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This is the second in the 2012 series  of  Cooketop News commentaries and news recaps.

By reviewing the previous week’s top stories involving — broadly speaking —  U.S./China clean energy, the commentary section isolates one trend/dynamic which points forward and can help illuminate news-in-the-making for the week(s) ahead.  Following the commentary is a summary of the week’s top stories.

This week? We look at the headline  (Cooketop News, Friday, January 13th) that, after four years, the U.S. re-took the lead from China as the front-runner in global clean energy investment.

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From 2008-10, the U.S. visibly lost pace – and, in some instances, lead position – to China as the world’s top investor in clean energy.  In 2010, China – then just over one-third the size of the U.S. economy – invested twice the absolute amount in clean energy as the U.S.  Yet, in 2011, the U.S. bounced back, reclaiming top-spot for the first time in four years:  U.S. investment increased 33% to US$56 billion while Chinese investment remained flat at $47 billion, according to Bloomberg New Energy Finance.  What does it mean? Less than the headlines might suggest.

Here are three key points to keep in mind while tracking current results – and handicapping future results – in the global clean energy arena:

(1) It’s not a sprint, it’s a marathon.  The bragging-rights prize will ultimately go to the economy which manages the best combination of technological innovation, political support, and financial sustainability over many years.  Germany and Spain have seen political support for their heavily subsidized systems erode with the euro.  The U.S. is in near political grid-lock over how to set that balance.  China’s position looks strong on the surface but is hobbled by lack of technology innovation, political accountability and financial transparency.

(2) How high’s the bounce?  The U.S. resurgence is due to short-term programs due to expire soon, such as biofuel support programs and energy efficiency measures.  Absent a broad national consensus, there is no strong reason to expect the U.S. “bounce” to remain strong throughout 2012, an election year.

(3) The bottom-line is this is a race is against time, not a Sputnik-type competition.  For either nation’s efforts to pay off, investment will need to be scaled to a global level by investors, public and private.  That won’t happen unless there is a clear middle-way between the extremes which tend to bedevil U.S.-China relations – zero-sum, highly-nationalistic competition on the one hand vs. unrealistic and unsustainable ideas of cooperation on the other.

While the metric of renewed investment vigor in the U.S. is encouraging, the real challenge for the future will be to define and align complementary ‘skill-sets’ in both the U.S. and China so that capital can be attracted and deployed on a global scale through these two massive markets accounting for 40% of the global GHG emissions problem.  We’ll need a discerning eye for the different strengths which our two countries can bring as complementary partners in this effort as well as a realistic understanding of our enduringly different systems and values.   Regardless of who has the momentary lead in investment level, we need to recognize that there is no path to a sustainable future for either country without  clear-eyed, realistically-based and sustained cooperation between the two.

                                              Monday, January 9, 2012

Africa & China: How it all Began

China to Tax Carbon Emissions by 2015

China Vows Backing for Firms Abroad

China Spring Festival Migration Begins

Tuesday, January 10, 2012

Hottest Solar Markets in Early 2012

12 Challenges for China in 2012

China’s Reform Irresolutions

DoE Heads Off Cleantech Materials Shortages

Wednesday, January 12, 2012

China’s Export Engine Downshifts

China Pumps In $10bn to Water Project

The Case Against Big Dams

Brand Make-Over for Philly Energy Hub

Thursday, January 12, 2012

Does the U.S. Prefer a Ma Victory in Taiwan?

The Perils of Cleantech Investing

China’s Cyber Deterrence

China Braces for Turbulent Year

                                            Friday, January 13, 2011

China’s Forex Reserves Decline

China Cedes Lead to U.S. in Cleantech Investment

China Idling New Aluminum Smelting Capacity

Dominique Doms of the International Trade Examiner shared the following observations on the recent clumsy steps in the pas-de-deux between the U.S. and China on climate change and clean energy policy coordination.  These missteps are beginning to follow a regular rhythym.  Last November, the COP15 in Denmark stumbled into acrimony when the Chinese negotiating team responded to Obama’s open hand with a pointed finger and the meeting broke up without a global framework deal to support cap-and-trade.  The approach to this November’s COP16 meeting in Mexico is already looking wobbly in light of two issues:

  1. The filing on September 9, 2010 of a trade action by the United Steelworkers against China for unfair subsidization of its renewable energy exports.  (Bearing in mind the ringside seat perspective I had on the U.S.-Japan auto trade dispute in the early 1990s, I see this move by U.S. labor on the global chessboard as natural and expected but hardly commendable.  At best, it will serve as a palliative and not a remedy).
  2. The clumsy steps China took to embargo strategic minerals essential for the manufacture of many clean energy products without official explanation.

