Can China Turn Its Clean Energy Dominance into Green Soft Power?

China 2026: What to Watch

The Stakes: A Chance to Lead on Climate

In 2026, China’s clean technology companies will double down on overseas markets, driven by intensifying domestic price wars and the imperative to ensure future profitability. Exports will expand, as will overseas investments in new manufacturing capacity — especially as international trade restrictions intensify and localization becomes more attractive. As firms engage abroad, they will face regulatory and political challenges from host countries, which must balance their own domestic industrial policies, energy security, and cost-competitive decarbonization. Geopolitical alignment will further complicate decision-making. As the Donald Trump administration aggressively promotes fossil fuel exports and discourages economic dependence on China, governments will face intensifying pressures from both Beijing and Washington.

China now dominates the “new three” technologies of solar, electric vehicles (EVs), and batteries, as well as wind, making its role critical to the global energy transition. Ample and affordable access to these technologies could represent a triple win: accelerating the fight against climate change, improving energy access, and ensuring energy security. In August 2025, China’s National Energy Administration claimed that China’s solar and wind exports reduced global carbon emissions by about 4.1 billion tonnes during the 14th Five-Year Plan, while independent analysts found that China’s 2024 clean energy exports alone cut global emissions outside China by 1%.

It remains to be seen whether Beijing and its cleantech sectors can secure political endorsement from host countries, maintain cost advantages, and scale rapidly. These questions carry major implications not only for China’s geostrategic positioning and the commercial success of its clean technology firms, but also for the speed and scope of global emissions reductions and the world’s energy transition. Moreover, obstacles and opportunities may diverge across solar, EVs, wind, and batteries, which will test China’s ability to further adapt its global cleantech strategy across sectors.

Core Dilemma: Balancing Global Expansion and Strategic Control

China’s cleantech companies — largely private enterprises — face an important challenge: They must expand internationally to sustain growth, yet Beijing risks undermining strategic advantages in their doing so. Domestic overcapacity, intense price wars, and squeezed margins are forcing firms to seek markets abroad, especially higher-profit ones, yet this global push exposes them to growing political, regulatory, and security pressures.

A flood of low-cost Chinese exports has already triggered trade barriers across most developed markets, with some emerging economies, such as Brazil, Turkey, and Mexico, starting to follow suit. Chinese companies are increasingly investing in overseas manufacturing bases, in part to bypass these trade restrictions. Some countries have also adopted policies designed to attract investment on their own terms. Host governments — especially in Western-aligned developed countries—will increasingly demand more in return, including technology transfer, local job creation, adherence to environmental and labor standards, and greater assurances around data security.

Beijing faces a consequential trade-off: China’s unfettered expansion without meaningful benefit sharing and alleviation of local concerns risks intensifying backlash that harms Chinese firms’ commercial prospects, erodes China’s green soft power, and slows global climate progress. Yielding too much by indiscriminately sharing technology or critical inputs, however, could dampen China’s long-term dominance in solar, batteries, and EVs — industries that have become critical to China’s economic health. Balancing these pressures — commercial growth, strategic control, and geopolitical positioning — will affect not only the future of China’s clean energy industries, but also global supply chains, geopolitical alignments, and the pace of climate progress.

Outlook for 2026

In 2026, China’s clean energy companies are likely to adopt a dual-track strategy: ramping up exports to countries where trade barriers are low — mostly developing economies — while investing in local manufacturing and upstream supply chains where incentives encourage it or restrictions require it. As policy frameworks evolve, firms may pursue innovative structures, such as regional hubs, joint ventures, and licensing deals.

In the Global South, Chinese companies will channel greater exports to lower-income economies that maintain positive ties with China or to areas where Beijing promotes them for geostrategic reasons, such as the Middle East. Where trade restrictions arise, firms will increasingly pivot toward local manufacturing investments — especially in emerging markets where host governments offer incentives, such as through adjustments to Indonesia’s domestic content requirements and Brazil’s tax waivers for companies that establish production bases. Local public sentiment toward firms’ value creation and environmental performance, as well as formal government policy will shape how Chinese companies adapt their practices to secure market access.

