The new Chinese investments are often two-pronged—both in car manufacturing and the raw materials that are central to the new economy.
Ilaria Mazzocco, a senior fellow at the Center for Strategic and International Studies, says the West needs to understand that China’s global ambitions create an opportunity for many countries to expand their manufacturing base and to obtain foreign direct investment in “technologies of the future.”
China’s cleantech investment in the developing world, she says, “really complicates” foreign policy for Western governments, which have already tried to warn about the risk of becoming dependent on Beijing through President Xi Jinping’s so-called Belt and Road infrastructure program.
“It is tough to tell a country in the developing world, ‘Hey, you shouldn’t want to have more factories or refining because it’s Chinese investment,’” she says. “With the [Belt and Road Initiative] there was a credible argument that a lot of debt is not going to be sustainable... but here if they open factories, they hire local people, then in the minds of the leaders of these countries, ‘why not?’.”
The International Energy Agency forecasts that this year, 10.1 million EVs will be sold in China, 3.4 million in Europe, 1.7 million in the US. Fewer than 1.5 million EVs will be sold everywhere else in the world.
Yet the agency has forecast that the global EV fleet will grow eightfold to about 240 million in 2030. This implies annual global EV sales of 20 million cars in 2025 and 40 million in 2030, or 30 percent of all car sales. Moreover, an increasingly large share of that expansion is likely to come from new markets.
In some important developing economies, Chinese companies are investing in both production and processing raw materials. Nowhere is this more striking than China’s involvement in the EV ecosystem in Indonesia, home to the world’s largest reserves of nickel, a key component of EV batteries.
Last year alone companies domiciled in China and Hong Kong invested $13.9 billion in Indonesia, most of which is believed to have been in the metals and mining industry. Chinese companies account for more than 90 percent of the nickel smelters in the country.
Chinese banks have also been keen to provide financing for nickel plants when others have been hesitant, says Alexander Barus, chief executive of the Indonesia Morowali Industrial Park—the country’s largest nickel processing site, which was built by Tsingshan, a Chinese nickel producer and a local partner.
“When we first started searching for mining investment, we went around the banks in Indonesia, no one supported us. The banks were in doubt, whether it would be profitable or not. But when we went to Chinese banks, they were ready to finance,” says Barus.
Having secured access to Indonesia’s key resources, Chinese companies have also been the first movers in setting up EV manufacturing plants, even as Indonesia—and President Joko Widodo personally—have courted other big names such as Tesla to set up EV manufacturing. BYD said early this year that it would invest $1.3 billion in an EV factory in Indonesia.
The story is similar in Brazil where BYD and compatriot group Great Wall Motor are about to commence local manufacturing that could also serve for exports to the wider region.
Great Wall is investing about $1.9 billion in Latin America’s largest economy with production expected to start this year at a former Mercedes-Benz factory in Iracemápolis, São Paulo state.
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