Does Chinese investment in US clean energy sectors help or hurt America?

The United States faces a strategic paradox: its transition toward energy security currently relies on a global supply chain dominated by Chinese manufacturing. As of 2024, China manufactured 92% of the world’s solar modules and 82% of the world’s wind turbines. China is estimated to account for producing 66% of the world’s electric vehicles (EVs) and over 85% of the world’s battery capacity, offering capital and scale that could accelerate U.S. deployment. However, this concentration of market share raises critical questions about strategic dependence, security risks, and domestic political backlash within the United States.

One option for spurring America’s transition that is being considered is inviting Chinese investment and manufacturing know-how into U.S. clean-energy sectors. This has become a consequential and contested policy issue, all the more so as rising electricity demand heightens the need for rapid capacity expansion. With U.S. electricity demand projected to grow 35%-50% by 2040, policymakers face a tension between the imperative to scale clean-energy infrastructure quickly and concerns about foreign investment from a competitor that dominates global clean energy supply chains.

As a result, policymakers face a growing trade-off between speed and security. Yet, current debates over how best to meet growing domestic electricity demand and secure energy independence often frame the issue in binary terms, pitting immediate decarbonization against national security. This narrow focus obscures both the costs of delaying deployment and what specific security risks must be mitigated, thus preventing more tailored policy approaches.

The Brookings China Center is launching this project, “Between dependence and delay: Chinese investment and America’s clean energy future,” to examine and offer recommendations on three urgent questions: how to balance national security risks against economic and climate imperatives; where to draw red lines on Chinese investment; and what policy frameworks can manage these trade-offs without slowing clean-energy deployment.

How China came to dominate the clean energy market

Analysts credit decades of sustained Chinese government support, including subsidies, low-cost financing, and deliberate demand creation, as instrumental in propelling China to its current dominating position in the clean energy sector. However, China’s progress was not achieved in isolation. In its early stages, China significantly benefited from foreign capital and technical expertise, which helped jumpstart domestic manufacturing capabilities. The result was a clean energy sector initially shaped by inbound investment that transformed into a core engine of growth and innovation, accounting for over 10% of China’s GDP growth in recent years.

China’s state-led expansion of the clean energy sector has not been without controversy. While government subsidies and targeted industrial policy have accelerated manufacturing capacity within China, the resulting oversupply exceeded domestic demand and saturated global markets with low-cost goods. This oversupply triggered allegations of dumping and prompted trade defense measures from the United States and the European Union.

The fallout within China’s markets has been equally damaging. Fierce internal competition has driven prices below production costs, leaving many firms with razor-thin margins and resulting in a significant amount of capital waste rather than sustainable growth. As these shrinking profits leave companies like BYD struggling to pay their suppliers, the government has begun pushing back to prevent further disruption to the manufacturing sector. Furthermore, reports of forced labor in Xinjiang, which produces nearly half the world’s polysilicon, a key material in solar panels, continue to disrupt international procurement and invite regulatory scrutiny.

America’s R&D dominance and the manufacturing bottleneck

The United States has historically led in clean energy research and development, from pioneering solar cell technology to advanced battery research through institutions like ARPA-E and national laboratories. America’s challenge, however, has been translating innovation into scaled domestic manufacturing and deployment. Recent landmark legislation like the Inflation Reduction Act and the CHIPS and Science Act aimed to bridge this gap with historic levels of funding and incentives. More recently, the rollback of consumer tax credits and uncertainty around funding for clean energy infrastructure have left U.S. clean energy sectors with cancelled projects and weakened incentives to reinvest. Absent the prospect of near-term regulatory predictability in the clean energy space, experts have also argued that the United States should more actively incentivize foreign investment.

As China has extended its lead over the United States in clean-energy technological and cost competitiveness, Chinese investment and partnership proposals in American clean-energy sectors have become harder to ignore but also more politically contentious.

Current Chinese investment in the U.S. clean energy sector

Chinese investment in the United States, specifically in the clean energy sector, has increased in recent years following major manufacturers’ announcements of factory plans and strategic partnerships. Leading Chinese solar manufacturers, including JA Solar, Longi, and JinkoSolar, have announced projects that were projected to bring thousands of manufacturing jobs to the United States, largely prompted by subsidies from the 2022 Inflation Reduction Act.

