ETI's Trip Report to Beijing, Shanghai, Chengdu, Chongqing, and the People's Republic of China
BACKGROUND
From February 17 until March 2, Susan Simon from the Office of Environmental Technologies Industries traveled to the People’s Republic of China to research the market for U.S. environmental technologies and identify trade promotion opportunities that further U.S.-China cooperation on environmental protection.
KEY FINDINGS
US companies are often outmaneuvered by entrenched competition from European, Canadian, and Asian companies that proactively use soft loans, tied aid, training programs, and extended payment terms to cultivate long term relationships with decision-makers. US companies must compete with foreign governments’ largesse and willingness to invest in projects to promote their countries’ products and services.
The Germans are working with SEPA on a large hazardous waste treatment project in Zhejiang Province that involves setting up a market system, establishing laws and regulations, technical standards, fees, and a non-BOT hazardous waste treatment plant. SEPA would like to conduct a similar demonstration project with the United States.
The Danes provided a $12 M Danish interest-free 10-year loan for a wind power project.
The Dutch won the Chengdu wastewater treatment plant with a 40% grant.
Canada’s Prime Minister recently led a 75-member trade mission to China.
The Japanese won a contract for a power plant desulfurization project with a low interest loan, and for a $120 M BOT water supply plant with low interest and repayment over 25 years.
The Koreans provided a $15 M loan for Chengdu’s urban development.
Belgium, Holland, Germany, Norway, and France host training programs for plant directors and technicians.
Britain, France, Spain, Italy and Japan provided $4 M in grants for Phase I of the World Bank’s $400 M Chongqing Urban Development Project.
Phase II of the Chongqing project, valued at ~$500 M is funded with $200 M OECF funds (purportedly untied) from Japan. The OECF is also providing $100M in soft loan for industrial air pollution control and monitoring for each of three cities.
Key Chinese government entities are eager to identify US-Sino trade partnership opportunities and TDA “grantable” projects in environment, energy, and aviation safety. Ministries and government agencies with environmental responsibilities include China’s Ministry of Foreign Trade and Economic cooperation (MOFTEC), the State Planning and Development Commission (SDPC), the Ministry of Water Resources (MWR), the State Environmental Protection Administration (SEPA), and environmental protection bureaus (EPB’s) in Shanghai, Chengdu, and Chongqing.
TDA’s funding criteria has changed from 11 years ago when it operated in China. TDA’s feasibility studies now assess the technical, economic, and financial aspects to create a “lookable” document. Average grants are ~$350,000 but may go as high as $1 million. Besides feasibility study grants, TDA may fund technical assistance, orientation visits designed for a project specific delegation, technical conferences, and de minimis training grants. TDA identified several energy and aviation safety candidate projects for feasibility study and training grants. TDA will send a definitional mission to China in late March to identify water projects, and specifically, air pollution projects for the June 4-6 TDA/AEP Asia Regional Clean Air Conference in Hong Kong.
China’s environmental priorities will focus on flood prevention; the south to north water transfer project; western development; water and air pollution monitoring, surveillance, and control systems; water conservancy; pollution prevention; energy efficiency; supplying water and energy to villages; and solid and hazardous waste handling.
China continues to develop diversified power sources from natural gas, hydropower, and renewable energy sources in order to reduce its dependence on coal-based energy production and serve the 40 million people who live off-grid. Environment-related energy projects include coal liquefaction, landfill gas cleaning and mixing, gasification technology, developing clean energy sources, and building small hydropower stations for villages not on the power grid. The Ministry of Land Resources is interested in learning about US oil, gas, and coal production and consumption, and coal washing techniques. They cite prospects for potential trade opportunities in coal bed methane extraction.
The Shanghai Municipal Engineering Administration Bureau reorganized in January 2001 and no longer handles wastewater treatment. Several large infrastructure development plans are underway, including a deep-water port, and a $5B, 20-year highway and long-span bridge construction project to be tendered in April. The Bureau reorganized primarily to increase natural gas use and supply from 1 to 20% by transporting gas west to east, and electricity east to west.