Whatever happens in Mexico, the dance will have to go on.  As Bloomberg New Energy Finance has pointed out, the U.S. and China are effectively “joined at the hip” as a de-facto G2 burdened with the responsibility of maintaining global environmental and economic sustainability.

The ultimate remedy will be for U.S. policymakers to look into the mirror and understand that the real issue is not an either/or issue of cooperation v. competition with China, though both are inescapable facts of the matter.   The ultimate challenge is for us to realistically assess what we have and have not done to move our country into the future.  We can compare ourselves with  China but that comparison must be based on a realistic assessment of how our national systems are different and on different pathways we will need to follow to move our country forward.  Just like with Sputnik, our goal should not be to hold China’s clean energy development back, it should be to marshall our resources to move our country’s clean energy development forward.  In the final analysis, the U.S. and China will need to be partners in this global effort but that global partnership — in order to be effective — must be based on maximum effort by each of the partners as well as on a respectful and realistic understanding of the strengths and weaknesses of each partners system.  tc

Beginning of Dominique Doms comment:

“Clean and renewable energy production has become a new dispute between the US and China and centers around Chinese subsidies that unfairly give an advantage to local companies and price US producers out of the market.  Stephen Chu, US Energy Secretary, told the international press that the US government welcomes Chinese green companies but that there has to be a level playing field for US companies as well.

At the center of the dispute are large subsidies to Chinese manufacturers of solar panels and wind turbines that allow them to gain an unfair and competitive advantage over US companies that are not entitled to the same government stimulus.  The US is requesting from China, through the World Trade Organization, that US companies that manufacture green energy components have access to the same stimulus funds as their Chinese owned counterparts.  It is expected that China will ultimately reach an agreement with the US as both countries believe that government subsidies are a key factor in the development and manufacturing of green and renewable energy sources.

The goal of both countries is to further reduce carbon emissions to halt global warming by lowering global pollution.  China holds an advantage over the US as the largest manufacturer of solar panels. The edge in the global market with a very high demand for renewable energy sources is the direct result of China’s near monopoly of the rare earth minerals market.

China controls 93% of the RE market both in raw materials as well as its alloys that are used in solar panel reflection mirrors.  The US has reopened some of its RE mines again after having been absent in the market for 20 years. That alone may not be sufficient to close the competitive gap with China but subsidies to American producers may result in a better pricing balance.

Discussions between Mr. Chu and his Chinese counterparts have been ongoing since the opening of the US-China Clean Energy Research Center last week.

The center is the largest research center of its kind where scientists from both countries will jointly develop green and renewable technologies.  A permanent agreement may be reached prior to the COP-16 meeting to be held in Mexico from November 29 through December 10.”

(end of Dominique Doms comment)

I wrote around to some contacts yesterday including a link to this article by Thomas M. Hout and Pankaj Ghemawat in the current issue of Harvard Business Review. 

China vs the World: Whose Technology Is It? – Harvard Business Review

Emon Wang, a partner at Spirea Capital, wrote back with some insight of his own:

“Interesting and impressive… maybe the best English article on this topic I read this year.

However, as a native Chinese who works in cross-border deals in cleantech from Europe I`d like to add some words:

– The relationship between Beijing and local governments are very complicated and subtle. For foreign players, knowing how to play with both side is critical. Tip for beginners: it`s practical to make friend first with local governments.

– Instead of complaining, in order to maintain competitive power, foreigners might spend more time and money on R&D at home, to ensure a leading position and be one step head of China and other emerging powers. Without continuous innovation, being caught up on is only a matter of time. VW shared its technology with China for so many years and is still the No.1 seller in the country, a hell of money they have made and I don`t think they lose any of their core technology strength. IMHO, if your stuff can be easily copied, then it makes theoretically no sense to over-protect it and increase the cost of simple technology artificially.

