June 6, 2022

The Opportunities in China’s Commitment to CleanTech

Written by German Accelerator

China has long been cited as one of the world’s largest polluters, but any suggestion that China continues to pursue economic growth at the cost of the environment is very far from accurate. China also has the world’s largest renewable energy capacity and consumption and is investing as much as any nation worldwide in clean technologies, or ‘CleanTech’.

It has been estimated that more than US$2 trillion has already been invested in CleanTech in China. 70% of the world’s photovoltaic panels, 50% of the world’s electric cars (including nearly three-quarters of the world’s manufacturing capacity for lithium-ion battery cells used by them), and 33% of the world’s wind turbines are produced in China. Nearly a quarter of China’s total energy consumption is from renewable sources, and the government has committed to carbon neutrality by 2060. This would represent almost half of the global emissions from countries that have committed to net-zero targets.

 

A Huge Investment Needed… And Arriving

While the estimated US$2 trillion that China has already invested in CleanTech is an enormous sum, this pales in comparison to the investment needed to reach the country’s ambitious net-zero target over the coming decades.

A recent report from Goldman Sachs predicts that China will need to invest US$16 trillion in CleanTech infrastructure, creating a potential 40 million new jobs in the process and being a major driver of further economic growth. A research group at China’s prestigious Tsinghua University also came to a similar figure of investment needed (US$15 trillion) as it mapped out the steps China would need to take.

The major contributors to China’s emissions – and therefore the key focus for CleanTech investments – are energy production, industrial activity, and waste management. Between them, these have accounted for more than 80% of China’s greenhouse gas emissions. Beyond these, transportation, buildings, and agriculture also contribute and will attract investment in CleanTech solutions.

The opportunity is attracting the attention of venture capital (VC) investment, with the Asia-Pacific region reportedly seeing a surge in CleanTech-focused VC funds. Existing and new venture capital firms and funds have emerged specifically to invest in CleanTech firms that will support progress towards China’s ambitious goals, whether within China itself or internationally.

 

The Opportunity for German Companies

The opportunity for German companies in China’s drive to a net-zero future is significant, with a number of the government’s priority areas for emissions reduction aligning well with Germany’s expertise.

For example, of the overall US$16 trillion investment predicted, Goldman Sachs estimates that US$2.7 trillion of this will be focused on industrial processes – an area where Germany is recognized as a world leader.

Germany has also developed significant expertise and capabilities in renewable energy and environmental technology, including solar projects, wind farms, biogas plants, and wastewater treatment plants. All of these will be key to China’s plans to transform its energy production and environmental processes.

The strengths of German companies in these areas will be valuable to China’s ambitious plans to decarbonize its economy and become carbon neutral before 2060. In 2021, China launched the world’s largest carbon trading market. While the market is currently limited to energy companies, it’s set to expand its scope to include other polluting industries – such as steel, cement, chemicals, and aviation – in the near future. All of these sectors will require CleanTech innovations in order to reach their new carbon quotas. And as China ramps up hydrogen fuel cell technology for ships, drones, and commercial vehicles, they will need CleanTech solutions that help make it happen.

As China gradually reduces government subsidies for CleanTech, the renewable energy industry will become more market-driven rather than government-led. This is good news for German startups and SMEs since product quality will become a bigger competitive factor among domestic and foreign companies. Still, the Chinese market can be intimidating to enter due to the market share of domestic competitors and inconsistent levels of government transparency – this is why having a local partner is essential.

 

How German Accelerator Can Help

While China represents a significant CleanTech opportunity, it is also a complex market. German Accelerator’s China Offering is an ideal way for any German CleanTech company to make an informed decision about whether China is a market suited to their business or not.

German Accelerator’s China Offering includes two parts: a three-day China Essentials workshop and – for those companies applying and accepted – a subsequent eight-week China Market Discovery program.

The China Essentials workshop gives German CleanTech companies a chance to establish whether China represents a viable growth opportunity. The workshop covers political and economic essentials, opportunities and challenges for overseas startups, and insights on legal issues and intellectual property (IP) rights.

For those startups applying and accepted, the China Market Discovery program provides a deep dive into assessing their suitability and includes further workshops, mentoring, meetings with local businesses and potential partners, and a readiness report.

 

 

One German company which has benefitted from both the China Essentials Workshop and the China Market Discovery program is SIQENS, which has developed patented methanol-powered fuel cell technology. Having created a product that can play a central role alongside renewable energy in reducing emissions, the SIQENS team recognizes the opportunity China presents as a market.

 

 

Thomas Esser, Director of Sales and Investor Relations at SIQENS, expands on the value the company has gained from German Accelerator’s offerings: “The China Essentials workshops were a real shortcut to understanding the fundamentals of doing business in China and a great way to make connections with experts who understand the nuances of the market intimately. It saves a huge amount of time and resources. And the reports that were generated as part of the China Market Discovery program, for instance in relation to the most appropriate business model, competitors, and pricing strategy, were extremely high-quality – concise, insightful, and well-structured.”

 

 

Jonathan Kriegelstein, Product Manager at SIQENS, adds: “Our German Accelerator mentor has been invaluable. We really felt as though we’re accessing years of expertise and a network of connections that has been built up over a career working in China. The contacts and companies we’ve been introduced to, a number of chinwhich are likely to become partners, are ones that we’d have struggled to find ourselves. Overall the program has transformed the way we’re planning to enter the China market and given us the confidence we’re doing so in a way set up for success.”

Find out more about the China Essentials workshop and China Market Discovery program, including how to apply.