By Equities First
China is leading the world in clean energy investment. In 2022, China invested $546 billion in renewable energy sources like solar and wind, electric vehicles, and battery technologies. That accounted for nearly half of the entire world’s low-carbon spending that year. The United States, by comparison, invested just $141 billion.
Manufacturing capacity for cleantech is being rapidly built out in China, establishing integrated, efficient value chains for making things like solar panels and battery cells. China’s $79 billion contribution accounted for more than 90% of low-carbon manufacturing investment in 2022.
This dominance in cleantech manufacturing capacity is the result of a national commitment by China to achieve carbon neutrality by 2060, with emissions peaking around 2030. Official plans call for staggering investment: around $327 billion annually through 2030, and then nearly $600 billion per year in the following three decades to reach net zero emissions.
Yet, amid this sustainability push, traditional financing channels have been somewhat constrained by higher interest rates. With the international community shining a spotlight on the need to mobilize private capital to address climate challenges, entrepreneurs and professional investors are looking for a viable path to invest in the long-term potential of China’s energy transition, electric vehicles, and other sustainability-focused business endeavors.
EquitiesFirst’s equities-based financing could provide a foundation for this sort of sustainable business growth. The company offers financing at lower interest rates in exchange for equity in assets such as shares or real estate. This enables asset holders like entrepreneurs and professional investors to leverage the value of assets into liquid capital that’s freed up to support strategies like investing in sustainable development and alternative energy.
The Growth of the Chinese Clean Energy Market
For China, the world’s second-largest economy, pursuing a green development model in recent years has been both an existential necessity and an economic opportunity. The impacts of climate change, such as increasing droughts, had already begun disrupting clean energy supply chains within China in 2022.
But those mounting challenges did nothing to slow investment — in fact, they appeared to accelerate it. Clean energy investment growth in China accelerated to a 40% year-over-year clip in 2023, reaching roughly $890 billion.
In 2023, renewables and cleantech drove $1.6 trillion in economic activity in China, a 30% increase over the previous year. Clean energy, in other words, was the single largest driver of gross domestic product growth in China, accounting for 40% of overall economic expansion.
The scale of the country’s investment dwarfed global figures. China’s $890 billion in clean energy capital expenditure last year nearly matched the estimated total global investment in all fossil fuel supplies worldwide. China’s renewables outlay was on par with the GDP of Switzerland or Turkey.
Solar, EVs, and Batteries
Where exactly is all this investment going? Three industries stand out: solar power, battery production, and wind power. These three interrelated industries saw spectacular growth in 2023, spurred on by policies aiming to accelerate wind and solar installation, promote electric vehicle adoption, and build domestic battery supply chains.
Solar was the biggest driver of clean energy expansion in China last year. The sector grew by 1 trillion yuan (approximately $141 billion) in fresh investments, goods, and services. Its valuation surged by 63% year on year, climbing from 1.5 trillion yuan in 2022 to 2.5 trillion yuan in 2023.
Growth in battery manufacturing has been equally meteoric. China now accounts for over 80% of the world’s lithium ion battery manufacturing, increasing its capacity to accommodate growing demand for EVs. The Chinese battery industry is able to take advantage of lower production costs; according to the International Energy Agency, factories in China can cost 70% to 130% less than factories in the U.S. and Europe.
Wind power manufacturing was the third critical area, as China rushed to construct a vast new offshore wind industry almost from scratch in order to achieve its near-term climate goals. China accounted for 65% of global wind capacity in 2023.
Many analysts have also pointed to a burgeoning opportunity in green hydrogen. While still a relatively small sector, green hydrogen derived from renewable energy has been gaining traction worldwide as a potential solution for decarbonizing hard-to-abate sectors like steel and fertilizers. China recently announced plans to produce 200,000 tonnes of green hydrogen annually and deploy 50,000 hydrogen fuel-cell vehicles by 2025.
Factors Driving Chinese Investment
There are several underlying factors driving growth and investment in sustainability and cleantech in China.
First and foremost has been the unwavering policy focus on developing renewable energy as a core economic priority. Beijing’s attention, at least for now, seems laser-focused on hitting near-term climate targets in a way that’s created a powerful economic tailwind.
Second was the availability of low-cost capital from state-owned investment funds and banks as well as private sector firms like EquitiesFirst. Financing clean energy development can be easier in China than in the West, where capital has been more scarce thanks to high interest rates, and clean energy development has been more uneven in recent years.
Finally, China’s control over mineral supply chains and refining capacity for key clean energy inputs like lithium, nickel, cobalt, and polysilicon have given some firms a structural cost advantage over foreign competitors. This has allowed renewable equipment and EV manufacturing to achieve greater scale and affordability.
Equities-Based Financing for Chinese Clean Energy
Some analysts believe China’s green energy juggernaut could present compelling opportunities for equities-based financing. This approach involves entrepreneurs and professional investors accessing low-interest liquid capital backed by equity in their existing, often illiquid, assets.
For example, EquitiesFirst issues financing as a percentage of the appraised value of an asset, typically around 60% to 70% of the valuation. Interest rates are maintained at modest levels, around 3% to 4%, lower than conventional financing costs. Once funded, EquitiesFirst takes custody of the asset, supporting the long position in its portfolio until the principal is repaid. At that point, the client recoups their original equity stake, keeping any appreciation upside and dividends from the original stake.
