How EquitiesFirst can unlock capital for clean energy investments in China

Author: ExecEdge Editorial Team

China is a world leader in clean energy investment. In 2022, China invested $546 billion in renewable energy sources such as solar and wind power, electric vehicles and battery technologies. This accounted for almost half of global spending on low-carbon technologies this year. In comparison, the United States invested only $141 billion.

Clean technology manufacturing capacity is rapidly expanding in China, establishing integrated, efficient value chains for producing items such as solar panels and battery cells. China’s contribution of $79 billion accounted for more than 90%. investments in low-emission production in 2022

This dominance in clean technology production capacity is the result of China’s national commitment to become carbon neutral by 2060, with emissions peaking around 2030. Official plans call for staggering investments: about $327 billion annually by 2030. , and then nearly $600 billion a year over the next three decades to achieve net zero emissions.

However, in the face of these sustainability pressures, traditional financing channels have been somewhat constrained by higher interest rates. As the international community sheds light on the need to mobilize private capital to address climate challenges, entrepreneurs and professional investors are looking for a viable path to invest in the long-term potential of China’s energy transition, electric vehicles and other solutions focused on sustainable business ventures.

EquitiesFirst equity financing could provide the basis for this type of sustainable economic growth. The company offers financing at lower interest rates in exchange for equity in assets such as shares or real estate. This enables asset holders, such as entrepreneurs and professional investors, to leverage their value in liquid capital that is released to support strategies such as investing in sustainable development and alternative energy sources.

Development of China’s clean energy market

For China, the world’s second largest economy, following an ecological development model in recent years has been both an existential necessity and an economic opportunity. The effects of climate change, such as increasing droughts, have begun to disrupt clean energy supply chains in China as early as 2022.

However, these mounting challenges did not in any way slow down investment – in fact, they seemed to accelerate it. China’s clean energy investment growth accelerated to 40% year-on-year in 2023, reaching approximately $890 billion.

In 2023, renewable energy and clean technologies generated $1.6 trillion in economic activity in China, up 30% from the previous year. In other words, clean energy was the single largest driver of China’s gross domestic product growth, accounting for 40% of its overall economic expansion.

The scale of investment in the country dwarfed global data. China’s clean energy investment spending of $890 billion last year almost equaled the estimated total global investment in all fossil fuel supplies worldwide. China’s expenditure on renewable energy sources was comparable to the GDP of Switzerland or Turkey.

Solar energy, electric vehicles and batteries

Where exactly is all this investment going? Three industries stand out: solar energy, battery production and wind energy. These three interconnected industries saw spectacular growth in 2023, helped by policies to accelerate wind and solar installations, promote the adoption of electric vehicles, and build domestic battery supply chains.

Solar energy was the biggest driver of clean energy expansion in China last year. The sector grew by 1 trillion yuan (about $141 billion) in new investments, goods and services. Its valuation increased by 63% year-on-year, from 1.5 trillion yuan in 2022 to 2.5 trillion yuan in 2023.

The increase in battery production is equally rapid. China currently accounts for more than 80% of global lithium-ion battery production, increasing its ability to meet growing demand for electric vehicles. China’s battery industry may benefit from lower production costs; according to the International Energy Agency, factories in China can cost 70% to 130% less than factories in the US and Europe.

Wind energy production was the third critical area as China rushed to build a massive new offshore wind sector almost from scratch to meet near-term climate goals. China accounted for 65% of global wind power capacity in 2023.

Many analysts also pointed to the growing opportunities associated with green hydrogen. While still a relatively small sector, green hydrogen from renewable energy is gaining popularity around the world as a potential solution to decarbonize sectors where greenhouse gas emissions are difficult to reduce, such as steel and fertilizers. China recently announced plans to produce 200,000 tons of green hydrogen per year and deploy 50,000 hydrogen fuel cell vehicles by 2025.

Factors driving Chinese investment

There are several fundamental factors driving growth and investment in sustainable development and clean technologies in China.

First of all, there is unwavering political emphasis on the development of renewable energy, which is the main economic priority. Beijing’s attention, at least for now, appears focused on achieving short-term climate goals in a way that has created a powerful economic tailwind.

Secondly, the availability of cheap capital from sovereign wealth funds and banks, as well as private sector companies such as EquitiesFirst. Financing clean energy development may be easier in China than in the West, where capital has been scarce due to high interest rates and clean energy development has been more uneven in recent years.

Finally, China’s control over mineral supply chains and its ability to refine key clean energy raw materials such as lithium, nickel, cobalt and polysilicon have given some companies a structural cost advantage over foreign competitors. This has enabled the production of renewable equipment and electric vehicles on a larger scale and affordability.

Equity-based financing for China’s clean energy

Some analysts believe the Chinese green energy giant could create attractive equity financing opportunities. This approach sees entrepreneurs and professional investors gain access to low-interest liquid capital backed by the equity in their existing, often illiquid assets.

For example, EquitiesFirst issues financing as a percentage of the asset’s appraised value, usually around 60% to 70% of the valuation. Interest rates remain moderate, around 3% to 4%, which is lower than conventional financing costs. After funding, EquitiesFirst takes over custody of the assets, supporting a long position in your portfolio until the capital is repaid. At this point, the client regains his original share of the share capital, retaining the increase in value and dividends from the original share.

Such financing methods could provide investors with the opportunity to gain greater exposure to China’s rapidly growing renewable energy sectors without having to sell existing positions. This would maintain portfolio diversification while enabling investors to take advantage of new opportunities in the rapidly changing market for clean technology production and installation, a market that requires the flexibility provided by liquid capital.

Over the past decade, China has established itself as a global leader in clean energy production. And as climate change increasingly disrupts business as usual, the coming decades may see an even more urgent influx of capital to electrify transportation and transition energy generation to zero-emission sources.

Entrepreneurs and professional investors will be looking for innovative financing methods to free up the capital needed to support this boom, and equity financing may be an attractive option for those who need immediate access to capital but want to maintain their long-term positions.

For more information please visit www.equitiesfirst.com/.

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