How China grabbed pole

Source: This post is created based on the article ‘How China grabbed pole’, published in Business Standard on 7^th October 2023.

UPSC Syllabus Topic: GS Paper 3, Economy, Changes in Industrial Policies

News: China has made many strategic moves to dominate crucial sectors, like renewable energy.

China capitalized on the global shift towards renewable energy and electric mobility. It amassed significant manufacturing capabilities to cater to global demand for solar panels, wind turbines, and EVs.

How China gained dominance in major manufacturing segments?

1) Foreseeing the rise of electric vehicles, Chinese firms invested in battery technology, achieving cost reductions that propelled EV sales.

2) China built a robust manufacturing base, which now can supply a significant portion of global demand for solar panels, wind turbines, and EVs.

3) This capacity also extends to critical materials and components necessary for these industries, underlining China’s manufacturing might. China secured access to essential raw materials like cobalt from Congo and lithium from Bolivia, critical for battery manufacturing, thereby further strengthening its position in the global EV market.

4) The West, particularly the US and European countries, didn’t act timely to China’s rise in these sectors. Their focus was on the technological advancements in other areas like Silicon Valley, instead of the manufacturing sector.

5) At the beginning of the century, Europeans countries themselves promoted China to fulfill their need for rooftop solar panels.

What are the implications of China’s dominance?

First, China has acquired power to impose trade sanctions. For example, recent stoppage of supplies of gallium and germanium, critical for chip manufacture.

Second, China tackles around 60 per cent of the wind turbine market. It also controls the market for active pharmaceutical ingredients (API), on which India’s feted pharma industry depends.

Third, Western countries are trying to replicate the Success story of China, but It will be difficult. China’s success is based on the cutting-edge research in industries, the reduction of cost through free land, state-backed loans, and cheap electricity, population willingness to live with the ill-effects of highly polluting production facilities.

Fourth, there is a global trend towards economic nationalism. Countries like the US, Europe, and India are now adopting protective measures and subsidies to bolster their domestic industries.