What You Need to Know to Enter China’s Cleantech Market
China has attracted much attention in recent years from Western industries looking to expand to the Far East. With rapid industrial and economic growth, the country is on a path to becoming an international powerhouse. Yet despite its upward trajectory, the nation is also home to some of the harshest environmental conditions across the globe, exemplified by heavy smog and high toxicity levels upwards of Particulate Matter 2.5 (PM 2.5). Chinese Premier, Li Keqiang, recently “declared war” on smog and emphasized that “fostering a sound ecological environment is vital for people’s lives and the future of our nation [China].”1
What does this mean to Western companies looking to enter the China cleantech market? What opportunities and challenges, lie ahead in successfully deploying Western clean technologies in China?
Opportunities in China
China’s interest and capacity to commercialize clean technologies is no less than what we’ve seen in North America and Europe. Leveraging the country’s favorable industrial policy, the government can provide capital and support for projects that are aligned with their strategic interests. For Western cleantech companies, this can result in any combination of private and public partnerships, sizable market deployment, an established export base, and multiple financing platforms to accelerate commercial development in China.
Cleantech-focused policy & strong government support
China is under immense pressure to solve existing pollution problems, which resulted in government mandates that essentially translate into cordial invitations for Western technology companies into China. Such government mandates call for aggressive clean energy investment targets in specific technology areas marked as national strategic priorities. Specifically, current policy is open to foreign technology companies that can address domestic technology gaps and actively encourages outbound investments from potential Chinese partners.
Faster and shorter technology cycles
The commercialization cycle for Western cleantech companies can happen much quicker, especially with the right strategic investors and partners who have relevant relationships in China. This assuages one of the primary frustrations that Western companies face at home where the route to commercialization is typically much slower, all the while under heavy pressure from investors who are demanding faster advancements for potential exits.
Financing capacity for clean technologies
Conducting business in China often require interactions with State-Owned Enterprises (SOE’s), which have the capacity to finance capital-intensive projects. In addition, SOE’s often have close relationships with China state banks that can provide project debt financing.
Challenges in China
For any Western companies, entering China could be considered an exercise in risk management. Issues ranging from intellectual property (IP) protection to logistics in running a global operation arise duringt the China market entry process. For instance, when conducting business in China, it is critical to focus on building relationships as these are prerequisites for successful business deals. Business is heavily relationship-driven, and can often occur outside formal office settings. For Western companies, this means it is never too early to start building a network and knowledge base in order to identify the best candidates, and prepare to engage on such partnerships when the right opportunity arises.
Explore China’s cleantech landscape this November
To dive deeper in China’s cleantech landscape, apply to join Cleantech Group’s 4th annual tour to China, November 2-7, 2014, in partnership with Idinvest Partners, Silicon Valley Bank and Tsing Capital. It is an intense week of meetings, seminars and networking to help a select group of young western clean technology companies and investors with relevant portfolio companies (1) significantly increase their understanding of the China challenge and the China opportunity; (2) meaningfully progress their “go to China” market entry and investment strategy; (3) accelerate their acquisition of valuable contacts and insights; and (4) expose their companies to a group of Chinese industrials, entrepreneurs and investors (collectively best thought of as “China Cleantech insiders”)
Contact firstname.lastname@example.org for more information.