As tariffs and trade barriers in the United States, the European Union (EU), and other aligned markets grow stiffer, the Global South will become even more important to China’s geostrategic and commercial interests. Nevertheless, higher profit margins in the United States and the EU especially will motivate Beijing to keep pushing for market access in these regions without compromising China’s technological dominance.

In the United States, regulatory difficulties and the Trump administration’s antipathy toward clean energy may make Chinese companies hesitant to invest without consistent political endorsement from Washington. By contrast, Europe may remain a more predictable destination as policy support for clean energy persists, though challenges will still dominate, especially if the EU’s desire for industrial sovereignty clashes with China’s willingness to provide clear and consistent access to material and technological inputs. However, there may be a constructive path forward if the EU imposes consistent and achievable requirements with respect to technology transfer, job creation, and ownership stakes for investments, and China agrees to meet them.

Meanwhile, Beijing will amplify climate leadership rhetoric touting the benefits of China’s dominance in clean energy industries as a global public good, especially as China’s existing domestic emissions targets face headwinds and its updated Paris Agreement targets underwhelm. This rhetorical push will be more symbolic than substantive by capturing what China is already doing. Senior leadership may be unlikely to promote a more collaborative vision of global green tech leadership unless the political and economic benefits for China are clear.

Finally, the Trump administration’s coercive measures to prevent other countries from deepening economic dependence on China, especially in strategic sectors, may force nations to thread the needle between Washington’s fossil fuel push and engagement with China. Some countries may leverage Chinese cleantech partnerships to “de-risk” from needing to ramp up their U.S. fossil fuel imports — a situation that could shape the direction of global energy politics.

Conditions and Contingencies

This forecast assumes that China can sustain its multipronged strategy — prioritizing the Global South, selectively targeting higher-end markets, and leveraging rhetoric to project climate leadership — provided several enabling conditions hold:

• Global deployment accelerates. Clean energy adoption expands globally, supported by investments in clean power projects by China and other actors. However, unless China provides additional investment incentives in developing countries or facilitates meaningful debt relief, deployment could remain limited to high- and middle-income economies or to a localized, distributed scale.

• Chinese firms maintain cost competitiveness. China’s domestic industry consolidation does not erode price advantages, and Global South energy choices remain primarily driven by cost competitiveness rather than geopolitical considerations. Their demand for clean energy continues to grow.

• Beijing remains committed to overseas expansion. China’s leadership continues to support international expansion of China’s cleantech companies and leveraging them for diplomatic gains.

• U.S. policy remains unpredictable and coercive. U.S. policy stays focused on securing long-term deals for the export of American fossil fuels, coupled with fierce pushback against clean energy in multilateral and bilateral spaces.

• No major technological breakthroughs. Other countries do not achieve major technological advances that threaten China’s market dominance in solar, batteries, and EVs.

What to Watch

Several indicators in 2026 will signal whether the forecast is on track:

• High-level political statements from Beijing emphasizing how Chinese clean energy benefits other countries’ development, or issuing guidance for cooperative engagements, would signal Beijing’s drive to secure host country endorsement.

• A de-escalation of China’s export controls on key material inputs would also signal a more pragmatic posture from Beijing.

• Greater emphasis by Chinese cleantech entrepreneurs on climate and development benefits — specifically in the context of international investments and market access—would suggest adaptation to foreign sensitivities.

• China may also attempt to set norms in multilateral platforms where it has influence, such as leveraging BRICS and the Shanghai Cooperation Organization to advance standards for clean energy projects.

Tracking these signals will clarify whether China prioritizes pragmatic growth and green soft power or doubles down on strategic control.