– What China lacks is exactly the ground of technology innovation and R&D competence. Not the available technology itself. Consider the growing number of high-educated Chinese both domestically and oversea, the next generation needs the infrastructure. The government is now building this up.

– Technology in exchange for market is a fair trade. No one is forced to share his technology (take Google for example, you can quit if you want). On the micro level it`s about greed. On the political level it`s about p/l and jobs at these multinational corporations. And it`s about negotiation. If you did your homework badly and made too many enemies, you can`t expect a good deal.

– All in all, if you really understand the Chinese history, you will understand why own technology competence is so important in the culture. It`s not about taking profit from the foreign corporation or about a technology war whatsoever.”

Tim Giesecke, author of the forthcoming EcoCommerce 101, made the following comment and asked for some clarification from me on Emon’s last paragraph.

Tim’s comment:  “Perhaps the timeline is the most telling – China becomes the #1 economy in 500 AD – looses the title in 1850AD – poised to regain it soon. We Americans will need to recognize asap that we can sit and be entertained, but not all the time.”

Tim’s question:  “If you can help me tie the ends of the last paragraph – technology competence is so important in the culture…is it to prevent themselves of becoming vulnerable to market forces, negoiations?”

My attempt at clarification:  “There’s a tactical level that has to do with negotiations (Sun Tzu’s Art of War and all that) but it is mostly a culturally-patterned value deeply embedded in Chinese (read ’embedded in the Han majority’ comprising 95% of the Chinese population) as a result of centuries of real and perceived humiliation on the global stage after centuries of preeminence. They don’t want to ever go back to that historical place of weakness and technology is their ladder out.”

28 Nov mterrycooke Terry Cooke

As Chinese state-owned enterprises make a splash overseas, they sometimes cause a flood of red ink back homehttp://lnkd.in/feVYa5

28 Nov mterrycooke Terry Cooke

Global Cleantech Investment? EU Falling from Peak, US in Valley, China Scaling Heightshttp://tiny.ly/Ud8e

27 Nov mterrycooke Terry Cooke

U.S.-China clean energy coop kicked off with high expectations. What have the ups and downs been? http://bit.ly/fAvWVF

27 Nov mterrycooke Terry Cooke

China’s support of North Korea grounded in centuries of conflicthttp://bit.ly/gJq5GN #cnn

26 Nov mterrycooke Terry Cooke

PE in China (as % of GDP) only 0.27 % versus 0.61 % in India, 1.42 % in US and 1.06 % in the UK. So says Carlylehttp://bit.ly/gaI8ZD

26 Nov mterrycooke Terry Cooke

Time to rethink your idea of first contacts between Asia, the Americas and Europe. Genes tell a story. time.com/time/world/art…via @TIME

26 Nov mterrycooke Terry Cooke

Beijing Consensus? The Japan Model 2.0? Mother of the Four Dragons? Bretton Woods freeloader? Who knows? http://bit.ly/h699lZ

24 Nov mterrycooke Terry Cooke

Which US states benefit most from solar power? – No surprise – sunny states not in the NE. Photovoltaics World electroiq.com/index/display/…

24 Nov mterrycooke Terry Cooke

US & China collaborate on low-energy buildings – US-China CERC at LBNL shares focus on bldg efficiency w Philly GPIC ecoseed.org/en/energy-effi…

24 Nov mterrycooke Terry Cooke

Where better than Philly for surveying the vicissitudes of centuries of East/West yin/yang? Niall Ferguson reprise: http://bit.ly/gcgWIz

23 Nov mterrycooke Terry Cooke

GoogleHistory view of the East/West Great Game of Centuries – Niall Ferguson at WSJ.comIn China’s Orbit http://on.wsj.com/aXRGgb

23 Nov mterrycooke Terry Cooke

For you battery geeks out there: Energy Storage Crucial Step for Renewable Electricity – electroiq.com/index/display/… via @AddThis

23 Nov mterrycooke Terry Cooke

Will China grow old before it grows rich? Today’s 10 workers supporting each senior citizen set to fall to only ‘2.5 workers per’ by 2050.

