China is Betting Big on Sustainable Development.
According to research conducted by the Green Finance Committee of the China Society for Finance and Banking, Tsinghua University, Goldman Sachs, and other reputable experts, achieving carbon neutrality by 2060 will require a range of USD 15 trillion to 75 trillion in carbon neutrality financing over the next 30 years.
The Chinese green goods and services market is expected to be among the world’s largest. China has established significant carbon emission objectives, the first of which is set to be met in 2030. To achieve these objectives, officials are developing frameworks to lead China’s green transition and establish a low-carbon economy. Creating a circular economy that is green, low-carbon, and low-waste is a priority for China.
This is one of the most significant opportunities for foreign companies to develop their China Green Strategy since China’s sustainable goods and services market will be the world’s largest, with a potential value of over a trillion USD.
Recent China Policies on Green Development
Several key policies have been announced by China in recent years, further reinforcing its decarbonization objectives. On September 22, 2021, the CPC Central Committee and the State Council released the Working Guidance for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy. On October 24, 2021, the State Council released the Action Plan for Carbon Dioxide Peaking Before 2030.
Furthermore, the government has issued implementation plans for essential domains such as energy, manufacturing, construction, and transportation, as well as crucial industries such as electricity, steel, cement, petrochemicals, and chemicals, as well as technological, taxes, and financial protection. These together provide a “1+N” policy framework, schedule, roadmap, and blueprint for China’s dual carbon objectives.
The Working Guidance refers to “1” as the country’s primary guide to achieving its climate goals, and the “N” represents an undefined number of auxiliary policy papers targeting specific fields, regions, and sectors. Publication of the Action Plan is an essential milestone in the “N” process, and it’s the first “N” document released.
Detailed decarbonization action plans can be expected for multiple sectors, including energy, industry, transportation, iron and steel, nonferrous metals, petroleum, petrochemicals, natural gas, urban and rural development, agriculture and rural areas, and building materials. Through the “1+N” climate policy framework, China wants to coordinate and consolidate the economy-wide carbon reforms.
Overall, the 1+N and the upcoming sectoral action plans provide China with a solid roadmap for meeting its climate targets in 2030 and 2060.
Implications for Foreign Investments & Green Branding
To seize the opportunities emerging from China’s green and low-carbon transition, foreign value investors should pay attention to its zero-carbon development and invest in green assets, projects, and technologies.
The National Development and Reform Commission (NDRC) released a new version of an industry catalog to encourage foreign investment on October 28, 2022. As China aggressively pursues high-level opening-up, it will continue to promote foreign investment in advanced manufacturing, the service sector, and the central and western regions.
The catalog, released just days after the Communist Party of China’s (CPC) 20th National Congress concluded, is one of the first batches of policy packages that eloquently highlighted the grand gathering’s opening-up attitude and policy priorities.
The new catalog is effective from January 1, 2023.
Climate Change Awareness Among Chinese Consumers
As consumer awareness of environmental sustainability rises, Chinese consumers search internet platforms for environmentally friendly items. This trend provides a chance for green firms to display their products. The concept of sustainable consumerism and worry about climate change has never been more popular in China, and this trend is projected to continue.
In the consumer market context, brands should consider integrating net zero considerations into existing and new marketing campaigns, for example, promoting low-carbon products and services, encouraging sustainable buying practices, and promoting net zero brand values.
If you can educate young Chinese consumers about the environmental costs of manufacturing and the economic boom, they will respond positively.
According to a survey by PWC, consumers in China support environmentally responsible companies almost three times as much as those in other countries.
Implications for Foreign Companies in China
While further regulations to stimulate essential ESG initiatives are feasible, firms must integrate ESG principles and ideas into their company culture and day-to-day operations. Retailers should invest strategically in sustainability and ESG initiatives, with each decision and activity filtered through an ESG lens.
Foreign businesses operating in traditional sectors may also need to thoroughly and systematically upgrade their existing operations and supply chains to perform better on energy saving, pollution control, and resource recycling, among others. Advanced technologies and management will play a vital role in this process.
The trend for green compliance in China and standards will be stricter, and their monitoring will be more consistent. Businesses operating in China are advised to keep a close eye on the rollout of China’s green compliance requirements and make preparations in advance.
Although China is now the world’s top CO2 emitter, cumulative and per-capita emissions are significantly lower than those of industrialized nations, owing to China’s far faster industrialization process. Achieving global climate targets will not be accessible unless China effectively transitions to a low-carbon economy.
When combined with adopting ESG measures, sustainability-based consumption represents an excellent opportunity for value development. Due to China’s tremendous technical capabilities, the route to carbon neutrality will offer new development opportunities.
Sapience Pro: How can we help foreign businesses to navigate China’s complex ESG landscape?
Pre-Market Advisory & Planning
We will help you figure out the best opportunities for your market entrance plan and investments in China, considering all environmental factors. Provide insights and assistance to businesses.
ESG Compliance
These developing sectors will be susceptible to quick regulatory changes; we will help you in keeping compliant with the new framework.
Tax Planning & Incentives Support
There are still many obstacles ahead of you; we will assist you in developing your tax plans and using government incentives.
Author: Chyngyz Sher
Compay: Sapience Pro
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Adam Brown
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