China’s renewable energy installed capacity exceeded 1.45 billion kilowatts in 2023, accounting for more than 50% of the country’s total installed power generation capacity, according to data released by the National Energy Administration. Photo: TUCHONG

Today, the Chinese economy is facing new challenges both domestically and internationally, making it imperative to understand China’s historical development opportunities from a strategic perspective. With the intensification of the global climate crisis and major breakthroughs in big data and artificial intelligence technologies, human society is undergoing the most profound paradigm shift since the Industrial Revolution.

Since the beginning of the reform and opening up, China has learned from industrialized nations and applied development strategies under a traditional industrialization model, creating miraculous economic growth and sustaining it for over 40 years. However, China’s comprehensive green transformation of economic and social development will provide the nation with a historic opportunity to rapidly accelerate once more, “overtaking on a curve.” China is expected to unleash the enormous potential of green development by deepening policy reforms, thus creating new growth miracles.

China’s advantages in green transformation

After the Industrial Revolution, Western developed countries achieved modernization through traditional industrialization models. Since then, the concept of modernization has been based on development models piloted by Western developed countries. However, while this model has brought about tremendous leaps in material productivity, it has also triggered global ecological environmental crises. China’s reform and opening up has created unprecedented development miracles in human history, but these miracles are largely built on the foundation of traditional industrialization models. China must now transcend development models that take a toll on the ecological environment to create new driving forces for China’s development.

The global consensus and action on carbon neutrality signal the end of the traditional industrial era and the advent of a new green development era. In this context, China could potentially achieve the goal of “overtaking on a curve” through green transformation, creating new development miracles using a Chinese-style modernization strategy, ultimately transitioning from “learning from the West” to “leading the world.” New energy vehicles provide a potential example. If China were to follow the traditional automotive industry development path, it would be impossible to surpass the Western automotive industry with a century-long history. 

Today, China already has its foot on the accelerator, “overtaking [the automotive industry] on a curve” in the field of new energy vehicles. Since 2015, China has become the world’s largest market for new energy vehicles, with annual production, sales volumes, and cumulative holdings accounting for approximately half of the global total. Since 2021, against the backdrop of China’s slow economic growth, new energy vehicles have experienced explosive growth. 

In the meantime, China has become a leader in the global renewable energy sector. In 2023, global renewable energy installed capacity increased by 510 million kilowatts, with China’s contribution exceeding 50%. It is expected that by 2028, China’s renewable energy generation will account for 60% of the global total.

This early success makes it clear that green development—through a comprehensive green transformation of economic and social development—has become the key to China’s upcoming economic transition. China has unique advantages in advancing green and low-carbon development, including the capacity to implement the new development philosophy accurately and comprehensively, strong government execution, stability and consistency of macro policies, a unified large market, complete industrial chain, and strong supporting capabilities. 

In contrast, though Western developed countries have their own advantages in promoting a green transformation, they all have undeniable shortcomings. For example, the United States has not yet reached a universal consensus on climate change and a domestic green transformation, nor can it guarantee the stability and consistency of its macro policies. Its climate policies often undergo significant changes with party turnovers, making it difficult to form stable market expectations and increase green investments domestically. Meanwhile, in its current state, the nation exerts negative impacts on global climate change mitigation efforts. The European Union has the motivation to transition to green development, but its fragmented consumer market, diverse policy arrangements, and institutional barriers stand in the way of a complete adaptation to the requirements of green transformation.

Breaking free from traditional thinking

Going forward, how we perceive and approach the shift in development paradigms is the key to seizing historic opportunities. The different perspectives and mindsets people take will affect their actions. To say the least, we need to break free from traditional industrialization models to truly understand the historic opportunities facing China’s economic development today. Whether green transformation is interpreted as a burden or an opportunity for economic growth largely depends on perspective.

At present, China is in a transitional period shifting from an old framework to the new. If we view the green transformation through the lens of an outdated industrialization model, we inevitably will face challenges and resistance. However, if we see the new model on its own, opportunities and momentum are what we anticipate. Often, green development involves discontinuous leaps from nothing to something. 

As specialization progresses, costs decrease rapidly. Any new product starts out as a high-priced luxury item, but as specialization evolves, costs continue to decline. Over the past decade, the significant reduction in production costs of new energy vehicles in China is a typical example. Although overall profit levels are still relatively low in China’s new energy vehicle industry, this is an essential stage in the process of industrial growth, and profits will continue to rise with the evolution of division of labor and specialization in the nascent industry.

