February 21, 2011
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- What are eco-cities in China? Why are so many popping up in China’s second-tier urban locations? What are the main drivers for this trend and what makes a sound eco-city development project or zone? Finally, what opportunities exist for foreign companies? TCBN Green Channel Editor Terry Cooke interviews Piper Stover, strategic advisor of China Dynamics, LLC, on China’s eco-cities initiative.
China policy on eco-cities:
• The 11th 5 Year Plan included goals of lowering energy consumption per unit of GDP, specifically, energy consumption per unit of GDP should have decreased by 20 percent in 2010 compared to 2005.
•The draft for the 12th Five-Year Program (2011-2015), with additional policy overseeing eco-city development, will be finalized by China’s National People's Congress in March, 2011.
China Eco-cities in the news:
Eco-city development projects have been announced in over 100 cities across China, however not all have been officially endorsed by China government regulatory authorities. Tongi University has conducted research citing nearly 170 self-proclaimed eco-cities.
China’s National Development and Reform Commission (NDRC) launched a national low-carbon province and low-carbon city experimental project in Beijing in August, 2010. The project is being implemented in five provinces: Guangdong, Liaoning, Hubei, Shaanxi and Yunnan, and in eight cities: Tianjin, Chongqing, Shenzhen, Xiamen, Hangzhou, Nanchang, Guiyang and Baoding.
Notable China Eco-city or Sustainable Community projects also include:
• Tangshan Caofeidian International Eco-city
• Sino-Singapore Tianjin Eco-city
• Chongming Dongtan Eco-city (currently inactive)
• Shenzhen Guangming Eco-city, Guangdong Province
• Yangzhou Eco-city, Jiangsu Province
• Nanjing Eco-city, Jiangsu Province (several eco-cities and eco-business parks are under development)
• Huaibei Eco-city, Anhui Province
• Langfang Eco-city, China (outside of Beijing)
• Mengtougou Eco-city (outside of Beijing)
• Meixi Lake Eco-city, Changsha, Hunan Province (there are several additional eco-cities planned for this region)
• Rongcheng Eco-town and Weihai City, Shandong Province
• Huangbaiyu (currently abandoned)
• Chengdu, Sichuan
• Xiamen Eco-city “retrofit”
• Guiyang, Guizhou
• “US-China Eco-city Initiative” between the US Department of Energy (DOE)and China’s Ministry of Housing and Urban-Rural Development (MOHURD). Both sides are developing guidelines and policies to support the integration of energy efficiency and renewable energy into city design and operation. January, 2011.
Research and policy development
• Tongi University has conducted research
citing over 160 eco-cities in China. UNEP-Tongji University Institute of Environment for Sustainable Development
Useful Eco-city Case Studies:
• Sino-Singapore Tianjin Eco-city Project
, released by World Bank on January 11, 2011
• Asian Development Bank’s overview on Eco-cities in China, “Eco-City Development: A New and Sustainable Way Forward?
: November 2010
2011 Eco-city Events:
• The World Eco-city Summit, Montreal 2011, held August 22-26, 2011
: This is Terry Cooke, editor of TCBN’s Green Development Channel. I’m here with Piper Lounsbury Stover. Piper’s been active in China for the last 20 years working with companies on the ground. On recent years she’s had involvement with a number of eco-city projects. Piper, welcome.
Piper Lounsbury Stover
: Thanks, Terry.
: We’re talking about eco-cities in China. For starters, can you just let us know what eco-cities are and why they seem to be popping up at a fast rate?
: Sure. “Eco” – meaning ecologically sustainable cities. I think in the late – well, early to mid-90s, the Chinese Ministry of Environmental Protection started to develop these ‘eco-city’ guidelines, which were really a series of key performance indicators (KPIs) to try to reduce greenhouse gas emissions and to conserve energy and water resources in several cities across China, starting as pilot project, and now expanding to hundreds of cities.
