BEIJING -- Jennifer Holmgren is a dream client for airlines that fly to China. She flies here from Chicago almost every two months, and China topped other countries as her business trip destination last year.
Holmgren is the chief executive officer of a Chicago-headquartered biofuel firm. Just like her, executives at Western clean-tech companies in recent years have been increasingly traveling to China, aiming to drive up business with the Chinese market.
According to the Cleantech Group, a research consultancy headquartered in San Francisco, the amount of venture investment flowing from China to Western clean-tech companies hit $737 million in 2012, a more than sixfold increase from 2010 levels.
"The investment trend is a good proxy of the overall trend of Western clean-tech firms heading to China," said Richard Youngman, managing director of the Cleantech Group. He said investors in China are backing these firms mainly because their technology has strong potential in the Chinese market.
Technology immigrants to China have grown both more numerous and more diverse.
For years, it was technology giants like Denmark's wind turbine maker Vestas Wind Systems A/S and American solar panel equipment supplier Applied Materials Inc. that led this trend, but lately even very young Western clean-tech companies have begun looking for a base in China.
Massachusetts-grown startup Boston-Power Inc., for one, is building a research and development center in Beijing. It is also building a factory in Shanghai that can make enough batteries to equip 20,000 electric vehicles. The company has gained widespread recognition for its longer-lasting, higher-capacity lithium-ion batteries and landed Mercedes-Benz among its early consumers.
Big markets and big money talk
"Electric vehicle is an example where quite a lot of technology companies involved in that in the U.S. today are seriously looking at China," said Stefan Henningsson, a senior adviser at the World Wide Fund for Nature, an environmental group that recently published a report to assess each country's clean-tech prowess.
Henningsson said that many other Western clean-tech startups are also heading east. As those companies share technical know-how with Chinese partners, help solve environmental problems in China and work with the Chinese hand in hand to answer global demand for a cleaner future, "it will bring great benefits to China economically and environmentally," he added.
To be sure, other countries are also keen on those benefits. The European Union called the clean-tech industry a key component for its sustainable future, and President Obama bet on green jobs to lift the United States out of its economic doldrums. But when it comes to action, experts say it is China that is making offers that move clean-tech companies.
"The U.S. is trying to be active, like the Solyndra project, they gave $500 million; but in China, they would give $500 million and also guarantee sales by government projects," said Richard Brubaker, adjunct professor at China Europe International Business School in Shanghai.
Unlike U.S. policymakers who believe in the free-market concept, Brubaker said, Chinese leaders view cleaner water, air and energy as a social issue. So they help create a domestic market in which clean-tech companies can test their ideas and reach economies of scale.
China Merchants Securities predicts that the Chinese market for environmental protection technology will be worth more than 3 trillion renminbi (about $483 billion) by 2015. The nation also has big financial reserves to lure in Western clean-tech companies.
While early Facebook investor and PayPal co-founder Peter Thiel famously called clean technology "a disaster" in 2011, his peers in China see it as an opportunity.
"There was a decent amount of money being spent in China in the past couple of years for energy businesses. Sometimes you are talking about tens if not hundreds of millions, if not billions of U.S. dollars," said Kenn Ross, a matchmaker between U.S. technology and Chinese money.
Ross' company, Hao Green Energy in Shanghai, helped form less than $100,000 worth of partnerships in 2011, but this year he says the value of the partnerships it handles soared to more than $200 million. "The market demand is very strong," Ross said.
What makes China attractive is also the country's openness to new solutions. China is still in the midst of upgrading its infrastructure and offers plenty of open fields for technology venturers to play in. By contrast, developed nations have already built most of their needed infrastructure, and attempts to replace it can run into resistance.
The result, according to David Gong, an independent consultant in San Francisco, is that "piloting clean-tech projects in China enjoy a much faster cycle." In some cases, Gong said, the speed can be three or four times faster than in Europe or North America.
That is the kind of speed that had lured Holmgren and her U.S. biofuel firm to China. Shortly after Holmgren left her job as vice president at Honeywell International Inc.'s UOP unit to join LanzaTech, a startup that uses a patented microbe to convert industrial waste gas into ethanol and chemicals, she started her frequent traveling between the United States and China.
Sitting in her office on the 18th floor of a high-rise in Beijing, Holmgren recently explained her decision to come.
"Nobody in the world moves as quickly as China," she said. "So in my mind, if you have a new technology, a new idea, China can help get it into a point where it is truly commercially ready faster than anywhere else in the world."
Turning carbon emissions into cash
Two years after Holmgren's journey to China, LanzaTech has already scaled up its ability to turn waste carbon into ethanol from the laboratory level to the industrial level. Its first demonstration facility, built outside Shanghai and partnered with the world's fourth-largest steel producer, Shanghai Baosteel Group Corp., can produce 300 tons of biofuel per year out of industrial waste gas.
