Opportunity beckons amidst China’s smog problem

Updated: Monday December 30, 2013 MYT 11:07:14 AM

Opportunity beckons amidst China’s smog problem

SHANGHAI: As China’s smog levels crept past record highs in early December, the phone lines at pollution-busting kit maker Broad Group lit up with Chinese customers worried about hazardous pollution levels that have gripped China this year.China’s government is struggling to meet pollution reduction targets and has pledged to spend over 3 trillion yuan (US$494bil) to tackle the problem, creating a growing market for companies that can help boost energy efficiency and lower emissions.

“Recently, we haven’t been able to make products fast enough to keep up with demand,” said Hu Jie, a general manager at Broad Group, which makes pollution-related products ranging from hand-held monitors to eco-friendly buildings.

Sales roughly doubled this year from 2012, Hu said, without giving details.

Pollution problems in China, the world’s second-biggest economy, are by no means new. But heightened public anger – and a growing political will to deal with the issue – has created opportunities for firms with sustainable know-how to earn a slice of China’s clean-technology market, which is set to triple to US$555bil by 2020, according to the US Department of Commerce.

Companies like US clean-energy expert Fuel Tech Inc, design engineer WS Atkins Plc and others have seized the opening by boosting staff numbers and clinching contracts.

“China has reached a saturation level which people can no longer tolerate,” saidFeng An, president and executive director of the US-China Clean Tech Center, which takes US clean technology companies to China to meet potential partners.

“Five years ago, people could pollute and get away with it. Now they can’t. This year you can really see the difference.”

THE COST OF SMOG

Pollution cost China’s economy at least 1.1 trillion yuan (US$181bil) in 2010, the environment ministry estimated this year – equal to 2.5% of GDP that year. Pollution has been tied to “cancer villages” and reduced life-expectancy.

Smog even closed down the major northern city of Harbin in October.

Acknowledging public anxiety over the issue, Premier Li Keqiang said in March that China should not sacrifice the environment to pursue economic growth, giving a boost to “green” companies.

US environmental engineering company LP Amina, which helps coal power plants reduce emissions by retrofitting burners to make them more efficient, saw its China sales double this year, said the firm’s marketing manager Jamyan Dudka, without providing specific figures.

Coal accounts for more than two-thirds of China’s primary energy consumption.

China is pushing to reduce nitrogen oxide (NOx) pollutants from power plant emissions and offering subsidies to get firms on board. The cost of retrofitting all China’s power plants over a five-year period is around US$11bil, said Dudka.

US-listed Fuel Tech, which also focuses in this area, sees China at the forefront of its business development plans, and has increased its China-based staff to more than 30 people, CEO Doug Bailey said on an analyst call last month.

GREEN BUILDING

Companies such as UK-listed Atkins and Australian developer Lend Lease Corp Ltdare also leveraging their global expertise in sustainable construction.

Atkins is working with local governments to develop sustainable construction guidelines and will partner with two Chinese cities to put them into action. China’s contribution to the company’s £88mil (US$144.6mil) in Asia-Pacific revenues increased to 40% this year, it said.

The region accounts for around 5% of global sales.

“Unlike Europe and the Americas, which have already been built out, there’s still a huge amount of development going on in China,” said Beijing-based Atkins associateMark Hewlett.

Around 300 million Chinese are expected to move from rural to urban areas over the coming decade as the government pushes ahead with an urbanisation drive to lift domestic consumption.

Vishnu Amble, Amsterdam-based principal at private equity firm Global Cleantech Capital, said the positive trends had drawn fund managers back to China’s clean-tech market, focusing on energy efficiency, lighting, waste treatment and water.

“People have been following China’s clean-tech market lightly the past year or so,” said Amble, whose firm manages around US$200 million in assets and has up to a fifth of its 2014 deal pipeline set to come from China.

“Now they’re really diving in” – Reuters.