Moreover, since China officially announced its carbon neutrality target in 2020, it has gradually formed a widespread market expectation for green and low-carbon development, thus creating a significant demand for, and investment opportunities in, green transformation. This process of green transformation—moving from nothing to something—requires us to break the paradox of “no green action without green evidence, and no green evidence without green action.” If one cannot foresee the potential of a green leap, it is difficult to take green investment actions, and then a green transformation is unlikely to occur. In contrast, if there is foresight and vision for a green transformation, green investment actions will likely be taken, and a green transformation might indeed occur.

It is thus crucial to seize the development opportunities brought by green transformation, as these are a prerequisite for any concrete actions. To translate investment opportunity into reality and achieve a transition from traditional growth paths to green growth paths, it is necessary to overcome the following obstacles.

First, macro policies under traditional industrialization models are no longer applicable to new development patterns. The shift in development paradigms implies profound changes to content and structure—on both the supply and demand sides. When traditional effective demand is insufficient, new green demands cannot be met by old supply structures. Therefore, macro policies need to focus on creating new green supplies and demands.

Second, traditional industrialization models have systemic transformation barriers and path dependency built into their systems. Green transformation is not just about breakthroughs in individual products and technologies but requires systemic transformation of the entire economy. For individual enterprises, it is often difficult to drive the transformation of industrial ecosystems, which means that governments should play a greater role in coordinating and promoting a top-down green transformation.

Third, many existing institutional mechanisms and policy systems were established under traditional industrialization models and old development concepts, making it difficult to meet the intrinsic requirements of China’s green transformation. These reforms often involve correcting deeper and more complex institutional issues.

Fourth, there are transition risks and issues related to shaping a fair transition. Green transformation is a process of “creative destruction.” Only by compensating the interests of sectors, regions, and populations affected by the impact, can a fair transition be achieved and resistance to the transition reduced. However, many existing economic structures were formed under traditional industrialization models, which are not conducive to promoting green low-carbon development within traditional sectors.

Finally, there is a need to create favorable conditions for business model transformation. For business models oriented towards a green transformation, there have been profound changes in the direction of value creation, enterprise organizational models, business models, market structures, and so forth, rendering many traditional business models ineffective.

Taking multiple measures

The comprehensive green transformation of economic and social development has provided China with new historical opportunities, and China also has unique advantages in promoting green and low-carbon development. However, whether the enormous potential of green development can be translated into reality, depends on whether the foreseen difficulties can be effectively overcome. In particular, enhancing the government’s role, thereby creating conditions to fully leverage the decisive role of the market in resource allocation, is crucial to whether China can create a new development miracle.

First, the most important task in this moment is to form stable market expectations. Through measures such as honoring commitments, market-oriented reforms, landmark policies, and strict environmental regulations, the government needs to strengthen the firm confidence of investors, entrepreneurs, and consumers in the bright prospects of the Chinese economy and the green transformation, to form stable market expectations.

Second, strong policy support for green transformation is essential, including green visions and expectations, green consumer culture and values, supporting green industries, strengthening the construction of green infrastructure, and increasing the supply of high-quality public services. This type of policy support would redefine the functions of the market and government from the perspective of traditional development paradigms and civilization forms.

Third, the key to deepening the reform of “streamlining administration and delegating power,” is to fully leverage the decisive role of the market in resource allocation. Under the premise of the government setting “traffic lights” for capital, the market’s decisive role must be maximized. Only by fully and accurately implementing the new development philosophy can we fully unleash the infinite vitality of the market, localities, and entrepreneurs.

Fourth, there should be an emphasis on enhancing independent innovation capabilities and deepening the reform of the science and technology system and mechanism. Green transformation is a new concept for all countries, and latecomers don’t have role models to learn from and imitate, posing unprecedented challenges to China’s independent innovation capabilities. Only countries with high levels of independent innovation capabilities can shape new international competitive advantages in green transformation.

Finally, promotion of high-standard opening up is essential. When faced with certain countries who are practicing “decoupling” and “building small circles,” China should firmly pursue an open strategy of mutual benefit and win-win cooperation, constantly provide new opportunities for the world through China’s new development and promote the construction of an open world economy with a higher standard and greater scope, thus building a human community with a shared future.

Zhang Yongsheng is director of the Research Institute of Eco-civilization at the Chinese Academy of Social Sciences.

Edited by YANG XUE