Global Industry Chains Amid Green Transformation: Opportunities and Challenges

Environmental movements in the 1960s marked the beginning of green transformation, and expedited the shaping of today’s global industry chains. The international transfer of low-value added and high-pollution industries to developing countries created economic boosts as well as significant environmental pressure for these countries. What kind of changes would a new cycle of carbon neutrality-centered green transformation bring to the global industry chains? What challenges and opportunities would such changes bring to China? We think the new round of green transformation may affect global industry chains in the following ways: China has switched focus from “prioritizing economic growth over the environment” to “putting equal emphasis on the economy and sustainable development”. Meanwhile, developed countries have started to protect their own green industries. This trend has led to fiercer international competition in global industry chains. Hence, we think that China’s role in this new cycle of green transformation is to balance the development of green and traditional energy intensive industries as it adapts to or even leads the change in global industry chains. Specifically, we believe China’s goals of achieving peak carbon emissions and carbon neutrality should be in line with efforts to maintain energy security. While industrial competitiveness should be protected, energy price regulations should be gradually relaxed, and carbon restrictions tightened. Faced with an increasingly rigorous international environment, China could deepen international cooperation, and encourage the innovative development of green industries via sustainable financing and investment, in our view. Moreover, we believe China could fully leverage its economies of scale to strengthen the resilience and steadiness of industry chains when coping with climate risks. We think enhancing the competitiveness of emerging green industries will help improve industry chain efficiency as well as strengthen China’s overall industrial security.