["Natural Resources Forum, EarlyView. ", "\nABSTRACT\nThis study intends to investigate how hydro energy technology innovation, represented by patent publications, affects inclusive, and sustainable development in China. Inclusive and sustainable development are measured through a multidimensional inclusiveness and achievement index. Apart from hydro energy technology, the study uses economic complexity (as a measure of structural transformation), information and communication technology, and regional and local power as additional variables influencing inclusive and sustainable development. The study uses data for 30 years and employs the Markov Switching Regression and Breitung–Candelon frequency‐domain causality approach. The study findings reveal that hydro energy innovation has a positive significant effect in Regime 1 while Regime 2 shows a positive and insignificant effect. ICT has opposing effects under different regimes while the non‐switching regressor economic complexity has negative effects. Local autonomy significantly and positively influences inclusive and sustainable development in Regime 1 while regional autonomy negatively influences development in Regime 2. The causality result demonstrates Granger causality from economic complexity, local, and regional power to inclusive and sustainable development while hydro energy innovation and ICT do not Granger cause it. Based on the results, policy recommendations are provided.\n"]