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Will the Recession Derail China’s Slow Train to Sustainability?
Green Futures, 16 Jul 09

Or could it spur a surge in green innovation which will see the country become the world’s leading cleantech hub? Sam Geall investigates.


Over the last year, something strange has been happening on the mainline platforms of China’s vast eastern cities. In normal times, they’re the site of mass seasonal migrations, as millions of migrant workers catch the train back home for the holidays, returning in equal numbers when work resumes.

Since 2008, though, the stations have also seen a steady trickle heading west in more ways than one: they’ve lost their jobs and, for the moment at least, they’re not coming back. As global recession squeezes the life out of China’s export-led boom, around 20 million rural migrants have returned to their villages – fuelling Beijing’s age-old anxieties about a countryside seething with discontent.

Among those hardest hit have been some of China’s green entrepreneurs – often held up as a spark of light amidst all the gloom surrounding the massive expansion of dirty coal and smokestack factories. Take Shi Zhengrong, founder of Suntech Power Holdings, and something of a poster boy for sustainable innovation in China. Born into a poor farming family on an island in the Yangtze River, and given up for adoption by his destitute parents, he excelled in school and took a doctorate in solar technology in Sydney. There, he pioneered a breakthrough in photovoltaic (PV) cell design which cut the use of expensive silicon. Returning to China in 2001, he set up Suntech to exploit its potential. The launch coincided with a global solar boom, and within four years Suntech was listed on the New York Stock Exchange. Dubbed, inevitably, “the Sun King of China”, Shi found himself, on paper at least, to be the country’s richest man.

Then came the downturn, and Shi’s order books looked worryingly empty. Heavily dependent on European customers – particularly from Germany, where generous government subsidy had boosted solar take-up on new housing – Suntech was hit hard by the collapse in construction. Its share price tumbled too. For a while, it looked as if it might go bust – a fate shared over the last year by one in five of China’s solar firms.

And it’s not just green industry that has been hit by recession, say insiders, but green regulations, too. A leading Chinese specialist on climate change policy, who asked to remain anonymous, says that, under pressure to keep the economy going, environmental concerns are falling by the wayside: “Many projects which have not passed [environmental impact assessments] have been given the go-ahead in an attempt to create jobs”.

Faced with the slump, China has joined many Western governments in trying to spend its way out of recession. But in doing so it faces a critical choice. Will it stimulate the devil it knows – the traditional, energy-intensive industries, such as steel and cement? Or will it seize the opportunity to reinvigorate its green sector and so become an engine of low-carbon development and innovation?

Within China itself, there are fiercely contrasting views, but initial signs suggest grounds for cautious optimism. Take Suntech again. It’s survived – and its shares are rebounding – thanks to two interventions. First, the local government and banks in Jiangsu Province, where the company is headquartered, have stepped in with vital support. Second, it’s set to benefit from the introduction of a domestic solar subsidy, which is paying builders US$3 per watt of installed capacity on each rooftop PV array (up to a total of 60% of the cost).

Interventions like these are part of a larger picture. China’s US$585 billion fiscal stimulus includes $31 billion earmarked specifically for “environmental protection and energy conservation” – including a threefold increase in railway investment. It’s the largest single chunk of environmental spend in any of the stimulus packages announced over the last year.

“The sheer amounts of money involved suggest China is serious about cleantech”

Analysts are more excited, however, by reports of another, much larger stimulus, around the corner. Aimed exclusively at boosting the country’s renewable energy sector, it is variously said to be worth between $440 billion and $660 billion. The sheer amounts involved, say analysts, suggest that Beijing is thinking seriously about how to make the switch from being the world’s all-purpose (and rather dirty) factory, to becoming a global hub for clean technologies.

It’s also inspiring growing confidence that China will comfortably exceed its target to increase the contribution of renewables in the energy mix from 8% in 2006 to 15% by 2020. On a recent visit to London, Zhang Xiaoqiang, Vice Chairman of China’s top economic planners, the National Development and Reform Commission, was bullish: “We will at least reach 18%. Personally I think we could [achieve] 20%”. That would put it on a par with European targets.

