New Energy Industry - A Big Winner in China's 5 Year Plan

China has just announced its next 5 year plan (its 12th) and one of the industries that will be a clear winner of the policies is New Energy. Now that the country has become the world's biggest producer and consumer of power, it's become a political imperative to develop clean and renewable sources of energy.

The plan is still in draft form so there is room for change but the headline figure is that by 2015 the country will develop 235 million Kilowatts of clean energy production. All renewable sectors have been singled out for specific developments in the plan too.

Hydropower

It may not be a favourite of environmentalists and the country may pay a high ecological price later on down the road, but there's no denying that hydropower is the most effective renewable energy source available today. 120 million Kilowatts is expected to be found from 3 major new hydro-electric projects on the Jinsha, Yalong and Dadu rivers.

Wind Farms

There will be a total of 8 new major wind projects, 6 on land and 2 to be built offshore in coastal areas. These projects are expected to enable another 70 million Kilowatts of power.

Solar

Solar is still an emerging technology and with typically poor returns compared to the energy collected and difficulty in storing that power for long-term use it's not surprising that it's the smallest part of the plan at the moment. In the future we'd expect a major increase in solar as it becomes more efficient and storage technologies improve. For the moment 5 million Kilowatts is expected to be produced by new solar farms in Tibet, Yunnan, Inner Mongolia, Gansu, Qinghai, Ningshia, and XinXiang.

It's not all good news though; there will still be a ramp up in gas and oil consumption and the plan also allows for nearly 150,000 kilometres of pipelines mainly to Asian republic states from the old Soviet Union to allow more efficient transportation and delivery.

With China already emerging as the world's biggest investor in New Energy it's not surprising that there is strong political will to begin implementing some of the world's largest investments in practical projects. For investors in the country this is a major opportunity to field these technologies and prove their effectiveness while gaining return on those investments to further research and development in the area. The best of the New Energy companies are looking at a very prosperous 5 years indeed.

Clean Technology Industry in China - Opportunities in Tier 2 Cities

As China bids to become a sustained world presence it's clear that at the top of the agenda lays clean technology. Clean technology investment in the country reached $34 billion US dollars in 2009, that's twice the investment that the United States had made in the same time frame, and far outstrips the spend in the rest of the world.

The rumours from local news sources are that as the next 5 year plan becomes clear, there will be a total investment in clean energy of $738 billion over the next 10 years in clean energy technologies by the Chinese government. Much of this money is expected to be focused on Tier 2 cities.

For those looking to take advantage of these opportunities it's worth making it clear that there's no official definition as to what exactly a "Tier 2" city is (unlike in India where this is defined by government) but it is likely to include most of the provincial capitals and up to another 200 large sized cities throughout the country. Most of these will be in close proximity to state capitals and deal with "overspill" from these more expensive (from a residential standpoint) locations.

Chinese cities tend to specialise around specific economic areas rather than applying an "across the board" approach as more commonly seen in the West. Though there are exceptions to this rule, such as Qingdao (home of Tsing Tao beer, one of China's more famous international exports) which is building a broad base of industries and thus is outperforming other cities (Qingdao and the local province was third fastest growing regional economy in China in 2010).

So given this it's sensible to focus on those cities where clean technology is an emerging industry in its own right, but keep in mind that where one city leads in China many others will follow. Zhongshan is already trying to capitalise on the success of Shenzhen, Guangzhou and Dongguan where there's been substantial progress in clean technologies and in particular LED/OLED production.

Wholly owned foreign enterprises don't usually qualify for Chinese state support so to take advantage of government investment in this area you'll be expected to partner with a local company which can come with a fair share of cultural headaches to overcome. Commonly these include both sets of employees (both local and expat) having stronger loyalties to their own parent company than the venture itself, and of course the "face culture" clashing with a more open Western one.

However with an expected 1 trillion RMB output in 2011 from these industries and clear and obvious massive growth potential those companies that overcome these hurdles will be well placed to join the world leaders of clean technology.