During the 15th Five-Year Plan period, China's economic growth faces an exceptionally complex and challenging environment. As a result, many of the previous strategies and models may have limited effectiveness, and it will be necessary to explore new approaches and innovate strategically. Notably, the dual circulation strategy, an economic model that emphasizes strengthening the domestic market (internal circulation) while promoting international trade and investment (external circulation), will play an increasingly prominent role during this period, and this is particularly true when it comes to the domestic circulation. The Chinese economy needs not only to be able to sustain growth but also to support broader development, ensuring that significant imbalances do not arise. In this context, China has to confront immense pressure to expand its market. Addressing the issue of market expansion is crucial, as only by enlarging the market scale can the country fundamentally mitigate the continuous decline in economic growth and prevent further deterioration of economic imbalances.
When examining the development conditions during the 15th Five-Year Plan period, some subtle changes are apparent, including the possibilities for China's market expansion and the available channels are shrinking rather than growing. In general, technological development is one of the ways to address these issues. However, converting technology into productive forces can be challenging. The real estate sector, which has historically been a main driver of China's economy, is now facing fundamentally changed conditions. China's population is entering a period of increasingly evident decline, urbanization is nearing its peak, and the demographic structure is shifting with more elderly and fewer young people. These factors cannot be reversed in the short term, which in turn limits the efficiency and feasibility of real estate and infrastructure development. Moreover, the momentum for consumption growth is also constrained, as consumption relies on improved conditions for consumption. Such improvements require more time, involve a wider range of issues, and are far from easy to achieve.
Considering the current conditions for China's economic development, expanding the market still requires increased investment.
The crucial issue is to effectively increase investment. Simply replicating old-school approaches from the past may be inefficient or even ineffective. Finding a new path for development, formulating strategic policy solutions, and making strategic innovations requires a clear recognition of the many issues present in China's current industrial landscape. These issues must be analyzed and translated into actionable conditions through information analysis, in order to redefine the development conditions and construct a new, large-scale development system. This, indeed, is an urgent task that must be addressed the country.
China's photovoltaic (PV) industry is currently facing severe overcapacity. By the end of 2024, the production capacity across key segments of the PV industry chain will far exceed global demand. For example, polysilicon capacity is around 1,447 GW, wafers 1,160 GW, solar cells 1,193 GW, and modules 1,428 GW, while global PV installation demand is only about 500 GW. In some segments, overcapacity exceeds global demand by more than double. The entire PV industry chain has suffered losses totaling over RMB 60 billion, with 140,000 jobs cut across the sector and total liabilities reaching RMB 3 trillion. This once heavily invested industry chain is now on the verge of collapse.
At the same time, cities in China's western regions surrounding the deserts are severely lacking in industrial momentum, with numerous near-abandoned "ghost cities". For a long time, policies have focused on developing the western part of the country, with massive investments. Since the launch of the "Western Development" strategy, total investment is estimated to have exceeded RMB 10 trillion. However, the effectiveness of these efforts is questionable. To date, the only truly vibrant cities in the western region are Chengdu and Chongqing. Yet even these two major cities lack sufficient economic strength to drive the full-scale rise of the vast western region.
At the same time, China's energy imports have become absolute, with a strong dependence on and demand for foreign sources. This makes the Chinese economy highly vulnerable. Although new energy vehicles like electric cars have created new consumer demand, the social costs and overall expenses are very high. Moreover, they are not truly environmentally friendly and pose serious public safety risks such as spontaneous combustion, which cannot be effectively resolved in the short term.
Another important point is that emphasizing the internal circulation does not mean neglecting the external circulation. The external circulation is equally important and should be actively expanded. The issue is that, for a long time, Chinese manufacturing has lacked true innovation in external demand markets. Traditional products and substitute goods make up the largest share, and the exported products and services have become outdated. As a result, external markets have already adapted extensively, leading to intense competition and making Chinese exports vulnerable to suppression, interference, and replacement. Therefore, China is in urgent need of new, strategically significant export products.