There’s an important caveat, though: the figure includes energy from China’s huge and controversial hydropower projects, such as the Three Gorges Dam, which has already displaced millions of residents and increased the risk of severe landslides. But interestingly, the company behind the scheme has recently announced plans to invest heavily in wind power, citing concerns about the social and environmental impacts of large-scale hydro.

Wind at present accounts for just 1.5% of the country’s energy, but it’s growing fast: installed capacity has more than doubled each year for the past four, taking China to fourth place in the world wind power league (behind the United States, France and Spain). Homegrown companies have jumped into a market that was previously dominated by international firms, thanks to government policies that encourage the use of domestically manufactured turbines. Goldwind – based in Urumqi, near the wind-swept deserts of China’s far northwest – has become the country’s largest turbine manufacturer after it succeeded in licensing advanced technology from a number of specialist companies in Europe.

In another encouraging development for the domestic renewables market, China has become the world’s largest consumer of solar water heaters: nearly one in ten households now own one. In Dezhou, a city of 5.5 million people in the eastern Shandong Province, every house in the new town uses solar heating, along with 90% of homes in the older quarters. Solar PV powers the city’s streetlights and traffic signals. It’s all part of an aggressive investment programme led by the municipality, which sees renewables as a source of future prosperity for the region. Already around 800,000 people – one-third of Dezhou’s workforce – are employed by the solar industry, and another 150,000 jobs are expected to be created in the next decade.

This huge employment potential has been seized on by Chinese advocates of a ‘green new deal’, among them Jiang Gaoming, an environmental scientist and columnist for chinadialogue.net. He’s researched the possibility of using locally generated renewable electricity to power rural vehicles, such as farm tractors and flatbed trucks. Most of the trips made by such vehicles are short, so well within the limits of battery ranges. Jiang calculates that making the switch would not only save carbon and reduce the country’s pervasive air pollution, but could create literally millions of jobs.

“Whatever central government says, local leaders chase GDP growth at all costs”

Julian Wong, a Senior Policy Analyst at the Center for American Progress, based in Beijing, is an expert on China’s cleantech industry. He sees the green new deal as key to overcoming one of the country’s crunch dilemmas for the 21st century: how to reconcile the aspirations of the Beijing leadership with those of local officials. The former increasingly see the long-term competitive advantages of low-carbon development, and view climate change as a serious threat to China’s social stability, and its food and water security. Local leaders, on the other hand, still tend to chase short-term GDP growth at all costs – especially environmental ones. If the government invests decisively to boost the market for domestic renewables, Wong believes, then these two goals “can become aligned. Central government can do a good job communicating to local governments that not only are they going green, but also they are boosting local GDP – and that’s going to look great on their records”.

Leading Chinese experts agree: Pan Jiahua directs the Institute for Urban and Environmental Studies at the Chinese Academy of Social Sciences, the country’s top think-tank. He says that, “China needs to deal with the current crisis, but also to make long-term plans for economic recovery and ongoing development. [And that means] choosing a low-carbon path with improved energy efficiency and a better energy infrastructure”.

Doing so could reap dividends in terms of foreign relations, too, according to Professor Jing Xuecheng of the Chinese Centre for Financial Research. The low carbon route, he says, “will strengthen mutual understanding and trust, and decrease international pressure on China – a new focus for the country’s international economic strategy”.

Chinese labour is still relatively cheap: another reason, says Charles McElwee, a Shanghai-based lawyer and environmental policy expert, why it stands a better than even chance of becoming a cleantech manufacturing hub. But can it move up the value chain and take the helm in green innovation? “It’s clearly making great strides,” he says. “But as yet it has no coordinated development goals for this sector.” There may be strategic reasons behind this lack, he adds. “As part of its climate change negotiation strategy, China has presented itself to the world as technologically backward and lacking the resources to develop [sustainably].”

But this is starting to change, as Beijing prepares to play a more active, if sometimes awkward, role in the climate talks at Copenhagen later this year. What is needed now, concludes McElwee, is for the US and other developed countries to get behind China’s cleantech ambitions, and so convince it that “green innovation and development can pay for itself – and boost the Chinese economy”.

