Hong Kong helps China’s goal of growing greener and leaner

By Matt Hu, InvestHK
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Rapid economic growth in China has taken its toll on the environment. In many areas, especially the Pearl River Delta (PRD) region, pollution, intensive energy use and resource depletion as a result of intensive manufacturing activity represent timely opportunities for green-tech companies to make carbon-smart investments and benefit from policy backing.

In its 12th Five Year Plan for 2010-2015, China identified challenges that threaten the continued development of its economy. The Opinion of the CPCCC on Establishing the 12th Five Year Plan, adopted on October 18 2010, and the Explanation of the Opinion authored by Wen Jiabao and presented to the Communist Party of China Central Committee (CPCCC) on October 15 2010, identified 10 factors that threaten economic development:

  • Resource constraints in energy and raw materials;
  • Mismatch in investment and imbalance in consumption;
  • Income disparity;
  • Weakness in capacity for domestic innovation;
  • Production structure is not rational – too much heavy industry, not enough service;
  • Agriculture foundation is thin and weak;
  • Urban/rural development is not coordinated;
  • Employment system is imbalanced;
  • Social contradictions are progressively more apparent; and
  • Obstacles to scientific development continue to exist and are difficult to remove.
Matt Hu Head of North China Investment Promotion InvestHK The Government of Hong Kong
Matt Hu
Head of North China Investment Promotion
InvestHK
The Government of Hong Kong

To address these factors, it was proposed that the 12th Five Year Plan focus on 10 areas, and ranked fifth on this list was to “promote energy saving and environmental protection”. The CPCCC heard that for every 1% increase in GDP, China’s energy use increases by 1% or more. If this rate continues, China will need to increase its energy consumption by 2.5 times to achieve its 2020 economic goal.

China recently reached a level where its per capita GDP equals US$4,000. Its goal is to achieve a US$10,000 per capita GDP by 2020. To meet this end, seven priority industries have been identified with the aim of increasing their total GDP contributions from 2% of GDP to 8% by 2015. Three of these industries belong to the green sector – energy savings and environmental protection, new energy, and clean-energy vehicles – and are expected to receive special policy backing and funding from the central government.

The list of the seven industries in order of importance are: New energy (nuclear, wind and solar power); Energy conservation and environmental protection (energy reduction targets); Biotechnology (drugs and medical devices); New materials (rare earths and high-end semiconductors); New IT (broadband networks, internet security infrastructure and network convergence; High-end equipment manufacturing (aerospace and telecoms equipment); and Clean-energy vehicles.

Market opportunities

In order to transform the PRD into a “greener” area, measures being put in place to reduce carbon emissions include a five-year Hong Kong government initiative called the Cleaner Production Partnership Programme. Created in April 2008, the programme is funded by the Hong Kong government to encourage and assist Hong Kong-owned enterprises in the PRD to adopt cleaner production techniques and operations. There are about 50,000 Hong Kong-owned factories in the PRD and the number is estimated to double by 2018.

The Hong Kong Productivity Council (HKPC) is responsible for implementing the programme in collaboration with other environmental technology (ET) service providers. Available funding amounts to over HK$93 million (US$12 million), and eligible factories can apply for funding support for carrying out the following projects:

On-site improvement assessments. Factories may apply funding support for hiring ET service providers to identify improvement potential with proposals for practical solutions on energy efficiency, emission reduction and minimisation of material consumption. The Hong Kong government will sponsor 50% of the assessment costs, with a ceiling of HK$15,000 per project.

Demonstration projects. Factories may partner with ET service providers to conduct demonstration projects to demonstrate the effectiveness, costs and potential returns of cleaner production technologies through installation of equipment and modification of production processes. Participating factories need to share the findings and experience gained from the projects with other factories. The Hong Kong government will sponsor 50% of the cost, with a ceiling of HK$160,000 per project, on average.

Verification of improvements. Factories that have implemented improvement projects for emission reduction and improvement of energy efficiency may also apply for funding support for independent third-party services to verify the effectiveness of their improvements. The costs of verification services can be funded with a ceiling of HK$15,000 per project.

Awareness promotion

Apart from direct funding, briefings, study missions, training seminars and workshops, conferences and exhibitions will also be organised from time to time under the programme, so that factory management can enhance their awareness and knowledge on cleaner production technologies and practices.

Hong Kong is also an excellent market for green-tech companies. As buildings and transport consume the most energy, subsidies for building owners to conduct energy audits and improvements, as well as measures to encourage the use of less fuel, are in place. An exemption of First Registration Tax (FRT) for electric vehicles exists, and there is a reduction of FRT for petrol-powered vehicles that qualify as environmentally friendly. The government has worked closely with electricity companies to install charging stations and more than 1,000 will be installed by the end of June 2012. The government has also implemented the Buildings Energy Efficiency Ordinance to ensure progressive enhancement of building energy efficiency standards.

Prime position

Hong Kong is well positioned to be a technology platform for the development of green business and export of services and technology to the mainland market. Companies like Dupont Apollo, CREE, Shenzhen’s BYD, Trony Solar and Humdinger Wind Energy have already set up in Hong Kong to capture the potential growth. Companies set up a base in Hong Kong to tap advantages including a lower tax rate and simpler tax system, a robust and reliable legal system, open and free economy and so on. Easy access to the manufacturing basin in the PRD makes a compelling case for high value-added activities in Hong Kong.

Matt Hu is the head of North China Investment Promotion at InvestHK, a department of the Government of Hong Kong

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