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The news from the Middle Kingdom is currently on the bad side. China’s population has shrunk by two million people, the economy is struggling, the financial markets are depressed and the elections in Taiwan were a slap in the face to Beijing. Is the economic miracle over? Is China sinking into a huge ‘middle-income trap’, as it is called in economics?

Not quite. There is one area where China is miles ahead and increasingly lagging the rest of the world: the field of sustainable energy and the ecological restructuring of society. The International Energy Agency (IEA) states in its latest report:

You can’t really say that the Chinese, as spoiled children of affluence, intend to force an unwanted green lifestyle on people. They’re pushing their massive Green New Deal because there’s nothing else they can do. Not so long ago, images of the smog in Beijing went around the world, when parents were no longer allowed to let their children outside because the particulate matter concentration had become life-threatening.

Today we see these photos from New Delhi. In China, the air has become noticeably cleaner, as about half of energy now comes from renewable sources and transport is rapidly being electrified.

But what about coal-fired power stations, critics will now object. China also builds these catapults. Two things: many of them are used mainly as spare capacity and are not connected to the grid at all. In addition, Martin Sandbu states in the ‘Financial Times’ that due to the rapid development of batteries and solar and wind farms, these coal-fired power stations ‘will soon become redundant’.

Electric cars are a central part of the ecological conversion. Almost overnight, the Chinese have become the largest exporter of cars. In 2023, they overtook the Japanese and BYD (Build Your Dream) replaced Tesla as the leading electric car manufacturer, a circumstance that led to all the leading business magazines prominently reporting on this Chinese electric car wonder.

This miracle has several reasons:

On the one hand, the Chinese have long been leaders in battery production, the heart of the new mobility. About 70 percent of all lithium batteries used in electric cars come from the Middle Kingdom. BYD also started as a battery manufacturer.

At the same time, electric car manufacturers are heavily subsidized by the state. This allows them to be much cheaper than their competition. However, that doesn’t mean you can sit back and relax. On the contrary, there is an almost murderous competition between them. There are currently about 150 car manufacturers in China. Experts expect about a dozen of them to survive in the long term.

The Chinese can count on a huge domestic market. While VW, GM & Co. once dominated the Chinese field when it came to combustion engines, the opposite is true when it comes to electric cars. Four in five electric cars come from domestic manufacturers and every second new car sold is now an electric car. Meanwhile, competition from the West is on the verge of becoming irrelevant. Yes, there are already analysts who advise VW, for example, to sell their production facilities in China while they still can.

Western manufacturers once mocked their Chinese counterparts. Nowadays they only do this at their own risk. When it comes to performance, even cheap Chinese electric cars can keep up with German luxury cars. A Chinese Nio accelerates as quickly as a Porsche Carrera, and costs many times more.

The Chinese have also recognized that horsepower as a means of payment is largely obsolete. Modern cars are moving iPhones; it’s about what they have to offer in software and consumer electronics. The Chinese are the leaders in this area and can also bring new models to the market much faster than their competitors. Developing a new model of combustion car takes years and costs billions. Chinese manufacturers replace a model that flops on the market within a few months.

So far, Europe and the US have largely been spared from Chinese competition. But at VW, GM, Toyota & Co. the plans to deal with this have the highest priority. There is also debate in government circles about whether they can be kept at bay with punitive taxes. To what extent this can be successful remains to be seen. The Chinese are also thinking about this. They imitate the Japanese recipe for success from the 1980s and start building factories in the affected countries. BYD has already announced that it will set up a production facility in Hungary. BYD wants to avoid possible punitive tariffs from the US with factories in Mexico.

The expected flow of electric cars from China also has positive aspects. Whether it’s Tesla or VW, everyone has already lowered their prices and will likely lower them further. But above all, the climate will benefit from this. China, which has so far shown great restraint at climate conferences, could soon change from a brake to a driver.

Or as Sanbu puts it in the Financial Times: