Green China: Sod the morals, follow the money
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Green China: Sod the morals, follow the money

In the world of green business, more notice is being taken of China’s officially announced enthusiasm for all things green tech. While the government has remained resolute in not giving way to expected demands at the forthcoming Copenhagen climate conference on cuts to emissions, it has made a series of announcements boosting the sector’s future in the country.

The government has officially lamented the droughts facing parts of the country and concurred climate change has partly been a factor. States have announced cleantech investment funds. Solar project after solar project is announced. And China is one of the top manufacturers of solar panels of all types and wind turbines.

Indeed research by HSBC indicates that about a third of China’s economic stimulus was aimed at ‘green’ projects.

In the west, investing in cleantech whose profitability is dependent on government support through subsidies or tax breaks has become strained, focus is on solid business models, like solar installation rather than solar panel development. The outlook for China is altogether different.

While China has leapt into creating its green credentials it, like most Asian markets, is somewhat behind in green projects. There are more opportunities and it is supported by government.

Investment has come flooding in. The Cleantech Group said it estimated foreign investment of about US$2.3 billion in private equity and venture capital into Chinese cleantech startups between 2005-08. This year has also seen a slew of deals, buyouts, start-ups and IPOs.

One of the most recent entrants was Dutch asset manager Robeco. It set up a joint venture fund with the Tianjin state government aiming to raise 4bn Yuan ($585 million) in China for a private equity fund that will focus on sustainable investments.

But the money-men recognise opportunity rather than any genuinely green credentials by China. “Officials are doing this, not from any philosophical belief on being green, but they are being faced with genuine sustainability issues,” said Andrew Musters, head of private equity for Robeco.

It’s also because government sees it as a business opportunity to become a manufacturer of renewable techs for the world,” he added.

China has several serious economic considerations for getting into the green thing. Firstly it is, in its current form, an economic power-house supplying the rest of the world with consumables. But when companies like Wal-Mart source up to 70% of their goods in China and they take on a green policy, China has to be ready to stay in the manufacturing game and change.

On top of that it knows a winning business when it sees it. In years to come you may see China as a champion of green energy as it will be the major global manufacturer of solutions.

It has another practical reason for its continuing investment in renewable power stations. It currently gets 60% of the world’s carbon credits. Under the UN’s Clean Development Mechanism (CDM), rich countries can fulfil some of their Kyoto Protocol greenhouse gas reduction promises by investing in green energy projects that help developing countries. So paradoxically, while China is now the world’s biggest emitter of greenhouse gases, it is also the biggest beneficiary under the CDM.

When it comes to business, Chinese entrepreneurs are no fools. Nor is the government. Just follow the money.


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