The main drivers to this development – China is facing massive migration right now. Almost 50% of China’s population currently lives in over 600 cities in China. Nearly 300 million will move from rural areas to Chinese cities in the next ten years, so this is a massive influx of people and China’s going to have to invest up to $3.6 trillion in urban infrastructure to handle that migration by 2020.
So with that, there’s going to be a growth of 2nd tier cities to handle the migration. And with that growth there is going to be continued strain on resources. So to conserve energy needs China’s has to implement policies. China will be increasing energy needs by 150% by 2020 and will have water issues. Water reclamation and water policies are going to be important because China, for its populations, has only a fourth of the world’s average water per capita. So it’s a big issue that the China Daily started reporting on in 2005 or 2006; we are seeing more and more domestic reports on water issues.
: And currently there’s a drought right now.
: Exactly. So to address this from a policy perspective, the 11th Five Year Plan and the 12th Five Year Plan have advocated objectives to promote sustainability in these eco-cities. And that means opportunity - opportunity for companies, and certainly land and real estate developers to try to meet the challenge.
: Well we’ll get to that investment and commercial opportunity in just a moment. Before we do, Piper, could you just say a word about where these eco-cites are which are the biggest?
: Sure. I mentioned the 2nd tier cities earlier. I think it’s important because when we think of the 1st tier cities in China we think of Beijing, Shanghai, Hong Kong, areas, but these 2nd tier cities are growing, and provides opportunities for real estate development that did not exist previously. The biggest ones right now are occurring in these 2nd tier areas. We have two greenfield projects that are the largest – 30 sq km areas. One in is Tangshan, called the Caofeidian International Eco-city. I believe that is an eco-city in coordination with the government of Sweden. There is the Sino-Singapore Tianjin Eco-city - that’s a 30 sq km also sq area in Tianjin. And then there was the Kingdom Chongming Dongtan Eco-city. That was a really big eco city planned for an island off of Shanghai that hasn’t really gone anywhere, as I do not think the investment and the original plan worked out. While those are the obvious biggest, I have a whole list of others that I’d be glad to post after the call, including some in Shenzhen, in Jiangsu Province, in Anhui Province. There are many.
: Ok Piper. And you were just talking about the real estate development angle. You mentioned three premier projects, two of which seem to be moving forward well and one that seems to be stalled. From a project development and investment standpoint, what makes a sound eco-city project? What are the signs investors should look for?
: Sure, there are probably five signs that I would look for if I were looking at a project. One would, obviously, be significant local and central government level support. You want to make sure the Ministry of Environmental Protection (MEP) or the Ministry of Housing and Urban Development (MOHURD) are backing these projects with key performance indicators approved by these two organizations to make sure they’re on track with national standards.
And of course the land acquisition. That’s important. You want to make sure that these projects are not encroaching on farmland or other areas where inhabitants are living, and certainly converting non-arable wasteland has been one way to look at better utilizing land.
: Just to clarify that one, Piper, there’s a risk that if the local government has misappropriated land there would be political risk attached to that.
: Certainly. That is one key issue, but also it is a higher cost in some areas to actually to move people. It’s very costly. So for those two reasons it is important to find out how the land was acquired and how it will be used (for the whole system).
And then there is location. You want to find out how far away these eco-cites are from an old city center - whether transportation is going to be convenient or not. Some of these eco-cities are located very close to rail lines or high-speed rails planned for the future, so that of course would be of interest to me.
The fourth and fifth would include: at what speed would the purchasing power of these cities develop? I know for 2nd tier cities this can be questionable. You want to make sure the economy will continue to grow, and you want growth predictions to be based on sound plans.
The fifth would be competition in the same area. If your company is looking at either investing or moving into one of these eco-cities, what is the competition around you? What human capital talents exist? And what are either other cities nearby or neighboring counties also doing to attract similar industries, or even your own competitors?
: Good. Those are key points for an investor to keep their eye on. What about the opportunity more broadly, for foreign businesses across the board to participate in and benefit from this trend of eco-cities throughout China?
