China becoming a big green protectionist machine

China may be the biggest green technology and clean energy equipment market in the world. But don't expect the Chinese government to let any foreign companies get a foothold in the Middle Kingdom's nascent green tech sector.

That's the message we get from a thoroughly researched New York Times piece titled "China Builds High Wall to Guard Energy Industry," which quotes high placed executives from General Electric (GE), Siemens (SI), and other companies. My only question is -- are they really surprised this is happening? China has long sought to build stiff barriers to competition in areas it considers essential to its economic future, a model previously employed by Korea and Japan.To recap, the attitude of the Chinese government toward foreign companies seeking to access that market appears to be cavalier at best. After essentially forcing foreign companies to set up factories in China in order to comply with rules dictating that 70 percent of the production process for green energy equipment be located in the country, Chinese authorities are now using arcane technicalities to eliminate foreign companies from the bidding process. At the same time, Chinese competitors that have yet to build a factory or produce a product are winning multi-billion dollar contracts.

Ironically, China's government is at the same time calling on the European Union to relax restrictions on importation of advanced green technologies that the Chinese feel could be very helpful for development of the sector. In fact, the Times piece appears to directly contradict messages in the Chinese state-sponsored media. "For the Chinese part, Vice Premier Wang Qishan said, China will continue to send buying missions to Europe and encourage Chinese companies to increase procurement and imports from the continent as a concrete move to boost trade with the EU in the difficult times," wrote the China Daily on May 28, 2009.

Yet according to executives quoted in the Times piece, the protectionism is so blatant that some European and U.S. companies have simply stopped bidding on the contracts. That's not good news for the scores of U.S. and European green tech companies counting on the fast growing Chinese market as a key leg of business. If the global markets remain open to Chinese clean energy companies but China is closed to Western and Asian competitors, then the net growth prospects for a significant portion of the world's green tech sector is likely to be far less than perhaps analysts understand or acknowledge.

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