China has a well-documented history of expansive, wide-ranging investments in clean technology and renewable energy. There’s evidence suggesting those efforts are paying off as the country’s looks to reduce pollution and curb carbon output.
With those expenditures slated to continue and likely increase, opportunity could be afoot with ETFs such as the KraneShares MSCI China Clean Technology ETF (KGRN). The fund follows the MSCI China IMI Environment 10/40 Index. It endured a rough 2023 amid struggles by Chinese and green energy equities of all stripes. But with many market observers wagering Chinese stocks are poised to rebound, KGRN could merit attention in 2024.
Currently, China’s economy is at a crossroads regarding long-term adoption of renewable energy. The economy there has been largely reliant on fossil-fuels-intensive infrastructure to drive growth. But policymakers are also aware of the point that exports and domestic consumption of clean tech and green energy can be important economic contributors. The latter point could pave the way for a KGRN rebound.
Stage Set for Long-Term China Clean Tech ETF KGRN Upside
China’s consumption of fossil fuels is well-known and the country has been on the receiving end of criticism for well-documented expansion of coal-fired plants. But there’s also no denying there are factors at play that bolster the long-term case for KGRN.
“There has been a surge of investment in manufacturing capacity, particularly for low-carbon technologies, including solar, electric vehicles and batteries,” reported Lauri Myllyvirta for Carbon Brief. “This is creating an increasingly important interest group in China, which could affect the country’s approach to domestic and international climate politics.”
Further bolstering the case for KGRN is the point that China’s carbon emissions are expected to decline next year. It’s possible that could touch off an era of reduced dependence on goal. That could usher in a new era of reduced dependence on fossil fuels and increased adoption of renewables.
“While CO2 is rebounding in 2023 from zero-Covid lows, there have also been record additions of low-carbon capacity, setting up a surge in electricity generation next year,” according to Carbon Brief. “Combined with a rebound in hydro output following a series of droughts, these record additions are all but guaranteed to push fossil-fuel electricity generation and CO2 emissions into decline in 2024.”
Those data points are pertinent to KGRN investors because the ETF provides exposure to themes such as green buildings, water conservation, and pollution prevention, among others.
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