Xin-Yao Ng, Co-Manager of Aberdeen Asia Focus plc says as geopolitical and geoeconomic events throw the idea of energy independence into sharper focus, investors may wish to devote more of their own energy to seeking out the hidden gems – the diamonds among the carbon deposits, if you will – that are increasingly helping China stand apart.
The concept of energy independence arguably emerged in earnest in the early 1970s. Confronted with an oil embargo imposed by the Organisation of Arab Petroleum Exporting Countries, Richard Nixon unveiled an ambitious initiative to make the US self-sufficient by 1980.
Like the President’s political career, the plans soon came unstuck. Amid mounting concerns over the safety of nuclear power, which had been touted as a cornerstone of the way forward, the US’s reliance on foreign energy suppliers instead rose during the ensuing decade.
Fast-forward half a century or so and we find genuine energy independence is still a largely elusive goal. The globalisation of supply networks has perhaps even made it impossible.
Yet it’s right to say some countries are considerably more independent than others.
As the White House repeatedly trumpeted during the fallout from Iran’s closure of the Strait of Hormuz, the US is nowadays high on the list.
Yet if anywhere has an authentic claim to pre-eminence in this arena, whether in the midst of turmoil or otherwise, it’s China.
The world’s second-largest economy stood especially strong as the repercussions of the chaos in the Middle East unfolded.
As well as possessing its own sizeable reserves of oil, China has become a major force in the sphere of renewables.
All this underscores a rapid and remarkable transformation. Relatedly, it highlights the attractions of investing in the energy sector of a country that was for many years rightly regarded as among the most energy-inefficient on Earth.
From fossil fuels to forward thinking
There’s no denying that China still depends heavily on fossil fuels. Although apparently past their peak, its greenhouse gas emissions remain unrivalled in magnitude[1].
Coal and oil products accounted for nearly 80% of the total energy mix just a few years ago[2].
At the same time, though, Beijing is determinedly ticking off one environmentally friendly milestone after another. China is embracing the energy transition while its fellow superpower, the US, is conspicuously rowing back on it.
Some of the resultant achievements are already widely recognised. The best-known include primacy in the global market for both electric vehicles (EVs) and EV batteries and acknowledged dominance in solar and wind energy.
Maybe less appreciated are attempts to develop emissions-free nuclear reactors, progress on ESG disclosure and a general commitment to the cause of “green finance”.
The last of these is nowadays officially enshrined in China’s model of a modern financial system[3].
A far-reaching appetite for innovation is central to all these efforts. In order to qualify as “a trailblazer in ecological conservation” – to quote a speech by President Xi Jinping[4] – China has had to earn and maintain a position at the cutting edge.
In tandem, it has long held a significant advantage in commoditisation and industrialisation. This has been a decisive factor in its success in solar and wind technology, with lower production costs driving the continued expansion of both industries.
In search of hidden gems
Of course, investors keen to tap into this positive trajectory face the task of identifying the brightest opportunities. In our view, there’s a lot to be said for approaching the challenge through a “picks-and-shovels” lens.
Like any field of commercial activity, the energy sector is populated by a mix of what might be described as architects and enablers.
Broadly speaking, the former endeavour to shape the future – but it’s the latter that make it possible for them to do so.
Take Zhejiang Shuanghuan Driveline, which has supplied a range of industries with gear components since 1980. As well as producing parts for EVs, it makes pinion shafts that can be used in wind turbines.
It began a collaboration with Shanghai-based Envision Energy, a leading turbine manufacturer, in 2020.
Why would we favour such a business? An important motivation in this context is that Zhejiang Shuanghuan Driveline is basically brand-agnostic – which is to say it can produce components for whichever market participants survive and thrive in the midst of ever-fiercer competition in the energy space. We see it as a classic enabler.
In addition, this is a smaller company – that is, one that was valued at less than £5 billion when we originally invested. As such, in our opinion, it can still offer plenty of scope for long-term growth.
The lesson? As geopolitical and geoeconomic events throw the idea of energy independence into sharper focus, investors may wish to devote more of their own energy to seeking out the hidden gems, the diamonds among the carbon deposits, if you will – that are increasingly helping China stand apart.
[1] See, for example, Carbon Brief: “Analysis: China’s CO2 emissions have now been ‘flat or falling’ for 21 months”, February 12 2026 – https://www.carbonbrief.org/analysis-chinas-co2-emissions-have-now-been-flat-or-falling-for-21-months/.
[2] See, for example, International Energy Agency: “Energy system of China”, accessed April 2026 – https://www.iea.org/countries/china.
[3] See, for example. United Nations Environment Programme: “What’s behind the growth of China’s green finance sector?”, February 10 2026 – https://www.unepfi.org/regions/asia-pacific/whats-behind-the-growth-of-chinas-green-finance-sector/.
[4] See, for example, People’s Daily: “Xi calls for unprecedented efforts to improve global environment governance”, June 6 2021 – http://en.people.cn/n3/2021/0606/c90000-9858116.html.
Main image: china, globe, map, christian-lue-2Juj2cXWB7U-unsplash
