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China’s Carbon-Neutral Pledge Boosts Solar Rally

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Investors can generally ignore goals that world leaders promise the U.N. General Assembly they will achieve 40 years from now. Chinese President
Xi Jinping
’s recent pledge to make his country carbon neutral by 2060 is an exception. 

The scope of Xi’s ambition, in a country that still gets two-thirds of its power from coal, is breathtaking. Follow-up documents from a Tsinghua University think tank estimate China will have to spend $15 trillion on green transformation, increasing solar power six times and wind more than three times. 

But these aims are underpinned by achievements. From a standing start 10 years ago, China has created seven of the world’s top 10 solar module manufacturers, says Xiaojing Sun, who follows the sector for consultant Wood Mackenzie.

These upstarts have largely wiped out European competitors on price, while high U.S. import tariffs have failed to stimulate a domestic industry. “The Chinese have been very good at leveraging other countries’ subsidies to sell into those markets,” says Louis Schwartz, CEO of consultant China Strategies. China is less dominant, but still a top player, in the race to build electric vehicles and their all-important batteries.

Buying the relevant Chinese stocks is another question, however. A lot of good news is already baked in, especially for solar producers, after recent price surges. Shares of industry leader

JinkoSolar

(ticker: JKS) have nearly doubled this year, and No. 2

JA Solar Technology

(002459.China) more than tripled, on expectations of a global green reboot after Covid-19 and a potential election victory for environmentally minded U.S. Democrats. “I can see pockets where companies have become expensive on a short-term basis,” says Will Riley, who manages Guinness Asset Management’s Global Energy fund. 

The headlong growth of renewable energy leaves companies challenged to keep up