However, more recently, Chinese clean-energy investment in the United States has come under severe pressure from the elimination of tax incentives and pervasive policy uncertainty. Last July, Chinese-owned EV battery manufacturer Automotive Energy Supply Corp suspended construction on its $1.6 billion South Carolina plant as market conditions deteriorated. The facility had been designed to supply battery cells for BMW’s EV models assembled at a nearby factory, with production set for 2027. This instability is not confined to Chinese firms. The $3.5 billion General Motors and Samsung SDI joint venture in New Carlisle, Indiana—originally slated to open in 2026—has delayed production to 2027 and slowed construction following the rollback of federal EV incentives and a reported recalibration of its battery cell technology. The sector’s broader volatility reflects higher input costs due to tariffs, the end of production subsidies, and Foreign Entity of Concern restrictions that limit federal support for supply chains linked to China and other designated countries.

This clean energy debate also unfolds within a broader economic context that the prevailing narrative of U.S.-China decoupling tends to overlook. While bilateral trade figures may suggest a cooling of U.S.-China ties, these metrics frequently undercount the persistence of “indirect” supply chains—and the two economies remain deeply enmeshed. Chinese manufacturers increasingly maintain access to the U.S. market by rerouting goods through third-party intermediaries, such as Canada and Mexico, where minor assembly or transshipment masks the true country of origin. Furthermore, deep financial interdependencies persist alongside these trade linkages. Recent research shows that Chinese state-linked financial institutions have extended more than $200 billion in credit to U.S. entities over the past two decades, supporting thousands of projects nationwide across real estate, infrastructure, technology, and manufacturing. Clean energy investment raises distinct and heightened concerns within this context, but it does so against a backdrop of deeply embedded bilateral financial ties.

The current moment presents a significant opportunity for the United States to greatly benefit from Chinese investment in its clean energy sectors, if the right guardrails are in place. This is especially true as many Chinese companies face immense involution, or fierce, race-to-the-bottom competition, in their domestic market. Coupled with the resulting overcapacity of goods, the lucrative U.S. market remains a desirable destination for these companies. President Donald Trump also has explicitly argued that access to the U.S. market should be conditioned on other countries investing and building factories in the United States.

What’s at stake?

How the United States navigates Chinese investment in clean energy will have significant consequences.

The risks of blocking too much investment

The case against excessive clean energy investment restrictions is as much economic as it is environmental. Clean-energy manufacturing is a proven driver of job creation and economic growth: the sector is projected to support over 575,000 jobs by 2030, with current workers earning roughly $42,000 more annually than the average U.S. employee. New factories anchor supply-chain clusters, support downstream services, and help support domestic manufacturing ecosystems. The clean energy sector added jobs three times faster than the rest of the U.S. economy in 2024, but growth is slowing amid policy uncertainty. Without sufficient investment, the United States risks missing out on these gains while ceding scale advantages to competitors, especially as China continues to take over larger swaths of the international market in clean energy technology.

Constraints on inbound Chinese investment into the domestic clean energy sector would also make it more difficult, and more expensive, to meet rapidly growing U.S. energy demand. Electricity demand is rising sharply, driven in part by the expansion of data centers and broader electrification. These energy constraints carry consequences beyond affordability and reliability; they also shape the pace and direction of technological innovation. Ample access to electricity is a critical enabler of high-tech innovation, as China’s experience illustrates. By rapidly expanding power generation, supported by renewables and large-scale grid investment, China has been able to lower electricity costs and support energy-intensive testing, training, and deployment of advanced technologies, including artificial intelligence.

Over time, delayed deployment also risks locking the United States out of critical innovation pathways. Clean-energy technologies improve through learning by doing, workforce development, and dense supplier networks. If investment restrictions lead to a more isolated U.S. ecosystem, the result could be ecosystem divergence, with China and the United States innovating along separate technological trajectories. Such divergence would limit access to inputs, talent, and manufacturing know-how, weakening U.S. capacity to compete in next-generation technologies such as advanced batteries, grid-scale storage, and future vehicle platforms. Slower deployment would also undermine U.S. credibility and progress toward near-term emissions targets and longer-term net-zero commitments.

