German engagement in the Chinese environmental market has a long tradition and is still developing due to growing demand and pressure.

This pressure comes from a growing amount of waste, untreated sewage water, and increasing carbon dioxide (CO2) and sulfur dioxide (SO2) emissions.

The Chinese government is increasingly aware of the environmental problem: The 11th Five-Year Plan (2006-10) proposed the expenditure for environmental protection be doubled, compared with the last five-year period, and amount to 140 billion euros (US$176 billion). It also proposed that 55 percent of this amount should be shouldered by private investors.

Opportunities for foreign investors with high-end technologies arise mainly due to shifts in environmental policies looking at optimizing the environment.

Efficient, clean energy

Energy shortages and high pressure on the environment and climate in China create the need for a rational use of clean energy.

German companies are important suppliers of clean coal technology and renewable energy technology.

Since the regulation was declared that all coal-fired power projects with a capacity of over 300 megawatts need to have a flue gas desulflurization facility, German companies conquered a market share of nearly 50 percent of this exploding market.

Their main approach in this field is to give licenses for production to their Chinese partners.

With the rising demand for energy, the importance given to renewable energy is reflected by China's renewable energy law, which came into force in January 2006.

In the wind and solar energy sector, many foreign companies have been in the Chinese market for a couple of years: with 82 percent of all applied turbines originating from foreign companies like the German firms NORDEX, RE Power, and Vestas. More and more foreign enterprises are active in the Chinese market, due to the increasing market demand.

As a Sino-German business-to-business event in November 2005 showed, not only local investors but also big Chinese investors such as Guodian and Huaneng are keen on cooperating with foreign developers, as the local expertise of planning and engineering wind parks is still limited.

A further step in the engagement of German companies is the project for five offshore wind energy systems, which was signed during the second Sino-German Environmental Forum between the German company RE Power and the municipal government of Qingdao in East China's Shandong Province, early this year.

In the bio-gas segment there are not yet very many foreign companies. But intensified reforms in State-owned firms and the renewable energy law have resulted in growing interest in investment in this field.

The Ministry of Agriculture has selected anaerobic digestion technology as a key technology to reduce environmental pollution, as well as rural energy generation. Until 2010, 600-700 big-scaled bio-gas plants shall be built annually.

Techniques such as dry-fermentation systems and equipment components, stirring devices and simple desulfurization units are important for technical cooperation between China and Germany.

This is reflected by the agreements on two bio-gas-projects that were also signed during the second Sino-German Environmental Forum.

In addition, standards and pilot projects by the Chinese government are stimulating the energy efficiency market.

The introduction of the heating reform represented a shift to consumption-oriented pricing systems- until then the payment depended on square meters.

In Anting, a town in Shanghai, German engineers developed an energy concept, that will offer beside central heating and cooling the input of modern building materials and isolation material for windows.

And in framework of the planned eco-building exhibition, based on a joint initiative of the sister cities Hamburg and Shanghai, several Chinese developers have committed to becoming involved on the basis of energy efficiency concepts.

Besides such demonstration projects, standards for buildings and the following monitoring systems are partly enhanced in China, which speeds up the demand for modern building materials.

One important reason for the high energy intensity of China is the high specific energy consumption in the industry.

Since the 1990s, the Chinese government has increased its efforts to increase the energy efficiency in the country. It has introduced mandatory, voluntary energy efficiency standards, pilot projects on load management in Beijing and Jiangsu, voluntary agreements for the improvement of specific energy intensity in the steel industry in Shandong and many international programs to strengthen local energy service market.

According to the 11th Five-Year Plan, the energy consumption over gross domestic product shall be reduced by 20 percent until 2010, compared to the consumption level in 2005.

Circular economy approach

In 2004, Germany and China began cooperation in this field: The Deutsche Gesellschaft fr Technische Zusammenarbeit, or German Agency for Technical Cooperation (GTZ), has elaborated in Guiyang, where the municipality launched a regulation for the promotion of a circular economy (first in China), a master plan for different projects like waste sorting, treatment of hospital waste and the conversion of sewage sludge into fuel for cement plants.

And in the same year, a memorandum of understanding was signed between the Fujian provincial government and Rheinland-Pfalz, in which four projects of circular economy were decided upon.

German solutions and technologies have a solid reputation with respect to quality and adaptability in China.

Increasing business opportunities are resulting from government plans to reduce the rate of landfill disposal from 90 percent to 55 percent.

Cities like Beijing, Shanghai and Guangzhou have started to invest in composting and incineration facilities, which means abundant opportunities for German companies, experts believe.

The future development of waste treatment depends mainly on the financing channels. And for making recycling plants economically viable, the waste collection and sorting has to be organized systematically.

Water supply, treatment

Two-thirds of China's registered 660 cities suffer from water shortage, mainly in North China; for the past four years the water resources diminished by 15 percent.

The water shortage is also aggravated by low efficiency in consumption.

According to the 11th Five-Year Plan, the Chinese government plans to invest around 300 billion yuan (US$37.5 billion) in the water supply and sewage treatment sector.

But only 20-30 percent will be financed by the central government, 70-80 percent need to be financed by the local governments and the private sector.

German engagement covers a wide variety of functions, from consulting, planning and supply of facilities or components, to the complete construction and operation of plants.

Many build, operate and transfer (BOTs) projects have and continue to be run under German management.

The engagement of German companies is facilitated by Sino-German comprehensive technical and financial cooperation, and by German foreign trade and investment promotion.

For instance, the German Chamber of Commerce in Beijing, Shanghai and Guangzhou, organize roundtables, forums and business-to-business events.

(China Daily May 22, 2006)