The San Francisco Chronicle recently ran an interview with Lenny Mendonca, the chairman of the Bay Area Council and a director of the San Francisco office of McKinsey & Co. Inc. The Bay Area Council (BAC) “represents 275 of the largest employers in the region.” “Green” tech and China consumed a large part of the interview.
Medonca first noted the Bay Area’s “very substantial dependence on connections to Asia and a growing Chinese economy” as a “saving grace” in the face of the current economic downturn. Although acknowledging that China could also be effected by a Western economic slump, he pointed out that “the bulk of Chinese growth is Chinese domestic growth. It’s hard to see how the Chinese economy won’t continue to grow and at a much faster rate than the U.S. or the Bay Area’s.”
The connection between the Bay Area and China with the most potential to benefit both economies, Mendonca said was in the area of “environmental technology.”
The opportunity to help solve some of the world’s substantial environmental and climate-related issues is a shared interest between the two countries and the two regions. And so there’s a fair amount of interest in trying to help bring creative, technology-oriented solutions to help ensure that China continues to grow, but does so in a productive way in terms of their use of energy and the carbon-intensity of that growth.
And that’s what I think is the most interesting intermediate and long-term connection. The Chinese economy needs to continue growing but they also need to do it in a way that uses less oil and has less carbon emitted as result. And the Bay Area, in particular, has technologies that could be very beneficial to the Chinese.
To facilitate the exchange between the two regions, the Bay Area Council is co-hosting an event in Shanghai and one in Beijing in November “to build the scientific and commercial connections between the regions” in the areas of clean tech and environmental technology. The Beijing event is “more oriented around government and education,” while the Shanghai event is “more oriented around business.” High-ranking California political officials and business leaders will be part of the BAC event delegation.
Both of these events are listed on this site’s new Events page. I’ll be a panelist at the Shanghai event, so I hope to see you there.
What does the tanking economy mean for the development of the US domestic cleantech industry? Mendoza notes that
Well, obviously there’s a tremendous amount of early stage and later stage capital going into green businesses these days.
Some of them will succeed and hopefully some of them will succeed really big because we need that technology to deal with climate change and other issues that work around energy. How they fund themselves, and what that market looks like, is really challenging right now. But good businesses - that have real, sustainable growth-creation potential - will be able to fund themselves in the long term.
This is really more of an equity and short-term risk problem than it is a fundamental shortage of capital.
What about the Chinese cleantech industry? So far so good. There are strong domestic players and there is still a tremendous amount of capital chasing the cleantech success stories of tomorrow. As Richard Stuebi, BP Fellow for Energy and Environmental Advancement at The Cleveland Foundation, noted in a recent piece on The Huffington Post (As Financial Markets Circle the Drain, What Happens to Clean Energy?) “many of the best opportunities for many U.S. players will lie in China.”
Ah China - the last refuge of the capitalist!
8 responses so far ↓
1 Kristjan Velbri // Oct 10, 2008 at 3:52 am
I think China is really good at this cleantech stuff. And they’ve got the biggest solar cell production facilities in the world, just after Germany (maybe they’ve even passed the Germans). I’ve looked into Chinese green companies and have decided to put my money into Suntech (NYSE:STP).
It has been heavily oversold over the past couple of weeks due to the financial crisis and right now is the best time to get in - while all the others are getting out. I’m betting long on long term growth and I don’t even care much if the stock falls down to $10. Hell no! I’d buy more of it.
2 Greg // Oct 10, 2008 at 3:52 pm
China is the last refuge of capitalism? I keep hearing that yet no one can give a satisfactory explanation as to how this is so. Anyways, the last refuge for financing appears to be private money.
3 cmcelwee // Oct 10, 2008 at 6:22 pm
Kristjan, Thanks for your comments. Good luck with the Suntech investment. As I inch my way down the soup kitchen line tonight, I can dream that I had a dime left to get some of that action. Of course, we can’t offer investment advice here at CELB, but if we could you wouldn’t want to listen to it anyway.
4 cmcelwee // Oct 10, 2008 at 6:47 pm
Thanks Greg. Let me try to explain my thought process. As I was finishing up this post I took a brief break to watch a video snippet of a recent American political rally and naturally Dr. Johnson’s quip that “patriotism is the last refuse of the scoundrel” came to mind. That lead me to construct the rather lame analogue that closes the post. I, of course, referred to capitalist, not capitalism. In any event, I certainly did not mean to suggest that capitalist are scoundrels; why some of my best friends are capitalist. As for China, its probably not the only refuse for the rentier class, Russia and Vietnam come instantly to mind as alternatives. As to your last point—the last refuge for financing appears to be private money—we are in complete agreement. But, at least in the China cleantech space, it was always private money that was the biggest player.
5 Greg // Oct 11, 2008 at 12:31 am
I probably did paraphrase “capitalist” for “capitalism” as I had a somewhat tense conversation with someone earlier in the evening who travels to China occasionally. So how does the capitalist find refuge in China? Granted the US is becoming more like France or Germany but that means we are becoming more like most of the world, including China.
6 cmcelwee // Oct 11, 2008 at 5:29 pm
I wasn’t using “refuge” in the sense of lack of regualtion. Although the regulations are freguently of a different nature in China than in many other places in the world (such as certain hurdles to getting your capital in and out of the country), it is not (at least for foreign capital), a laissez faire paradise. I probably should have said China offers the “best opportunity.” And, I should have made it clear I was referring to “cleantech” capitalist. Assuming that capitalists seek the highest returns, than at least in the short term, China offers the highest returns in the cleantech sector, if for no other reason than the fact that the Chinese government has created a demand for certain cleantech products through regualtion and KPIs for local officials that have not been created elsewhere in the world. Now if you want to know which sectors I would recommend, well that’s where the free lunch on this site ends. . .
7 Greg // Oct 12, 2008 at 12:56 am
You can’t just cut off the buffet cold turkey like that! Besides, water is my thing and that is China’s biggest problem. There are alot of ways to make electricity, but there is only one water in the known universe.
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8 cmcelwee // Oct 12, 2008 at 5:47 pm
I’m going to try to focus more on the cleantech sector here, so I’ll put water up first. It’s my favorite as well.
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