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Is China Going Green, Part XVIII: It Is, But Damn It's Tough To Make A Buck On China GreenTech.

By Dan Harris and Steve Dickinson

One of the great things about being a lawyer is that you get to work with and observe a diversity of businesses. My firm has helped all kinds of businesses get into China and do deals with Chinese companies and if I had to single out one industry that has the highest percentage of failures, I would pick those that are environmentally related. Years ago, I was totally gung-ho on these industries, figuring China obviously needs environmental assistance and Beijing knows it. Not so fast. Two things too often seem to get in the way. The first is that so much of this industry is tied to governments and this means so much of this industry is not as based on merit as it should be. The other thing is that this industry seems so "hot" that it brings in a disproportionate number of "flakes" and scammers. China is hot (or at least was hot) and greentech is hot (or at least is still sort of hot). Combine the two, and you have a recipe for bringing out those who do little more than move from hot industry to hot industry with little more than a briefcase and a claim that they "do deals." Find me a Westerner in China to avoid and there is a decent chance that person claims his or her business is "China GreenTech." There are plenty of completely honest and knowledgeable people in this industry, but it does attract its fair share of those seeking a quick and easy buck. In an aptly named post, "Private investors, beware! China?s green sector still faces challenges," ResponsibleChina cites an article by Ray Cheung in the book, ?Sustainable Investing: The Art of Long-term Performance,? setting out three obstacles GreenTech entrepreneurs face in China: -- increased manufacturing costs, particularly of raw materials: -- lack of human capital, since ?the brightest minds are entering more lucrative industries, such as finance and information technology,? which can turn profits quickly, compared to environmental companies that require longer term development; and, -- a fragmented market because of undeveloped regulatory infrastructure, i.e. lack of enforcement of environmental laws and weak environmental agencies: All true. GreenTech in China is and will continue to take off, but a sure thing it most certainly is not. What do you think? Hate to keep asking this, but if you like this blog (or even just mildly dislike it), please go here and vote for it. Thanks.

Full post as published by China Law Blog on December 29, 2008 (boomark / email).