Worlds apart: Contrasting US-China approaches to scaling clean technology manufacturing

Global clean technology manufacturing investment has moderated following a decade of rapid expansion. While China and the United States (US) were the primary drivers of this growth, both have recently experienced significant pullbacks, though for vastly different reasons. China’s manufacturing boom resulted from sustained government support and demand-side policies creating deep domestic markets. Recent pullbacks in Beijing aim to address excess capacity and price wars, with investment falling nearly 70% from its 2023 peak. Conversely, the US saw a surge in investment following the Inflation Reduction Act (IRA), but this has recently reversed due to the removal of demand-side policies and support measures, with investment falling 17% in 2025.

Clean manufacturing investment is falling in China and the US

Over the last decade, global investment in decarbonisation has grown substantially. Clean energy manufacturing is now viewed as a strategic priority involving economic and national security concerns. This shift drove global investment in clean technology manufacturing and low-carbon industrial products to a record $265 billion in 2023, nearly five times the 2018 level. However, momentum has since reversed, with annual investment falling to $155 billion in 2025, representing a 42% decline from the 2023 peak. The contraction was led by China and the US, while European investment remained more stable with only a slight year-on-year decline from its 2024 peak.

China

China has dominated global clean tech investment through aggressive, long-term, state-backed industrial policy. Domestic clean tech manufacturing investment rose from $37 billion in 2018 to a peak of $189 billion in 2023. However, manufacturers now face domestic overcapacity, price wars, and rising wages. In response, Beijing is refining its approach under the 15th Five-Year Plan (FYP), moving from a model of quantity to one of quality and long-term resilience. While some anti-involution measures have cooled, the new policy focus involves maintaining a leading position and closing technological gaps.

Solar

China’s rise in solar manufacturing involved subsidised land, cheap loans, and feed-in tariffs that transitioned to a competitive auction system in 2018. Manufacturing investment peaked in 2023, but dual expansion of current investment and prior commitments triggered severe overcapacity. Consequently, the price of Chinese modules fell by 60% between 2022 and 2024. In 2025, domestic solar manufacturing investment dropped to an estimated $16 billion, an 80% fall from 2023. Despite this, China has massive capacity in the planning stages, including 1.3 TW of announced capacity yet to commence construction.

Batteries

China’s battery industry was shaped by national purchase subsidies and the Dual-Credit Policy. As the electric vehicle (EV) battery market became oversaturated, producers shifted toward grid-scale storage. While actual capital investment in new facilities remained modest in 2025, announcements for new investments rebounded to nearly 2023 levels. This recovery is driven by a shift toward grid-scale storage, with nearly two-thirds of 2025 battery investments earmarked for energy storage. By the end of 2025, 20 provinces had set rules for ancillary service subsidies to provide stable income for energy storage.

United States

The US investment surge kick-started with the Infrastructure Investment and Jobs Act (IIJA) and the IRA, causing investment to rise more than five-fold to a peak of $50 billion in 2024. However, the July 2025 passage of the One Big Beautiful Bill Act (OBBBA) modified several support provisions. The OBBBA terminated support for wind components produced after 2027 and introduced new restrictions on the 45X tax credit regarding “material assistance from any prohibited foreign entity” (PFE). Sourcing requirements for battery components start at 60% in 2026, rising to 85% by 2030. These changes, alongside the elimination of the ATVM Loan programme, contributed to a 17% fall in 2025 investment.

Demand for EVs also weakened as the $7,500 consumer subsidy expired in September 2025, leading to a 43% fall in consumer spending in Q4. Consequently, EV inventory ballooned to 168 days’ supply by January 2026. In 2025 alone, 24 manufacturing projects tied to $22.5 billion were cancelled. When earlier-stage cancellations are included, the total rises to $46 billion across 95 projects. Project cancellations in 2025 primarily hit EV assembly and battery manufacturing, though critical minerals fared better with announced investments of $3 billion exceeding cancellations of $1 billion.

A new phase of global competition

China’s domestic slowdown is unlikely to provide openings for US companies. Market consolidation may strengthen top Chinese players like BYD and CATL as weaker firms exit. These survivors benefit from subsidisation mechanisms that scale with revenue, further entrenching their market position. Without long-term, bankable government support and policies that spur domestic demand, competing with these firms will become increasingly difficult for US companies.