China's Clean Energy Strategy

Sept. 30, 2010 - PRLog -- By David Caploe PhD, Chief Political Economist, EconomyWatch.com.

We have been pretty appalled w, & confused by, way China has been handling its “crisis” –

the reasons for which we still don’t see – with Japan.

That disturbing recent sequence of events aside, we have consistently argued that

the value of China’s currency is NOT a significant factor

in its economic relations with US & other “advanced” countries.

In our view, China keeps piling up massive trade surpluses w them because of real economic factors,

above all, combination of a highly-educated and –skilled work force

that, at least until now, has been willing to accept low wages.

From our perspective, there have been two key points about China’s economy:  

First, the generally, albeit not universal, effective control of the banking sector by the government,

which has, at least until now, stopped them from embarking on the same kind of foolishness that produced Black September 2008,

and the current brutal recession that has ensued,

as the Too-Big-To-Fail sector of the banks basically manipulate the political system to make sure their profits and prerogatives are protected,

whatever the cost to any other members of American or other “advanced” societies;

and, relatedly, the thorough-going effort made by that same government elite

to move China from the bottom to the top of the value-added chain,

especially by supporting its rapid – and solid – development of clean / green high-technology,

above all in the transportation and energy-production sectors.

For quite a while now, we have argued these are the real stories about China’s economy, especially the latter,

and now, it appears, the Western media is finally beginning to realize

the key issues in China’s economy lie at the TOP of the value-added chain,

and not at the bottom, where, as the Chinese themselves recognize,

they are already losing out to even lower-cost / equally high-skilled manufacturing forces such as Vietnam.

In this context, much more attention is now being paid to the “advancing sectors” in the Chinese economy,

although, as usual, the coverage is almost completely ahistorical,

focusing on “government protection” practices  US used throughout 19th century in building its economy,

and were a structural feature of the British Empire.

While there is little doubt China’s political elite has been deeply involved in

helping these “infant industries” – as they were called in America –

ramp up quickly to serve the global market,

we frankly find constant Western criticism of these practices

as disingenuous as the “outrage” about China’s “undervalued” currency.

In our view, most significant point is that

government is helping companies develop technologies

that are going to benefit the whole world from an environmental AND economic point of view –

and we see nothing wrong in this,

especially given difficulties facing Western companies in their home countries,

which will be a topic we’ll be discussing briefly below and at greater length in the future,

but which is easily inferred from the fact we continually note about the US banking sector, namely,

its pronounced UN-willingness to LEND the money it receives from the Federal government at ZERO INTEREST,

preferring instead to put it into foreign, short-term securities that quickly & safely fatten its bottom line.

But apparently that’s all right.

In any event, while we agree Chinese government is taking an active role

in helping development of companies in its green / clean / high-tech sector,

we see nothing wrong with that –

especially since, as you will note, several of the companies they are helping are NOT Chinese,

but, rather, AMERICAN firms that were unable to get the assistance they need

from sources “at home”, while being welcomed by China.

In the end, the crucial question is whether the products and services these clean / green companies

are offering the world are going to make it a better place or not –

and we think the answer to that is stunningly self-evident.

I

Until very recently, Hunan Province was known mainly for lip-searing spicy food, smoggy cities and destitute pig farmers.

Mao was born in a village on the outskirts of Changsha, the provincial capital in south-central China.

Now, Changsha & 2 adjacent cities are emerging as a center of clean energy manufacturing.

They are churning out solar panels for the American and European markets,

developing new equipment to manufacture the panels

and branching into turbines that generate electricity from wind.

The booming Chinese clean energy sector,

now more than a million jobs strong,

is quickly coming to dominate the production of technologies

essential to slowing global warming and other forms of air pollution.

Such technologies are needed to assure adequate energy

as the world’s population grows by nearly a third,

to nine billion people by the middle of the century,

while oil and coal reserves dwindle.

But much of China’s clean energy success lies in aggressive government policies that help this crucial export industry.

A visit to one of Changsha’s newest success stories offers an example of the government’s methods.

II

Hunan Sunzone Optoelectronics, a two-year-old company,

makes solar panels and ships close to 95% of them to Europe.

Now it is opening sales offices in New York, Chicago and Los Angeles

in preparation for a push into the American market next February.

To help Sunzone, the municipal government transferred to the company

22 acres of valuable urban land close to downtown at a bargain-basement price.

That reduced company’s costs & greatly increased its worth & attractiveness to investors.

Meanwhile, a state bank is preparing to lend to the company at a low interest rate,

& provincial government sweetening the deal by reimbursing company for most of the interest payments,

to help Sunzone double its production capacity.

Heavily subsidized land and loans for an exporter like Sunzone are the rule,

not exception, for clean energy businesses in Changsha & across China,

Chinese executives said in interviews over the last three months.

China’s success in clean energy also stems from assets enjoyed by many of the nation’s industries:

·        low labor costs,

·        expanding universities that groom lots of engineering talent,

·        inexpensive construction and

·        ever-improving transportation and telecommunications networks.

For example, engineers with freshly issued bachelor’s degrees

can be found here in Hunan Province for a salary of only about $2,640 a year —

not significantly more than blue-collar workers w vocational school degrees can make.

China’s aggressive tactics are making clean energy more affordable.

Solar panel prices have dropped by nearly half in the last two years,

and wind turbine prices have fallen by a quarter —

partly because of global financial crisis, but mainly because of

China’s rapid expansion in these sectors and the accompanying economies of scale ...

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