The impact of the U.S. Inflation reduction act on the restructuring of the Asia-Pacific energy industry Chain and China’s response strategies

Xinxuan Cheng and Manjiang Fan

China Economic Journal, 2024, vol. 17, issue 3, 345-367

Abstract: The development of the energy industry holds a crucial position in the industrial layout of countries worldwide. The Inflation Reduction Act intends to exclude China and other Asian countries from the clean energy industry supply chain, which will have a significant impact on the Asia-Pacific energy industry chain layout. This paper constructs a GTAP-GVC model to simulate and analyze the impact of the act on the layout of the PV and EV industry chains in the Asia Pacific region through GVC participation, location, and industry chain elasticity. The study finds that the implementation of the act will drive the ascent of the international division of labor in the U.S. clean energy industry, while worsening the trade environment for other Asia-Pacific countries. Canada, Mexico, and other ‘allies’ of the U. S. cannot benefit from the subsidy conditions of the act. China should strengthen the development of its domestic clean energy industry, enhance its independent research and development capabilities, and promote industrial technological upgrades to cope with the impact of the act.

Date: 2024
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DOI: 10.1080/17538963.2024.2310938

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