Alternative Scenarios

• Baseline (most likely): China expands its cleantech presence across the Global South, especially in markets with minimal barriers, while negotiating with developed economies to secure terms for investments that it deems favorable. Beijing emphasizes protecting its technological advantages over benefit sharing, resulting in persistence of the status quo.

• Alternative 1: An alternative scenario would see China recognizing the soft power benefits of the global expansion of its cleantech companies. Officials would outline clear pathways for companies to create value locally across developed and developing economies alike — such as through technology transfer, worker trainings, and joint ventures — as part of an active, collaborative vision for how Chinese investments will enhance other countries’ economic and social development.

• Alternative 2 (least likely): A third scenario, though unlikely, is technically feasible. In this case, barriers to global cleantech trade become so pervasive and counter to countries’ economic interests that mass pushback shifts policy toward a more cooperative approach — one that prioritizes free trade in green goods and greater international cooperation. Countries would recognize the public benefits of China’s low-cost clean energy and open their markets to these imports to accelerate their deployment and reduce emissions. China would correspondingly limit its coercive practices toward material and technological inputs where it dominates the market, and would take substantive steps to address unfair subsidies and domestic overcapacity.

Strategic Implications

Domestically, Chinese cleantech companies will face increased pressure from the central government to abide by its vision for protecting China’s interests as those companies engage abroad, including where and how they should share their technology with international players. Intense competition within China will also lead to further domestic consolidation of the sector. Companies that align with the government’s vision while catering to the demands of overseas markets — for example, by devising innovative ownership structures to accord with host country requirements — will come out in the lead.

The outcomes for U.S.-China relations may depend on whether U.S. policymakers recognize that, with strategic safeguards and risk mitigation, Chinese participation in clean energy supply chains can enhance American interests, as well as whether the Trump administration backs off from its hostility toward clean energy. Chinese firms’ urgency to access the U.S. market and willingness to transfer technology will also play a role. Chinese investments gaining a clearer pathway for U.S. market access could benefit the U.S. domestic clean energy transition, which may otherwise continue to suffer under the Trump administration’s aggressive anti–clean energy policies and lack of access to China’s technologies. It would also enhance the bilateral relationship by providing a win-win and greater incentive for sustaining constructive economic ties. Should the two countries fail to reach a compromise, however, China may double down even more intensively on its Global South orientation, thus accelerating the bifurcation of the global green economy.

In other economies and especially the Global South, the degree of China’s cooperation and host countries’ assertion of their agency will shape the extent to which China can continue promoting its vision of global multipolarity. It will also pose major implications for the speed and scale of the global energy transition and climate progress. Should deployment of China’s cleantech enable regions to decouple from dependence on imported hydrocarbons, for instance, it will further curb U.S. influence and the Trump administration’s economic leverage.

Policy Shaping and Conclusion

China’s clean energy expansion is entering a decisive phase in which commercial necessity and strategic calculation increasingly collide. Whether China’s clean energy dominance can supercharge its green soft power will hinge largely on Beijing’s willingness and ability to cater to host country interests. To enhance China’s credibility as a genuine climate leader, the central government will need to balance political, security, and economic considerations while shaping a more constructive pathway for its clean technology companies to contribute to other countries’ development.

Several other sets of actors may influence Beijing’s calculus as well. China’s clean energy companies could prompt the government to adopt a more open stance toward local value creation, including through technology transfer and joint ventures. Host country governments — especially in the Global South, where China seeks to deepen its influence — could establish clear investment criteria to ensure that Chinese participation supports local economic and social priorities. Likewise, multilateral actors and civil society can advance frameworks and campaigns that encourage Chinese investments to uphold high social and environmental standards.

As domestic competition compels firms to expand abroad, Beijing’s ability to balance openness with strategic control will shape the broader trajectory of global decarbonization. How China manages these tensions — between profit and partnership, dominance and credibility — will determine whether its clean energy leadership reinforces or undermines its green soft power.