Can organic vegetables grow in China’s depleted soils? Won’t environmental pollution offset any gains from eating healthy? Aren’t vegetables here, produced by China’s 500 - 600 million farmers, already dirt-cheap? These are just some of the questions I had about a year ago, when a Chinese entrepreneur pitched me on an idea that seemed so ridiculous that I had to remind myself of one of the traditional entrepreneurial litmus tests: If you’ve got an idea so crazy that everybody thinks you’ve lost your marbles, on the contrary you just might be onto something.

In a nutshell, this fellow had agricultural and academic connections to be parlayed into a network of greenhouses. They would be rented to foreigners who wanted to grow their own food. An integrated coffee shop and walking tour would allow people to hang around and watch their vegetables grow precariously from the ceilings. It was to be located in Shanghai’s picturesque and rural Fengxian district.

Although I knew something about the locavore and LOHAS (Lifestyle of Health and Sustainability) concepts, I still wondered if there were really enough green-thumb foreigners in the city to rent his greenhouses and farm their own produce.

“No problem!” he said, “We have people who do the actual farm work.” And what’s more, fresh ten kilogram baskets of the organically grown fruits and vegetables would be delivered to customers’ doors weekly. Ah, a garden without the work! Now he might be onto something.

I passed on the opportunity to invest but recommended the entrepreneur instead focus his marketing on the emerging middle/upper class of Chinese consumers who would be more than eager to eat up healthy vegetables at inflated prices. It turns out I was at least partly right. Before I get to that, let’s review a little Olympic context for organic foods in China.

In the wake of a poisonous dumpling scandal which rocked China-Japan relations in early 2008, China’s pre-Olympic food preparations suffered one indignity after another: The US planned to boycott the Olympic Village food altogether, Australia had to be banned from bringing its own food into the Village (including, it seems, copious quantities of Vegemite - Australia’s favorite spread), and the Olympic Village cafeteria itself would offer only 30 percent of the menu from China’s famous local cuisines. Then perhaps the ultimate loss of face for Chinese gourmands: Usain Bolt’s pre-world-record-setting meal? Chicken nuggets.

I mention the Olympics for its effect of kicking China’s organic foods production up a notch. In order to reassure Olympians - and the world - that China’s food chain was safe, no expense was spared. From RFID-encoded shipments to pigs having Mozart played on their final walk to the abattoir, safety was the number one priority. Number two was health.

In the run up to the Olympics, China has embraced organic foods extremely rapidly. Despite the fact that China has been a producer of organic foods for decades, just two years ago it was hard to find locally-available organic foods in even the foreign-owned hypermarts. Now, fresh, locally-grown organics are not only found in major grocery stores and served in top restaurants, they are even joining the ranks of DIY products.

Vegetable gardens put the commune back in China

Last week in the Shanghai Daily, a pair of organic food stories caught my eye, but this one about the People’s LOHAS Commune in Qingpu District was especially relevant given my experience with the farm/coffee shop/vegetable gallery I was told about last year:

The 33-hectare commune includes 27 hectares of farm land, and a 7-hectare eco-lagoon. The farm is divided into four parts - an orchard, a flower garden, an organic Chinese medicine farm and a vegetable farm.

For only 3,000 yuan (US$441) a year, you can have 3 hectares of land to grow any plant you like, even expensive ginseng.

In Supertrends of Future China, we discuss the growing trend in China of consumers seeking high-quality alternatives and upgrading their lifestyle, adopting activities such as LOHAS originally found in more affluent countries. We believe the trend is just getting started in China, although a number of incumbent businesses such as popular Shanghai eateries Element Fresh and Jujube Tree are already benefitting from the growing segment of health-conscious consumers. The Commune’s proprietor, Xie Lun, seems to share our optimism:

“The People’s LOHAS Commune welcomes everyone who loves nature as long as they observe two simple rules,” Xie says. “The first is no spitting and the second is that other people’s produce must not be taken without their permission. ”

So far more than 400 people, most white-collar workers, have applied to be members of the commune even though it will not officially open until next year.

