Green Intentions, Inventions, and Investment

China’s growing wealth and investment capacity has recently attracted the attention of Western companies and nations. The reveal that some Chinese merchants and villagers hold multibillion-dollar stakes in the Anbang Insurance Group, which owns the Waldorf Astoria in New York, seemed to rattle the Western company. Anbang’s acquisitions are representative of a greater outflow of money from China to the West that often has an aura of secrecy. Many of these investors uphold the use of secrecy to protect their privacy. However, this mystery also adds challenges to evaluating the financial wellbeing of Chinese buyers, creating suspicion among Western recipient companies and regulators. These large investments may fund part of China’s low-carbon transition but may also create mistrust among foreign companies and governments along the way.

Chinese state-funded investments have targeted tech inventions of Western companies to bring overseas technological capabilities to China. A recent New York Times article explains that China’s goal is to replace foreign technology leaders and provide a source of rejuvenating capital for “ailing” European businesses, like Sweden’s Volvo. However, Westerners complain that Chinese companies can dominate takeover bids for Western companies but Western companies often cannot do the same in China. In addition, Chinese companies have started to target Western companies with groundbreaking technologies and brand names. Some Westerners fear that Chinese investors will transfer the knowledge without maintaining the facilities

This strategy of acquiring technology, however, is not new in China. Chinese organizations have used Western technology for renewable energy development, specifically wind energy, since the mid-late 1990s. According to Joritt Gosens and Yonglong Lu, from 1985-2000, the Chinese government organized wind technology transfer programmes from the West, including the purchase of grid-connected turbines for government organizations to study. Before 1995, the majority of the turbines were donated or provided against soft loans by foreign governments. Under the “Ride the Wind” plan, two national teams were created as joint ventures with Western companies to train Chinese partners in turbine manufacture. The Chinese government also arranged for the transfer of property rights, and between 2000-2007, Chinese manufacturers began sourcing their own turbine designs in independently arranged licensing deals with foreign designers. Gosens and Lu state that it is difficult to determine how “truly domestic” supply is in China since many foreign manufacture facilities are still in the country.

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This purchasing of knowledge and skills highlights how technology can be a source of national pride and prestige, and how in the current tumultuous political and environmental climate, these acquisitions can create tensions. One reason for these tensions might be the loss of first-mover advantage by companies selling their technologies. First-mover advantage is when a company or inventor gains a competitive advantage through control of resources by being the first to create a new technology. With this advantage, first-movers can gain huge profits and a monopoly-like position in the market.

These concerns of Western countries play into the idea that China is a copy-cat, imitation country. However, this does not need to have a negative connotation. A main advantage for developing countries is their ability to to leapfrog through the polluting developmental stages faced by previous nations. Developing nations can harness lessons of past dirty economies and mobilize new technologies to avoid making the same poisonous mistakes. As long as copyright and intellectual property right laws are abided by, this sharing and adoption of knowledge should be encouraged and seen as a positive method to shorten the heavy emissions period of developing economies.

China’s recent ratification of the Paris agreement will mean more adoption of clean tech. During the 13th Five-Year Period, China aims to lower its carbon dioxide per unit of GDP and energy consumption per unit of GDP by 18% and 15% respectively. During this period China will also increase the share of non-fossil fuels in primary energy consumption. Shanxi Province, the country’s biggest coal-producing region, recently gave coal firms $142 million to shut down surplus capacity. In February, China promised to close 500 million tonnes of coal production in the next 3 to 5 years to lower the annual surplus. Henan Province similarly plans to give 2.18 billion yuan to coal and steel producers to cut down capacity and to help with layoffs. At the same time, delays in subsidies to renewable power generators have become a roadblock in the nation’s transition to a greener economy. Additionally, China can only afford to finance 15% of the $1 trillion required over the next five years for investments in energy efficient buildings, transportation, and energy.

A man searches for usable coal at a coal dump site in Changzhi
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In summary, these investments illustrate the massive amounts of capital needed for a transition to a low carbon economy and all the moving parts involved in such a shift. A recent report from the United Nations Environmental Program estimates $90 trillion in public and private finance over the next 15 years will be needed, with 2015 global GDP being $73 trillion. Imagine other developing countries attempting this transition without financial abilities like China’s, which still may not cover the costs. China’s wealth has grown rapidly, and the nation is putting its money where its mouth is to meet its ambitious goals. Skepticism and fear towards Chinese investments should be upgraded for positivity and support for a global tech transfer and climate finance scheme. To transition to a green global economy, it shouldn’t matter where the technologies come from; what matters is where they are going.

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