Key Renewable Player

China’s growing renewable energy sector represents enormous opportunities, but significant challenges, for foreign investors.
By Lisa Gibson | March 21, 2011

The renewable energy sector in China is growing by leaps and bounds as the country strives to meet its goal of 15 percent renewable electricity by 2020. That poses opportunities for foreign investors, but all foreign investment in China, from a simple representative office to the creation of joint ventures, requires government approval, according to Ellen Eliasoph, managing partner with law firm Covington & Burling LLP.

Eliasoph was one of five speakers discussing renewable energy in China during Developments in China’s Renewable Energy Markets, a March 1 webinar hosted by the American Council on Renewable Energy U.S.-China Program. “Foreign investment in China is regulated in every respect,” she says. “Luckily, the clean energy sector is very much open to foreign investment.” In fact, the country aims to strike a balance between supporting indigenous industry and encouraging foreign investment, she adds.

All forms of foreign investment are allowed in some areas of manufacturing industries including biomass-drying pyrolysis systems and gasification devices, among many others; power production and supply including biomass power stations; and scientific research, technical services and geological exploration, again including biomass energy development technology. There are some categories, however, where foreign investment is limited to joint ventures, such as the manufacturing of complete or key equipment for generating electricity with new energy sources including biogas, among several others. Foreign investment in the production of biological liquid fuels is restricted in China, and is prohibited in certain coal applications and products, Eliasoph says.

Despite those challenges and restrictions, the Chinese energy market is opening up, according to webinar speaker Gary Wigmore, partner with Milbank, Tweed, Hadley & McCloy LLP. Some issues in the regulatory framework have plagued the markets, but many have been amended, and more changes are most likely on the way, he says, adding that the country’s needs and targets have put it on the map with foreign investors. “We expect China will continue to be a key player in the renewable energy business,” McCloy says. 

—Lisa Gibson