Climate Energy Finance (CEF) has highlighted the billion-dollar opportunity in China’s outbound “green capital tsunami”.
A new report from the think tank reveals Chinese firms have committed upwards of US$100 billion to outbound foreign investment since 2023 – spanning decarbonisation sectors like solar, wind, and green hydrogen – as the country’s corporates increasingly “go global”.
And while other regions of the world have reaped the rewards of this unprecedented investment program, CEF notes that investment in Australia has been comparatively, “exceptionally weak”.
“Australia risks forgoing its massive strategic opportunity to co-invest with China – our number one resources trading partner – on decarbonisation,” it said, adding that this topic was high on the agenda of Treasurer Jim Chalmers’ talks last week with Chinese leaders.
The report reveals that Australia’s current stance is disincentivising Chinese private investors, with private Chinese investment in the country plummeting to a multi-decade low of just US$613 million in 2023.
“Chinese capital is increasingly going elsewhere,” CEF said.
Simultaneously, the report highlighted several promising areas for private Chinese co-investment in Australia, including clean energy infrastructure, onshore value-adding in energy transition materials such as critical minerals and strategic metals like green iron, as well as manufacturing within the cleantech supply chain.
“It makes geopolitical and economic sense for Australia to find a strategic way to work with our biggest trading partner and the region’s major power, while navigating the challenges and risks Chinese technology and manufacturing expansion and its global critical minerals supply chain dominance pose.”
Namely, the report noted that China’s accelerating investment into strategic critical minerals supply chains globally, coupled with its dominant buying power, has driven price deflation, impacting key Australian commodity exports such as critical minerals.
As such, CEF has called on the Australian government to establish a strategic critical minerals reserve trading fund to underwrite new investment in mining and extraction and protect Australia’s national interests.
Other recommendations for the government included:
- As a strategic national-interest priority, clarify the rules of engagement with the Foreign Investment Review Board (FIRB), so that Chinese firms looking to co-invest are incentivised by transparent, stable, welcoming investment policy frameworks and guidelines.
- Improve and streamline engagement by tasking federal and state investment bodies to communicate FIRB rules to prospective Chinese investors, assisting them with market entry strategies.
- Strongly advocate for an Asian Carbon Border Adjustment Mechanism (CBAM) – a green premium price signal to accelerate investment into renewables-powered processing of Australia’s energy transition materials, helping foster collaboration with China.
“This report makes it clear: we are at a pivotal moment where Australia’s relationship with China can either unlock vast opportunities or see them slip away to other regions,” David Olsson, president of the Australia China Business Council, said.
“The time to act is now. We have the resources and capability, but if we don’t create the right environment to attract these technologies and solutions, those investments will go elsewhere.”
