7 Fast-Growing Industries To Watch For In China

Shanghai smog. Photo: Getty

The big new trend in China is a race to develop alternatives to the fossils fuels which are choking the dragon in what has been called the airpocalyse.

The China government is throwing large sums of money at the pollution problem and its industry is running with it.

Coal is by far the dominant energy source in China, accounting for around 68% of total primary energy consumption in 2012.

China’s State Council plans to spend 1.75 trillion Yuan (around $US277 billion) between 2013 and 2017 to combat air pollution, according to the National Australia Bank’s latest China Economic Update Report.

IBISWorld, the Australian-based industry research company, analysed more than 230 Chinese industries and compiled a list of the seven fast-growing industries to watch out for.

The analysts looked for revenue growth over the past five years and expected performance to 2018.

One trend stood out above all: China’s quest for energy conservation and independence, through the development of alternatives to fossil fuels, is playing an integral role in determining which industries are growing the fastest.

IBISWorld said:

Development of alternative energy sources – such as wind, hydroelectric, and solar – is at the top of the Chinese Government’s agenda due to escalating domestic electricity demand, a heavy reliance on imported oil and gas resources, and growing environmental pollution concerns.

Deteriorating air and water quality in China’s big cities have led to increasing regulation of high-polluting sectors.

This has led to strong growth in environmental protection related industries, such as energy-efficiency consulting, pollution treatment equipment manufacturing, environmental monitoring and water pollution control.

Here are the top seven industries:

Pollution treatment equipment manufacturing

Used for controlling environmental pollution, as well as for processing waste materials and recycling industrial materials. In 2013, revenue for the Pollution Treatment Equipment Manufacturing industry in China is expected to total US$36.5 billion, up 30.0% from 2012. Annualised revenue growth over the past five years is estimated at 30.4%.

Energy efficiency consultants

IBISWorld estimates that the Energy-Efficiency Consultants industry in China will generate US$49.4 billion in 2013, representing annualised growth of 46.7% over the past five years. Based on the Chinese Government’s 12th Five-Year Plan (2011 to 2015), energy efficiency service companies will continue to receive strong government support. IBISWorld projects that industry revenue will grow 35.5% annually to reach US$225.4 billion over the next five years.

Water pollution control

Demand for the Water Pollution Control industry in China comes mainly from government institutions responsible for handling the rising pollution of inland waters and underground water. Revenue for the industry is expected to total US$1.0 billion in 2013, up 13.2% from 2012. In the five years through 2013, industry revenue has been increasing at an estimated annualised rate of 16.4%.

IBISWorld anticipates that rising government investment and increased collaboration in the treatment of cross-regional waters will drive revenue up 11.0% annually to US$1.7 billion by 2018.

Environmental monitoring

The Environmental Monitoring industry in China monitors and tests for pollutants – such as liquids, gases, solids and radiation – in the environment. Revenue for the industry is expected to rise 19.7% to US$1.7 billion in 2013, with growth of 18.1% annually over the past five years. The Chinese Government is bringing more commercial reform to the industry to deal with capital shortages and to improve efficiency, both of which are expected to drive strong growth of 16.0% annually over the next five years.

Alternative energy generation

With the fast development of China’s economy and rising demand for power, the limitations of traditional and imported energy resources, such as gas and oil, are becoming increasingly apparent.

  • Among the renewable energy modes being developed in China, wind power currently has the most potential. Revenue for the Wind Power industry in China is estimated at US$13.4 billion in 2013 and has been growing 62.1% annually over the past five years. Revenue for the Wind Power industry is forecast to grow 22.2% per year to reach US$36.6 billion in 2018.
  • In the five years through 2013, revenue for the Hydroelectric Power Generation industry has been increasing at an annualised rate of 13.5% to US$42.8 billion, driven by increased overall investment in China’s alternative energy sector and the implementation of a market-based pricing mechanism. In the next five years, rural energy supply and the development of small hydropower plants are expected to grow in importance, which will lead to continued revenue growth of about 13.0% per year.
  • The still immature Solar Power Generation industry has been developing rapidly, experiencing phenomenal growth of 195.8% annually over the five years through 2013 to total US$1.6 billion. However, it does face considerable challenges. A complete, well-developed electricity distribution network is essential for maximising usage of solar power but current solar power resources are scattered across the country.

Other industries forecast to grow strongly over the next five years include Nuclear Power Generation and several others in the nonpolluting information, financial service and retail sectors, such as Online Shopping, Furniture Stores, Social Networking, Life and Car and Property Insurance, Securities Brokerage and Transaction Services, and Software Development.

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