China is the leader both in terms of existing low-carbon energy capacity and the future of hydropower in terms of its annual commissioning. However, the share of RES in the energy balance is still negligible – only about 12%.
At the same time, China has plans to achieve carbon neutrality by 2060, for which it is necessary to radically reduce hydrocarbon consumption in favor of renewable energy, which can become a growth driver for the industry. The ETF, along with the entire Chinese market, is now down 35% from last November’s highs.
Global X China Clean Energy is an ETF focused on investing in Chinese equities from the increasingly popular low-carbon energy sector. The ETF covers primarily solar, wind, nuclear, and hydropower.
The fund’s key growth factor is the prospect of increasing the share of renewable energy sources and the future of hydropower in China’s energy mix.
China is the world leader both in terms of installed solar and wind energy capacity and their annual commissioning. The government expects that the total increase in solar and wind capacities in 2022 will be a record 140 GW in the country’s history.
The main incentive to increase the share of renewable energy in the energy mix is China’s plans to achieve carbon neutrality by 2060. Now the share of RES in the energy balance is only 12%, and 59% is coal, which is the most non-environmentally friendly type of fuel.
The IEA believes that to meet environmental goals, China needs to increase the share of renewable energy to 18.5% by 2030 and 59% by 2060. At the same time, the total volume of solar and wind generation, due to their current meager share in absolute terms, may increase by 3 and 10 times by 2030/2060, respectively.
The two largest ETF assets are China Yangtze Power and Tianjin Zhonghuan Semiconductor. China Yangtze Power is the world’s largest publicly traded hydropower company. The company’s business is quite stable, allowing it to increase revenue and an increase in tariffs and pay dividends with a yield of 3.4%.
Tianjin Zhonghuan Semiconductor is engaged in the production of various semiconductor equipment, including those necessary for solar energy. Due to the expansion of production capacity and optimization of the business, the company is expected to achieve impressive growth rates this year.