Webinar: “Breaking into the Chinese green construction sector” – 25 February 2021
March 2, 2021 Category Past events, Weekly
The Flanders-China Chamber of Commerce, the EU SME Centre and EUROCHAMBRES organized a webinar on the topic of “Breaking into the Chinese green construction sector” on 25 February 2021.
Ms Gwenn Sonck, Executive Director of the Flanders-China Chamber of Commerce and the EU-China Business Association, welcomed the participants and introduced the topic. The Chinese construction sector is one of the largest in the world and is expected to continue growing at an annual average of 5% until 2023. The Chinese government is making green building a top priority by promoting more energy efficient buildings. Therefore there is great potential for European SMEs. By 2030, two-thirds of the Chinese population is going to live in urban areas and Chinese authorities are already planning to build 60,000 new multi-floor residential buildings and 117 new mass transit rail and underground projects. The Comprehensive Agreement on Investment (CAI) agreed in principle by the EU and China grants European investors a greater level of access to the Chinese market and will level the playing field for European businesses in China, a market which cannot be ignored.
Mr Gianluca Ghiara, Managing Director, Geapower Consulting Co, is normally living in Beijing but is now staying in Rome due to Covid-19. He is an independent consultant active in the Chinese green-tech sector for more than 15 years and holds an MBA from Peking University. The Chinese green construction sector is extremely important. About 15 years ago the building sector was not modern, and China started to renew the sector, which will continue to grow for at least 10 to 15 years. All municipalities in China are pushing the construction sector in different ways. In a centralized country like China, the central government plays an important role and provides the direction for municipalities and local governments. Related to the construction sector, the three most important ministries are the National Development and Reform Commission (NDRC), the Ministry of Housing and Urban-Rural Development (MoHURD) and the Ministry of Ecology and Environment (MEE). The role of municipalities is still very important in developing green construction projects, including areas such as the water supply, solid waste management and energy generation. In the last 10 years the government has been transforming the construction sector into a green construction sector, as it wanted to control pollution and support the renewal of local industries. Chinese people are now more conscious about living in beautiful, green and sustainable cities.
There are new laws and regulations in all areas of the green building sector, such as in design, construction and operations. MoHURD introduced the “New Assessment Standard for Green Building”. In the past, cities were not well-planned, causing many problems in terms of energy efficiency, traffic control, water and waste management etc. Another important regulation is the “Green Building Evaluation Standard”, approved in January 2015, and subsequently amended. China wanted to upgrade to the level of Europe and the U.S. China’s ”three star system” is very similar to the LEED system in the U.S. The evaluation system has two different standards: one for residential buildings and one for public buildings, covering six categories. Three stars means green buildings. The system is a way for the central government to push municipalities and developers to focus on good quality buildings. The legislation created a “green wave” in the construction sector and a bottom-up approach. Now the whole country is involved in the modernization.
Over the past 20 years, China has promoted the development of eco-cities, which are in fact districts in some cities. The government wanted to control CO2 emissions in cities and create some areas where the best technologies could be developed and only certain companies and buildings are allowed. New eco-city projects that have gained international attention include the Sino-UK Dongtan Eco-City in Shanghai, Caofeidian International Eco-City in Tangshan, Sino-Swedish Wuxi Low Carbon Eco-City, Sino-Finland Mentougou Eco-Valley in Beijing, and the Sino-Singapore Tianjin Eco-City. These offer opportunities for European companies to partner with Chinese companies in their development. They present positive competition between different cities and have been developed through bilateral cooperation projects. Being involved in these eco-cities can offer a good entry to the Chinese market.
