China’s Electrifying Future

It has become increasingly clear in recent years that the US and China are pursuing different visions of energy leadership. While the US is doubling down on oil production – “drill, baby, drill” – China is betting on large-scale electrification. This is giving rise to the idea of China as the world’s first major “electrostate”. That is, an economy powered predominantly by electricity – especially clean electricity – and industrial competitiveness built around electrified technologies such as EVs, robots and AI-driven manufacturing.

As such, electrification is not merely an energy transition that enhances self-sufficiency and national security – a policy direction only strengthened by developments in the Middle East – it is increasingly viewed as a pathway to technological leadership.

China already operates the world’s largest electricity grid, with 25% more installed power capacity than the US and EU combined, and 35% more annual generation.¹ The country’s electrification rate – electricity as a proportion of all energy consumed – has risen to around 30%, and the National Energy Administration recently forecast this would rise to almost 50% by mid-century.² This is aligned with the twin goals of peak carbon emissions in 2030 and making the economy carbon neutral by 2060.

Underpinning China’s ambitious plans to become an electricity superpower has been a sustained period of heavy investment to overcome three main problems that had previously limited the usefulness of electricity – it was not storable, it could only be moved around at very high cost, and it was not usable for transport.

China’s rapid progress in electrified transport has become increasingly well-known. Its companies are already global leaders in electric cars, high speed trains and drones. EVs made up around half of all new passenger vehicle sales in China in 2024. China also has by far the world’s largest high-speed rail network. But this progress would not have been possible without similarly rapid developments in other areas such as energy storage systems (ESS) and battery technology.

It has not, however, all been plain sailing. Investment in the electricity transmission grid has not kept pace with the massive additions of renewable capacity in the past five years. As a result, large amounts of wind and solar capacity are not reliably connected either to the grid or to backup generation or storage facilities that can compensate for intermittency.

In response, the policy focus in China shifting from new capacity towards connectivity, grid efficiency and storage. In the latest Five Year Plan, the State Grid aims to increase its investment by 40%, around 7% p.a.³

Pricing reforms are steering consumption into renewable-rich hours, and grid digitalization aims to strengthen the management of voltage variability. AI-enabled “intelligent grids” are under development which include automated supply-demand matching, and improved weather forecasting to generate more accurate predictions of wind and solar generation. The goal, ultimately, is to create a more integrated nationwide power market, reducing dependence on imported fuels while tapping into low-cost electricity at scale.

The government has also accelerated the construction of ultra-high voltage (UHV) transmission lines, designed to move large electricity volumes over vast distances with minimal energy loss. These “bullet trains for power” allow for the balancing of regional power supply and demand, by transporting power from resource rich regions in central and western China to demand-heavy coastal provinces in the east.

China’s ability to electrify is underpinned by a comprehensive, vertically integrated domestic supply chain across generation, transmission, and distribution, from solar panels and wind turbines to switchgear and inverters. This enables rapid deployment of critical infrastructure without reliance on foreign suppliers. This ecosystem also allows grid upgrades and infrastructure expansions at relatively low cost compared to markets reliant on imported equipment or facing supply chain bottlenecks.

However, this manufacturing scale has also created its own set of structural challenges. The sector has been grappling with oversupply. The rush to capitalize on green energy policies and subsidies led to a saturation of players in the solar, wind, and battery industries, resulting in aggressive price wars, a phenomenon locally described as “involution” (neijuan 内卷).

This domestic saturation has spurred a strategic pivot toward global markets. While Western economies face shortages of critical grid components, particularly transformers and high-voltage switches, where lead times have stretched significantly, this have opened opportunities for Chinese manufacturers to gain market share abroad. As a result, outbound shipment of these products has increasingly risen in recent years, providing an external outlet for domestic capacity even as the industry undergoes consolidation.

Just as access to cheap oil defined industrial power in the 20th century, access to a cost-effective, reliable, highcapacity grid is defining industrial power in the 21st, and emerging as a new source of strategic competitiveness. This is especially evident in sectors such as EVs, battery technologies, advanced materials, and robotics, where production lines depend on stable, high‑quality power to scale output and improve manufacturing consistency.

AI data center demand is also fast becoming one of China’s fastest growing electricity loads, expected to grow around 17% annually to reach roughly 479 TWh by 2030, approximately equal to France’s total power consumption.⁴

China is not only electrifying faster than any other major economy, it is also building a deeply integrated ecosystem of industries that both supply and depend on its expanding electricity system. This spans well beyond EVs and high speed rail to include a range of other areas such as drones, industrial automation, power electronics, and semiconductors and artificial intelligence.

One consequence of this shift towards ‘electrotech’ is that products that were once highly differentiated in the combustion era are becoming more alike, as they now share a similar underlying architecture.

Electric vehicles are often described as smartphones on wheels. While the analogy is debatable, it is nonetheless clear that EVs and smartphones are far more closely related than a combustion-engine cars ever were to telephones. This convergence is enabled by the interconnectivity of an intelligent, electrified system built around high performance electric motors, battery storage and specialized chips running sophisticated software.

In short, China has created not just the world’s biggest electricity network but is also heading towards a selfreinforcing energy-industrial ecosystem. Over time, this is likely to result in leadership in new technology industries of the future.

¹ Gavekal, 13 January 2026.
² National Energy Administration (NEA), 23 February 2026.
³ Gavekal, 9 March 2026.
⁴ Wood Mackenzie, 25 July 2025.