China’s economy is the world’s second-largest, trailing only the U.S. Though not yet on par with U.S. regarding domestic consumer consumption, China has myriad economic levers it can pull to bolster GDP growth.
In recent years, those levers have increasingly included clean technology and renewable energy. That’s expected to continue for years to come. And that indicates ETFs like the KraneShares MSCI China Clean Technology ETF (KGRN) could be participants in, if not leaders of, a China equity rebound.
Naysayers often note some Chinese economic reports spark as many question as answers. But data confirms the importance of clean energy in China as an economic growth engine. A recent analysis by CarbonBrief indicates that in 2023, clean tech drove $1.6 trillion worth of China’s GDP. That’s a larger share than any other industry.
Other Positive Factors for KGRN
A case can be made that KGRN is a baby being thrown out with the bathwater. Said another way, the struggles of broader Chinese equity benchmarks are well-documented. And that downside may be infecting KGRN. That’s despite the fact that China’s clean technology fundamentals are sound.
“Clean-energy investment rose 40% year-on-year to 6.3tn yuan ($890bn), with the growth accounting for all of the investment growth across the Chinese economy in 2023,” reported CarbonBrief. “China’s $890bn investment in clean-energy sectors is almost as large as total global investments in fossil fuel supply in 2023 – and similar to the GDP of Switzerland or Turkey.”
Arguably, those are remarkable statistics. They confirm a foundation that includes robust demand for clean tech goods and services exported by China to developed economies. Governments in those regions have made commitments to renewables as well as the resources they have to realize those pledges. So the long-term case for KGRN may be more attractive than recent price action suggests.
More demand and end markets for clean tech and renewables produced in China is pivotal for investors considering assets such as KGRN. That’s because some market observers believe the country is dealing with a green energy supply glut. That must be trimmed for the related stocks to rebound. But there’s no denying China is the behemoth on the global renewable energy stage.
“The growing importance of these new industries gives China a significant economic stake in the global transition to clean-energy technologies,” concluded CarbonBrief.
For more news, information, and analysis, visit the Climate Insights Channel.