Booming Green Opportunities in China
21 November 2013
China is keen to apply green technologies to improving its environment, according to many of the exhibitors at this year’s ECO Expo Asia held in October 2013 in Hong Kong. Demand for environmental services and equipment on the Chinese mainland is, understandably, being led by the industrial and commercial sectors, as businesses are legally obliged to observe the increasingly stringent green requirements imposed on them by the government. According to the representatives of the Shenzhen-based Dongjiang Environmental Company Limited at the ECO Expo, they are increasingly “going out” to look for foreign partners for green technological cooperation.
Sustainable development needs
Undoubtedly, the demand for green services and equipment is booming on the mainland, as the environmental problems are becoming increasingly serious. Mr. Tu Ruihe, Deputy Director General of the Department of International Cooperation, Ministry of Environmental Protection, estimated at the Eco Asia Conference of the ECO Expo that the annual industrial output of the mainland’s energy conservation and environmental protection industry could reach Rmb 4.5 trillion by 2015, more than double from the Rmb 2 trillion in 2010.
|Eco Asia Conference of ECO Expo Asia 2013|
Indeed, one of the top priorities of the mainland government in its 12th Five-year Plan (2011-2015) is to promote green development and accelerate the building of a resource-saving and eco-friendly society. Recent problems, such as smog happened in many cities, as well as the food contamination and safety problems, have pressured the government to act faster when it comes to tackling these matters.
As mainland companies, on the whole, lack the necessary front-end technology there is considerable demand for imported green technologies and equipment. As a result, the government has put in place facilitation measures aimed at aiding the importation of certain electronics, renewable energy technologies, wastewater and air pollution control equipment. Demand will further increase as industrial activities and the pace of urbanisation continue to accelerate.
Well-placed to take advantage of these emerging opportunities, Hong Kong provides a convenient platform for both local and overseas players. It not only provides green service companies with a diverse range of finance facilities, but also functions as a technology transfer platform for overseas enterprises and mainland clients on the back of its excellent record in the protection of intellectual property rights and its comprehensive range of professional services. With these factors in mind, as well as Hong Kong’s geographic proximity to the Chinese mainland - especially the huge green market represented by the Pearl River Delta (PRD) - there are now an increasing number of companies making use of the city’s facilities in order to target the mainland’s ecological improvement and environmental protection sector.
A number of overseas players are making use of Hong Kong to capitalise on the booming demand for green products and services on the mainland. One case in point is BioZone Scientific International Limited (BioZone), one of the exhibitors at ECO Expo Asia 2013. BioZone, headquartered in Finland, is engaged in the design and manufacture of purifiers that can rid the air of mould, VOC, odours, bacteria and even viruses such as H5N1. BioZone told HKTDC Research that the company is using its Hong Kong office to expand its sales in Asia, particularly in China. The company is targeting hotels and public premises, such as shopping malls and office blocks on the mainland, which have a huge demand for air purification systems for commercial reasons.
|Products of BioZone shown at ECO Expo Asia 2013|
Industrialisation and urbanisation
In terms of the mainland’s macro environment, although the previous massive level of industrial activity has levelled off over the last few years, the level of overall activities has continued to expand. Energy consumption in China, for instance, has continued to increase, albeit at a slower pace.
|Energy consumption in China has continued to increase, albeit at a slower pace.|
Source: China Statistical Yearbook
|Urbanisation has compounded China’s pollution problems and has put additional pressure on the living environment.|
Source: China Statistical Yearbook
Besides, urbanisation has compounded the mainland’s pollution problems and has put additional pressure on the living environment and raised health concerns. Household and other urban wastewater, for instance, has to be properly treated before discharge to avoid polluting land and water resources. In the meantime, while some household garbage is recycled, most is buried underground or incinerated (such as the WEEE), inevitably causing environmental pollution in the process. The introduction of the relevant management and technology is therefore essential when it comes to minimising these problems.
Demand for environmental services and equipment on the mainland is, understandably, being led by the industrial and commercial sectors, as businesses are legally obliged to observe the increasingly stringent green requirements imposed on them by the government. According to representatives of the Shenzhen-based Dongjiang Environmental Company Limited (Dongjiang) attending ECO Expo Asia 2013, the company is increasingly “going out” to look for overseas partners for technological co-operation, with a view to enhancing its capability to serve the mainland’s environmental market. Dongjiang is one of China’s leading green service providers, engaging in a wide range of environmental services when it comes to recovering resources from waste. It is involved, for example, in a number of waste-to-product and waste-to-energy initiatives, as well as with hazardous waste management. Its annual capacity for waste treatment is over one million tons, and it currently works with businesses in the PRD, YRD and south-western China. Dongjiang told HKTDC Research that they use Hong Kong as a ‘window’ to access green players from advanced countries. This is facilitated by the territory’s intrinsic advantages, such as its free flow of information and professional services, which act to foster technological deals with overseas service and product providers.
