Arguing about China’s overcapacity overlooks its drive for clean energy

China is often described today as having “overcapacity” in manufacturing. Its dominance in solar panels, batteries and wind equipment, for example, has left many observers baffled. How did a country once dismissed as undeveloped become, within a generation, so technologically developed that its success now unsettles global markets?\nPart of the answer lies in how we frame China’s development. What is often described as excess capacity is better understood as the outcome of an energy-centred development strategy – one that treats energy as the foundation of modern economic capability.\nEnergy is the oxygen of modern life. Without it, economies suffocate. Every major leap in human development – from steam engines to silicon chips – has depended on energy availability. The decisive question today is whether we can deliver enough energy cleanly and quickly. Few countries illustrate this dilemma more clearly than China.\nIn the late 20th century, China was energy-poor. Its economic take-off was fuelled overwhelmingly by coal – abundant but environmentally devastating. By the late 1990s, toxic smog and contaminated rivers and soils were impossible to ignore. Chinese leaders understood this development model was unsustainable.\nFrom the early 2010s, policymakers were already grappling with multiple challenges at once: environmental degradation, energy supply, industrial upgrading and the limits of growth driven by low-cost manufacturing. These issues also had to be addressed simultaneously.\nIn 2012, the Communist Party wrote “ecological civilisation” into its constitution, signalling that growth could no longer come at any cost and that five-year planning cycles had to align accordingly. The urgency intensified in 2013, when severe smog episodes triggered a nationwide “war on pollution”, tightening enforcement, capping coal use in key regions and legitimising deeper structural change.\n\nBy the middle of the decade, these strands had been brought together. In 2015, China formally launched Made in China 2025, aligning industrial upgrading and technological self-reliance with energy efficiency, cleaner production and green manufacturing.\nThat same year, China submitted its climate commitments ahead of the Paris Agreement, pledging for the first time to peak carbon emissions around 2030. In 2020, this direction was locked in when China declared its dual carbon goals: peaking emissions before 2030 and achieving carbon neutrality by 2060.\nThis was not green rhetoric. It was a conscious effort to build national capacity around clean energy as a new engine of development.\nThe scale of execution has been unprecedented. China’s manufacturing and clean energy supply chains today produce 80 per cent of the world’s solar panels, lead in wind turbine manufacturing, and control a large share of global battery production. In a single year, it installs more solar capacity than most countries have in total.\nEqually important, China has invested in the systems that make clean energy work. It built ultra-high-voltage transmission lines stretching thousands of kilometres to connect renewable-rich inland regions with coastal megacities. It expanded nuclear power and pumped hydropower storage to stabilise an increasingly renewable grid.\n\n\nThe transition was not flawless. In its early years, transmission lines stood underused and solar farms waited for grid connections.\nBut China grasped a critical truth: energy infrastructure has to lead demand. What were once dismissed as white elephants are now the backbone of a rapidly decarbonising power system. The improvement in air quality tells the story. Between 2013 and 2021, average concentrations of the deadly particles known as PM2.5 fell by nearly 40 per cent, saving countless lives.\nChina’s experience offers three lessons with global relevance. First, energy transitions require scale and speed. Waiting for markets alone to signal readiness would have locked in pollution and energy insecurity for decades.\nSecond, policy coherence matters. By embedding sustainability into national development strategy – rather than treating it as an environmental add-on – China mobilised industry, finance and local governments around a shared direction of travel.\n\n\nThird, systems thinking is essential. Clean energy requires grids, storage, pricing mechanisms and market design capable of managing complexity. China is now grappling with how to price diverse energy sources feeding into its grid.\nDespite record investment in renewables, fossil fuel use continues to rise. Global emissions reached a new high this year. Clean energy has so far met new demand rather than displaced existing fossil fuels quickly. Energy security further complicates the picture. Geopolitical tensions and supply chain anxieties are accelerating electrification in some countries while slowing adoption in others.\nThere is irony here: the same China once viewed primarily as a climate problem has become a driver of solutions. Its industrial scale has helped slash global solar module prices from around 80 US cents per watt in 2014 to under 10 cents today.\nWhether countries embrace this interdependence or retreat to costly protectionism will shape the pace of the global transition. Energy is not optional. It is the foundation upon which modern economies build their capacity for clean development. The way we produce energy today will determine whether prosperity and climate stability can coexist.\nChina’s journey from energy scarcity to clean energy abundance shows that transformation is possible. It also shows that it is complex, imperfect and politically contested.\nThe real question is no longer whether a clean energy future can be built. It is whether we understand that energy, not ideology, ultimately underpins sustainable development – what China terms ecological civilisation.\n