China Ascendant

This week’s cover story, “Chemistry Energizes China,” by Senior Correspondent Jean-François Tremblay, examines the remarkable developments in alternative energy in China and the opportunities these developments hold for global chemical companies.

“From producing biofuels to improving the efficiency of its power grid, China has embarked on an all-out drive to change the way it generates, transports, and consumes power,” Tremblay writes. “The national effort is opening up myriad opportunities for chemical and materials companies around the world for which, in many ways, China is a more appealing market than the U.S.”

Tremblay notes that Ernst & Young ranked China first in the world in its latest Renewable Energy Country Attractiveness Index and that a recent Pew Charitable Trusts report said that “China led the world in clean technology investments” in 2009.

China is the world’s second-largest consumer of energy after the U.S. It recently became the largest emitter of greenhouse gases because so much of its energy supply comes from burning coal. Unlike the U.S., though, China knows its current energy consumption is unsustainable. Hence its efforts to develop sources of alternative energy.

For example, Tremblay reports that China is the world’s largest consumer of wind energy turbines. China is also the world’s largest solar-cell producer, accounting for about 40% of the world’s output. In this capacity, Tremblay writes, it is the largest buyer of DuPont’s solar materials.

“Because China is such a big market for alternative energy, it makes sense for companies supplying related chemicals and materials to build manufacturing and R&D capabilities in the country,” Tremblay writes. “Both DuPont and Dow Corning operate prototyping lines at their R&D centers in Shanghai where they test how their solar materials can be integrated into customers’ production lines.”

How in the world did we get to this ludicrous position? For well over a century, the U.S. has been the most innovative nation in the world. Now, while politicians in the U.S., primarily conservative Republicans, block meaningful energy legislation that would put a price on carbon, China is becoming the global leader in the most important technologies of the 21st century.

And China is not a benign competitor. The cover story in the Aug. 30 issue of C&EN (page 9), “Securing the Supply of Rare Earths,” by Senior Editor Mitch Jacoby and Contributing Editor Jessie Jiang pointed out that nearly 100% of the world’s rare-earth metals and more than 94% of rare-earth oxides come from China. China achieved this dominant position by—surprise!—producing at much lower costs than any competitors and driving most non-Chinese rare-earth mining and processing operations out of business.

Of course, the low-cost production was a result of horrendous environmental practices, which China is now attempting to address. The country is cutting back on exports, and prices are rising. “The news from China should serve as a huge red flag for U.S. government officials,” Jacoby and Jiang quote Edward Richardson, president of the U.S. Magnetic Materials Association. Rare earths and rare-earth oxides are essential ingredients in many high-tech and clean-energy applications.

China doesn’t distinguish between economic and geopolitical power. You have likely read of the serious diplomatic row between China and Japan over a collision between a Chinese fishing trawler and Japanese Coast Guard vessels near some uninhabited islands in the East China Sea that both nations, as well as Taiwan, claim sovereignty over. What you might not have read are reports that one of the actions China took as the standoff escalated was to cut off shipments of rare earths for a time to Japan. People forget at their peril that nothing in China is outside the government’s control.

C&EN’s role is to report on developments in the global chemistry enterprise. China’s intense focus on developing alternative energy sources presents excellent business opportunities for global chemical firms, but it is profoundly depressing to this U.S. citizen.

Thanks for reading.

Rudy Baum
Editor-in-chief