Simple Green: China’s Development Strategy

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Chairman Wang Shi of Vanke Co. Ltd is taking advice from all over the world. He has studied renewable energy technology in Norway and Japan. Last year, he was in Germany and the Netherlands.

His company is on the frontier of green building technology in China, particularly in water. At the moment, Vanke is working on rain water filtration for secondary usages, such as washing clothes, and using water circulation within a building for energy. This technology isn’t anything new; it’s being adapted to China’s needs from similar technology in other areas of the world.

Wang embraced the advice of a green consultancy firm that told him: In China, if you want to realize green building, it is not necessary to use high tech. Low tech, low cost is more suitable for China’s situation.

Low tech for China means adapting and innovating upon tried and true technologies to meet the country’s pressing environmental challenges. Vanke has several arms including an environment fund, over half of which is spent on translating water conservation technology for China’s needs. The goal, Wang says, is not to use a single drop of water from the water company.

But nothing is as simple as it seems, explains Julian L. Wong, a regenerative systems policy analyst:

“For China to be green, it will have to do things as never before.

“People talk about China having the opportunity to leapfrog developed countries by going big on renewables. … It will take imagination and vision to cut through conventional wisdom, … building cities in new ways that is different from how Western cities have developed.”

China Under Pressure

China has 8 percent of the world’s arable land, three times less than the United States, which has one-fifth the population. Fifty-eight percent of the land in China is arid or semi-arid, making it poor for growing crops, and the country has lost 12% of its “highest quality” arable land due to industrialization and urbanization.

China also has five times less water than the United States, and it’s estimated that 70 percent of all water sources in China are polluted. The Financial Times recently reported that China’s coal imports are up 500 percent, coal being the one natural resource that the relatively resource poor China has in abundance. But for the first time in 2008, its coal demand matched its production. Coal power is becoming less viable for China in the short term.

China faces creeping desertification, deforestation, severe water shortages, and an inability to power itself. The reason is that China has completed about 200 years of Western-style, resource-intensive industrialization in roughly 30 years.

Facing rapid urbanization pressures over the same period of time, Beijing’s resource intensive economic development drive finally caught up with it. The few natural resources China had are being exhausted or have led to environmental degradation that will noticeably alter its way of life by 2020.

By 2020, the National Climate Assessment Report (II-2007) finds, the average national temperature in China will have increased by 1.1-2.1 degrees Celsius.

China’s urban population is also expected to double by from 2005 to 2025, with about 40 percent migrant workers. Under the Chinese government’s Confucian tradition the Mandate of Heaven, the government’s job is the preservation of the Chinese people — enough housing and jobs is therefore ultimately Beijing’s responsibility, giving Beijing little choice but to maintain the break-neck speed of economic development.

The Shift to Innovation

Alexander Conrad, a global development strategy executive in China, explains,

“There’s an emphasis in China’s clean tech community to implement and execute quickly. For example, Fu Zhihuan, chairman of the Finance Committee for the 10th National People’s Congress, said in September at the US-China Clean Energy Forum in Shanghai: China has vast markets; the U.S. (ie. developed world) has capital and technology.

"The emphasis is on market development. While I wouldn’t go so far as to say this is at the expense of R&D, market development of proven technologies is certainly the priority in China’s clean tech development. I view the ‘keep it simple’ comment as an expression of the sentiment … let’s build and execute proven technologies today.”

Conrad says to look no further than the wind sector: In 5 years, China has accelerated closing the gap between its export of wind turbines with Denmark and Germany. Within China, domestic wind manufacturing firms had 21 percent market share in 2004, they now dominate it at 83 percent. It won’t be long before China is the leading exporter of the technology. Last year, China overtook Germany as the world’s largest exporter of goods by value. It already leads the world in the manufacture of solar photovoltaic panels.

China has pursued the tried and true development strategy of its regional forebearers: copy, manufacture, repeat. Japan, for example, imported steel production technology, learned it, innovated a more efficient way of doing it, and when it had moved up the value chain of production, picked it up and sold the industry to South Korea.

But China has reached the inflection point from low cost labor to value added, the next wrung on the development ladder.

The state news agency Xinhua reported earlier this month, “The number of Chinese applying to sit the [graduate school] exam soared from 1999 to 2007 with an average annual increase rate of 17 percent.” And Chinese graduates of Western Universities are repatriating at an increasing rate.

It’s no longer a question of a manufacturing bubble economy: China has reached the innovation stage.

At Vanke, Wang isn’t the only one making a practice of learning from the rest of the world. He sends his staff out to do the same: Vanke’s Building Research Institute arranges “study tours” for employees to “collect” knowledge on different green technologies like windmills, tidal, methane capture, and thermal energy with multinational companies around the world. Wang explains that even though these technologies only have commercial value for the next five to 10 years, his company is collecting the information for future introduction into his building techniques.

China has used economic partnerships to learn technology and is about to break out into it’s own innovation. According to a report from the Breakthrough Institute, China’s Suntech is constructing “a leading global R&D facility” for second and third generation solar technology which “recently broke industry efficiency records for multicrystalline solar cell modules.”

Applied Materials, an American firm, and China will partner on an R&D facility in China. The UK, EU, and China will partner up on developing CCS technology. So while the cutting edge in clean tech innovation is still largely happening outside China, Chinese companies have picked up the basics from their new partners and are out manufacturing them.

According to Xinhua, the Chinese government is considering upping it’s wind power capacity target for 2020 to 150 GW; the current target stands at 30 GW. But this will only be possible if China solves another problem: lack of infrastructure. China is short on transmission lines and smart grid technology needed to use the overcapacity and move the country closer to reducing economic carbon intensity.

Conrad is confident infrastructure gaps should be easy for China to solve because the nature of Chinese economic development is fundamentally different than that of any other major clean tech economy:

“China’s form of government vis-a-vis clean tech already lends itself to the keep it simple argument. For example, smart grid build-out can be coordinated at a central/national level not possible in the U.S. or EU. Also, the very fact that China’s urban development involves such a large degree of new rather than replacement infrastructure makes ‘keep it simple’ planning and development an easier and more obvious choice.”

While the Chinese government’s ability to implement policy is different than other major clean tech economies, the simple strategy to economic development: copy, manufacture, innovate, and create means China’s economy has firmly taken off and now will dominate the next chapter of the global economic story.


See also:

Is China Still a Developing Country?

China’s Smart Grid Ambitions Could Open Door to US-China Cooperation

China’s Entrepreneurs Are Ready, But Is Their Government?

Next-Gen Vestas Wind Turbine Made in China, for China

China’s Trina Solar Bets on America’s Thriving Photovoltaics Market