Although China’s organic food industry is clearly only for affluent locals and foreign residents at this time, this is indeed a trend to watch and get positioned for. China’s own version of Whole Foods of Trader Joe’s may not be far behind.

Categories: Aspiring, China Supertrends, Consuming, Greening
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Last week in a major environmentally-themed speech in Washington, Al Gore called for complete elimination of carbon-based energy generation in the US within ten years. It was a bold statement, equivalent to Kennedy’s Man on the Moon address, and then some: Achieving his goal will not only require the full participation of the US government, but also that of every consumer in the United States, a far more ambitious effort than the manned moon landing. It’s an inspiring speech that I highly recommend:

Predictably some feel this is a long-shot, if not an impossibility. Yet perhaps that is the point: By aiming for the stars, at least we may reach the moon.

And I’ll go one step further to say that, if the US is to have any chance of success, China’s participation will be needed as well, to provide many of the products needed - the solar water heaters, the wind turbines, the batteries to store power in electric cars, among other things.

A growing number of Chinese firms listed domestically and abroad are positioned to profit from China’s own environmental woes by taking them as the newest business opportunities. We make this point in Supertrends of Future China (scheduled for release in about three weeks, just before the Olympics), where we devoted a full chapter to what we call the Greening Supertrend.

In brief, Greening is the intersection of China’s national environmental policy with the domestic and global trends towards clean energy and pollution reduction. A new generation of entrepreneurs in China is embracing this modern Green Revolution. By taking advantage of the domestic market size and manufacturing power, they will put China at the forefront of environmental technologies, first domestically and then, if present trends continue and Gore’s vision becomes a reality, globally.

Red Star Greening Over China

The central government has put green development as a prime objective of the 11^th Five Year Plan for China’s economy. The target is further outlined in the Five Year Plan for Environmental Protection. Many critics rightly point out that national policy is often ignored at the local levels, but last year’s promotion of the State Environmental Protection Agency (SEPA) to full ministry status is a sign of how seriously the central government is taking the issue.

Recently, the government has made some regulatory steps which are actually putting China in the lead of global environmental policy: For example, the plastic bag ban I discussed last week was announced, implemented, and accepted by the national population in just six months.

Replacing those bags with environmentally-sound reusable bags is just one of the new opportunities that China’s entrepreneurs have already jumped into. On a much larger scale, China’s wind and solar energy industries are taking center-stage.

The World Wind Energy Association currently ranks China as number five in a list of global wind users. China has approximately six thousand megawatts of generating capacity, about a quarter of world-leader Germany’s capacity, and not even one percent of China’s massive energy needs. Shi Pengfei, the vice-president of the Chinese Wind Energy Association, said that the National Development and Reform Commission had increased China’s target of wind-energy generation to 100,000 megawatts by 2020, five times as much as Germany’s present capacity.

Xinjiang Goldwind Science and Technology Company (SZ 02202), China’s leading wind turbine producer, went public on the Shenzhen stock exchange in 2007. Although large scale wind farms face many obstacles in China, such as an electric grid that is oriented towards cheaper coal-powered energy generation, on the strength of its domestic market growth, some analysts (additional link) believe Goldwind and other Chinese companies can rise in the next three years to challenge the world’s biggest turbine manufacturers including GE.

By 2020 the central government has pledged meeting 15 percent of China’s energy needs through renewable energy sources, including wind, biofuels, water, and solar. By 2050, the ratio is to be 30 percent including nuclear power. This means huge investments are required, but China is already a world leader in the use of at least one clean energy technology: Solar.

Star light, star bright

In many of China’s second, third or fourth tier cities, rooftops are covered by solar water heaters. The cheap, ubiquitous devices use the sun’s rays to heat water so that even rural workers can afford to take a hot shower after a long day’s work. In China, 200 million people have their water heated in this way, according to the NDRC. China has more than 50 percent of both the world’s production and use of solar water heaters, and other forms of solar energy are starting to grow as well.