Another important element is the Chinese green municipal finance. The level of local finance is very different from national finance. Most taxes are not kept locally, but are controlled centrally. Municipalities don’t have much financial power and the level of municipal debt is high. The central government obliges the municipalities to develop projects that are sustainable, also from a financial point of view. Municipalities were selling land and asking banks for loans. This can’t be done anymore. The prices of apartments in China are skyrocketing and the central government want to limit the rise. Municipalities are no longer allowed to ask for finance which is not sustainable. In the past, municipalities only had to look at the financing side: think about the project and look for money. Now they also have to focus on the funding. The project has to be sustainable in terms of “green” and “finance”. Screening of green projects is very strict. Municipalities have to be able to finance them, because there is no longer any financial support from the central government. Developers are looking for foreign companies to partner with Chinese companies that don’t have enough experience. In the field of laws and regulations, much still needs to be done. Some are too strict, making them difficult to follow, and some too vague, giving too much room to local developers.
China set out clear goals to develop green building:
- The energy efficiency of newly constructed buildings in urban areas must be improved by 20% compared to the year 2015
- Th share of newly constructed green buildings in urban areas shall be increased to 50%
- The newly constructed green building space nationwide is expected to reach 2 billion sq m
- The retrofitting of existing public buildings for energy efficiency covering 100 million sq m and existing residential buildings covering over 500 million sq m to be completed
It is evident that China represents a good opportunity for European SMEs. At least 10% to 15% of the overall investment in the Chinese green construction sector is expected to go to foreign companies. There is a need for stable technology and Chinese companies are looking to upgrade their systems and follow the green wave started by the Chinese government. The Chinese market is profitable but very diversified, so you need to do your homework. Chinese companies have learned to appreciate the role of European SMEs, presenting a good opportunity. But a good business strategy is essential and you need to determine according to your technology which cities you want to enter. Your technology needs to be localized, you can’t simply replicate what you do in Europe.
Ms Ma Jingjing, Senior Low Carbon Urban Planner, NORDIQ Group China, has over 17 years of professional experience in climate change and related topics and holds an MBA from Peking University and a Master’s degree from the Technical University of Denmark. China’s climate targets for 2030/2060 have been announced in September 2020: before 2030, achieve peaking of carbon dioxide emissions and before 2060, achieve carbon neutrality. More specifically, by 2030:
- Lower carbon dioxide emissions per unit of GDP by over 65% from the 2005 level
- Increase the share of non-fossil fuels in the primary energy consumption to around 25%
- Increase the forest stock volume by 6 billion cubic meters from the 2005 level
- Increase the total installed capacity of wind and solar power to over 1.2 billion kilowatts
The 14th Five Year Plan (2021-25) and 2035 targets have been announced as well as the climate strategy until 2030 and 2060. The Ministry of Ecology and Environment (MEE) has taken over the climate strategy from the National Development and Reform Commission (NDRC). The National Energy Administration (NEA) has called for public comments on the renewable energy plan and laid out the seven priority areas. The part of non-fossil fuels in China’s energy structure has been increasing in the past 10 years. Achieving the 1.5°C target will require an additional investment of about CNY138 trillion, or about 2.5% of GDP per year. To achieve the “Europe Green Deal” targets with reduced emissions by 50% to 55% by 2030 will need an annual investment of €260 billion or about 1.5% of GDP in 2018. In the Chinese building and construction sector, the use of electricity and natural gas has been increasing. By 2020, the national target for the total building area with ultra-low energy consumption has exceeded 11 million sq m.
Concluding her presentation, Ms Ma Jingjing described three case studies: the Hubei 50MW biomass CHP project, the Datong zero carbon project and the green industrial park in Changsha, Hunan province.
Q&A: How sensitive is the Chinese population regarding green cities? Do they take it into account when moving to a city? Ms Ma: First university graduates will consider if they could get a good job with a high salary, but the green factor, mobility and housing are also taken into account. Mr Ghiara: Sometimes it’s a matter of choosing where to live in a city. People are frustrated by traffic and heavy pollution and will try to find new, good quality districts. Does the government also give incentives for factory construction like for residential buildings? Mr Ghiara: Yes, seveal industries receive incentives to upgrade their systems and machinery in terms of the use of electricity and water, but it depends on the kinds of industry.
The above is a summary of the webinar, which lasted around one hour and forty minutes. The webinar can be viewed on the Youtube channel of the EU SME Centre: Part 1 and Part 2.
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