China Cleantech Venture Capital Investment

Investment in ‘clean technology’, or ‘cleantech’ in China increased 147 percent between 2005 and 2006, with investors placing US$420 million across 26 cleantech deals in 2006, reports The Cleantech Venture Network.

This is an increase over the US$170 million placed in 2005, and the momentum is expected to continue through 2007, concludes the group’s China Cleantech Venture Capital Investment Report. Further, the US$154 million that was invested in Q1 2007 is almost four times the amount invested in 2005.

Some 70 percent of the US$420 million invested in 2006 was devoted to the solar energy sector. Energy efficiency, biomass, wind energy and other segments will contribute to cleantech’s dramatic rise in the coming decade, projects the Network.

Clean tech investment generally includes: renewable energy systems; fuel cell related technologies; water purification and conservation systems; waste recycling and processing technologies; systems and processes that promote the reuse of materials; and wind and solar energy generators.

China, the world’s fastest growing economic superpower and increasingly a candidate for the title of the world’s top polluter, provides a promising marketplace for clean technologies. As the world’s largest maker of cement, home electronics, steel and many other industrial and consumer products, the country has been enjoying an annual growth of over 8 percent for seven continuous years, based on its gross domestic product.

But the boom has carried a price in the form of serious environmental deterioration and over exploitation of natural resources. Clean technologies are increasingly needed by the whole country to create sustainable development.

According to the report, Cleantech ranked as the third largest category for venture capital investment in China, behind only information technology and communications. Cleantech is on an upward trend, growing from about 8 percent of overall VC investments in 2005 to 19 percent of total venture investment in 2006. Overall venture activity in China was robust, with investors placing US$2.2 billion in deals in 2006.

The analysis in the report indicates that policy drives much of the interest in China’s cleantech industries. The enforcement of China’s Renewable Energy Law attracted a flood of venture capital investment into energy-related fields in 2006. The 11th 5-Year Plan is and will continue to be a stimulus on cleantech investment in the coming years, predict the report authors.

The Cleantech Network provides comprehensive and in-depth information to help those who are interested in the advancement of clean technologies to make informed decisions. It makes use of one year and a quarter of data on cleantech venture investing in China to map out patterns, explain reasons for trends and project short-term future activities. The data covered venture investments placed in China in 2006 and Q1 2007.

The China Cleantech Venture Capital Investment Report is available for free download here.

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