23 Nov mterrycooke Terry Cooke

GPIC Innovation Hub for Bldg Efficiency now on Twitter, FB & RSS. Go to www.gpichub.org

22 Nov mterrycooke Terry Cooke

SlideShare upload on Cleantech & Clean Energy in Greater China (from Going Global Asia, Temple Univ SBDC, 11-5-10) http://slidesha.re/aCbFCv

8 Nov mterrycooke Terry Cooke

Insider insight on Greater Philadelphia Innovation Cluster as energy efficiency breakthrough — http://blog.mcclureco.com/?p=593

29 Sep mterrycooke Terry Cooke

Knowledge@Wharton on IT merging of computer compatriots “Ch-iwan” http://bit.ly/8YqUFy

2 Sep mterrycooke Terry Cooke

18 months after reset of US-China climate change cooperation, the two need to get in step on the global dancefloor http://bit.ly/b3hIso

1 Sep mterrycooke Terry Cooke

Philly houses US research hub for energy efficient bldgs. Buildings now consume 40% of energy consumed in U.Shttp://lnkd.in/K3-STW

31 Aug mterrycooke Terry Cooke

The Philadelphia region snagged a $122 million Energy Innovation Hub grant yesterday: Here are a couple of reasons http://lnkd.in/ST5WQt

26 Aug mterrycooke Terry Cooke

PlanetShifter Networks’ Interview on China, Pollution and the 11th Five Year Plan at http://www.planetshifter.com/node/1580

21 May mterrycooke Terry Cooke

Radio interview on significance of increased Chinese voting share at World Bank – Listen at http://terrycooke.com/videolinks.aspx

26 Apr mterrycooke Terry Cooke

Investment, Technology & Policy Trends in China’s Cleantech Market – PPS from NY Cleantech Investor Forum 2010http://slidesha.re/bTJzZF

25 Apr mterrycooke Terry Cooke

Hope to see you at the New York Cleantech Investment Forum 2010. Will be talking on China cleantech market. http://bit.ly/cXNvGf

15 Apr mterrycooke Terry Cooke

Philly to host May conference eyeing link betw environmental & economic unsustainability in U.S./China relations –http://bit.ly/aNcria

14 Apr mterrycooke Terry Cooke

The U.S. & China have two left feet in the dance of global sustainability. Let’s put our best foot forward.  http://bit.ly/aB82BV

6 Apr mterrycooke Terry Cooke

PRC’s RMB. Common sense over passion. Multilateralism over bilateralismhttp://bit.ly/aIRPn9

5 Apr mterrycooke Terry Cooke

China: from Sandstorms to a Low-carbon Economy: http://bit.ly/ceuos2 via @addthis

4 Apr mterrycooke Terry Cooke

Backfilling, here’s link to my earlier February newsletter on US-China clean energy — also policy, investment & tech http://bit.ly/a393id

1 Apr mterrycooke Terry Cooke

My March newsletter on U.S.-China clean energy issues — policy, investment, technology. Pls see http://bit.ly/cMp1Yk .

1 Apr mterrycooke Terry Cooke

If you read just one article about China this week, make sure it’s this one — http://bit.ly/acqESd

30 Mar mterrycooke Terry Cooke

A take on U.S. & China fm astute Time Mag piece on 21st c. trends: Not G2, not ‘Chimerica’ but worth reading at @timehttp://bit.ly/bLhGTC

13 Mar mterrycooke Terry Cooke

Follow US & China sustainability challenges — environ & econ — at Facebook Group U.S., China & Sustainability: Forum for Global Citizens

7 Mar mterrycooke Terry Cooke

Here’s what I’m up to in WashDC heat & humidity this summer – Cooke’s WWICS Project: http://bit.ly/cT4d3n

 
Bill Taylor of the "US Policy on China and the Rest of the World" Group has asked:  "Can China Feed Itself?"
 
It depends.
 
More specifically, it depends on the sustainability of a delicate balancing act which Beijing is performing with major  social forces.
 

