IN late 2023, a reporter for the Financial Times stood before a power plant in Ordos, Inner Mongolia, watching an 18-inch-diameter boiler’s maw blasting out a flame at 1,600 degrees Celsius. He later wrote that the plant was generating enough electricity every hour to power London’s financial district for three days. It is a vivid snapshot of a new reality: the world’s first “electrostate” has arrived.

Last year, China’s electricity generation crossed the threshold of 10 trillion kilowatt-hours, nearly a third of the world’s total and 2.5 times that of the US. For the first time, installed capacity of wind and solar power, at 1.45 billion kilowatts, officially surpassed that of coal.

But to see this as a story in terms of sheer scale is to miss the point. This is the construction of a new operating system for the 21st-century economy. China’s vast, stable and cost-controlled electricity infrastructure is the bedrock for building formidable advantages in manufacturing, artificial intelligence and a new phase of household consumption.

As China begins to export this entire model across the globe, it’s no longer just a story about megawatts, but rather about mega-marketing.

For China to expand the “world’s factory,” energy is key. Industry consumes more than 65 percent of China’s electricity, with four pillar industries — steel, chemical engineering, construction materials and metallurgy, gobbling up the lion’s share.

Power has long attracted business. Since the dawn of industrial revolutions, entrepreneurs have engaged in a grand game of energy arbitrage to pursue the cheapest kilowatt-hour. It’s a journey that explains why the global supply chain was dragged to China and how modern-day players are moving within its diverse landscape.

“To sell aluminum is to sell electricity.” That conventional wisdom in a power-hungry industry explains why China’s aluminum smelters were initially clustered in coal-rich provinces like Shandong and Henan. But the key business decision wasn’t just to be near the coal; it was to eliminate the cost of moving it. That logic then sparked a migration to regions like Xinjiang and Inner Mongolia, where massive “pithead” power plants were built directly adjacent to coal mines and smelters.

More recent migration has been greener. As China embarked on the largest hydropower and solar power construction boom in human history, industries followed the water and sun. In the mountainous province of Yunnan, smelters suddenly gained access to electricity at rates as low as 0.25 yuan (3.5 US cents) per kilowatt-hour. For a European competitor paying prevailing industrial rates, that represented an 80 percent discount advantage.

The pursuit of the cheapest, most abundant sources of power has rendered China the producer of 70 percent of the world’s electrolytic aluminum, 60 percent of its electrolytic copper and 50 percent of its polysilicon.

The gravitational pull of affordability and certainty in power supply has also reshaped the strategies of multinational giants. In 2022, facing an energy crisis in Europe that sent natural gas and electricity prices skyrocketing, German chemical titan BASF gave the go-ahead for a 10-billion-euro (US$11.8 billion) Verbund chemical complex in Zhanjiang on China’s southern coast, the company’s largest-ever foreign investment.

It was a decision underwritten by energy security. Europe’s energy market had become volatile and unpredictable, while China’s state-controlled grid, despite its own challenges, offered a degree of scale, stability and long-term planning that had vanished from many industrial states.

Power needs and cost go beyond manufacturing; they also creates a formidable barrier to entry in cutting-edge research and development. Consider the challenge of designing the most energy-efficient car or the fastest airplane. In the case of the latter, to test a prototype, you need a wind tunnel capable of simulating flight at over five times the speed of sound. And to do that, you need an almost unimaginable amount of electricity, delivered in an instant.

The JF-22 hypersonic wind tunnel in Beijing was built to address just that need. With an instantaneous power demand of 15 million kilowatts, a single test firing consumes 5.41 million kilowatt-hours of electricity. In most countries, the energy cost alone would make such a facility a white elephant, too expensive to operate routinely.

China’s ability to supply this power reliably and affordably transforms the JF-22 from a piece of scientific equipment into a unique global asset with powerful business implications. For decades, aerospace and car firms had to fork out millions of dollars to access such sites in the West and share research data with facility owners. Now, with a cheaper, more powerful Chinese alternative, the innovation barriers are significantly lowered. An infrastructure upgrade built on the back of the power grid has become a strategic tool for innovative technologies.

All this advantage, of course, rests on obsessive operational excellence. When the new North Yangtze River High-Speed Rail line was being built, its path cut directly through a dense network of power lines in the Nanjing. The team at State Grid Nanjing, led by manager Wen Yifei, was tasked with the complex engineering challenge of relocating 29 separate high-voltage lines with minimal disruption.

