European companies still have a stronger foothold in China's growing clean technology market than their American counterparts, according to Xiaomei Tan, China expert at the World Resources Institute (WRI).
"Based on our research, European companies definitely benefit from China's green technology market more than US companies," Tan said in an interview with EURACTIV.
"US companies realise this and they now try to catch up."
European companies' stronghold on the Chinese market is evident in wind energy technology, for instance, according to Tan. "Many Chinese wind turbine producers don't own key technologies – they all buy production licences from European companies," she said.
US companies are also failing to benefit from China's massive clean coal market, and especially supercritical (SC) and ultra-supercritical (USC) technologies, which make coal-fired power generation more efficient as Chinese companies mainly purchase the technology from Siemens, Mitsubishi and Toshiba, she added.
US Secretary of Energy Steven Chu is now trying to play catch-up with a US-China bilateral technology cooperation agreement, the researcher said. She singled out carbon capture and storage (CCS) and buildings efficiency as fields where the US is keen to tap into the big Chinese market. It is also eyeing a foothold in the Chinese nuclear power market, which has long been dominated by the French and the Japanese, she added.
China has in a very short period of time developed a huge clean technology market with a systematic strategy, Tan said. The government first identifies a clean technology that it reckons to be good for China and then provides direct R&D support to Chinese universities and companies, she explained.
This was the case for wind energy development, where a government technology transfer programme was set up in 1996 to create joint ventures with foreign investors to acquire technology, according to the researcher.
All the while local partners were given R&D support to develop their technology capacities, helping companies like Goldwind and Sinovel to become global leaders in manufacturing wind turbines, she said.
"In such a short time, China has quickly become a very important turbine manufacturer in the world. It really benefited from the government's front-end R&D support," Tan said, which was "directly [targeted at] those turbine manufacturers," Tan said.
Direct support is coupled with financial incentives for Chinese companies to buy Chinese-made technologies, the researcher said. The success of the take-up of SC/USC technology can be partly explained by government tax credits for plants buying the technology and mandates obliging new coal-fired plants to use it, she added.
China's approach offers the advantage that it provides investors with long-term certainty that the government will constantly support green technology development, Tan said.
"China's Five-Year Plan and Medium-to-Long-Term Science and Technology National Plan all have development of clean technology as a priority," she said. Instead, "US policy depends on the Congress, which every two years renews its solar or wind energy initiative," she said by means of comparison.
But accelerating technology transfer has hit the wall on the thorny issue of intellectual property rights. Tan attributed many of the problems to China's political and economic structure, in that many green technology developers are state-owned enterprises.
In the 1990s when the Chinese were first buying technologies like USC, purchases were made by a Chinese government agency, which then handed them on to several state-owned companies, Tan said.
"To Western business practice, that's just wrong because only one entity can buy a technology, the IPR and then use it; that's the Western practice. But in the Chinese practice, because the government owns this – it's like a father and your sons can naturally use it," she explained.
Such incidents have created distrust among Western technology owners, who are now less likely to go to China with cutting-edge technologies, she said. This will create problems for any future international technology transfer mechanism that might be set up under a global climate agreement, but Tan said that the market should remain the basic driver.
"However, considering that climate change is a common threat, national governments in developed countries should come up with incentive policies to encourage their multinational companies to invest in innovating clean technology and give out advanced clean technology at a faster pace," she said.
In developing countries, more effective policies to deploy existing clean technology will be needed, she added.