The company is also working with Shougang Group Corp., another Chinese steel giant, to build a new demonstration about 150 miles east of Beijing. The project will help not only prove the feasibility of the company's technology but also improve its ability to run the system with less water and energy.
The two demonstrations are expensive experiments. Building the Shanghai project required a $10 million investment; running and testing the technology raised the cost to $80 million. The Chinese partner helped with part of the project financing, Holmgren said. She added that it is possible for a startup to raise all these funds alone, but that would be take more time.
Her company and Baosteel will commercialize the technology this year in a new steel mill in eastern China's Anhui province. That's a $112 million venture. If it succeeds, it will turn all the industrial waste gas the mill generates into about 50,000 tons of ethanol every year starting in 2015.
The ethanol is expected to be sold to local gas stations, said Sheng Zhongke, who leads Baosteel's effort with LanzaTech. He also expects the project to get tax breaks, research funds and other financial incentives -- the sort of government support Chinese clean-tech companies usually enjoy.
"We all talk about emissions reduction. But as a business, you cannot do it if it doesn't make economic sense," Sheng said. "The good thing about this technology is that it not only reduces carbon, but also turns it into something that can make money."
China has pledged to lower carbon dioxide emissions per unit of economic output by 40 to 45 percent by 2020 against 2005 levels. The nation is also scheduled to launch emissions trading pilots in seven regions this year to cap the amount of carbon dioxide that major emitters release. Steel mills are key targets on the list.
Compared with steel mills of its kind, Baosteel's new plant equipped with LanzaTech's waste-carbon-to-ethanol solution is estimated to lower its carbon footprint by 60 percent -- a significant cut for one of China's major greenhouse gas emitters.
Holmgren said Shougang also has plans for commercial projects. The Chinese companies will work with LanzaTech to cash in on the Chinese market, but only LanzaTech has the right to explore overseas markets. Already, its success in China has helped the company expand into other countries like India and Malaysia.
Local politics and discrimination
Some other Western clean-tech companies found China a tough place. Among them is Greenkey International Ltd., a British startup that helps factories reduce lubricant oil use by cleaning up the used oil.
After Greenkey demonstrated its "laundry service" in southern China's Shenzhen last year, it began pitching to Chinese factories. Although those sales pitches all went well, the final answer Greenkey got was always "no."
"There are just too much interest conflicts inside factories," said Stephen Scoones, marketing director at Greenkey. He said executives at Chinese factories welcome the service, but purchasers there have close personal relationships with domestic lubricant oil sellers and therefore are resistant to change.
Such resistance has forced Greenkey to focus on markets other than China, hoping that transparency of factories in the West will ease the acceptance of the oil reduction technology.
Experts say it is hard to sum up whether happy stories or sad stories are the mainstream of the China-based Western clean-tech experience, as the situation in one sector might be totally different from another. But a widely accepted conclusion is that doing business in China isn't an easy matter.
As Brubaker of China Europe International Business School explained, Chinese policymakers are encouraging domestic innovations, so when companies bid for government projects, the origin of a clean technology often outweighs its performance.
"That's where lots of foreign companies are frustrated, as they feel, for right or wrong, they have been discriminated against because the Chinese government is trying to promote Chinese firms," Brubaker said. He also pointed out that such frustrations might be temporary, as foreign players begin gaining a foothold in areas where the Chinese government has an acute need.
Some partnerships have perils. There are plenty of horror stories of Chinese companies stealing technology from their Western partners and then cutting off the Western companies.
China's wind turbine manufacturing leader, Sinovel Wind Group Co., for one, got tangled up in lawsuits with American Superconductor Corp. (AMSC), a Massachusetts-headquartered clean energy solution provider that accused the Chinese company of bribing a former employee in Austria to sell software codes. The former AMSC engineer admitted guilt in 2011, but the years-long legal fight continued.
The disputes over intellectual property (IP) happen so frequently that they have even left a mark in government policies. The European Union, for example, offers a step-by-step guide to its companies on "Protecting Your Trade Secrets in China."
Chinese experts argue that China has already significantly improved IP protection. They also assert that stolen IP can be an excuse for Western companies that fail to figure out the real reason for their failures. Yet Western experts say IP thefts are just becoming harder to detect.
For Holmgren, whose firm's core asset is its waste-carbon-to-ethanol technology, IP leaking in China is a valid concern but not a reason to stop coming.
"In every country, you can have your IP stolen, even in the U.S., too," Holmgren said. "China is a wilder world than the U.S. in the maturity of IP, but I think it is changing here, and the government is paying more attention.
"The best way to protect the IP is to develop trustworthy partners," she continued. "That still does not mean the risk is zero, but it is not zero anywhere."
Holmgren seems comfortable with her two steel company partners. "China is not only a big market but also helps us move the technology forward," she said. "You can own 100 percent of something and move it slowly, or you can deal with some risks and move it quickly. I'll gladly take that risk."
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