The American Chamber of Commerce in China Salutes China’s Efforts to “Go Green”

The recent release, by the American Chamber of Commerce in China, of the 2013 American Business in China White Paper, provides an opportunity to discuss the latest developments in one of China’s most dynamic industries: the clean technology industry. China’s innovation and investment policy in the clean technology sector continues to show strong results as the country remained, in 2012, “the most significant and rapidly growing market in the world for clean technology”, the White Paper states. Indeed, China’s 12th Five-Year Plan (March 14, 2011) put a strong emphasis on developing clean technology and addressing environmental issues, including the development of seven strategic emerging industries. Energy savings and environment protection, new energy and clean energy vehicles, biotechnology, new materials, new IT and high-end manufacturing should therefore benefit from government favor for the years to come, the aim being to increase their GDP contributions from 2 percent of GDP to 8 percent by 2015.

However, in spite of China’s laudable efforts to “go green”, the clean technology regulatory and investment environment saw fewer developments in 2012. A downturn believed to be due to China’s recent leadership transition that began in the fall and was completed on March 12th as Xi Jinping succeeded Hu Jintao as state president (READ: New President Xi Jinping outlines his vision of the “Chinese dream”). Notable key policy papers and regulations were nonetheless adopted in 2012 to further encourage development of the strategic emerging industries, support clean energy industries and technologies and address the issue of air pollution. To this end, the government promulgated a number of industry-specific five-year plans, amended its Foreign Investment Catalogue and released new regulations providing government financial support and encouraging private investment in the renewable energy sector.

Industry-Specific Plans Added

Industry-specific five-year plans were added to China’s 12th Five-Year Plan in 2012, providing more details about China’s targets and goals regarding smart grids (“12th FYP on Industrialization of Key Projects for Key Technologies of the Smart Grid”, March 2012), solar power technology (“12th FYP for the Solar Photovoltaic (PV) Industry”, February 2012), energy savings (“12th FYP on Energy Conservation and Emission Reduction”, August 2012), renewable energy (“12th FYP on Renewable Energy”, August 2012) and green buildings (“12th FYP of Building Energy Efficiency”, May 2012).

According to those specific plans, renewable energies are expected to contribute 9.5 percent of China’s national energy needs by 2015 while 670 million tons of coal shall be saved and 50 percent of buildings located in key metropolitan areas shall meet green buildings standards.

Foreign Investment Encouraged in the Clean-Tech Industry

The “Guiding Catalogue on Foreign Investment in Industry”, which provides policy guidance to foreign investors in China by subdividing industries into encouraged, restricted, and prohibited industries, was amended in 2011. Part of the amendments which came into force in January 2012 applied to China’s clean technology industry. The joint venture requirement regarding foreign investment in new energy equipment manufacturing was removed from the Catalogue. Certain activities, namely electric car charging stations, the construction and operation of renewable water plants, and the manufacture of batteries and other key components for new energy vehicles fell into the “encouraged” category. On the downside, a new requirement limiting foreign investment in “high energy propulsion batteries” to 50 percent or less was added to the Catalogue.

In order to further accelerate investment in the clean technology industry, the Ministry of Finance and the National Development and Reform Commission established a number of special funds for renewable energy, including a special fund to support the “demonstration and promotion of clean production technologies”. On September 20, 2012, the Ministry of Finance, the Ministry of Industry and Information Technology, and the Ministry of Science and Technology added their stone to the building by jointly issuing a series of measures to support key technological innovation in complete sets of equipment and power batteries for new energy automobiles.

Pending Issues

If the American Chamber of Commerce member companies acknowledge China’s efforts to meet its sustainable development goals, they are also calling for increasing engagement of the foreign invested enterprises in the development of policy and regulations related to clean technologies. The authors of the White Paper encourage both the Chinese and the US governments to further support bilateral market development, while urging China to ensure “that high-quality, practical, internationally harmonized standards are in place for all sectors of the clean technology industry, and that they are effectively implemented and enforced”.

by Jonathan Pecaut-Dupy

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