China embraces cleantech, dodges downturn

A combination of factors could combine to soon make China the world's leading laboratory, market for and exporter of clean technologies, maintained international industry insiders at the Cleantech Forum in Shanghai.

And to the surprise of many attendees, investors at today's conference said they hadn't yet seen a significant slowdown in the cleantech economic powerhouse gaining steam in China.

"We need the expertise that’s found here in China to figure out how to manufacture these technologies faster and cheaper and get them deployed," said Todd Glass of law firm Wilson Sonsini Goodrich Rosati, one of several speakers who cited China's manufacturing savvy as key to scaling clean technologies like solar and biofuels so that they become cost competitive with fossil fuel equivalents.

Tom Preststulen, General Manager for Asia of environment-friendly metals and materials company Elkem, suggested many clean technology sectors should be investing in China, especially those involved with clean coal technology.

"The whole world is, of course, concerned about climate change. But we’re all sitting on different continents and doing things ourselves. I can’t understand why we can't get together. I think we should converge in China. The Chinese have a track record of getting things done. Instead of doing it in 8 years elsewhere, we can do it in 2 years in China. And in a world financial meltdown, it will also be cheaper to do it here," said Preststulen.

"The U.S. has its program. Europe has its program. But, personally, I think China is going to get there first. I also think they’re chasing the next generation, for instance, producing hydrogen out of the process."

Others agreed, even when it came to IGCC (integrated gasification combined cycle) coal plants, the emerging type which first turn coal into cleaner-burning synthetic gas. The United States, in a high profile project called FutureGen, had intended to lead in IGCC, but instead shuttered the program days after President Bush touted clean coal in a state of the union address (see FutureGen goes FutureBust.)

"The U.S. was supposed to have FutureGen. ZeroGen in Australia is moving. But with GreenGen in China, ground is broken and stuff is getting built. China was supposed to be trailing the pack, and now it’s leading the pack. And I have every confidence it will lead the world," said Ming Sung, Chief Representative for Asia Pacific for the Clean Air Task Force, a nonprofit dedicated to restoring clean air and healthy environments.

Coal gasification was clearly on the country's agenda for the future, said Wilson Sonsini's Glass. "China graduates more coal gasification technicians every year than the rest of the world combined," he underscored.

And aside from the lower out-of-pocket costs of doing business in China with less expensive labor and facilities, Chinese government incentives are now substantial, noted insiders, especially when taken together for aggregate benefit.

"Today, there are vast amount of untapped resources sitting on the sidelines waiting to be put to work, including money for rural development, for instance," said Charles Manger, Chairman and CEO of Zephyr Holdings Group. "There are organizations for economic development. Then there are organizations for foreign investment, which are different. Then there are organizations aimed at improving air quality. Still others offer money for educating local workers."

Clean technology industries in China have been on an upswing. Attendees and speakers said they had seen a marked improvement in the quality of Chinese clean technology investment opportunities.

"If you went back a decade, the quality of the deals would have been a huge step down from what you’d find in the States," said said Gary Rieschel, Founding Partner of Qiming Venture Partners China. "That’s not the case today. The deals are at least as sophisticated as anything you’ll see in the U.S."

Qiming makes selective investments in clean technology, but has been historically focused on consumer & retail, health care and the Internet.

A repeated theme through the day examined the current economic environment and how it's affecting the clean technology sector. Local investors at the conference said the economy had not necessarily changed how they're putting money to work in clean technology investing.

"It hasn’t changed us one bit. We hadn’t been chasing energy. If I were investing in biofuels, I’d be worried," said Rieschel.

Benjamin Zhang, Associate Director of Prax Capital also said he hadn't seen any slowdown yet.

"We’re looking at more deals now than before. The crisis is opportunity for us. We’re more cautious, however, as we can’t see what the future will be."

Greg Ye, Partner of New Margin Ventures, agreed. "We continue to be optimistic about the opportunity in China, and cleantech in particular. Certainly in the short term. Our investment pace is not going to slow down. To an extent our dealflow has improved. And it’s now easier to tell good companies from bad."

But he cautioned that all wasn't necessarily well for entrepreneurs. "Adjust your expectations given the current market," he advised.

More than 250 leading entrepreneurs, investors, service providers and other influencers gathered today for Cleantech Forum Shanghai, the first day of a two day event.

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