China Charges Ahead of World

Inside China's massive, $220 million pavilion at the Shanghai Expo, exhibits charting that nation's path toward modernization start with the humble transistor radio and end with electric cars and homegrown technology powered by sun, wind and algae.

The largest Expo in history has drawn more than 30 million visitors. It showcases the country's ambitions to become not just factory to the world but a global leader in technologies of the future — particularly green energy.

For a visitor from the Pacific Northwest, it's hard to escape the parallels with the Seattle World's Fair of 1962, when American ambitions pointed skyward with the Space Needle, and Boeing helped propel aerospace technology to new heights.

The Shanghai Expo, like the Seattle gathering nearly 50 years earlier, seems a watershed event, in this case heralding both a shift in global economic power and a leap in China's imagination.

A Chinese consortium is building a commercial jet to rival the Boeing 737. Chinese car and battery maker BYD ("build your dreams") is launching an all-electric car this year.

But nowhere is China's competitive push more evident than in its rush to dominate clean energy.

Environmental disasters and China's reputation as a prime polluter have driven some of that urgency. The country has become the world's largest energy consumer and its biggest carbon emitter.

Now it's investing billions of dollars in greener, more efficient energy production. Recent incentives and policies encouraging alternative energy have helped Chinese companies leapfrog over competitors to lead the world in areas such as solar power.

As a result, much of the manufacturing for photovoltaic cells and panels has gone to China.

In Washington state, the competitive stakes are high.

In the last decade, investors poured $783 million into clean-tech companies in Washington state, according to the Cleantech Group. The sector, which includes energy generation, green building and environmental engineering, employs about 23,000 people in the Puget Sound area alone.

Politicians and investors are touting clean tech as the growth opportunity of the future. But they worry that American companies are already falling behind.

"Many of these technologies were invented in the U.S., but they have since migrated overseas because there has never been much of a market in the U.S.," said Peter Brehm, vice president of business development and government relations at Infinia, a solar-power company in Kennewick.

Overall clean-technology investments in China reached $34 billion last year, more than any other country and almost double the U.S. investment of $18 billion, according to the Pew Environment Group.

This year, China has attracted more clean-tech financing than Europe and the U.S. combined, according to Bloomberg New Energy Finance. Financing for wind turbines, solar panels and low-carbon technology in China rose 72 percent in the second quarter to $11.5 billion, compared with U.S. investment of $4.9 billion.

The size of the market and a sweeping array of incentives are acting as magnets. Chinese utilities are required to buy up all renewable energy generated in the country and sell to consumers at discounted rates. It helps that China's energy sector is largely state-owned. Government ministries subsidize half of the investment cost for solar-power systems.

That doesn't mean China's growth will be clean.

"A lot of manufacturing is very dirty," said Christopher McNally, a fellow at the East-West Center in Honolulu who studies China's system of state-managed capitalism. "But the policy thrust is very clear. And that is actually what we lack. We don't have a very clear policy of where we're going."

Washington clean-tech companies are staking their future on how well they can both sell to China's growing market and maintain their own edge.

But that's getting harder to do as the U.S. lags in investments and policies that foster development of clean-technology products and build market demand for them, many business leaders say.

"China has a problem with pollution," says Robert Roche, the chairman of the American Chamber of Commerce in Shanghai. "They're addressing it from a national view. Our government hasn't decided there's a problem yet."

Recent Chinese actions include a cap on carbon, aggressive fuel-efficiency targets and a plan for $700 billion in investments over the next 10 years, said U.S. Rep. Jay Inslee, D-Bainbridge Island, who met with Chinese environment officials in July.

Without a bold U.S. strategy, money will go elsewhere and domestic enterprises will lose out, he said.

"It's pretty amazing, our lack of performance relative to Chinese aggressiveness in trying to seize these jobs," he said.

An hour outside Shanghai, factories fill the bland landscape around Kunshan, a satellite city that has become an economic powerhouse.