Suntech Power (NYSE:STP) is the world’s third largest solar cell producer after Q-Cells of Germany and Sharp of Japan. It had US$1.4 billion in revenues in 2007. Revenues are expected to increase quickly as solar cell-generated electricity starts to approach price parity with carbon-based energy sources such as coal and currently high-priced oil.

The government is also active in solar energy policy, mandating that China should increase its current 100 million square meters of solar water heaters to 150 million by 2010, and 300 million by 2020.

With China set to take its place as the world’s largest economy by mid-century, its power needs will also dominate and, if it is not careful, the pollution problem will reach unprecedented levels. Green technologies promise to be among the best industries to be in during this challenging period of growth.  While China’s domestic market alone is a considerable prize for any green company, globally the potential is astronomical.  Gore’s call to action may help considerable to raise a green star over China.

Related Information:

A number of other commentators have written on China’s Green potential as a business opportunity. Here are a couple of articles that I recommend:

China: A Clean-tech gold rush

China’s Coming Environmental Renaissance

China’s Green Leap Forward

China’s Silver Lining

A possible Olympic legacy: A greener China

Sphere: Click here to see related content on other China blogs and news sites

Categories: China Supertrends, Drivers of the Drivers, Greening, Pro-business Policy
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This week in Japan, the G8 leaders pledged to cut greenhouse gas emissions by 50 percent before 2050. In the same week, China announced it would immediately cut more free plastic bags. What is the main point of difference between these countries’ environmental policies? It could be summarized thus: More talk versus real action.

The G8’s move to cut greenhouse gases (primarily CO2) by 50% was immediately decried by some environmentalists and tagged as insufficient by the group of developing countries, including China, on the sidelines of the summit.

For example, the pledge didn’t even make clear whether the cut was to be from 1990 levels (as is the general practice of the UN and the Kyoto Protocol when measuring emissions reductions) or present levels, which would significantly decrease the impact of the pledge. The US in particular has increased carbon emissions in the subsequent 18 years by 20%. From a BBC report:

…the US has refused to set any interim targets for cutting emissions - and environmentalists have criticised the progress at talks as “pathetic”.

Five of the world’s biggest emerging economies said the G8 should increase its targets to more than 80% by 2050.

China, India, Mexico, Brazil and South Africa - who will join talks on Wednesday - also urged developed countries to commit to an interim target of a 25-40% cut below 1990 levels by 2020.

Meanwhile, in China, the Ministry of Commerce on July 11 announced changes to the plastic bag ban policy. Effective immediately, restaurants, bookstores, and clothing stores will also be required to eliminate free plastic bags, charging customers for each one issued. In fact, this was a clarification of the already-implemented plastic bag ban law, which came into effect on June 1 this year.

Is Red China Becoming Green?

One law eliminating free plastic bags does not a green country make, but I believe that China’s environmental policy is frequently unfairly derided by critics as unenforced. In fact, such a broad generalization is inaccurate: Here in Shanghai, it’s true that not every store has implemented the policy at present, and it seems many of the aforementioned clothing, restaurant and bookstores presumed the law was meant to apply to groceries only, but this loophole has now been closed. In hypermarts, supermarkets, and convenience stores, it is already impossible to get free plastic bags, so I expect the new revision will take effect quickly in restaurants and other venues.

In our new book Supertrends of Future China, we cover the plastic bag ban law as an example of China’s new environmental movement and the central government’s willingness to put its words into action. The G8 really should pay more attention instead of just making more hollow promises.

Related information:

For more details on the plastic-bag ban update, the resourceful China Environmetal Law blog has a post on the matter, describing the hitherto unknown-to-me existence of ‘produce department hooligans.’

Categories: China Supertrends, Drivers of the Drivers, Greening, Pro-business Policy
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