Why China's Winning the Clean Tech Race

Two recent articles by NYTimes reporter Keith Bradsher feature stories that tell why China is leading in clean tech manufacturing: friendly venture capital and a government that’s willing to bend the rules to support business. What’s the American response? Blame Obama.

Chuck Provini developed a new way to make solar panels that replaces a costly furnace with a room temperature process. To get US investment, he would have had to convince a bank that is leery of unproven business models to finance him, or a venture capital firm that would sacrifice long-term sustainability for quick profits.

Even if he sought government assistance, he would have been bogged down in regulations and applications before he saw any funding. Still needing long-term financial backing, Provini turned to China, where he found willing investors.

“I feel what China is doing is taking chances on new technologies, investing relatively small amounts of money understanding that some of those technologies will blossom,” Mr. Provini said.

Provini's story is just one of many that show how green jobs in the US are leaving for China. Recently, the last incandescent light bulb factory closed down, as regulations force this outdated technology into retirement. But though the public can replace their incandescents with CFLs, American factories are not making these new light bulbs. That’s happening in China.

In Bradsher’s other article, China doesn’t come out so rosy as a business partner. Digging into government subsidies of one solar manufacturing company, Sunzone, he tells the story of a government that’s willing to bend international trade rules to keep the edge in clean energy manufacturing.

To start, Sunzone was able to buy property at $90,000 an acre from the government, about a third of the official price for industrial land. Through low interest loans from the state bank and reimbursements from the provincial government, Sunzone will be virtually debt-free and will be able to double its production capacity off the ground.

“But this kind of help violates World Trade Organization rules banning virtually all subsidies to exporters, and could be successfully challenged at the agency’s tribunals in Geneva, said Charlene Barshefsky, who was the United States trade representative during the second Clinton administration and negotiated the terms of China’s entry to the organization in 2001."

"Other countries also try to help their clean energy industries, too, but not to the extent that China does — and not, so far at least, to the point of potentially running afoul of W.T.O. rules.”

In addition to government loans, labor is extraordinary cheap in China. “Engineers with freshly issued bachelor’s degrees can be found here in Hunan Province for a salary of only about $2,640 a year.” And startup times are quick too. From permitting to ribbon cutting ceremony, it took just over a year for Sunzone to get started. In the US, a similar project would take 14 to 16 months, and getting environmental and other permits can take years. Compared to the business climate in the United States, it’s no wonder more and more businesses are looking to China to manufacture their products.

China’s assistance has allowed the cost of clean energy technologies to drop dramatically in recent years and help governments meet their carbon reduction commitments. But with a potential WTO law suit pending and labor cost so dramatically low, will China be a good business partner? Can the US compete when China is willing to bend the rules?

It’s not surprising that a recent poll by Deloitte shows that while the American public supports American manufacturing, they blame politics, not world trade violations, for why the US fallen behind.

“Americans are concerned about U.S. government policies and leadership in the area of manufacturing – respondents singled out state and federal government leadership, tax rates on individuals, and government business policies as their three top areas of concern. In short, they believe we have what it takes – but they’re not seeing the type of leadership and policies required to keep the manufacturing industry healthy and successful in the long run.”

Without a strong push back from the international community about China’s financial support of export businesses, it’s hard to see how any kind of US leadership, personal taxes or business policy could make clean tech businesses thrive in the US. Is there a business model that would work? Should banks or venture capitalists step up? Let us know what you think in the comments below.

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