|Dongjiang’s green demonstration at ECO Expo Asia 2013|
Guangdong: a prime market
Geographically, Guangdong is the mainland province with the largest electricity consumption and wastewater discharge, as shown in the following two figures. This creates a number of opportunities for Hong Kong businesses, with Guangdong needing to source energy-saving technology as well as securing a means of tackling industrial water and air pollution. A number of other provinces, such as Jiangsu and Shandong, also consume high levels of electricity and have wastewater discharge issues, making them ideal targets for Hong Kong companies in the green technology sector.
|Guangdong is the mainland province with the largest electricity consumption and wastewater discharge.|
Source: China Statistical Yearbook
Grabio Greentech Corporation (Grabio), a Taiwanese company exhibiting at ECO Expo Asia 2013, said it was utilising Hong Kong’s platform as a way of targetting US and European clients. One of Grabio’s major products is a state-of-the-art compostable and biodegradable starch plastic material, which can be used to make shopping bags, rubbish bags and seedling pots that comply with the relevant green requirements in the US, Japan, Germany, Belgium, and several other territories. The company is also targeting export manufacturers in China, whose overseas clients are increasingly requiring that their China-sourced merchandise comes in eco-friendly packaging. According to Grabio, though, domestic mainland demand on green packaging materials remains weak as consumers are still less conscious of environmental issues and unwilling to pay a premium for green plastic bags for the time being.
|Grabio shows its compostable starch plastic materials at ECO Expo Asia 2013|
Trade facilitation measures in place
The aforementioned green targets, established under the 12th Five-year Plan, are aimed at conserving energy and resources, while reducing the emission of pollutants. By 2015, the programme aims to have: (i) secured the reduction of COD emissions by 8%; (ii) secured the reduction of SO2 emissions by 8%; (iii) secured the reduction of ammonia nitrogen emissions by 10%; and (iv) secured the reduction of NOx emissions by 10%. According to government figures, an investment of Rmb3.4 trillion is needed for environmental protection projects in 2011-2015.
In early 2013, the government issued a notice outlining the development of a recycling economy strategy (循環經濟發展戰略及近期行動計劃的通知) This would see action plans introduced to accelerate the reuse and recycling of industrial materials and resources, while enhancing controls on any pollution stemming from industrial activities. In addition to import facilitation measures, the mainland has introduced a number of incentives aimed at encouraging businesses to source appropriate technology, equipment and key components from their overseas counterparts. These incentives cover such areas as electronics, software, solar and renewable energy technology/equipment, wastewater treatment and air pollution control equipment, as well as equipment for the recycling of waste electrical and electronics equipment.
Guangdong and a number of other provinces have established a special fund to help qualified enterprises import such technology through interest subsidies and fiscal support. The mainland government has also lowered customs tariffs on hundreds of related import items, including a number of technology products, materials, equipment and apparatus deemed important to the development of the environmental protection industry.
Hong Kong: an effective platform for targetting the mainland market
When it comes to developing the mainland market for environmental products and services through technology transfer, overseas technology companies face considerable problems. Apart from finding suitable clients, their biggest headache comes with the potential for infringement of intellectual property rights. Additionally, they may not be able to immediately apply their technologies directly as, very often, these technologies have to be modified or refined in order to meet the mainland’s particular needs. Technology transfer also requires suitable financing arrangements to be put in place if the financial requirements of both parties are to be met.
Hong Kong is well-placed to provide a platform for technological co-operation between overseas environmental enterprises and mainland clients. It has the ideal business environment for facilitating technology transfer, with its excellent protection of intellectual property rights, comprehensive professional services and free flow of information. Hong Kong, situated close to the mainland and, especially, the PRD region, also offers a geographical advantage when it comes to meeting the country’s demands. Hong Kong also has a number of other advantages when it comes to serving as a platform for environmental technology transfer. These include:
|–||Wealth of experience in technology co-operation||Hong Kong companies are adept at introducing advanced technologies from Europe, the US, Japan, Korea, and providing cost-effective solutions for competing in the mainland market.|
|–||Well-versed in mainland environmental standards||Some of China’s environmental standards are more stringent than those of other countries. Hong Kong companies have accumulated expertise in modifying and upgrading overseas technologies in order to meet mainland market needs.|
|–||Excellent protection of intellectual property rights||Hong Kong has a sound legal system and is well-regarded for its excellent protection of intellectual property rights, a fact that is highly conducive when it comes to technology transfer and licensing the business of overseas firms.|
|–||Using Hong Kong services for financing||Hong Kong is one of Asia’s largest venture capital management centres with a strong focus on the mainland market. It can readily provide funds for any foreign investors embarking on environmental technology projects on the mainland.|
Coupled with the advantages provided to the city under the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA)1, Hong Kong companies are ideally placed to provide environmental services on the mainland. Hong Kong is, therefore, an ideal platform for overseas companies to access the mainland’s burgeoning green market.
1 For the details of the CEPA provision, please refer to HKTDC Research Report: “Environmental Protection Industry in Hong Kong”
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