelligence Unit even states that China represented 57% of global demand for lithium-ion batteries in 2022.

Observers warn, however, that the industry is overproduction capacity.

“Extreme imbalance”

Washington and Brussels are concerned about potentially seeing China strengthen its production capacities and increase its inventories to levels such that American and European companies would be unable to compete without trade barriers.

The “huge overcapacity of Chinese industries is not only a challenge for open economies, but poses the danger of provoking protectionist forces” in certain countries, said Joerg Wuttke, president emeritus of the European Chamber of Commerce in China.

Janet Yellen's visit this week is therefore crucial to getting the message across to Chinese officials, he told AFP.

China's industrial added value is about 30%, far above the level of the United States and other developed countries.

However, the world's second largest economy represents only 14% of global consumption, noted Mr. Wuttke, highlighting an "extreme imbalance".