Australian businesses will have to wrestle for a share of green business in China

China’s environmental challenges

Often when we think of China we think of pollution and smog. Pollution is a weighty issue for the country and it has been estimated to cost the Chinese economy 7-10 per cent of GDP each year.

Environmental impacts have been fuelled by long-term growth rates of 8-10 per cent, one of the highest of any country. To give you a sense of scale of the problems, 75 per cent of energy production is still dependent on locally-sourced coal with a new coal-fired power station opening every week.

The Three Gorges Dam project, which is nearing completion, is projected to generate a whopping 18,000 MW of power, however it can potentially cause large scale geological and ecological impacts; submerging more than 600 km2 of land, and displacing entire city populations.

Like many things in China, environmental impacts also happen on a large scale.

China’s marathon efforts

China is making great strides in managing its environmental footprint, but their commitment to managing greenhouse gas emissions has largely been overlooked by the media.

Despite its coal-dependent economy, The Climate Group’s recent report (www.theclimategroup.org) reveals that the Chinese government and businesses have embarked on a clean revolution that has already made it a world leader in the manufacture of solar photo-voltaic technology (Solar PV).

To put this into perspective, its six biggest solar companies have a combined market value of over $US15 billion. The Chinese government has mandated targets for its 1000 largest companies to reduce their energy intensity by 20 per cent by 2010, and it is also the world leader in the use of low-carbon transport. Furthermore, its investment in research and development dwarfs that committed to by most western countries, at more than US $100 billion annually.

Potential role of telecommunications

I believe the potential for telecommunications to enable a faster and more extensive shift in reducing carbon emissions in China will be significant. Innovations (services or technologies) that harness telecommunications networks to drive greater uptake of renewable energy, improve supply-chain efficiency or improve the work-life balance of the world’s largest population of workers are, in my view, exemplary candidates for successful transfer to China.

Australian concerns

Despite the effort by the Chinese to reduce their environmental footprint, there is an opportunity for countries like Australia to export their environmental technologies to help in meeting this important goal.

The race for market share will be tough; the market and business dealings are very different to Australia and the winners will be those that can navigate the institutional, political and bureaucratic terrain and persist at it.

From research I have done, there are numerous non-trade barriers to transferring environmental goods and services from Australia to China. The barriers that stand out to me are:

• Lack of protection of intellectual property (IP) in China,
• Limitations of the rule of law in China, and
• Fragmentation and bureaucracy in the Chinese government.

Scaling the hurdles

Despite these hurdles, Australian companies have hit the ground running in the Chinese environmental goods and services market and should be a source of encouragement to others aspiring to win market share.

In a nutshell, successful companies are dealing with the issues by:

• Transferring those environmental goods and services that are difficult to replicate e.g. high quality consulting and advisory services, and development of strategic alliances.
• Knowing the key players in both the industry and within the relevant Chinese government authorities (regulating a particular industry).
• Having a reliable source of legal advice on the changing legal landscape in China.

The future

Awareness and training in intellectual property rights will be critical to bring about long-term changes in attitudes to the protection of IP rights in China. Australian businesses have a vested interest in seeing that a proportion of China-derived profits are put back into this type of training locally in China. Of course, this applies to any technology transfer to China and not just for green solutions.

Further information:

• For a deep dive into transferring environmental technologies into the world’s fastest growing economy, check out the research articles in the Wiley Publication Business Strategy & Environment (www3.interscience.wiley.com)
  > and search for “China”
• The Tasmanian renewable energy company, Roaring 40s (www.roaring40s.com.a ), is building wind farms in China. Their Australian parent, Hydro Tasmania, is owned by the State of Tasmania.
• See Austrade’s webpage “Environmental Technologies to China”  (www.austrade.gov.au) for information on the size of the prize and how to get into the market.
• Numerous Australian organisations highlight their concerns and identify opportunities for doing business in China in submissions to Australia’s Free Trade Agreement to China (www.dfat.gov.au) – some of these address environmental issues.
• Environment Business Australia (environmentbusiness.com.au) lists numerous members that provide “green” business solutions into China.
• Suntech (www.suntech-power.com) is a worldwide leader in the design and manufacture of innovative solar energy solutions and a great example of how China is taking centre stage in fighting climate change. It is no co-incidence that their Founder, Chairman of the Board and Chief Executive Officer, Dr Zhengrong Shi, received the Banksia Foundation Award (www.banksiafdn.com) for International Environmentalist of the Year 2008.