The country\u2019s incentives for shifting its stance, and the potential implications of this for other Global South emitters, are central to the future of climate politics. And beyond traditional modes of finance, China\u2019s cleantech leaders \u2013 most of which are private companies \u2013 are investing abroad at an even greater scale, including in new production capacity. Understanding these dynamics may present opportunities to trigger greater ambition in the face of ongoing threats to global climate action and the clean-energy transition.<\/p>\n\n\n\n
China engaged constructively to secure a new UN goal<\/h2>\n\n\n\n
Going into COP29 in Baku, Chinese officials were well aware of international expectations for China to contribute to climate finance as part of a new UN target, known as the New Collective Quantified Goal (NCQG), which was to be negotiated at the conference.<\/p>\n\n\n\n
This pressure did little to shift China\u2019s official position, which Ministry of Ecology and Environment (MEE) director-general Xia Yingxian outlined at a press conference<\/a> the week before the conference.<\/p>\n\n\n\n Xia explained three core elements to China\u2019s stance: first, developed countries need to take the lead in mobilising funds, in line with the Paris Agreement; second, the scale of funding should be expanded on the basis of developed countries first meeting their existing commitments, including contributing USD 100 billion annually to developing countries before 2025; and third, developed countries\u2019 public funds should be positioned as the core source, with additional layers complementing this, including from multilateral development banks (MDBs) and the private sector.<\/p>\n\n\n\n Nonetheless, at the World Leaders Climate Action Summit<\/a> as COP29 opened, Ding made a pivotal statement<\/a>: \u201cSince 2016, China has provided and mobilised more than CNY 177 billion [USD 24.5 billion] of project funds in support of other developing countries\u2019 climate response.\u201d<\/p>\n\n\n\n This declaration was the first time<\/a> a Chinese official referred to climate finance for developing countries in the context of provision and mobilisation \u2013 the language applied to developed countries \u2013 rather than as \u201cSouth-South cooperation\u201d. While it is still unclear exactly how the figure was calculated, it presumably includes a wide range of investments by China\u2019s development banks and other actors, rather than just those earmarked for South-South climate aid, which had previously been benchmarked by officials<\/a> at CNY 1.2 billion (USD 170 million).<\/p>\n\n\n\n Ding\u2019s remarks placed China\u2019s contributions to global climate finance on the same order<\/a> \u2013 if not higher than \u2013 many developed countries\u2019 efforts. They also demonstrated that China may have the capacity and political will to be more transparent about the scale and scope of its own efforts, and to build on what it is already doing. While pressure from developed countries may have played a role in this shift, China\u2019s overwhelming dominance in key clean technology sectors likely buttressed the case for it.<\/p>\n\n\n\n These public messages foreshadowed the compromises embedded in the final NCQG text, indicating that China was actively negotiating behind closed doors.<\/p>\n\n\n\n The nucleus of the NCQG agreed at COP29 is located in paragraphs 7 to 10 of the final outcome text:<\/p>\n\n\n\n 7. Calls on all actors to work together to enable the scaling up of financing to developing-country parties for climate action from all public and private sources to at least USD 1.3 trillion per year by 2035;<\/p>\n\n\n\n 8. Reaffirms, in this context, Article 9 of the Paris Agreement and decides to set a goal, in extension of the goal referred to in paragraph 53 of decision 1\/CP.21<\/a>, with developed-country parties taking the lead, of at least USD 300 billion per year by 2035 for developing-country parties for climate action:<\/p>\n\n\n\n (a) From a wide variety of sources, public and private, bilateral and multilateral, including alternative sources;<\/p>\n\n\n\n (b) In the context of meaningful and ambitious mitigation and adaptation action, and transparency in implementation;<\/p>\n\n\n\n (c) Recognising the voluntary intention of parties to count all climate-related outflows from and climate-related finance mobilised by multilateral development banks towards achievement of the goal set forth in this paragraph;<\/p>\n\n\n\n 9. Encourages developing country parties to make contributions, including through South\u2013South cooperation, on a voluntary basis;<\/p>\n\n\n\n 10. Affirms that nothing in paragraphs 8\u20139 above affects any party\u2019s development or recipient status.<\/p>\n<\/div><\/div><\/div>\n\n\n\n The structure of the NCQG agreement essentially contains two layers: an outer USD 1.3 trillion goal reflecting the projected needs of developing countries, and an inner \u201ccore\u201d of USD 300 billion that will function in a similar way to the previous USD 100 billion goal agreed at Copenhagen in 2009<\/a>, by tracking finance provided and mobilised for developing countries. This inner core updates the conditions that applied to the previous goal, with three specific aspects reflecting how it balances requirements from developed countries with China\u2019s priorities.<\/p>\n\n\n\n First, the text grounded the goal in the entirety of Article 9 of the Paris Agreement. This includes binding language recognising the responsibility of developed countries to provide climate finance to developing nations, rather than just the individual, non-binding clause referenced in the NCQG\u2019s mandate (Article 9.3). This accommodates the divergent positions regarding legally binding parameters \u2013 in general, developing countries wanted them, and developed countries didn\u2019t.