Greening the dragon

If the Chinese Government gets serious about boosting green innovation, then the country’s nascent motor industry could be one of the first beneficiaries. Li Hujun, a Beijing-based environmental journalist, reports plans to give rebates of up to $7,330 to buyers of cars powered by biofuels, electricity or hybrid engines. These should “stimulate both domestic consumption and the development of new-energy cars”, says Li.

Emblematic of that industry is BYD Auto. It’s based in Shenzhen, site of the country’s first Special Economic Zone, and the city that jump-started China’s economic ascendance. BYD, which started life as a battery supplier, has now become the world’s first company to mass-produce a plug-in hybrid car. The BYD F3DM, as it’s unimaginatively known, can be charged with a normal household electrical supply. But it does not come cheap: at $22,000, it’s around six times China’s average annual wage. Not surprisingly, BYD’s set its sights on the export market, and is targeting the Copenhagen climate talks in December as a showcase for the F3DM, setting up a network of recharging stations in the Danish capital. Meanwhile, it has already impressed legendary US investor Warren Buffett, who bought a 10% share.

Government backing for big green ambitions is also in evidence at Tianjin. This industrial port east of Beijing is to be the site of a hugely ambitious new ‘eco-city’, a joint Chinese-Singaporean venture which will shortly enter its first phase with the construction of a 1.5km2-‘eco-business park’. When complete, the city’s 350,000 residents will live in super-efficient buildings clustered in hubs designed to minimise commuting needs, and travel to work by light railway. It’s a lot less ambitious when it comes to energy, however, with only 20% to be sourced from renewables.

In a country which builds two Manhattan islands’ worth of new floor space every year, there’s an urgent need for such exemplar developments. But Tianjin’s experiment will be watched closely, because such projects in China have often not lived up to expectations. Its first eco-village project, Huangbaiyu, led by American green guru architect William McDonough, was widely criticised [see GF special publication, Greening the Dragon] for its lack of local consultation, its unaffordable housing, and a host of deviations from its original model – none of the houses faced south, as planned, for example, and only one was built with solar panels.

More recently, controversy has flared around Dongtan, the giant ‘zero-emissions’ city designed by British engineering consultants Arup for Chongming Island, Shanghai, which was supposed to house 50,000 people. A year before the proposed completion of its first phase, when half of its eventual population should have moved in, the project has barely broken ground and construction permits have expired. For some, the relative modesty of the Tianjin project’s first phase is a welcome change. “Dongtan inspired me,” says Goh Chye Boon, chief of the venture running the business park, “but I think when you reach too high, you may forget that the ultimate beneficiary must be the resident.”

While projects like the Tianjin Eco-City and BYD Auto eye a green future for the cities, some innovators look to the residents of China’s rural areas for inspiration. Here innovation proceeds more quietly, if no less dramatically. The vast majority of Chinese households are still dependent on coal as cooking fuel. It’s relatively cheap, but it’s dirty, inefficient and, of course, polluting. There is an alternative in the form of crop waste: the maize and wheat stalks which litter the fields after the harvest, and which are usually just burned off in situ.

Daxu, a specialist stove company based in Yanqing County, on the northern outskirts of the capital, has developed a new type of cookstove which can burn briquettes made from the crop waste. It’s clean burning and reaches cooking temperature much faster than coal. And it supports a growing local briquetting industry, too. The design won Daxu an Ashden Award for Sustainable Energy in 2006. Daxu’s late director Pan Shijiao, born into a farming family himself, said that government support for climate-friendly energy sources was key to his company’s success. Shortly before the receipt of his award, Pan told me: “Renewable energy has been a priority on the agenda of the Chinese Government. Perhaps my company is only a part of the practical expression of this agenda”.

China’s expertise in fuel-efficient cookstoves has huge export potential, too. Shengzhou Stove Manufacturing is shifting around 300,000 units of its simple clean-burning woodstove each year, mainly to India – an achievement which led it to share one of this year’s Ashden Awards.

Sam Geall is Deputy Editor of chinadialogue.net

This piece originally appeared in Green Futures.

Photo credit: Flickr/Jeremy Levine Design, Creative Commons License.

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Comments

Harold,

some news about what is happening may interest you. I will send you those if I think it will help you understanding of China economy today.

Tony Qiu


Posted by: Harold on 17 Jul 09

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