In a bid to assert leadership and decrease reliance on China’s dominance in the clean energy sector, the United States has initiated a “de-risking” strategy, aiming to separate its supply chains from Chinese influence. Despite these efforts, insiders caution that this approach may prove unsustainable, potentially detrimental to both the U.S. and the global battle against climate change.
The strategy, involving measures such as subsidies and tariffs to break away from China-dominant supply chains, as well as the implementation of trade protectionism, is met with skepticism among experts. H.L. Yiu, Chief Corporate Development Officer of Hong Kong Science and Technology Parks, highlighted the impracticality of a complete “decoupling” from China, emphasizing the importance of integrated supply chains, rapid tech-to-market pipelines, and thriving startups.
Yiu, leading a delegation from China’s Guangdong-Hong Kong-Macao Greater Bay Area at the Consumer Electronics Show in Las Vegas, underscored the success of regions like his in clean energy technologies. He pointed out that the U.S. had missed opportunities due to offshoring for cheap production, leaving the country lagging in domestic manufacturing capabilities.
The cautionary tale of the $90-billion clean energy initiatives during the Barack Obama era serves as a stark reminder. Despite good intentions, political interference led to the initiatives stalling and many startups going bankrupt.
Contrasting this, Beijing actively stimulated its domestic market, heavily subsidizing electric vehicles and domestic solar installations, leading to China’s current leading position in manufacturing and deploying these technologies. Henry Sanderson, Executive Editor of Benchmark Mineral Intelligence, emphasized that China’s success was not solely due to subsidies; they scaled up and manufactured superior products compared to Western companies.
Chinese companies like Shenzhen-based YJC Group are thriving, even facing U.S. tariffs, by offering cost-effective electric vehicle batteries. Denny Du, YJC’s Vice-General Manager, sees potential in the U.S. market, citing the demand for electric golf carts and pickup trucks.
In terms of critical minerals for clean energy, China is significantly ahead, producing the majority of the world’s graphite, manganese, and polysilicon. U.S. tariffs on Chinese solar products have caused project delays, impacting the 2023 and 2024 installation projections. Despite U.S. renewable subsidies increasing, there are concerns about the sustainability of merely throwing taxpayer money at the problem.
Industry players argue that the challenges of successfully de-risking with respect to China have not been adequately understood by Western leaders. A report by the European think tank Bruegel highlights the economic inefficiency of reshoring production, given limited access to critical raw materials and high production costs, with Chinese firms leading in green tech manufacturing and innovation.