Amid the electronics companies churning out iPods, mobile phones and laptops, a solar-energy industry is taking shape.

Kunshan is encouraging biotech, wind and solar companies to set up shop. Taiwanese manufacturer Motech Industries started mass production of solar cells there two years ago, and demand now exceeds its capacity.

"The government is involved a lot in the development of industries," said York Wu, vice chief of investment promotion in the New & Hi-tech Industrial Development Zone.

The goal is to make Kunshan a base of renewable energy, producing 400 million to 500 million solar panels.

At a demonstration center near the Motech factory, a young woman in skinny black jeans and precariously high heels leads visitors on a tour of displays.

She shows miniature homes of the future, with green roofs and solar-powered lights, new types of small wind turbines and ultrathin solar-cell material that can be used in roofing or curtains. They even have a model handbag designed to tap sunlight to charge cellphones.

John Evans, an Asia-based business consultant, has been watching the growth of China's clean-technology industry and advising the Washington state Department of Commerce and local companies on strategy.

"China is going to be both a competitor and an opportunity," Evans said. "When the Chinese decide they're really going to push forward with something, they do it quickly and put a lot of money into it."

That means opportunities for Washington companies with cutting-edge technology, such as software to manage smart electricity grids, to sell into the Chinese market, he said. But they may eventually be competing with companies in China.

"China is putting in place incentives, such as tax reductions for investment, to attract companies from across the globe," he said. "That's not necessarily a great thing for Washington state."

At its factory in Kennewick, Infinia makes a device that captures sunlight through a mirror and converts the heat directly into electricity. Infinia was listed by the Cleantech Group as one of the 100 most promising private companies in the world for addressing environmental challenges.

There is little market yet for its products in the U.S.

Instead, Infinia's technology is in demand in Spain, India and China. Much of its manufacturing may soon follow.

"Other countries are smart enough to incentivize manufacturing. We're not," Vice President Brehm said. "They make it very easy for you to win projects and develop markets over there if you manufacture over there."

Recently, the U.S. Senate scrapped energy legislation that would have placed a cap on carbon emissions by utilities and set new renewable-energy standards.

Opponents called that legislation "cap and tax," saying it would increase energy prices and hamper growth. But Brehm argues the failure to pass that kind of energy legislation is likely to drive more investment overseas.

"The decision not to go forward — all it does is perpetuate the uncertainty that's already in the market for companies like ours that manufacture renewables."

The same factories that make parts like vehicle doors for the U.S. auto industry also make parts for Infinia on the same assembly line, using the same machine tools.

"For converting dwindling auto jobs to real jobs, we are literally the poster child," he said.

Federal stimulus money has helped boost renewables, but the benefits have gone disproportionately to companies with technology that is being made overseas, Brehm argues. Incentives focused on emerging technologies are needed to keep his industry ahead of the curve and support jobs that are still based here, he says.

"Our argument is: where things are manufactured matters," Brehm said.

Inside China's bright-red Expo pavilion, which replicates an ancient Chinese building style, the larger upper tier is designed to shade the rest of the building, which has a rooftop garden, natural ventilation and rainwater collection.

A display compares carbon emissions of various forms of transportation, and two of China's electric cars are shown, including the YeZ, or "leaf" in Chinese, a concept car designed in Shanghai that absorbs carbon dioxide from the air and emits oxygen. Another display shows how algae is being converted to biodiesel.

The pavilion offers a sharp contrast to the grittier reality of everyday life in most Chinese cities, with their heavily polluted skies and water and sprawl. Near Shanghai, a giant new eco-city was supposed to be completed in time for the Expo, but never made it past the planning stage.

Still, Chinese officials such as Song Chao, director of the Shanghai municipal government's information office, insist the Expo is showing that China can be as innovative as any country.

He said that demonstrating how to make cities more sustainable through clean technology is one way to "let young people know what are the most advanced civilizations and technological developments in the world today."

SOURCE