<\/p>\n\n\n\n Second, the goal will track all climate finance from MDBs. Previously, only MDB contributions attributed to developed countries were typically counted. China channels significant funding throughs MDBs, and the agreement means these contributions will now be recognised and tracked, without imposing a binding commitment. This approach drew some criticism from developing countries, especially India, but was ultimately advanced with China\u2019s support. And third, the text encouraged developing countries to make bilateral contributions on a voluntary basis, enabling China to enhance its climate finance while framing its role on its own terms.<\/p>\n\n\n\n China had helped prevent a torpedoing of the fragile deal, which had been stitched together despite vulnerable nations walking out of the talks just hours earlier. With word that India may block the deal in the final plenary, Chinese negotiators bounced between huddles to avoid a complete meltdown. When the gavel came down \u2013 without room for so much as a breath to raise objections \u2013 the Chinese delegation enthusiastically welcomed the outcome with applause, just before India\u2019s lead negotiator delivered a scathing tirade. A few years earlier, in 2021, China and India had sided together in Glasgow to water down COP26\u2019s final outcome on coal \u2013 but in Baku, they played divergent roles in the end game of the NCQG.<\/p>\n\n\n\n Still, a compromise between developed countries and China on who contributes to the goal was never going to answer another critical question: how the goal could provide enough finance to meet the needs of developing countries.<\/p>\n\n\n\n Such countries had claimed that expanding the contributor base to include China and other countries was necessary to hit the increased target. But the paltry USD 300 billion figure in the final goal did little to reflect an expansion in sources beyond business-as-usual by developed countries<\/a> beholden to the original USD 100 billion goal.<\/p>\n\n\n\n While the NCQG was agreed under the spectre of a second Trump administration, the extent of the backtracking to come was not yet clear. In addition to the expected US withdrawal from the Paris Agreement, Trump has revoked all US climate finance, gutted USAID, and pushed back against climate lending by multilateral institutions, while prompting other countries to shift funds<\/a> away from aid and toward defence. With countries tasked with implementing the NCQG against this broader retraction in climate governance, what factors will shape China\u2019s role in bridging the global climate finance gap?<\/p>\n\n\n\n At the core of this question is how the shifting politics around multilateralism and global climate governance will evolve. With the suspension of US support and multilateral climate finance under attack, other countries<\/a> are under even greater pressure to shoulder the developing world\u2019s climate finance needs. It remains to be seen whether climate-vulnerable nations will double down on getting developed countries to cover the difference, or push non-traditional contributors, such as China and the Gulf States, to take greater responsibility.<\/p>\n\n\n\n Early signals indicate that China may be cautious to build on its actions in Baku. Beyond Ding\u2019s announcement, the country has yet to enshrine its climate finance contributions in official documents, such as its first Biennial Transparency Report<\/a> submitted at the end of 2024. However, President Xi did reaffirm<\/a> in late April that \u201cChina will vigorously deepen South-South cooperation and continue to provide help for fellow developing countries to the best of its capability\u201d. It has also been slow to ramp up existing high-profile vehicles, with its USD 207 million Kunming Biodiversity Fund only supporting USD 1.2 million of projects so far<\/a>. And while some argue that China will leverage the gap left by USAID, it is more likely that the country\u2019s actions will be limited<\/a> to situations that strategically align with what it is already prioritising.<\/p>\n\n\n\n There are two areas where China\u2019s ongoing actions may enhance its impact, even without overt political signalling. First is that China\u2019s MDB contributions have already grown<\/a> from around USD 1.2 billion in 2017 to nearly USD 4 billion in 2022, after averaging around USD 500 million per year from 2013-2016. With the NCQG now tracking these funds, China could boost its reputation by further enhancing its MDB commitments, especially in the face of uncertain US support for climate lending by MDBs.<\/p>\n\n\n\n Second \u2013 and much more significantly \u2013 is that China\u2019s cleantech sector has been investing in a slew of overseas factories and projects that could expand clean energy while creating local jobs and enhancing development. In 2024, Chinese companies committed approximately USD 58 billion<\/a> to building overseas manufacturing facilities for new energy products. This pivot reflects a deeper structural transformation within China\u2019s economy: new energy industries \u2013 most of which are private enterprises \u2013 have become growth engines, comprising over 10%<\/a> of China\u2019s GDP in 2024, and driving more than a quarter of its economic growth.<\/p>\n\n\n\n These investments are already making real-world impact on a massive scale, but the new goal is not necessarily set up to track their climate and economic benefits. Paying attention to the shifting power dynamics of clean energy could help to capture China\u2019s broader contributions.<\/p>\n\n\n\nThreading the needle between China\u2019s red lines<\/h2>\n\n\n\n
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<\/div>Incentivising China\u2019s climate finance leadership<\/h2>\n\n\n\n
Early signals indicate that China may be cautious to build on its actions in Baku<\/blockquote><\/cite><\/div><\/div>\n\n\n\n