“Jing-Jin-Ji” – future chances for German environmental technologies

In a nutshell:

As a result of decentralising the region around the capital city of Beijing to an extent never seen before, a megalopolis of about 150 million inhabitants will be created, which will offer new chances in particular to German technologies and ideas in the renewable energy sector.

from Dr. Martin Seybold

The term “Jing-Jin-Ji” unofficially stands for the current mega project of the Chinese government providing for the consolidation of the three neighbouring provinces of Beijing (“Jing”) ,Tianjin (“Jin”) and Hebei (“Ji”) to one single region, with each province being allocated one special economic function. The project aims, in the first place, at solving the severe infrastructure and environmental problems of the capital city of Beijing by way of targeted decentralisation. Although Beijing still remains the political and cultural centre of China and of the region, its functions, as envisaged by the country's economic policy, will be reduced in the future to those of a “knowledge centre only”. The industry location of Tijang will further expand its present function as a “processing centre” and a hub for international trade. The Hebei Province, which, geographically, virtually surrounds the Beijing Municipal Province, will take over the function of a “raw material centre” in the future. In doing so, China will probably also create the largest megalopolis in the world spanning an area of nearly three times the size of Bavaria and a home to about 150 million inhabitants.

In concrete terms, this means that the government will not longer tolerate a further worsening of environmental conditions in China's capital city. The energy-intensive heavy industry, which is harmful to the environment, will be relocated step by step from the outskirts of Beijing to the hinterland of Hebei during the next years. Moreover, with the new Chinese Environmental Law the government has already laid the foundation for future higher environmental standards applicable to the approval of production facilities.

But what does this mean to German enterprises? As with so many things in China: on the one hand a worsening of the investment conditions, but on the other hand also new chances that have as yet received little attention. As regards the existing branches, “grandfathering clauses” will probably formally apply to the valid permits, in particular, to environmental permits issued for production facilities. Nevertheless, it should be expected that local authorities will intensify the supervision of compliance with the environmental standards and impose more severe environmental restrictions to production facilities – this will imply increased investments in environmental technologies and production losses from time to time.

German enterprises currently planning to establish a branch office in the Beijing region will have to look for another location, if necessary, or should critically rethink their decision about their business location in view of the future regional policy changes in China. Within the borderlines of Beijing, new permits, even for simple production processes, are not likely to be issued in the near future because of environmental reasons

For the renewable energies sector, these changes will open up new chances to which little attention has been paid so far. First of all, energy concepts based on urban decentralisation have been discussed for quite a while as a solution to the future urban development of China’s agglomerations, even if mainly in the form of scientific discussions and, at best, internationally supported sample projects. So far, in practice, the aspect of most favourable construction and cheap production costs has always been given priority over aspects such as sustainability and environmental considerations – this also applies to the approval of construction projects and productions facilities. This will have to change in respect of China’s megalopolis “Jing-Jin-Ji” in the future.

It is a declared objective of the Chinese government to expand the existing economic areas around Guangzhou and Shanghai not merely by adding by a third metropolitan region around Beijing. In fact, the government first and foremost intends to finally cope with the massive environmental pollution by way of decentralisation, a measure which is as a novelty to China’s urban development planning. As a result, Beijing as the future “Knowledge Centre” for North China and the surrounding provinces will develop from an applier of future environmental technologies and ideas to a laboratory for the renewable energy sector in China.

In other words: In our opinion, the investment conditions in Greater Beijing offered to German enterprises specialising in products and services in the renewable energy segment have never been better. Enterprises venturing into Beijing as pioneers in environmental technologies and processes will contribute their knowledge and products to shape the future in the probably largest megalopolis in the world.