With China focusing more heavily on the quality and sustainability of its economic growth, the country is innovating in targeted technological areas.
05/11/2021
China has set an ambitious target of achieving peak carbon by 2030 and overall neutrality by 2060. For the country to attain this goal, the Institute of Climate Change and Sustainable Development at Tsinghua University anticipates that approximately RMB138 trillion (US$20 trillion) of new investment is required between 2020 and 2050.
Using technology to improve sustainability will become increasingly important as China moves toward its carbon targets. Of course, the energy sector will play an essential role, but technology is also developing rapidly in other areas of the economy.
Investors now recognise that sustainability is positively correlated to investment returns over the long term. This means market participants now consider adherence to environmental, social and governance (ESG) factors as a non-negotiable requirement rather than an optional extra. What’s more, sustainability means taking a more holistic view that goes beyond balance sheets and bottom lines.
Sustainability, technology and the energy sector
The need to drive down carbon emissions will continue to generate opportunities for technological innovation. China is the foremost global supplier of wind turbines, solar cells and batteries. For example, some power generation companies are now using sensors and computing resources to automatically change the direction and shape of turbine blades to optimise energy generation. These innovative advancements will help reduce the cost of wind power and allow the transition away from thermal sources.
Despite the removal of government subsidies for wind power, the associated costs continue to decline while installations increase. As an illustration of how globally dominant China is in this segment, total wind power generation capacity in 2020 accounted for over 25 per cent of the world’s overall capacity1.
New technology is also being used to generate energy from urban landfill waste in some Chinese cities. A move that creates a ‘double win’ because waste is diverted from the ground and incinerated to produce electricity. When burned appropriately, this also improves the environment by reducing landfill and providing an economically attractive and cleaner power source.
Advancements in electric vehicles
China is emerging as a world leader in battery technology, particularly those used in electric vehicles (EVs). A sticking point that constrained mass-market EV adoption was always battery efficiency. However, recent years have witnessed a sea change in this segment, with batteries becoming more efficient. This, in turn, makes EVs affordable and encourages their rapid adoption. Charging infrastructure is also improving rapidly, which also helps promote uptake. And in certain cities, car registration plates are given free to EVs, boosting their relative attractiveness.
There are now over 1 million public charging points across the country2, predominantly in the coastal provinces3. Indeed, EV uptake is nearing an inflexion point in China due to falling costs and supportive regulations. These vehicles are expected to account for 50 per cent of all new cars sold by 20354.
Similarly, the development of autonomous driving technology is being actively supported by policymakers. This is occurring in tandem with a rapid 5G data infrastructure rollout, which provides a vital source of additional data inputs for the driving systems. Another interesting advantage for China is that it is a principal player in the production of multi-layer chip capacitors (MLCCs). These products are required in significant quantities to build the chips needed for autonomous driving systems. The positive outlook is further bolstered by Chinese consumers’ willingness to adopt this technology, which should encourage the strong uptake of autonomous driving and support the companies involved with the sector’s growth.
Artificial intelligence opportunities driven by access to user data
While tighter regulation of the internet and tutoring sectors has impacted the affected companies’ business models and outlooks, the use of artificial technology (AI) to create, for instance, smarter cities, is expected to progress rapidly. China’s technology companies have the advantage of good access to user data compared to other markets, such as the US and Europe. This means tech companies in China can use this data to develop and test new applications more quickly.
We have seen this in action with AI and data access being applied to the management of traffic flows and congestion, thereby reducing environmental pollution, power usage and transport times.
It’s worth noting that advancing successful AI solutions is mainly dependent on creating suitable algorithms – to do this, software engineers are required. In relative terms, China has a deep and growing pool of science, technology, engineering and mathematics (STEM) graduates who can design and test such new formulas.5
The positive environmental impact of Covid-19-induced lockdowns
The move away from offline transactions to online activity has been accelerated by the Covid-19-triggered lockdowns. As people retreated indoors, physical trips to bricks and mortar stores consequently declined, and home deliveries increased. The growing profile of the delivery sector has inevitably shone a light on its component companies and the efforts being made to reduce the environmental impact of their activities.
As an example, a leading delivery company in China that handles 47 million parcels per day has introduced e-waybills and cut down the volume of paper needed for its printed documents. By doing this, the business condensed paper consumption per package by 70 per cent, saving some 50,000 tons of paper each year. That is equivalent to 850,000 trees or 500,000 tons of carbon emissions.6
The various lockdowns have also encouraged the development of lifestyle apps – particularly with health, home learning, home working and fitness. Health consultations can now be performed remotely, which reduces wasted time for both professionals and patients. Elsewhere, some home-learning solutions are now using AI to analyse whether the learner is confused or disengaged and react accordingly by repeating the relevant content.
The outlook for sustainability and technology
China is hugely committed to transitioning its economy away from a dependence on cheap energy towards high-tech sustainability. This won’t happen immediately, but the regulatory environment and necessary resources in terms of skills and investor support are in place, presenting an ever-expanding range of opportunities to market participants in the country.
2http://en.people.cn/n3/2021/1029/c90000-9913528.html
3https://autonews.gasgoo.com/m/70019015.html
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