China adapting to cleantech and cleantech adapting to China

China is leading the way, having put USD54.4 billion towards clean tech last year, more than any other country. However, there are a lot of obstacles to overcome before all this investment pays off.

China's huge investment in clean tech is the direct result of government policy.

In October 2010, the State Council launched a development plan to foster strategic emerging industries and decided to make a priority of clean tech such as energy conservation, new energy and bio-technology.

"The policy support on clean tech will bring huge business opportunities. This level of government support is not often seen in other countries," Ma Songde, former vice-minister of the Ministry of Science and Technology and director of the Institute of Automation of the Chinese Academy of Sciences, told the Global Times.

In the government's plan, strategic emerging industries will account for 8 percent of GDP by 2015 and 15 percent of GDP by 2020. The government has already allocated subsidies and encouraged private capital to enter the clean tech sector.

"Fast economic development, traditional energy supply and pollution are challenging sustainable growth. Meanwhile the development and convergence of new technologies are boosting the maturity of clean tech. These factors are the external reasons for the fast development of clean tech in China," Ma said.

Private investors seem to be just as enthusiastic as the government.

According to a report by investment consulting company Zero2IPO in July, there were 130 cases of investment in the clean tech sector in 2010 with at least USD114 billion invested, which made it the second hottest area in attracting capital after the Internet industry.

The tricky bit

"Clean tech offers a lot of investment opportunities, but it is different from other industries such as the Internet. It has much stronger dependency on policy, technology and the market," Shao Jun, a partner at investment firm DT Capital Partners, told the Global Times.

"The clean tech market is not fully developed in China. It faces competition from traditional technologies that are not so 'clean' but maybe cheaper. Long-term support from the government is needed. So the government's attitude on clean tech is a guide for investors. Also, core technology is essential. Only those who own core technology can bring down their costs," said Shao.

Government support for the industry has encouraged investors, despite a relative lack of core technology. "Many companies in China simply raise money from investors and buy equipment and technologies abroad," Shao said.

The development level in terms of technology and the market also varies in different areas, according to Shao.

For instance, several Chinese solar energy product manufacturers have their own core technologies and have been able to cut their costs compared with foreign companies. However, the domestic market is not fully developed and cannot accept the current price. So Chinese solar energy firms rely on the international market.

The situation with nuclear power is different. China acquired third generation nuclear power technology from a US company, Westinghouse Electric Corporation, in 2006, which was interpreted by the industry as an abandonment of China's homegrown nuclear technology. China's nuclear power sector remains reliant on foreign technology.