Such financing methods could provide a way for investors to gain more exposure to the fast-growing renewable sectors in China without having to sell off existing positions. That would allow portfolios to maintain diversification while also letting investors take advantage of new opportunities in the rapidly shifting market for cleantech manufacturing and installation, a market that demands the flexibility afforded by liquid capital.
China has established itself as a global leader in clean energy manufacturing over the past decade. And with climate change increasingly disrupting business as usual, the coming decades may see even more urgency and capital flow into electrifying transportation and shifting energy generation to carbon-free sources.
Entrepreneurs and professional investors will look to innovative financing methods to free up the capital needed to support this boom, and equities-based financing may be an attractive option for those who need immediate access to capital but want to maintain their long-term positions.
For more information, please visit www.equitiesfirst.com/.
Disclaimer
This Document is intended solely for accredited investors, sophisticated investors, professional investors, or otherwise qualified investors, as may be required by law or otherwise, and it is not intended for, and should not be used by, persons who do not meet the relevant requirements. The content provided herein is for informational purposes only and is general in nature and not targeted to any specific objective or financial need. The views and opinions expressed in this Document have been prepared by third parties and do not necessarily reflect the views and opinions of EquitiesFirst. EquitiesFirst has not independently examined or verified the information provided herein, and no representation is made that it is accurate or complete. Opinions and information herein are subject to change without notice. The content provided does not constitute an offer to sell (or solicitation of an offer to purchase) any securities, investments, or any financial products (“Offer”). Any such Offer shall only be made through a relevant offering or other documentation which sets forth its material terms and conditions. Nothing contained in this Document shall constitute a recommendation, solicitation, invitation, inducement, promotion, or offer for the purchase or sale of any investment product by First Holdings, LLC or its subsidiaries (collectively, “EquitiesFirst”), nor shall this Document be construed in any way as investment, legal, or tax advice, or as a recommendation, reference, or endorsement by EquitiesFirst. You should seek independent financial advice prior to making an investment decision about a financial product.
This Document contains the intellectual property of EquitiesFirst in the United States and other countries, including, without limitation, their respective logos and other registered and unregistered trademarks and service marks. EquitiesFirst reserves all rights in and to their intellectual property contained in this Document. The Document should not be distributed, published, reproduced or otherwise made available in whole or in part by recipients to any other person and, in particular, should not be distributed to persons in any country where such distribution may lead to a breach of any legal or regulatory requirement.
EquitiesFirst make no representation or warranty with respect to this Document and expressly disclaim any implied warranty under law. You acknowledge that EquitiesFirst is not liable under any circumstances for any direct, indirect, special, consequential, incidental, or punitive damages whatsoever, including, without limitation, any lost profits or lost opportunity, even if EquitiesFirst has been advised of the possibility of such damages.
EquitiesFirst makes the following further statements that may be applicable in the stated jurisdiction:
Australia: Equities First Holdings (Australia) Pty Ltd (ACN: 142 644 399) holds an Australian Financial Services Licence (AFSL Number: 387079). All rights reserved.
The information contained on this Document is intended for persons located in Australia only and classified as a Wholesale Client only as defined in Section 761G of the Corporations Act 2001. The distribution of information to persons outside this criteria may be restricted by law and persons who come into possession of it should seek advice and observe any such restriction.
The material contained in this Document is for information purposes only and should not be construed as an offer or solicitation or recommendation to buy or sell financial products.
The information contained in this Document is intended to be general in nature and is not personal financial product advice. Any advice contained in the Document is general advice only and has been prepared without considering your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. You should seek independent financial advice and read the relevant disclosure statements or other offer documents prior to making an investment decision about a financial product.
Hong Kong: Equities First Holdings Hong Kong Limited holds a Hong Kong Securities and Futures Commission Type 1 License and licensed in Hong Kong under the Money Lenders Ordinance (Money Lender’s Licence No. 1780/2022). This Document has not been reviewed by the Hong Kong Securities and Futures Commission. It is not intended as an offer to sell securities or a solicitation to buy any product managed or provided by Equities First Holdings Hong Kong Limited and is only intended for Professional Investors. This document is not directed to individuals or organizations for whom such offers or invitations would be unlawful or prohibited.
Korea: The foregoing is intended solely for professional financial consumers, professional investors or otherwise qualified investors who have sufficient knowledge and experience in entering into securities financing transactions. It is not intended for, and should not be used by, persons who do not meet that criteria.
United Kingdom: Equities First (London) Limited is authorised and regulated in the UK by the Financial Conduct Authority (“FCA”). In the UK, this Document is only being distributed and made available to persons of the kind described in Article 19(5) (investment professionals) and Article 49(2) (high net worth companies, unincorporated associations etc.) of Part IV of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (‘’FPO’’) and any investment activity to which this presentation relates is only available to, and will only be engaged in with, such persons. Persons who do not have professional experience in matters relating to investment or who are not persons to whom Article 49 of the FPO applies should not rely on this document. This Document is only prepared for and available to persons who qualify as Professional Investors under the Markets in Financial Instruments Directive.
©2024 Equities First Holdings Hong Kong Limited. All rights reserved
Contact:
