China Power Investments Could Drive Upside for This ETF

When it comes to infrastructure investments, including those in renewable energy and electric utilities, few countries can rival China.

Beijing’s commitments on those fronts are substantial and have the potential to affect an array of investments, including the KraneShares MSCI China Clean Technology ETF (KGRN). Across the board, clean tech and renewable energy equities and ETFs scuffled last year. But market participants should be careful to not let KGRN’s 2023 struggles obfuscate the fund’s long-term opportunity set.

That includes the point that from 2020 through 2060, China is expected to drive $13.7 trillion — that’s trillion with a “T” — in domestic power investments. Indeed, some of those investments could include fossil-fuel-related expenditures, including coal-fired plants. However, reducing carbon emissions is a major priority for Beijing. And that could set the stage for long-term KGRN upside.

KGRN Could Be China ETF Star

It’s a long way off, but China wants its carbon emissions to peak in 2030. From there, the world’s second-largest economy aims to slash those emissions, which currently account for 30% of the global total. Those ambitious objectives will require sizable financial commitments — ones Chinese policymakers have shown a willingness to make.

That could pave the way for KGRN upside, with solar power standing as a prime example of China’s commitment to reducing its carbon footprint.

“Investment in solar power generation in 2022 surged 232.7% to 286.6 billion yuan,” reported Reuters. “China aims to source about 33% of power from renewable sources by 2025, up from 28.8% in 2020, its state planning agency said.”

Further adding to the case for KGRN is the fact that China’s green energy efforts are already garnering praise in the global community. The largest country by population ranked third out of 40 nations for renewable energy in 2023. That trailed only the U.S. and Germany, according to consulting firm EY. The polls measured countries’ commitments to deploying renewable energy as well as the attractiveness of the related investment climates. KRGN investors may also want to monitor province-level news flow for items of note, some of which recently emerged.

“As of Dec 10, Xinjiang had added more than 20.1 million kW of new energy installed capacity last year, and the new grid-connected installed capacity ranked first in the country in 2023, according to the State Grid Xinjiang Electric Power Co Ltd.,” reported China Daily. “Xinjiang’s installed power capacity from new energy sources has surpassed 62 million kW. Among them, the installed capacity of wind and photovoltaic power goes beyond 31 million kW and 30.6 million kW, respectively.”

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