Opportunities for German SMEs on China’s path to CO₂ neutrality

As the world’s largest carbon emitter, China plays an important role in this. What is being done about the CO₂ increase in China and what needs to be done? What economic opportunities are there here for German companies or SMEs?

The economic background
China is a country located about 7,000 km from Germany with a population of 1.41 billion people and an area about 27 times the size of Germany. The People’s Republic of China was newly founded in 1949 and was then an agricultural country with only a few run-down and outdated factories. Therefore, the primary goal at that time was economic recovery and development. While Germany experienced high economic growth from the 1950s to the 1970s and paid more attention to environmental protection over time, China developed an industry with low energy and resource efficiency. The reasons for this were technical and scientific backwardness as well as lower funding. With the upswing of the Chinese economy from the late 1970s onwards, environmental problems increased rapidly and environmental protection then became an increasingly important issue, which also led to increasing investment. Today, China is still at the stage of industrialisation and urbanisation and faces the difficult task of improving the livelihoods of its citizens. Therefore, the balance between economic development and environmental protection needs to be discussed regularly.

Achievements in energy conservation and emission reduction
In 1979, China passed the first national environmental protection law, followed by a series of laws that initially provided the legal framework for environmental protection. In the mid-1980s, an energy efficiency standard system was introduced. In the four years from 2016 to 2020 alone, the introduction of 26 energy efficiency standards achieved an annual electricity saving of 49 billion kWh, equivalent to an emission reduction of 2.86 million tonnes of carbon dioxide.

China’s forest area and accumulation have increased for more than 30 consecutive years, making it the country with the largest increase in forest resources in the world. According to the statistics, the new green areas created in China between 2000 and 2017 constituted a quarter of the total green areas in the world. By the end of 2019, carbon intensity had fallen by 48.1% compared to 2005, and the share of non-fossil energy in energy consumption had risen to 15.3%. Of course, this is still not enough.

Action plan for the future – 2060 target
At the UN General Assembly in 2020, China for the first time presented a target date for climate neutrality: To peak carbon dioxide consumption by 2030 and to become completely carbon neutral by 2060. Chinese President Xi Jinping told the world that China would take stronger policy measures. In October 2021, the State Council published an action plan on how to peak CO₂ emissions before 2030. The share of non-fossil energy consumption is to be 20% by 2025 and 25% by 2030. Moreover, CO₂ emissions per unit of GDP are to decrease by 18% by 2025, compared to the level recorded in 2020, and by more than 65% by 2030, compared to the level recorded in 2005, according to the plan.

The action plan also lists the ten important tasks to achieve the carbon peak:

Advance clean and low-carbon transport.
Improving energy efficiency in key sectors
Expanding a circular economy
Supporting technological innovation
Improving the capacity of carbon sinks
Promoting environmentally friendly production and lifestyles.

In terms of international cooperation, the plan says China will strongly align itself with global climate governance, pursue green cooperation in the fields of economy, trade, technology and finance, and push forward the construction of a green “belt and road” initiative.

Sino-German cooperation on the path to climate neutrality
On 10 October 2014, Chinese Prime Minister Li Keqiang and former German Chancellor Angela Merkel jointly adopted the Framework of Action for Sino-German Cooperation entitled “Shaping Innovation Together” in Berlin. Almost a year later, the Chinese Ministry of Housing and Urban-Rural Development (MoHURD) and the German Federal Ministry for the Environment (BMU) signed a Memorandum of Understanding on cooperation in implementing the Sino-German Urbanisation Partnership. The “Eco-Cities in China” project, which is managed by the Chinese Society for Urban Studies (CSUS) and the German Energy Agency (dena), was created on the basis of the Framework for Action and the Urbanisation Partnership.

“Eco-Cities” aims to increase the market penetration of energy efficiency technologies, improve the investment environment, promote international know-how transfer and introduce high-quality German products to the Chinese market. Both countries will work together on solutions to achieve the goal of climate protection in the urban energy system. 25 pilot cities in China are currently implementing lighthouse projects that introduce advanced German technology concepts with the help of German and Chinese experts.

The pilot district of Tianjin Daqiuzhuang
One of the 25 pilot districts is Tianjin Daqiuzhuang, in which BVMW Beijing is involved. Through cooperation, a small German-Chinese industrial district with a higher quality of life is planned here. The industrial focus is on research, development and processing of new materials and health equipment, as well as the planning of green buildings.

After lengthy analyses, Daqiuzhuang finally declares to become CO₂-neutral by 2030. To achieve this goal, all new buildings will comply with the green building standard in the future and 30 % of them will be prefabricated houses. In addition, the share of green spaces in built-up areas will be 40 %. The share of green mobility in the transport sector will even be 75 %.

Opportunities for German companies
Various domestic and foreign institutions expect a market volume of 160 to 200 trillion RMB (approx. 22.8 to 28.6 trillion euros) in the future, which will be needed to transform the relevant industries in China on the way to CO₂-neutrality by 2060. Assuming linear growth for the next 40 years, this results in an annual average investment amount of 5 trillion RMB (approx. 714 billion euros). Many industries in China, such as steel and metal processing, petrochemicals, building materials and transport, are currently undergoing or will soon undergo a “green revolution”. As German companies are way ahead of China in green energy, energy efficiency, circular economy, green buildings and technical & scientific research and development, it opens many new avenues for German companies. Especially for SMEs, as they are the main addressees of China’s 14th Five-Year Plan.

The construction industry as an example
China has built over 6.6 billion square metres of green building space across the country, over 23.8 billion square metres of energy-efficient building space has been built. Energy-efficient buildings account for over 63% of urban construction space. Newly constructed and completed energy-efficient buildings can achieve an annual energy-saving capacity of nearly 300 million tonnes of standard coal in China. This can reduce carbon dioxide emissions by 740 million tonnes (2019).

The China Foresight Industry Research Institute estimates that around 1.054 billion square metres will be newly built in 2025. Chinese prefabricated housing construction companies are in the early stages and there is still a significant gap between the large market demand and supply. German companies, on the other hand, can look back on a hundred-year history of development in this field and have a great technical lead as well as a complete and comprehensive system of standards. Therefore, there are many opportunities for German companies in this field. In addition, the Passive House is also a popular topic at the level of urban management. Germany is known to be the initiator and pioneer of the concept there. China would like to develop in a similar direction in the future.

In addition to the building sector, China is also particularly interested in cooperating with foreign companies in other areas, such as renewable energies, the circular economy, the production of appliances and environmentally friendly consumer goods as well as new materials. Our foreign office in Beijing is at your disposal for further information about the Chinese market and will accompany you on your way to China.


Yang Wang
BVMW Representative for China, Beijing office

Projekt Manager

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