Environmental woes create business opportunities
Some see China’s overcast and smoggy urban skylines as a sign of the polluted times, but a growing number of Chinese firms listed domestically and abroad are positioned to profit from the country’s environmental woes as some of the newest business opportunities.
Some are calling this China’s new Green Revolution. In fact, China’s first Green Revolution – the improvements in seeds, farming techniques, pesticides, and inorganic fertilizers to improve crop yields – hasn’t even had a chance to fully take hold: According to China’s most recent agricultural census, released in February this year, more than 340 million rural workers are working full-time in agriculture or related industries, down only about five percent from 1996 levels, and far above per capita agricultural employment in developed countries.
Nevertheless, a new generation of entrepreneurs is embracing the new Green Revolution and has put China at the forefront of environmental technologies.
How big will the market be? A Chinese official from the State Environmental Protection Agency, the former incarnation of China’s new Ministry of Environmental Protection, said that government investment alone could reach 1.3 trillion yuan, about US$190 billion, in clean technologies between 2006 and 2010.
This opportunity cannot come soon enough. China, already the world’s number two consumer of oil after the US, in May also become the world’s second largest importer of petroleum, unseating Japan and possibly influencing the recent trend of US$140 per barrel oil prices. According to data released by China Customs on June 30, the country’s imports increased 25 percent year on year in May.
More than 90 percent of China’s energy needs are supplied through the burning of fossil fuels such as coal and oil. As a result, China is now, according to the Netherlands Environmental Assessment Agency, ranked as the world’s number one emitter of carbon dioxide, which is a major contributor to global warming.
China’s waterways are so polluted by phosphorus, nitrogen, and other toxic chemicals that algae blooms turned picturesque Taihu Lake green one year ago, and in late June Qingdao’s Olympic sailing venue was beset by a strange type of algal seaweed that threatens to bring sailboats to a standstill. Shanghai’s own Huangpu River has again been invaded this year by water hyacinth, a phenomenon that seems to occur earlier every year.
The list could go on, but we do not need to belabor the point that China has several multi-faceted and intertwined energy and pollution problems. The question now is, what to do about it. The answer is a combination of government policies and environmental entrepreneurship that has never been seen before.
The central government has put green development as a prime objective of the 11th Five Year Plan for China’s economy. Many critics rightly point out that national policy is often ignored at the local levels, but last year’s promotion of SEPA to full ministry status is a sign of the seriousness the central government is taking the issue.
Recently, the government has made some regulatory steps which are actually putting China in the lead of global environmental policy: The plastic bag ban was announced, implemented, and accepted by the national population in just six months. As Shanghai residents can attest nary a free plastic bag can be found in the city’s retailers, causing much consternation and arguments by shoppers used to handfuls of free plastic.
Replacing those bags with environmentally-sound reusable canvas bags is just one of the new opportunities that China’s entrepreneurs are jumping into. On a much larger scale, China’s wind and solar energy industries are taking center-stage.
The World Wind Energy Association currently ranks China as number five in a list of global wind users. China has approximately six thousand megawatts of generating capacity, about a quarter of world-leader Germany’s capacity, and not even one percent of China’s massive energy needs. Shi Pengfei, the vice-president of the Chinese Wind Energy Association, said that the National Development and Reform Council had increased China’s target of wind-energy generation to 100,000 megawatts by 2020, five times as much as Germany’s present capacity.
Xinjiang Goldwind Science and Technology Company, China’s leading wind turbine producer, went public on the Shenzhen stock exchange in 2007. Although large scale wind farms face many obstacles in China, such as an electric grid that is oriented towards cheaper coal-powered energy generation, on the strength of its domestic market growth, many analysts believe Goldwind and other Chinese companies can rise in the next three years to challenge the world’s biggest turbine manufacturers including GE.
By 2020 the central government has pledged meeting 15 percent of China’s energy needs through renewable energy sources, including wind, biofuels, water, and solar. By 2050, the ration is to be 30 percent including nuclear power. This means huge investments are required, but the China is already a world leader in the use of at least one clean energy technology: Solar.
In many of China’s second, third or fourth tier cities, rooftops are covered by solar water heaters. The cheap, ubiquitous devices use the sun’s rays to heat water so that even rural workers can afford to take a hot shower after a long day’s work. In China, 200 million people have their water heated in this way, according to the NDRC. China has more than 50 percent of both the world’s production and use of solar water heaters, and other forms of solar energy are starting to grow as well.
Suntech Power is the world’s third largest solar cell producer after Q-Cells of Germany and Sharp of Japan. It had US$1.4 billion in revenues in 2007. Revenues are expected to increase quickly as solar cell-generated electricity is starting to approach price parity with high-priced oil.
The government is also active in solar energy policy, mandating that China should increase its current 100 million square meters of solar water heaters to 150 million by 2010, and 300 million by 2020.
With China set to take its place as the world’s largest economy by mid-century, its power needs will also dominate and, if it is not careful, the pollution problem will reach unprecedented levels. Green technologies promise to be among the best industries to be in during this challenging period of growth.
Republished from July 7, 2008
Jason Inch is a Shanghai-based consultant and author of the soon-to-be-released “Supertrends of Future China.” Email: Jason@ChinaSupertrends.com