Market Conditions and Strategic Value
- The Green New Deal industry is being promoted with a focus on green, low-carbon, and circular development policies.
- China is joining the global carbon-neutral movement, including the launch of the world’s largest carbon emissions trading exchange.
- Aiming for carbon neutrality by 2060, China plans to establish a carbon emissions trading exchange with 2,000 companies and a scale of 4 billion tons (as of July).
- In line with the new urbanization policy, the focus is on urban regeneration and smart city development industries, as well as renewable energy, which are expected to benefit.
- Industrial output is expected to shrink, while the service sector’s share is set to increase. The energy sector will also transition towards greener (clean) energy.
Key Issues and Trends
- Carbon Emissions Status: As the world’s largest emitter of carbon, urgent action is required to reduce emissions.
- Over the past 20 years, China’s carbon dioxide emissions have steadily increased.
- In 2020, China’s carbon dioxide emissions reached 9.8351 billion tons, accounting for about 32% of global emissions.
- China’s power and heating industries are the largest sources of carbon emissions, together accounting for more than 50% of the total emissions.
- “3060” Policy: The “2030 Carbon Peak and 2060 Carbon Neutrality” target was set to tackle green development and climate change.
- A continuous push for energy development strategies, air pollution prevention, and greenhouse gas reduction policies at the national level.
- At the Central Economic Work Conference (Dec. 18, 2020), carbon neutrality was designated as one of the eight key national tasks for 2021, marking the start of full-scale efforts.
- To achieve carbon neutrality, China is increasing investments in clean energy and relaxing overseas investment regulations, creating opportunities for market entry.
- Carbon Emissions Trading: China launched its nationwide integrated carbon emissions trading exchange (July 16, 2021) to build a green technology innovation system.
- Initially, the exchange focuses on the power industry, which accounts for 30% of the total emissions.
- Over the next five years, the exchange will expand to include high-energy-consuming industries such as petrochemicals, chemicals, building materials, steel, non-ferrous metals, paper, and civil aviation.
- By the end of 2020, more than 3,000 companies in over 20 industries such as steel, power, and cement participated in carbon emissions trading.
- ESG Business: China’s ESG (Environmental, Social, and Governance) sector is still in its early stages, but it is expected to grow as China joins the global movement and works towards its carbon neutrality goals.
- Major corporations are increasing their involvement in environmental (E) initiatives, focusing on social responsibility, contributing to a broader societal shift in awareness, and fostering growth in related industries.
- Key areas include the production of green products, eco-friendly construction, environmental pollution management, renewable energy applications, and energy-saving technologies.
Entry Strategy and Promising Sectors
- Companies can collaborate in various forms, such as government-to-government (G2G) projects, joint R&D on core technologies, and equipment supply, to contribute to China’s carbon neutrality goals.
- The expansion of investments in clean energy and the relaxation of overseas investment regulations provide opportunities for market entry.
- Environmental regulations are expected to tighten in relation to events like the Winter Olympics and carbon reduction measures, so companies must closely monitor these developments and respond promptly.
- Policies to increase the share of renewable energy and electric vehicles, along with power restrictions and other environmental regulations, are being implemented across various industries, requiring companies to strengthen policy monitoring and adapt swiftly.
- It is crucial to develop and launch products that align with the strengthened environmental protection policies to gain both government and consumer trust.
- Promising Sectors: Key areas of growth include eco-friendly vehicles, hydrogen energy, renewable energy, and green urban infrastructure.
Eco-Friendly Vehicles
- Identifying opportunities for cooperation in key components and systems related to eco-friendly vehicles.
- As a key area of the Green New Deal, the eco-friendly vehicle market is rapidly growing, supported by demand-promotion policies such as subsidies and supply-strengthening measures like mandatory production quotas.
- By 2025, the target is to expand the share of eco-friendly vehicle sales to 25% of total sales, with an annual growth rate of 27%.
- Cooperation should align with policies related to electric vehicles, plug-in hybrids, hydrogen vehicles, as well as battery and management systems, motors, power electronics, and connected/smart technologies.
Hydrogen Energy
- Given the current low development level in China, there are opportunities for cooperation, especially through China’s competitive advantages in the hydrogen energy sector.
- China’s long-term hydrogen energy development plan is expected to accelerate the growth of energy and hydrogen vehicles.
- By 2050, hydrogen is expected to account for 10% of China’s total energy supply.
- Korean companies, including Hyundai and other players in the hydrogen value chain, have an advantage in hydrogen cars, fuel cells, and hydrogen refueling stations.
Renewable Energy
- Cooperation opportunities exist, particularly in areas where South Korea has a comparative advantage, such as renewable energy integration.
- China is the largest producer of wind and solar energy.
- China’s installed wind capacity is 210 GW (accounting for 10.4% of total power generation), and solar capacity is 205 GW (accounting for 10.2%).
- South Korea has a comparative edge in offshore wind, thin-film solar cells, smart grids, and renewable energy integration.
Green Urban Infrastructure
- Collaborating on infrastructure projects such as energy-saving, wastewater treatment, and waste collection systems for green cities.
- There are opportunities to cooperate on building green city projects that use renewable energy, eco-friendly transportation systems, and environmentally sustainable technologies.
Success Case Study
Eco-Friendly Energy Sector: Company E “Leveraging Growth in the Renewable Energy Battery Industry”
- Success Process: The company faced challenges securing local raw materials but shifted its strategy to establish a joint venture with both local and foreign partners.
- As demand for new energy vehicles surged, so did the demand for related batteries.
- After entering the Chinese market, the company encountered difficulties securing raw materials for stable supply to its local factory.
- Due to the nature of its products, establishing a production line and achieving normal operations quickly was not feasible, so the company focused on finding a suitable local manufacturer and establishing a joint venture to ensure a stable supply chain.
- The company utilized KOTRA’s legal advisory services to help set up the joint venture and navigate issues related to company establishment, labor and personnel matters, and internal control systems.
- Insights and Future Plans:
- China’s carbon neutrality commitment and its drive to foster green industries will likely boost demand in the renewable energy sector.
- The company plans to expand into environmental protection technologies, such as battery recycling, reuse, and related services.
- Plans to establish a standalone subsidiary in China and build a stable supply chain to increase production capacity and expand its customer base.