The underlying tectonics in China are, naturally enough, all interdependent:

o    As a matter of state policy, China is committed to moving 15 million people per year from rural locations to cities
=> This rate of human relocation requires 8% economic growth for the central, provincial and municipal governments to sustain, hence the talisman-like status of 8% growth in Chinese economic plans and reports
=> On the positive side of this massive (and planned) demographic shift of population from the countryside to cities is potential environmental benefit since urban habitation is, per capita, a lighter load on the environment than rural habitation
=> On the negative side is the potential drag on perceived ‘agricultural security’ and ‘agricultural self-sufficiency’ in China unless the fact of fewer farmers year by year is consistently offset by increasing agricultural efficiency per hectare year by year
=> The imperative to achieve increasing annual agricultural efficiency helps explain China’s fervent embrace of agricultural biotechnology. On the flipside, this imperative is seriously undermined by patterns of municipal corruption in the expropriation and development of former farmlands.

In the background of all these interrelated trendlines is the ticking sound of China’s extreme demographics. As a result of China’s ‘one-child’ social engineering, China will soon (withinn decades) be at the extreme end of the global spectrum of age-imbalance with a narrow base of young people trying to support a top-heavy number of old people.

The key question is obviously will the government have managed to have delivered enough of a virtuous cycle of economic/enivonmental benefit for it to be sustained even when the demographic ‘graying’ starts serious downward pull on this house of cards.

Lost in all this is what individual citizens, with changing life-horizons and expectations, think of these state-managed forces affecting their lives. More important is what they will do if enough of them feel the same way. Social stresses on the one-year anniversary of the Sichuan earthquake don’t inspire confidence that the CCP will be well-equipped for this wild card in the deck.

No wonder the Zhongnanhai leadership shows some nervousness about the growing influence of China’s ‘netizens.’

Ernst & Young’s  list of 7 global mega-trends (see previous blog entry below) is incisive. What’s more important is what the 7 show about 1 mega-mega-trend.

  •  E&Y’s shift of power from East to West => particularly, the rise of China (& India) among emerging markets
  • E&Y’s changing financial landscape => structural imbalances in global liquidity and currency exchange rates
  • E&Y’s overhaul of regulatory environment + rising economic importance of resources & commodities => climate change

Compellingly, China is at the epicenter of all three of these global tectonics.  China is simultaneously the world’s fastest growing economy, its greatest holder of foreign exchange surpluses, and its largest carbon-emitter . More compellingly, these three surface-facts of today’s world straddle a common fault-line:   a quarter century of rapid industrialization in China to produce manufactured goods primarily  for export to Western markets. Over this period, exchange rates have been controlled in China to maximize exports and export production has been further maximized by rapid depletion of environmental inputs to promote economic output (ie, without sufficient regard to what Thomas Friedman calls "marking to Mother Nature’).  In other words, a quarter-century of globalization in China has been discontinuous — accelerating the global movement of goods but but accompanied by restrictions in  the global movement of capital (free movement of exchange rates, transparency of SWF sovereign wealth funds, etc) and  ideas (environmental stewardship, corporate governance, free press, etc).

 During the 1982-2008 period of rapidly expanding global trade, the ‘3 C’ stresses (China’s emergence, currency rigidities, climate change impacts)  could be   absorbed within the policy framework of the global system and conceptualized in separate and disconnected terms.  In 2009, during a period of negative growth in global output growth and and of even sharper negative growth in global trade, we need ‘smart policy’ for  framing the opportunities and challenges we face globally.  Business, also, can focus on the opportunities and challenges of its own ‘3 C’s":  China, capital (especially PE and other alternative investment vehicles) and cleantech.  For public policy and global business, the ‘3 C’s" will prove key to helping promote globalization in balanced and sustainable fashion. Without clear focus on the interrelated opportunities for transformational shift, we otherwise risk falling back on global finger-pointing during global recession. 

The key insight is how to frame the issue.  The E&Y list notwithstanding, these are not distinct mega-trends.  From the perspective of globalization, they are three facets of a single phenomenon.  Among E&Y’s 7 global mega-trends, the 3 C’s are the single mega-mega-trend for both policy makers and business.

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