: Certainly with an opportunity to pursue either a green field investment or rehabilitation of some cities, opportunities exist for green building, green technology companies, green energy – renewable wind, solar, CHP, and other types of renewable energy technologies, as well as water and waste technologies. For all of these eco-cities. With already nearly 170 of these so-called eco-cities popping up around China, imagine the opportunity for green technologies in each of these cities.
So that is one area: products and services in the sustainable building sector. The other would be finance and investment opportunities - for R&D and start-ups. I could imagine incubators/ R&D facilities established in some of these areas outside of larger cities, depending on the location in China.
And then third - knowledge-based economy opportunities: in new media, computer networking, IT/ back office outsourcing-types of IT services, and problem solving and consulting. Certainly with the growing concern that China has scarce resources, there is a natural and understandable inclination to try to move from industrialization and heavy machinery/heavy energy and water-using industries to higher-value, knowledge-based services. The eco-cites would be targets to offer or create such knowledge-based service opportunities for companies looking for such.
: Piper you commented on the investment outlook and also the commercial opportunities. What about the durability of this trend in China from a business standpoint?
: I would say that certainly we all understand the top-down policies either promulgated from the 11th or 12th Five Year Plan (to be reviewed in March 2011), are central to understanding where growth will happen, and that funding will be diverted to these eco-cites to make them a success, so can trust in that. However, at the same time we need to think about the greater economy and health at the local or regional level where these eco-cites are located, as well as the national level.
And because eco-cities are a more expensive operation to create (to meet stringent KPIs), you’ve got some very sensitive systems that do need management and attention. There is a danger that some shortcuts would be made to save money. I’ve heard one story in the past couple years where in an eco-city in a more remote location, the energy was considered expensive and so the lights were basically turned out during the winter to meet KPIs. In general, looking at the five or six points I mentioned earlier about making sure you’re researching the right eco-city and ensuring it is in a location that is sound and associated with strong economic growth, things should be okay.
: Piper earlier in our talk you identified three particular projects and then ticked off the names and a couple others that you will post to the TCBN website. One project that I did not hear you mention was the Chicago-Shanghai Eco-city agreement. Could you tell us a little bit about that particular agreement?
: Well it’s a bit of a different animal, but I’m glad you mentioned that. I think, dating back to the Clinton administration, there was an effort to create a more cooperative information exchange, particularly between the DOE and China’s counterparts. I think that in the 2010 September timeframe, the DOE announced a new Chicago-Shanghai Eco-city. It’s basically a way for the two cities to trade best practices and to work together to develop standards and to help each other understand what could be possible in cities located throughout not only China but also the United States. So I think in this effort, if I’m not mistaken, there are 7 or 8 cities in the US and in China that may be paired together in this US-China-India Integrated Cities Initiative that is being coordinated by the US Department of Energy via the Brookhaven National Lab. It will help not only create more transparency and understanding of some of the standards that could evolve, but also to provide more of a quality control so that companies can have a bit of political cover in understanding which eco-cites are going to be considered sound and which are not.
: All right, well time’s drawing to a close, but in closing, Piper, let me just ask whether there’s just one project you’d like to highlight as a case study?
: You know, in some of the research that I’ve done, I found one report to be very useful, which has made me think that this particular eco-city could be a success: the Sino-Singapore Tianjin Eco-city. A case study written by the World Bank, or I believe prepared based on a grant application that the Tianjin Eco-city had submitted to the World Bank. It is on the web and available to the public, and I think the study is the most recent comprehensive report I’ve found on eco-cities in China.
: Well great! Piper, thank you for your thoughts and your insights. We’ll possibility try to get back to you in a year or so and see how the progress with eco-cities has been.
: Sounds great, Terry. Thanks. And I will post those cities for everyone to take a look at.
: Thank you. Bye bye.
TCBN's Green Development Channel Editor Terry Cooke is the Founder of GC3 Strategy Inc., helping U.S. technology and investment firms since 2002 to create and sustain commercial partnerships in Greater China and India. >>See more on his profile>>
Piper Lounsbury Stover is the Principal for China Dynamics LLC, based in Vermont. She has nearly 20 years of experience in China business and policy. >>See more on her profile>>