China, explained.
There is huge potential for Australia-China collaboration in areas of mutual interest, such as solar R&D (Getty Images)
A focus on risks shouldn’t blind us to the opportunities in the global green transition.
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If Australia is serious about becoming a renewable energy superpower, China must be part of the answerIf Australia is serious about becoming a renewable energy superpower, China must be part of the answer
Australia’s mining sector is expected to be worst hit locally by the Trump tariffs due to reduced demand from China and the slowdown in global trade. But at a time when the economy also needs to accelerate a transformation in response to climate change, this presents an opportunity. Australia must urgently reposition from a dig-and-ship economy to a zero-emissions trade and investment leader. But to do this, Australia needs to build strong, productive, global partnerships – including with China.
Australia and China share strong complementarities in green energy. Australia has abundant natural resources while China leads the world in clean tech and green energy manufacturing, technology, and investment. There is huge potential for enhanced Australia-China collaboration in areas of mutual interest, including solar R&D (UNSW and JA Solar joint lab), green iron (Fortescue and China Baowu Steel), and battery recycling (Envirostream Australia and Hithium Energy).
In fact, many governments around the world have been attracting Chinese investment to help build local green industries. China’s foreign direct investment has ramped up significantly over the last three years, as various companies invest in local manufacturing to reduce export dependencies, including batteries (European Union), solar photovoltaics (Vietnam, Malaysia) and new energy vehicles (Thailand, Brazil). Climate Energy Finance found that since 2023, there have been more than 180 green energy and clean tech projects with Chinese partnerships worldwide worth in excess of US$140 billion. This includes the recently announced partnership between Shanghai Electric Group and Masdar to build a 2GW solar PV project in Saudi Arabia.
Last month, the United Kingdom and China signed a Clean Energy Partnership memorandum of understanding in Beijing to enhance cooperation on renewables, grid modernisation and clean technologies, while at the same time protecting national security. Two weeks ago, Spain’s Prime Minister Pedro Sánchez met with China’s President Xi Jinping to “give new impetus” to the China-Spain relationship. Sánchez also spoke with representatives of a dozen major Chinese companies present in the Spanish market or considering investing there in the EV, battery, and renewable energy sectors. These recent efforts are seeing Spain emerge as a European hub for EV battery manufacturing, enabled by strategic partnerships with leading Chinese companies, such as the Stellantis and CATL joint venture to build a $US4 billion battery plant in northern Spain.
If Future Made in Australia is to succeed, the government needs to create an enabling environment to attract investment and technology from world-leading Chinese companies.
When it comes to Chinese investment in the EV sector, European countries are motivated to revitalise manufacturing at the national level and take advantage of Chinese battery superiority, backed by the EU’s Green Deal Clean Industrial Plan. Since last year, European governments have facilitated partnerships with three Chinese EV manufacturers to build EV battery plants in Slovakia, Spain and Hungary, and further projects are in discussion. They understand that global cooperation offers the strongest path to commercial success. Partnering with China is key to accessing world-leading tech, scale, and supply chain efficiency.
These important trends seem lost on Australian political leaders, with a bipartisan consensus more concerned with perceptions of risks rather than opportunities. A recent report by KPMG and the University of Sydney found that 2024 saw the third-lowest level of Chinese investment in Australia in 18 years. China does not even feature in the top 10 countries as sources of investment, according to the most recent Foreign Investment Review Board quarterly report. This seems to ignore the reality that China is the global leader in green economy sectors, and the top producer of renewable energy, generating 40 per cent of the world’s solar power in 2024, according to Ember’s Global Electricity Review 2025.
The last three years have seen Australia-China relations stabilise since the 2020 fallout, however the overall trust deficit has not recovered. The government has maintained a high level of securitisation in its approach to China. By not engaging, Australia is losing out on opportunities to ensure the country’s future economic security and prosperity. These opportunities are instead going to other countries, keen to partner with leading Chinese clean tech companies to strengthen their economic competitiveness in the global green transition. In just the last two months, more than 7 countries have strengthened renewable energy cooperation with China.
The profound shift in the global order, with the US set on retreat, further calls into question whether the current approach of applying a blinkered national security lens to China serves Australia’s interests. The government should consider a different approach based on pragmatic, future-oriented engagement with China. A “win-win” as is said.
To ensure our inbound foreign investment framework is aligned with the government’s vision for Australia to become a “renewable energy superpower and advanced manufacturing powerhouse”, Australia could learn from policy approaches being developed abroad. Notably, the European Commission is exploring conditions for inbound foreign investments in the EV sector. These could include local content requirements in joint ventures, the composition of senior management, and the licensing of technology or intellectual property.
If Future Made in Australia is to succeed, the government needs to create an enabling environment to attract investment and technology from world-leading Chinese companies. Establishing an Australia-China green energy MOU to build upon the climate change cooperation MOU would be a good start. Otherwise, companies will – and already are – go elsewhere to find a more welcoming environment. Australia risks falling further behind as the world accelerates towards renewable energy and advanced technologies.
About the author
Caroline Wang
Caroline Wang is the China Analyst at Climate Energy Finance.
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