Shanghai invests 3% of the city’s GDP into environmental projects. The city’s EBP is familiar with and benefited from TDA grants prior to 1989. The Director cited four possible TDA projects ranging from air pollution monitoring, sludge treatment and disposal, medical hazardous waste, and natural gas transfer from western China to Shanghai. They will submit proposals for TDA to consider. Below are some key findings regarding Shanghai City projects:
Shanghai launched an ambitious $6 billion, 3-year project for water pollution control, air pollution control, solid waste handling, urban greening, rehabilitation, and improvement for industrial areas.
The World Bank has a $1 billion loan for new projects including $200 million for sewage improvement, $100 for solid waste management, $200 million for traffic/mass transit development, and $200 million for a tunnel or bridge. They expect multi-channel financing.
The Shanghai Water Assets Bureau seeks a management partner for water supply and wastewater treatment projects. The Bureau may sell some of the equity in a water asset facility to a foreign investor, and plans to tender a bid for a $90 million JV opportunity to operate and manage a water supply facility. Additionally, the Bureau seeks wastewater and sewage treatment equipment, machinery, irrigation, and water supply, and wants to buy a complete, turnkey facility. They derive loans mostly from foreign direct investment and stock funds.
The Suzhou Creek Rehabilitation Project is directed by the Shanghai municipal government and receives World Bank and ADB funding. They urgently seek US help to treat, dredge, and clean up contaminated sediments along this 100 km-long river in order to restore fisheries and the ecological balance.
SH participated in and completed a technical plan for a joint vehicle maintenance and inspection project, with USEPA technical assistance.
The Sichuan Government is making pollution prevention, energy efficiency, and cleaner production high priorities in the environmental measures they take to develop western China. In Chengdu, capital of Sichuan Province and center for the western development push, many European companies have representative offices and well-established relationships with public and private decision makers. No US environmental firm has a representative office in Chengdu.
The Chengdu #2 wastewater treatment plant, valued at $48 million with a World Bank loan will open to international bidding. The project will be divided into two stages with final treatment capacity reaching 450,000 TPD. The Southwest Civil Engineering Research and Design Institute is expected to complete the feasibility study by the end of March. The bid for implementation will be tendered soon after so construction can begin by the end of 2001.
The World Bank’s Chongqing Urban Environmental Management Project, the largest in China, will tender a bid for the construction and procurement of Phase I, valued at $400 M. Although two US companies are on the short list, the French provided advice and technical design to the World Bank and Chongqing for the last four years and are perceived to have the inside advantage. Phase II, valued at ~$500 M, includes two wastewater treatment plants, 10 smaller treatment plants, and a solid waste and recycling facility.
The World Bank plans a conference on Urban Environmental Issues in Shanghai and another on Air Pollution Control for Western China. The World Bank is also funding projects on coal conversion, and mobile sources air pollution in Beijing.
Several US companies are making inroads into China’s environmental market through highly desirable technology and products, strategic project development, and astute yet responsive financing mechanisms. Illinois, Michigan, California, New Jersey, and Washington states and even cities such as Denver now have representative offices in China.
The focus for smaller US design and engineering companies is shifting from working with multinationals, which do a good job of environmental self-policing, to working with the state owned enterprises (SOE’s). Although SEPA’s influence varies, heavy-polluting SOEs face stiffer enforcement and possible closure for non-compliance. Increased public outcry for a cleaner environment seems to be one of the influences.
For more information about the U.S. Department of Commerce’s Office of Environmental Technologies Industries (ETI), the Environment Subgroup under the bilateral U.S.-China Joint Commission for Commerce and Trade (JCCT), or to be added to Ms. Simon’s mailing list for events and trade notifications, please contact ETI’s Susan Simon at: Susan.Simon@mail.doc.gov
