THE BUSINESS OF CLEAN TECH IN CHINA
- - Insight - -
The Business of Clean Tech in China
China is investing heavily in clean tech opportunities that will allow for sustainable growth with fewer negative environmental impacts. In fact, the country is now the world’s largest producer and consumer of clean technology and renewable energy.[1]
Context
At the Paris Conference in 2015, China pledged that by 2030, 20 per cent of all its energy use would come from non-carbon-based sources. Achieving this goal will require installing between 800 and 1000 gigawatts of clean energy generating capacity[2].
The country’s most recent Five-Year Plan was introduced in March 2016 and covers the five years to 2020. It sets ambitious targets to move to a lower-carbon economy by reducing energy consumption, increasing efficiency, investing in lower-carbon energy sources and seeking to remediate and protect air, water and soil quality.
These targets require significant investment – upwards into trillions of dollars.
Three Key Growth Areas
Clean technology is a broad term that encompasses everything from energy generation and storage to products and services that improve energy efficiency and/or reduce negative environmental impacts across a range of industries. The three main areas of focus are renewable energy, energy efficiency, and environmental protection.
In 2017, China announced plans to invest US$360 billion in renewable energy by 2020[3] with investments in solar power generation, wind, hydro and biofuels attempting to shift the country away from coal, which accounted for 62 percent of the country’s energy use in 2016.[4]
Energy efficiency is another high-growth area, with government policy focusing on smart grids (including a target to build 89,000 kilometre ultra-high-voltage transmission grid lines by 2020), green buildings (including more energy-efficient building codes) and a shift to electric vehicles.[5]
A third area of focus is environmental protection and efforts to remediate polluted air, soil and water.
Opportunities for Canadian Companies
Canada is a recognized leader in clean tech. In the 2017 Global Cleantech Innovation Index, we ranked fourth overall and first among the G20 countries.[6] Thirteen companies were named to the global 2018 Cleantech 100 list, a record number that represents our strengths in this area.
Companies wanting to enter the Chinese market face significant domestic competition in many clean tech sectors. However, in some areas – like energy efficiency and environmental remediation – Canadian businesses can bring expertise and advantages to market.[7] Specifically, companies may want to pursue opportunities in:
- green buildings, designed from the ground up to minimize environmental impacts
and incorporate energy conservation technologies and solutions - smart city solutions – including transportation and utilities
- energy storage and next-generation batteries
- biofuels
- water quality monitoring and quality management solutions
- soil remediation solutions
March, 2019
[1] PwC, Chinese Cleantech Market Report, May 2017.
[2] Natural Resources Defense Council, Paris Climate Agreement Explained: Next Steps for China, December 12, 2015.
[3] Asia Pacific Foundation of Canada, China’s Clean Tech Commitment, May 29, 2018.
[4] ChinaPower, How is China’s Energy Footprint Changing?.
[5] Asia Pacific Foundation of Canada, China’s Clean Tech Commitment, May 29, 2018.
[6] Cleantech Group, 2017 Global Cleantech Innovation Index: A Look at Where Entrepreneurial Clean Technology Companies Are Most Likely to Emerge from Over the Next 10 Years – and Why, June 13, 2017 .
[7] Asia Pacific Foundation of Canada, China’s Clean Tech Commitment, May 29, 2018.
Strategies to Consider
Chia Wan Liew, Chief Representative for Greater China for Export Development Canada suggests companies wanting to enter the Chinese market need to be able to offer scalable solutions. “Because of the severity of their environmental issues, Chinese companies are looking for scale, so be aware that your solutions must be scalable and be large enough to address the seriousness of the issues that China faces.”[1]
Other recommendations include focusing on second- and third tier cities where it may be easier to secure a toehold than first-tier cities. There are more than 100 cities in China that have smart city program budgets ranging from $21 million to $200 million.[2]
Finally, Chinese corporate venture capital companies are a potential source of venture capital for Canadian firms.
[1] EDC, Top 5 Sector Opportunities for Canadian Businesses in China, April 20, 2018.
[2] MaRS Discovery District, Entering China’s Emerging Cleantech Markets: An Opportunity for Ontario Startups, June, 2017.