Finally, delays in clean-energy deployment also carry climate consequences. Transportation accounts for nearly 30% of U.S. carbon dioxide emissions, and decarbonizing private passenger vehicles is central to meeting national targets. Slower deployment would lock in higher emissions trajectories and increase the long-term economic and environmental costs of transition.

The risks of allowing investment without guardrails

At the same time, allowing Chinese investment without adequate guardrails carries substantial risks. Investment and partnership arrangements can create channels for technology and intellectual-property exposure in strategically sensitive sectors.

Cybersecurity concerns are particularly relevant in the clean energy space, where connected vehicles, battery systems, and grid-connected equipment create unique vulnerabilities and dangers through the linking of hardware with data flows and remote connectivity. Federal probes have highlighted vulnerabilities related to data sharing and remote access in electric vehicles, as well as risks associated with inverters and other grid-connected components that could be exploited to disrupt power networks.

There is also the risk of overdependence. Heavy reliance on a single foreign supplier, especially one that has demonstrated a willingness to use economic leverage for political ends, could expose the United States to supply disruptions or coercive pressure over time.

Finally, political sustainability itself is at stake. The fate of recent U.S. clean-energy projects linked to Chinese firms clearly illustrates the challenge. Gotion’s proposed EV battery components factory in Michigan and the joint venture between Ford Motor Company and CATL both promised to create thousands of U.S. jobs and opportunities for American engineers to gain hands-on experience with advanced battery technologies. However, both projects encountered strong opposition, including federal scrutiny, state and local political backlash, and public concern within host communities.

U.S. public concerns regarding Chinese investment in the United States focus on several key issues. Many Americans worry about industrial pollution, the potential loss of jobs to Chinese companies, and the introduction of foreign influence into local institutions. Beijing, for its part, has its own concerns: protecting sensitive technology from transfer arrangements that could unfairly benefit the United States, and preserving its economic and strategic advantages. These differing priorities highlight the complex and sometimes conflicting considerations that shape U.S.-China investment and policy decisions.

Together, these competing risks underscore why the debate over Chinese investment in U.S. clean-energy sectors cannot be reduced to a binary choice between urgent deployment and security. The challenge is not whether to manage risk, but how to do so in ways that maintain deployment momentum, industrial competitiveness, and public trust while protecting national security.

Questions that need to be answered

This project is organized around three core questions that frame the trade-offs, risks, and policy choices surrounding Chinese investment in U.S. clean energy sectors.

First, how should we weigh the urgency of clean energy deployment and industrial buildout against the risks of Chinese participation in U.S. supply chains? As the United States races to build clean-energy supply chains, it faces a fundamental tension between the urgency of deployment and concerns about who builds that infrastructure and with what technologies. This first question examines what U.S. clean energy and industrial goals should be, assesses the current state of U.S. capabilities, and explores what would be required to bridge existing gaps without unduly slowing progress.

Second, where could the United States most strategically place its guardrails? Not all risks associated with foreign investment are equal, yet current debates often treat them as such. This second phase of the project seeks to differentiate between genuine national security vulnerabilities and more manageable commercial, political, or reputational risks. Clarifying which risks matter most, and in which sectors or technologies, is essential to moving from blanket restrictions toward more targeted safeguards.

Third, what would a more effective policy playbook look like? Moving beyond sweeping exclusions or never-ending ad hoc rules, the third phase of the project builds on the findings of the previous two questions by framing them in practice. This phase will explore which policy levers are best suited to managing different categories of risk, how federal and state authorities can coordinate more effectively, and how public messaging can be reframed around affordability and demand realities to sustain political support. Further, how can policy solutions both strengthen coordination with allies and address Chinese supply chain exposure that may be redirected through partner countries?

These questions aim to inform a more pragmatic and durable approach that preserves U.S. competitiveness and deployment speed while protecting America’s national security.