China's Energy Transition Offers Lessons for Southeast Asia's Competitiveness

China's rapid transition to renewable energy is reshaping its economic landscape, offering valuable insights for Southeast Asian countries. In 2024, clean electricity sources like wind and solar met over 80% of China's new power demand, a significant increase from previous decades. This shift has led to a decline in thermal generation, marking the first absolute decrease in a decade. Beyond power, electrification is beginning to reduce fossil fuel use across the broader economy.

This transition is driven by a strategic shift in development, moving away from the fossil-fuel-dependent model that powered China's initial economic rise but resulted in increased oil and gas imports and environmental costs. The new approach enhances energy security, lowers power costs over time, drives industrial upgrading, and builds a more resilient foundation for long-term prosperity.

China's phased strategy, often described as "build before breaking," focuses on scaling the new renewable system while repositioning legacy coal as backup. This pragmatic approach has created a self-reinforcing dynamic where rapid growth in renewables, electric vehicles, and batteries spurs jobs, investment, and innovation. These gains fuel further advancements in smarter grids, long-duration energy storage, and technologies that convert electricity into other useful forms, like hydrogen.

As China sets a new course, Southeast Asia stands at a critical juncture. Nations in the region are increasingly exposed to climate impacts and are becoming more attentive to how climate action, or inaction, shapes economic credibility and reputation. Embracing a similar energy transition could enhance their competitiveness in an increasingly climate-sensitive world.