Speed bumps ahead as smart cars and clean energy fuel China’s rise
Despite an impressive roll call of achievements, such as high-speed rail, the country faces more than a few obstacles
It used to be all about Ford, GM, BMW and Mercedes-Benz. Now, the fast lane in the auto industry resembles a Beijing highway during the bumper-to-bumper rush hour period with BYD, Beijing Electric Vehicle Corporation, ZhiDou, Shanghai Auto and Zotye muscling into the market.
Fueled by the “Made in China 2025” program, these top-selling Chinese brands specialize in hybrid or electric vehicles and dominate the sector. Up to 96% of the 711,000 EVs sold in the world’s second-largest economy last year were manufactured by domestic car companies.
In total, 777,000 electric vehicles were wheeled out, a rise of 53% compared to 2016, or 2.7% of overall auto sales, the China Association of Automobile Manufacturers revealed.
“Chinese consumers are on track to buy more than one million [EVs] this year,” Chris Busch, the director of research at Energy Innovation, said. “And China’s leadership is charting a course to an all-electric future, targeting two-million annual EV sales by 2020 and a complete ban on internal-combustion engines, which officials predict will happen before 2040.
“[Beijing] sees a strategic economic opportunity in EVs and wants to lead in a new technology that most analysts expect will dominate the global transportation market,” he added.
Naturally, President Xi Jinping’s government has been key in steering China down this road. State-funding has brought the cost of new models down, while a subsidies scheme has helped build crucial infrastructure, such as city and highway power points.
Direct investment in the supply-side chain has also reaped dividends for lithium battery manufacturers such as Contemporary Amperex Technology, which is based in Fujian province and is the main player in the industry.
“On the supply side, China’s government has made it a priority to create favorable conditions for EV stakeholders, including investors,” a report compiled by Patrick Hertzke, Nicolai Muller and Stephanie Schenk for McKinsey & Company, the global management consultancy, stated.
“For example, China’s lithium-ion battery-cell [firms] now account for about 25% of global supply.”
On the home front, the high-speed rail network has also benefited from the “Made in China 2025” project.
The next-generation of bullet trans are aptly named Fuxing, which means “renaissance” and “rejuvenation” in Mandarin. They are steadily being rolled out to replace the slower Hexie, or “harmony,” models with a cruising speed of about 400 kilometers per hour or 250mph.
“China’s ambitious project to develop high-speed rail (HSR) across the country has been nothing short of phenomenal over the past decade,” Huang Bo, a professor with the Department of Geography and Resources Management, Faculty of Social Science, at The Chinese University of Hong Kong, told Asia Times.
“Beijing has spent an estimated 2.4 trillion yuan, or about US$360 billion, building 22,000 kilometers of HSR lines, more than the rest of the world combined.”
While those figures are impressive, they fail to match the renewable energy sector. Chinese factories now account for 60% of global solar cell production and in the wind energy industry, China Energy Investment Corporation is peerless in the domestic market.
Xinjiang Goldwind is also the world’s third largest wind turbine manufacturer and plans to expand overseas as it ramps up production. Hydro is another cornerstone of Beijing’s “smart energy” program, a report by the Institute for Energy Economics and Financial Analysis, which is based in the United States, highlighted earlier this year.
But, perhaps, China’s investment in the expanding energy efficiency sphere underlines the depth and range of the “Made in China 2025 policy.” In 2016, the country accounted for half of the $2.2 trillion spent across the globe, the IEEFA stated, installing 500 million ‘smart meters,’ which was “more than six times that of the US, the second-largest market.”
Necessity has fueled this shift in focus as the world’s most populous country is also the world’s largest emitter of greenhouse gases, triggered by its dependence on coal-fired power stations.
Chronic air pollution in major cities, including Beijing, has forced the ruling Communist Party to act as it battles an array of pollution problems.
“Large-scale renewable energy deployment is core to China’s energy transition,” Wenjuan Dong and Ye Qi said in an article for the Brookings Institute, a think tank based in Washington. “This has become a key moment for China’s transition to low-carbon energy and power industries.
“Renewable energy will shift from meeting new electricity needs to replacing existing electricity needs … [and] is expected [to] become the main power source by 2030.”
Challenges, though, still exist. Xi’s administration will need to address and close the “innovation gap” with the West when it comes to science and technology.
Just weeks before the ongoing trade dispute with the US turned into a full-blown trade war, Liu Yadong, the respected editor-in-chief of the Science and Technology Daily, issued a stark warning.
“The large gap in science and technology between China and developed countries in the West, including the US, should be common knowledge, and not a problem,” Liu told a select audience at a science and technology seminar in Beijing last month.
“But it became problematic when the people who hype [China’s achievements] … fooled the leadership, the public and even themselves.”
In the end, relying on electric cars, smart railways and green energy will only take the country so far.