January 20, 2011
If it is happening in China, it is being felt around the world. That's the unstated theme of the summit now occurring between President Obama and Chinese President Hu Jintao, whose discussion will undoubtedly affect how American companies do business with the Asian nation and particularly in the area of energy.
The economic growth rate of 10 percent a year is exceeding China's own hopes. But power production there can't keep pace. It needs foreign assistance, although U.S. enterprises are complaining that they not necessarily getting a fair shake there. Meanwhile, some union organizations are protesting that the overt favoritism and artificially low currency rates are promoting their products and services and hurting jobs in this country.
"The United States risks losing its place as the world's leading economy unless we take a firmer stance against China's mercantilist economic practices," says Scott Paul, executive director of the Alliance for American Manufacturing. "Currency manipulation, market-distorting subsidies, and harmful barriers to trade must be eliminated for the benefit of a global economic recovery."
While manufacturers here have made their feelings known, they are also clear about one thing: They do not want to see a trade war between the United States and China. China has the world's second largest economy and too many opportunities exist there. China, meantime, is dependent on American know-now and its capital to power its prosperity.
That is especially true for China's energy sector that underscores its whole economy. The country's power needs are growing by 12 percent a year -- all fueled by rising investment in wind, solar, hydro, nuclear and clean coal energy forms. Altogether, the two nations announced $45 billion in total export deals. General Electric, for example, will be awarded new contracts tied to coal gasification, which in turn, will create jobs here.
Already, the two nations have created the U.S.-China Clean Energy Research Center. The White House produced a statement in the fall of 2010 that said the pair is partnering in the area of clean vehicles and advanced coal technologies that include carbon capture and sequestration.
Both countries are now reliant on coal to power their electricity sector and oil to fuel their cars. At the same time, each says that they are committed to reducing their greenhouse gas emissions and each has anted up in an effort to do so. The energy center is housed in both countries and is staffed with hundreds of scientists, all working on these issues. The $150 million or so in funding is evenly split.
"The U.S.-China Clean Energy Research Center will help accelerate the development and deployment of clean vehicle and clean coal technologies here at home," says Energy Secretary Steven Chu. "This new partnership will also create new export opportunities for American companies, ensure the United States remains at the forefront of technology innovation, and help to reduce global carbon pollution."
International Table
To be sure, subsidies are roundly used by all countries. But they are not supposed to favor a nation's exports. While China denies it violates any trade rules, it has leveled similar allegations against the U.S. - that it is overly-subsidizing some of its own domestic energy resources, which puts competing enterprises at a disadvantage. China, though, is reluctant to keep persisting as this country is its biggest customer.
Likewise, the U.S. may push hard behind the scenes but it would be foolish to publicly chastise China. An Ernst & Young report says that it has surpassed the United States as the most desirable place to begin investing in renewable energy. China has twice the number of clean energy investments, including being the world's fastest growing wind energy segment.
By 2020, China says that sustainable power will rise from about 10 percent today to provide 15 percent of its electricity. By 2050 green fuels will supply 30 percent. China, meanwhile, is also working to cut its energy consumption by using new conservation tools. Within 15 years, the country says that it must attract more than $200 billion, most of which will come from foreign capital that is demanding internal market reforms.
Those goals are coupled with an increase in China's spending on environmental regulation. According to Ernst & Young, the country has committed to plow an additional 20 percent into such oversight, all to advance a low-carbon economy.
"Our analysis shows that shifting China towards a low-carbon economy also brings with it large opportunities, not only costs," says Feng Fei, director of industrial economics research for China's Research Development Center.
China's place at the international table is set -- a stature that obligates it to abide by global trade rules. The question then is how to bring about such change without alienating China. The goals are not just to open borders and to level the playing field but to also encourage compliance with global climate treaties.
As such, the United States is taking the long view and realizing that a robust Chinese economy will likely loosen both the political and economic constraints. That will create more jobs at home and will result in new opportunities to sell everything from windmills to nuclear reactors.
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