As China’s latest economic stimulus package takes shape, one critical question arises: What does this mean for its net-zero ambitions? China’s latest package appears heavily focused on traditional sectors like real estate and infrastructure, raising concerns about whether this emphasis might delay or complicate China’s climate commitments.
For those like me, who have witnessed the 2008-09 financial crisis and then the COVID-19 pandemic, news about economic stimuli has become part of life. A very significant proportion of the measures since have carried green characteristics, with the Inflation Reduction Act (IRA) in the USA serving as a prime example of the evolution toward sustainability. China itself is no stranger to similar injections; it has made massive strides in renewable energy and electric vehicles (EVs) over the last decade and a half, positioning itself as a global leader in clean energy technology. In fact, 40% of China’s GDP growth in 2023 came from its green sectors, a testament to the dominance of solar panels and EV production in its economic framework 1.
That dominance hasn’t just impacted the global market—it has changed lives, including my own. Growing up in Pakistan, a country where structural inefficiencies plague power production and distribution, I witnessed the direct impact of China’s solar technology supply boom. One of the greatest days of my life was when our family home was taken off a historically unreliable grid and powered by Chinese solar panels. That independence is life-changing. Millions of Pakistanis now benefit from the widespread and affordability of this technology, experiencing energy independence thanks to China's green innovation.
Yet, despite China’s remarkable advances, the absence of a strong green focus in this new stimulus may breed uncertainty. Optimists may argue that green commitments are already set and being worked on concurrently, and it’s clear that China’s biggest growing sectors are in clean energy. Significant sums of the stimulus, whatever final shape it takes, will undoubtedly end up supporting entities contributing to the greening of the world. But owing to China’s historic opaqueness in decision-making processes, the eventual outcomes may remain elusive.
China’s approach to coal has also been sending mixed signals. While China is a green giant, producing 80% of the world’s solar panels and 60% of its EV batteries, the country remains heavily reliant on coal 2 3
In 2021, President Xi Jinping made a clear commitment to limit coal-fired power plants, which was expected to be a cornerstone of China’s move toward carbon neutrality by 2060. However, between 2022 and mid-2023, China experienced a significant coal boom, with 243 GW of coal capacity permitted and construction rapidly accelerating 4.
Yet, in 2024, the situation began to shift. As China’s renewable energy capacity surged, with over 400 GW of solar and wind energy added since 2023, coal plant approvals dropped dramatically. In the first half of 2024, only 9 GW of coal capacity was permitted—a stark contrast to the previous year 5. This signals that China is starting to address the imbalance between its coal reliance and its clean energy future, making progress toward its 2030 peak emissions goal.
Complicating matters further, reports from the Centre for Research on Energy and Clean Air (CREA) suggest that China has not fully fulfilled its 2021 pledge to stop financing overseas coal projects 6. China continues to back coal developments abroad, particularly in Southeast Asia, contradicting its stated goal of reducing global emissions.
While China’s coal policies seem to be shifting toward a greener future, it's important to recognize that the country's broader actions continue to prioritize economic growth. This focus on growth has shaped China's economic strategy over the past few decades, and it remains central to its current stimulus efforts. The real estate sector, a key driver of China’s economic expansion, is struggling, with many major companies facing debt crises. Meanwhile, exports have also been lacklustre, and globally, there is growing resistance to China’s dominant position in manufacturing, further straining its economy.
This need for growth was evident in the ambitious Belt and Road Initiative (BRI), which China once promoted as a cornerstone of its economic outreach. However, I’ve seen first-hand how countries, like Pakistan, are now struggling with the financial strain of repaying BRI-related debts. Over time, China’s involvement in the BRI has waned, particularly since the pandemic-induced slowdown.
Now, with the latest stimulus package, China appears to be shifting its focus back to domestic sectors like the manufacturing, real estate and infrastructure. While there are signs of green progress, growth remains the overriding priority for the Chinese government. Given China’s historically opaque decision-making process, it is uncertain how this balancing act will play out. The country is known for making unexpected shifts in policy, and whether the focus will remain on green growth or revert to traditional sectors to fuel the economy remains to be seen.
While traditionally coal-reliant sectors are set to receive a renewed boost, the tension between stimulating growth and accelerating sustainability grows ever more apparent. Significant sums of the stimulus may still benefit renewable energy, but it’s unclear if this will be enough to balance the emphasis on traditional, high-emission sectors.
Ultimately, this stimulus package, while necessary for economic recovery, raises concerns about its implications for China’s long-term climate goals. For a country that has both massive clean energy industries and is also the world’s largest carbon emitter, this question will define its future—and that of the global fight against climate change.
For now, some of us are watching closely. Will China’s stimulus help it navigate this critical juncture, or will it delay its green transition, risking the ambitious timeline for carbon neutrality?