Failure meant blackouts for businesses and residents. Wen’s team deployed a sophisticated toolkit of advanced techniques to complete the relocation without causing a single power outage.

The Chinese people have always been frugal about electricity use, which opens up a new dimension for the power industry.

In 2024, residential electricity use accounted for just 15.2 percent of China’s total consumption, compared with 39 percent in the US. On a per-person basis, the average Chinese resident used about 82 kilowatt-hours of electricity, four times less than the average American.

This gap represents the next major wave of opportunity for the power sector and the universe of businesses that serve consumers.

The implied growth is already underway, driven by a full-scale electrification of Chinese households. Power-hungry appliances like clothes dryers, dishwashers and ovens are rapidly becoming standard fixtures in middle-class homes, changing the energy profile of the average family.

But the real explosion is coming from intelligent home appliances finding their way into households.

AI fuels electricity demand

These new devices expand electricity demand. The market data is stunning. China’s smart home appliance market hit 756 billion yuan in 2024 and is projected to reach 793.8 billion yuan this year. From smart mattresses that adjust through the night to automated pet feeders, each new product adds another always-on node to the household’s electricity grid.

The Silicon Valley and its Shenzhen version can agree on one thing: “The end of AI is computing, and the end of computing is electricity.” The exponential growth of artificial intelligence is creating an unprecedented hunger for energy, making electricity the most critical strategic resource in the global tech race.

A single training run for a model like OpenAI’s GPT-4 consumes an estimated 240 million kilowatt-hours of electricity. Tech pioneer Elon Musk predicted that the primary constraint on AI development by this year would no longer be a shortage of silicon chips, but a shortage of electricity.

The global race for AI supremacy has fundamentally become an energy race.

Anticipating this bottleneck, China’s industrial policy focused on geographic transfer — moving data centers from technology hubs in the east of the country to wind and solar power rich areas in the interior.

The Centrin Data zero-carbon computing park in Ulanqab, Inner Mongolia, is an embodiment of that strategy. The campus is being built with its own dedicated 300-megawatt wind, solar and energy storage system. This model allows the data center to achieve over 40 percent green energy self-sufficiency from day one.

The zero-carbon model is also proliferating into other power-intensive industrial areas. In April 2022, Shanghai-based Envision Energy launched the world’s first operational zero-carbon industrial park in Ordos, powered by an “energy island” that integrates wind, solar, energy storage and green hydrogen, with 80 percent of electricity used from local renewables. The park hosts a 10.5 gigawatt-hour power battery super-factory, which generates 300 billion yuan in green output and cuts carbon dioxide emissions by 100 million tons annually. The park has attracted 10 leading new-energy firms and is being replicated globally.

Having built and refined this immense domestic power system, China is now exporting the entire playbook — technology, standards and operational expertise — particularly across the Global South. Several Chinese power-equipment manufacturers now derive over half their revenue overseas.

In 2022, TBEA, which makes power transformers and other electrical equipment, reported overseas revenue of 6.28 billion yuan, while Huatong Cable said foreign income of 3.32 billion yuan represented almost two-thirds of its earnings.

In Saudi Arabia, Chinese firms are central to the kingdom’s ambitious Vision 2030 energy transition plan. China Energy Engineering Corp has already brought its massive Al-Shubakh 2.6-gigawatt solar plant there to full capacity.

Chinese companies have also moved decisively into Brazil. Companies like turbine-maker Goldwind and blade maker Sinoma didn’t just export products; they invested in local manufacturing facilities, building a complete wind power supply chain on the ground. China-made turbines now account for 20 percent of Brazil’s new installations.

For developing nations eager to expand their industrial bases and improve their economies, China’s turnkey solutions provide a complete package of complete, cost-effective solutions. It’s no surprise that State Grid, China’s largest utility, already operates backbone energy grids in 11 countries, institutionalizing this export model.

Where next? China’s “electrostate” is moving to capitalize on its infrastructure to drive growth across three core fronts: electrification of Chinese households, powering the global AI race and export of its energy model to the world. Each of these vectors points toward a market worth trillions of dollars.

(The author is founder of WisePromise, a boutique advisory agency specializing in the international expansion of Chinese tech companies in the advanced hardware and energy sectors. He also serves as a geo-economic expert for several think tanks in Beijing.)