Op-Ed Contributors

The clean energy game US plays

By Xia Yishan (China Daily)
Updated: 2010-11-04 07:57

Economic relations between China and the United States have been somewhat strained over the past several months because of disputes over several issues. Tension escalated recently when the Barack Obama administration said it would investigate into subsidies granted by the Chinese government to its clean energy industries.

Accusing China of granting subsidies to its clean energy sector is another politicized economic move by the US for which the midterm election (held on Tuesday) was the main motive. The US economy has recovered very slowly over the past two years, tilting the scales against the ruling Democratic Party in the midterm election. The Democrats needed somebody to blame for the economic mess in the US, and China became the scapegoat yet again.

For many years, US elections have seen the Democrats and Republicans both play the "China card" to win voters. This time China has been targeted for something as benign as granting subsidies to its clean energy sector.

In its complaint, the US blames China for introducing new measures against foreign companies in the clean energy market and claims that it would make them unable to compete with their Chinese counterparts fairly. But this accusation is irrational.

As is universally acknowledged, the clean energy sector in China is in its infancy. Traditionally, all countries try to protect their nascent and vulnerable industries. The US has taken (and still takes) many such measures, offering much stronger support to its industries. Even in the first three quarters of this year, the US gave $4.6 billion in subsidies to its clean energy industry in cash. In contrast, no clean energy enterprise in China has received any direct subsidy. So, how can the US blame China for implementing something that it itself has been doing for such a long time?

Besides, the US blames China for "discriminating" against foreign companies. The truth is China has never done any such thing. During the past seven years, China has called many bids for its wind power projects. Foreign companies won some of them initially but couldn't do so after 2005, and their market share dropped from 70 percent in 2005 to 13 percent last year. But the reason for that is not any discriminatory measure but foreign companies' high labor cost, which counterbalances their technological advantages.

In fact, high labor cost has created disadvantages for US companies in many fields despite their more advanced technologies, and clean energy is only one of them. Maybe what Paul R. Krugman has said would drive some sense into US politicians. In a speech delivered in China, Krugman said the average salary of a Chinese worker was only 4 percent that of his US counterpart.

Sometimes US companies even give up opportunities to bid for a project because the profit to be made would not cover the high labor cost in their country. And the US politicians should not blame China for the high labor cost in their country.

The inequality between the two countries can also be cited to support China's position. Even with the so-called "subsidies", China's export to the US is still very small in the clean energy sector. Until now, Chinese companies have exported only three aero-generators to the US, with a total installed capacity of less than 10,000 kW. In contrast, the capacity of aero-generators General Electric Company of the US exported to China was 80,000 kW in 2005 and 34,000 kW in 2009. If China has really taken some "unfair" measures, why has the situation not changed drastically?

The fact is not "discriminating" measures taken by China against US companies rather it is that the US is trying to "contain" China in the development of clean energy. Such "containment" measures reflect the lack of foresight on the part of the US, for they will not only hurt China, but also be detrimental to the US in the long run.

Let's see the US' move from a totally different perspective. The US has been blaming China for high carbon emissions for long. And the best way to reduce emissions is to promote the generation of clean energy. So how can the US expect China not to help develop its clean energy sector and fight climate change at the same time? Saving energy and reducing carbon emissions is the shared goal of the entire world. We hope the US politicians stop acting against the common interests of humankind only to win elections, be it presidential or midterm.

Of course, even if the US insists on taking harsh measures, China is not likely to submit to them and stop developing its clean energy sector. The sector is growing at a fast pace. China is expected to raise its investment in wind energy this year. Seven wind power farms are already under construction, each with a capacity of more than 10 million kW, increasing the overall capacity of wind energy greatly.

Such a prosperous growth rate of the clean energy industry is beyond the containment of any country, including the US.

The author is a research scholar in energy at the China Institute of International Studies. This is an excerpt of his interview with China Daily's Zhang Zhouxiang.

(China Daily 11/04/2010 page9)