Is China Going Green, Part XVIII: It Is, But Damn It's Tough To Make A Buck On China GreenTech.
One of the great things about being a lawyer is that you get to work with and observe a diversity of businesses. My firm has helped all kinds of businesses get into China and do deals with Chinese companies and if I had to single out one industry that has the highest percentage of failures, I would pick those that are environmentally related. Years ago, I was totally gung-ho on these industries, figuring China obviously needs environmental assistance and Beijing knows it.
Not so fast.
Two things too often seem to get in the way. The first is that so much of this industry is tied to governments and this means so much of this industry is not as based on merit as it should be. The other thing is that this industry seems so "hot" that it brings in a disproportionate number of "flakes" and scammers. China is hot (or at least was hot) and greentech is hot (or at least is still sort of hot). Combine the two, and you have a recipe for bringing out those who do little more than move from hot industry to hot industry with little more than a briefcase and a claim that they "do deals." Find me a Westerner in China to avoid and there is a decent chance that person claims his or her business is "China GreenTech." There are plenty of completely honest and knowledgeable people in this industry, but it does attract its fair share of those seeking a quick and easy buck.
In an aptly named post, "Private investors, beware! China’s green sector still faces challenges," ResponsibleChina cites an article by Ray Cheung in the book, “Sustainable Investing: The Art of Long-term Performance,” setting out three obstacles GreenTech entrepreneurs face in China:
-- increased manufacturing costs, particularly of raw materials:
-- lack of human capital, since “the brightest minds are entering more lucrative industries, such as finance and information technology,” which can turn profits quickly, compared to environmental companies that require longer term development; and,
-- a fragmented market because of undeveloped regulatory infrastructure, i.e. lack of enforcement of environmental laws and weak environmental agencies:
All true.
GreenTech in China is and will continue to take off, but a sure thing it most certainly is not.
What do you think?
Comments (6)
Read through and enter the discussion by using the form at the endCleaner Greener China - December 28, 2008 10:54 PM
Dan,
I am in agreement with you that there have been too many people out here saying they are in the "green space" looking for "cleantech" deals, but how does this post begin to change that?
the three issues that are highlighted in Erica's post are really only the beginning of the problem, and are only related to a niche part of the market. There are huge hurdles related to funding or programs, operating equipment (i.e. it is purchased but never turned on), education of China's youth, and so on.
It is more than solar panels and hybrids....and there are many here working on the problems related to transportation, food, water, urban planning, equipment, materials, education, auditing, and so on.
There is a lot more going on than meets the eye here, and while I agree that a lot needs to be improved, I would also say some of the improvements need to come from the writer/ blogger/ analyst community as well
r
darnoc - December 28, 2008 11:16 PM
Agree with most of these points. Greentech in China will thrive in certain areas, but it won't happen quickly and certainly not to all market entrants.
You are correct....government often does get in the way here....particularly with the awarding of projects, approvals, etc. The coming domestic stimulus will also likely loom significantly here, particularly for non-domestic entities as they may not have equal access to stimulus capital.
Not unlike a lot of other industries, most of the money being made in china greentech is currently in the manufacturing for export sector.....solar being exhibit A. Other sectors with significant project development, like wind, are seeing investors moving forward despite very low projected returns....essentially the bet is being made that tariffs will eventually trend to market. Perhaps not a bad bet in the long run, but far from certain.
I agree that greentech and China are 'hot'...but you also missed another,carbon markets...combined together, these three elements are a bit of a hype trifecta. China is a significant recipient of CDM money via Kyoto which figures prominently in financial forecasts for many non-manufacturing greentech projects in China. With the post Kyoto/2010 future unclear at this point, China's role in global negotiations (along with an engaged US presence) for a post Kyoto framework will be one of the most interesting stories to watch in 2009 and beyond. Short term for 2009 greentech project development in China....strong advantage to domestic firms.
Greg - December 29, 2008 10:59 AM
Dan,
What would you think of the possibility being able to sell IP directly to Beijing or a conglomerate of provinces, municipalities, universities and/or big domestic companies in China?
Simon Laing - December 29, 2008 5:08 PM
Hey Dan,
You are right about there being many hurdles especially since solar and other industries are capital intensive industries and have had strong fall out from the financial crisis.
However there are signs that things could be getting better in China. Examples of this would be the recent roll out of the Electric car, Shanghai government considering a Feed-in Tariff (tax rebate for electricity generation) and continued demand for job oriented uses like High way solar lights, airport roofs,Cell Phone Base Transmission stations etc..
With the government subsidizing coal it may be awhile before PV, Wind and solar thermal power plants get built but that doesn't mean green tech won't grow.
Pak Karamu - December 31, 2008 12:46 AM
Happy new year to you
Doc Green - January 5, 2009 12:54 AM
Hi Dan,
Being or selling green doesn’t just mean reducing carbon footprint but is a way of life.
I have been called many names and earned many certificates over the years. In the early days they shouted dreamer, hippy and tree hugger, purist, extremist. Later it became eco freak, Permaculturists, Ecolonomicsist, Earthship designer, Finally they call me sustainable living consultant, eco housing designer, eco village designer etc.
I have been here for four short years but have experienced things never before imagined. Currently I run a small experimental organic farm (self financed) in the northern suburbs of Beijing as well as work with a German Landscape Architectural firm specializing in greenroofs. I am helping them develop greenwalls for the Beijing area. Another related item with lots of potential is my living air filter, using plants to “eat” away pollutants, instead of creating hazardous waste like all other air filters do.
I think I'm one of the few in this (green) industry that is actually qualified to help. Although I am LEEDS certified along with many degrees I find it very difficult to work with the Chinese so we primarily stick with over seas investments and have built up a solid reputation with projects all over china.
My difficulty in working with them has many reasons. One is that I’m not “one o da good ol boys”. I’m too expensive. And three I learned through experience that my greed is not as great as their wit. I have been invited to collaborate with two proposed eco villages but finally had two back out when things smelt fishy. I guess it all boils down to integrity. They all end up being scams to cheat the government out of land and money with no intention to develop technologies or even use current technologies to its appropriate measure. Throwing up a couple of solar streetlights and a compost station does not make it an eco village.
As far as I can tell Beijing will NEVER reach any kind of sustainability without true uncorrupted government support. Unlike Hong Kong and most SE Asian countries who’s government truly seems to be concerned with the well-being of their people.
Will they continue with this excuse to rape the poor? Hell yes! And until it changes, that’s the system we play in.