Party-State Decarbonisation The contradictions of China's decarbonisation

China is not just building clean energy faster than anyone else. It is trying to become something new.

Call it the electrostate. Still, big caveats loom, says Chris Saltmarsh in a superb @ripejournal.bsky.social article geoeconomic.substack.com/p/party-stat...

Geoeconomic | Substack Cornel Ban, associate prof at Copenhagen Business School and fellow at Boston University's China Initiative at the Global Development Program. Click to read Geoeconomic, a Substack publication with hu...

Friends, I have a substack with my thoughts and others on current events and megatrends from an international political economy perspective. geoeconomic.substack.com

GGFs are the missing piece in understanding how China sustains its lead in cleantech and narrows the gap in semiconductors. Ignore them, and you miss the financial engine of China’s industrial strategy.

For Europe, the lesson is sobering: we talk “sovereignty funds,” but GGFs already operate as a parallel financial infrastructure on a scale we haven’t matched. This is how China turns finance into an industrial weapon.

GGFs embody a statecraft of patient capital. They extend time horizons beyond what private VC can tolerate — a decisive advantage in industries like batteries, chips, and green tech where scaling takes decades.

But GGFs are not without problems: regional duplication, weak governance, political meddling, and uneven returns. Still, they are a powerful institutional innovation in channeling finance toward strategic industrial goals.

Chinese GGFs also illustrate the “generative” power of China’s state capitalism. They don’t just allocate existing resources; they create new financial ecosystems where banks, local governments, and tech firms co-invest.

Unlike Western VC, which is demand-driven, GGFs are mission-driven. The state sets the priority, absorbs early-stage risks, and then lets private capital scale. The result: systemic financing of frontier sectors, not just unicorn chasing.

GGFs fuse financial engineering with developmental strategy: they mobilize local governments, SOEs, and private funds into joint ventures that embed industrial upgrading in financial circuits.

By 2023, China had more than 2,000 GGFs, managing over €0.6 trillion in capital. That’s larger than the total AUM of European venture capital. The scale alone shifts the balance of global techno-industrial competition.

GGFs are hybrid creatures: part state, part market. They combine public seed capital with private co-investment, lowering risks for investors while steering money into sectors that match state priorities (EVs, semiconductors, renewables). Mostly state tho

Thread. China’s GGFs are the quiet giants of industrial policy. While Western debates obsess over subsidies, Beijing has built a massive state–market financial infrastructure to channel capital into strategic tech sectors. Let’s unpack.

This new paper by Xuan Li and @cornelban.bsky.social is so great I have a nickname for it and it’s VC à la CCP.
www.tandfonline.com/doi/full/10....

Financing technological innovation in China: neo-developmental financial statecraft through government guidance funds This paper examines China’s distinctive approach to financing innovation, contributing to debates on the derisking state, neo-developmentalist alternatives, and economic statecraft. It focuses on t...

Just out: How China builds strategic dominance in high-innovation niches fracturing the economic status quo in the world: Government Guidance Funds turn fiscal money + SOE assets into venture capital with planning discipline. A different game than Europe or Korea. www.tandfonline.com/doi/full/10....

No one in European automotive will worry about Chinese EVs now

Thanks. One quick comment on self-reliance. Is it not rational given US sanctions? Take chips: Huawei together with Chinese chipmaker SMIC — which is also under US sanctions — improved the yield of its latest AI chips to about 40 per cent, doubling from 20 per cent a year ago.

Must read

EU decorum cracks over green agenda Normally taciturn officials spar online over climate policy and reveal a deep split within the EU.

Weiss and Thurbon’s (2021: 477): economic statecraft is when state actions are designed to fend off, outflank, or move in step with clearly defined rival powers’ in key sectors. US and increasingly Europe acknowledge they lost to China on green tech. www.politico.eu/article/eu-d...

Shares in world’s biggest offshore wind developer tumble as US woes deepen Ørsted blames interest rates, supply chains and ‘market uncertainties’ for latest writedown of US business

Even the best of European clean tech firms groan and fold under the combined weight of frayed European macro-finance and Trumpian climate nihilism. www.ft.com/content/eb76...

Sandbu: "Maga antipathy for anything green strengthens the case for doubling down on incentives to make more profitable in Europe the decarbonisation investments that have just become less profitable in the US." How to pay, given US-demanded defence spending and more US LNG dependence?

How Chinese A.I. Start-Up DeepSeek Is Competing With Silicon Valley Giants The company built a cheaper, competitive chatbot with fewer high-end computer chips than U.S. behemoths like Google and OpenAI, showing the limits of chip export control.

Generally import substitution is not a great idea in technology. Unless you are China and weaponized US export controls force you to focus decades of investment in technoscientific capabilities on homegrown innovation. www.nytimes.com/2025/01/23/t...

The US green coalition and its manufacturing base was too weak for a sustainable green derisking state to survive political cycles even with geoeconomics in place. The IRA was too little to change the balance of power inside US capital. Fossil, finance and tech have green capital for breakfast.

There is probably a Latin expression for this.

Some of the evals were challenged by European Court of Auditors (ECA) in September 2024 regarding the accuracy of reported climate-related expenditure

Mid-term evaluation of the Recovery and Resilience Facility (RRF) The Mid-term evaluation of the Recovery and Resilience Facility (RRF) was completed in 2024 and covers the period from 2021 to 2023

Check out the Feb 24 European Commission's mid-term evaluation especially External supporting study at this link. Not aware of published scholarly work doing that commission.europa.eu/about/depart...

Global economic governance and environmental crisis: the widening repertoire of IMF economic ideas and limits of its climate policy advocacy This article analyses the IMF’s economic thinking on climate policy to explore the scope and limits of working towards green transition within global economic governance institutions. It distils th...

My new article on IMF economic ideas and climate advocacy explores how the IMF highlights environmental tipping points and call for deep decarbonization, yet its technocratic, economistic approach neglects fossil-fuelled capitalism‘s political power dynamics.

www.tandfonline.com/doi/full/10....

the British derisking state, promising to partner with AI firms while doling out more austerity for public services and calling it the 'golden age of public service reform'- @cornelban.bsky.social

There's also a rich lit on industrial policy at the city level in the US. We cite it in the biblio.

What Are The Implications Of $66/kWh Battery Packs In China? - CleanTechnica China's battery packs plummet in price again. Hydrogen prices didn't decline and BNEF triples its estimates for future costs. The implications are huge.

Why it's probable that in open competition (big if) big Western legacy automakers will likely go out of business in the coming decade or become niche producers. Kind of like mechanical watchmakers going into jewelry watches and the rest disappearing. cleantechnica.com/2024/12/24/w...