Five business opportunities in China for western businesses resulting from the fight against climate change
While the US and Europe are still recovering from the – not so surprising – decision of President Trump regarding the Paris climate agreement, the eyes of the world are slowly shifting to the far east. China and the US, the world’s largest emitters of greenhouse gases, are currently responsible for 38% of global emissions. Considering the unstable political environment concerning climate change in the US (2018 budget of US aims to cut spending on climate change with 30%), the efforts of China are becoming increasingly vital for a healthy planet.
China’s decision is no surprise for those who have been following the development of their plans to control the Chinese contribution to global warming. In their 12th and 13th 5-year plan, climate change has been a strong focus and President Xi himself has been promoting China’s position: “I have said many times that green mountains and clear water are as good as mountains of gold and silver. To protect the environment is to protect productivity and to improve the environment is to boost productivity.”
In fact, the Chinese are convinced that they can turn the fight against climate change into a new engine for growth with many opportunities for businesses. Not only do they acknowledge and aim to control the threat, they are also confident that the solution to creating and sustaining a beautiful planet is an economic driver. This position is far more advanced than most developed western countries who, despite being part of the Paris agreement, are still debating the conclusions of 95% of the worlds scientists. China’s position has resulted in staggering results, ambitious plans and surprising investments. 1421 Consulting Group sees business opportunities in China from climate change in five separate areas:
Increasing Clean Energy
China sees clean energy development as a renewable revolution rather than simply a climate change concern. As a global leader in renewable energy, China has enormous resources and great potential for future development. By the end of 2015, China installed about a quarter of the global capacity for renewable power (Figure 1). In the new 2014-2020 energy plan, China aims to reduce reliance on coal and raise the share of non-fossil fuels of the total energy mix to 15% by 2020, to 20% by 2030. The percentage of renewables in China’s energy mix was 13% in 2010. Therefore, in order to achieve the goal and its dedication of shifting away from coal power towards cleaner fuels, it plans to invest at least $360 billion by 2020 in clean energy. International companies have, and will continue to benefit from these business opportunities in China.
Figure 1. Renewable Power Capacities* in World, EU-28, BRICS and Top Seven Countries, End-2015
*Not including hydropower.
Encouragement of global cooperation
With an eagerness to combat climate change issues, the vice premier of China, Zhang Gaoli, has said that China is willing to acquire international joint efforts and deepening innovation cooperation in clean energy. Through close work with international communities, China has worked with the US, the UK, Germany, France, Russia, Australia, and other regions worldwide. Despite President Trump’s strategy concerning climate change in the U.S., China and America have many opportunities to work together on clean energy, according to U.S. Energy Secretary Rick Perry.
The most recent news in automotive industry underlines this statement: by a total investment of 6 billion RMB, the Volkswagen Group and Anhui Jianghuai Automobile have established their new joint venture JAC-VW, with a focus on electric vehicles. Meanwhile, Daimler also plans to invest to Beijing Electric Vehicle Co., Ltd. to enhance their strategic collaboration. The success of founding JAC-VW means the regulation of “one foreign automotive company can only have two joint ventures in China” has been broken, which might generate new business opportunities in China.
Green policies and incentives
China focuses on clean energy economic transition as the innovation of growth pattern. “Made in China 2025“ has set clear guiding principles for China to have manufacturing achieve green development. Right now, China plans to build demonstration areas to inspire large-, medium- and small-business on smart manufacturing. In order to boost renewable energy and sustainable development, China improves incentives on green building, electric cars and green bonds. For example, waiting for your non-electric car is a lottery which can take up to 5 years. Launching the trading of “green certificates” provides opportunities for enterprises and individuals to contribute to the energy revolution.
One of the key strategies of China is stimulating innovation and scientific advancement to contribute to cleaner living. Between 2010 and 2014, China managed to reduce the country’s CO2 emissions per unit of GDP by 15.8 percent (!) through scientific advancement alone. A so called ultra-super-critical technology is helping power plants save 29.4 million metric tons of coal every year. This is precisely why SME’s and inventors are important for China. They need the innovative thoughts and ideas to change the world. Other innovative examples the Chinese have embraced are the anti-air-pollution tower designed by Dutch inventor Daan Roosengaarde and the innovations of local farmers in collaboration with the ministry to change their impact on the carbon footprint while increasing their income (also known as “Planting for Change”).
Global green investments
The last area is China’s global investments. They are currently the number one investor (more than Europe and the US combined) in creating a world without fossil fuel. Their most recent example is the knowledge-collaboration between China and the state of California to combat climate change. This is exactly why they have been promoting a green ‘belt and road’ investment strategy (follow 1421 for more about this development in our next newsletter), so progress on climate change is a global initiative with economic gain.
In short, China is leading the fight against climate change and they are creating a legion of business opportunities in China for SME’s, inventors and large corporations to join them in this struggle. Since the US national government is no longer actively joining the fight, the Chinese can use all the help they can get. Now is the time to set up or extend your business relation with China and create a healthier world while enjoying your part of the economic growth that will undoubtedly follow.
And we happen to know the people to help you get this done in a constantly changing and culturally challenging climate for Westerners.
Written by Ms. Baihui Grundmann and Mr. Alexander Pronk