Compared to these problems and shortcomings, China has made significant progress in the entire hydrogen energy industry chain in recent years, with technologies becoming increasingly mature. The progress has been substantial, and issues such as safety risks are no longer major challenges. In fact, a variety of hydrogen energy projects have already been completed. According to incomplete statistics, the number of enterprises involved in the hydrogen energy industry across the country has reached an estimated 4,000. By contrast, the number of enterprises related to China's high-speed rail industry, which has already achieved remarkable success, is only 54. This situation suggests that the hydrogen energy industry may hold even greater macro-level significance.
Based on these industrial conditions and factors, and grounded in redefining the broader economic system through information analysis while taking various development conditions into account, the strategic policy we propose is "Hydrogen Energy in Deserts" (HED), a new, large-scale economic stimulus plan aimed at revitalizing China's economy and expanding market size during the 15th Five-Year Plan period.
The fundamental concept of HED is to invest RMB 5 trillion during the 15th Five-Year Plan period, that is, RMB 1 trillion annually, in building the entire hydrogen energy industry chain through the issuance of global green bonds. The plan involves constructing PV power centers in designated desert zones to absorb the excess production capacity of the PV industry. It also involves in building hydrogen production hubs in selected locations nationwide, using relatively mature water electrolysis technology to mass-produce genuine green hydrogen and establish storage facilities. In addition, it encompasses constructing dedicated smart power grids to transmit green electricity from PV centers to hydrogen production hubs, and developing a hydrogen logistics and transportation network to facilitate the export and large-scale use of hydrogen energy.
As China builds PV facilities, it should also undertake large-scale desert transformation and greening efforts, creating remarkable achievements in desert management and ecological restoration. By leveraging the hydrogen energy industry, this can drive urban renewal in the western regions and revitalize the local economy. Through promoting the development of hydrogen-powered vehicles, including passenger cars, trucks, trains, and aircraft, the adoption of clean energy in transportation can be accelerated. At the same time, China can seek to become a major exporter of green hydrogen fuel by integrating this effort with broader goals of energy conservation, emissions reduction, and diversified energy exports. Through these initiatives, China can reestablish itself as a key global energy exporter and to reshape its role on the international geopolitical stage.
The solution to the HED strategic policy holds not only overarching significance for the 15th Five-Year Plan, but also long-term and profound macro-level importance and value.
The HED strategy is a practical and forward-looking policy solution that leverages existing resources and technologies, while requiring further technical planning and validation (note: these are outside the professional scope of ANBOUND). It offers a powerful engine for large-scale market expansion, economic stimulation, and job creation. Given China's massive economy, valued in the hundreds of trillions of yuan, a rough investment estimate of RMB 5 trillion could contribute approximately 5 percentage points to GDP growth, or around 1 percentage point annually, which would have real significance for maintaining stable economic growth.
As a long-term initiative, it supports the development of western China through both construction and ongoing maintenance projects, driving industrial activity and urban renewal. Unlike many centralized national projects, its relatively decentralized value chain allows significant participation from private enterprises, creating a more dynamic and inclusive economic environment. Ultimately, by promoting the widespread use of green hydrogen, this strategy positions China to create a new economic miracle in its deserts, transforming it from a vulnerable energy importer into a major global energy exporter, thereby reshaping its geopolitical standing.
Realizing such an ambitious development blueprint does not necessarily rely entirely on state investment or local government debt. China is already a global leader in green bond issuance, with totals exceeding USD 100 billion. A significant portion of the trillion-yuan annual investment required for HED can come from international financial markets. This approach to financing is both domestic and international in nature, supporting not only industrial development but also fostering substantial growth in the financial sector.
All in all, the HED is a strategic and large-scale initiative that aligns well with China's recent policy trends and directions. This ambitious policy proposal, put forward by ANBOUND, aims to stimulate healthy and stable economic growth during the 15th Five-Year Plan period, while also focusing on the long-term, sustainable development of China's economy.
