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GreenWorld Capital, LLC
Capital for a Greener World
Opportunities for China FDI in U.S.
Renewable Energy and Clean Technology
Presented by
David Elkin
University of Pennsylvania
April 16, 2013
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Capital for a Greener World
A Big Thank You to Our Sponsors at
University of Pennsylvania
This presentation was generously sponsored by the University Pennsylvania
Chapter of Global China Connection, The Center for East Asian Studies, and
the International Relations Program
And co-sponsored by Penn Engineers Without Borders, Penn International
Sustainability Association, Wharton Energy Club, Penn Oikos, and Wharton
China Business Society
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Capital for a Greener World
©2013
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Capital for a Greener World
The Dragon Turns Green: China's Manufacturers Adapt to a New Era
Published : June 03, 2009 in Knowledge@Wharton
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GreenWorld Capital, LLC
Capital for a Greener World
Growth in China Annual OFDI Flows
China's OFDI Flows from 2005 to 2012
90.0
~$80B in 2012:
China was the
5th largest
provider of FDI
in the world
80.0
70.0
$ Billions
60.0
50.0
40.0
30.0
20.0
10.0
0.0
2005
2006
2007
2008
Ministry of Commerce
2009
2010
2011
2012
The Heritage Foundation
Source: Statistical Bulletin of China’s Outward Foreign Direct Investment by MOFCOM and Heritage; UNCTAD
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China OFDI on the Cusp of Dramatic Growth
Relative Size of China OFDI vs. Advanced Economies in 2011
OFDI
Flows/GDP
OFDI
Stock/GDP1
China
1.0%
5.0%
G-20
2.0%
26.4%
OECD
2.8%
38.4%
Transitional economies have average ODFI Stock/GDP of
15%2. At this level, China would have OFDI stock of $1.1
trillion in 2011, and $3.7 trillion by 20203. Actual China OFDI
reached only $365 billion in 2011.
1. Source: OECD Statistics, World Bank, China’s National Bureau of Statistics, UNCTAD
2. Source: “An American Open Door” by The Wilson Center, 2011
3. Based on Standard Chartered’s China’s projected 2020 GDP of $24.6 trillion
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Capital for a Greener World
Market Potential for China OFDI to U.S.
U.S historically has been world’s largest recipient of global
FDI at 17%, 3x larger than the next largest recipient
Market Potential provided that…
1.China’s economy grows to $24.6 trillion by 2020 as
forecast
2.China’s OFDI stock/GDP = 15% transitional economy
average
3.U.S. receives 17% of China’s OFDI
Market Potential = $620 billion
(equivalent to ½ of $1.2 trillion of U.S.
Treasuries that China holds in reserve)
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Inbound FDI is Integral to U.S. Economy
According to the President’s Council of Economic Advisors,
in 2008, U.S. majority owned affiliates of foreign companies:
•Employed 5.7 million U.S. workers, or 5% of private
workforce, with 13% in manufacturing
•Paid average wage of $71,000+ per employee (31% higher
than national average)
•Owned $11.7 trillion in U.S. assets
•Generated $3.5 trillion in annual sales
•Invested $188 billion in Capex, 11.3% of total private
investment
•Invested $40.5 billion in R&D, 14.3% of total private R&D
•Source of 18.1% of U.S. exports
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Capital for a Greener World
Presidential Support
President Obama –
– “… business investment in the United States by
foreign firms is a major engine of economic growth
and job creation. My administration is committed to
enhancing the efforts of the United States to win the
global competition for business investment by
leveraging our advantages as the premier business
location in the world”
Executive Order Creating Select USA. June 2011
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U.S. Will Be Major Recipient of China OFDI:
Push Factors from China
©2013
Diversification into Hard
Assets
Target Investments Into
Advanced Economies
Chinese government
effort to diversify $3
trillion in foreign currency
assets to hard assets
People’s Bank of China
to create $300 billion
fund to target U.S. and
Europe investments
The $500 billion CIC has
43.8% of equity holdings in
North America; now
targeting 51% to PE, Real
Estate, and Infrastructure
Goals to secure energy
and mineral resources
and acquiring advanced
technologies
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Capital for a Greener World
U.S. Will Be Major Recipient of China OFDI:
Pull Factors from U.S.
©2013
Multi-Level U.S. Efforts to
Attract FDI
Distressed Asset Pricing
Federal, state, and local
government efforts:
“Select USA”, peer-topeer discussions with
Chinese officials
Technologies for China;
capital for growth and
operations for U.S. firms
Financial incentives:
grants, low interest loans,
tax-exempt bond
financing, tax credits
Higher willingness to pay
by buyers given capital
resources and China
domestic growth
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Long-Term Pull Factor: U.S. Educated Future
Chinese Leaders
“Today’s youth are
tomorrow’s leaders.
International education
creates strong, lasting
relationships between the
U.S. and emerging leaders
worldwide.”
- Ann Strock, U.S. Asstnt
Secretary of State for
Education & Cultural Affairs
©2013
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Capital for a Greener World
U.S. Renewable Energy and Clean Tech Will
Benefit from China OFDI to U.S.
Of the 7 strategic emerging industries (SEIs) identified by China’s
12th Fifth Year Plan, 3 are related to sustainability:
1.Biotechnology
2.New Energy
3.High-End Equipment Manufacturing
4.Energy Conservation and Environmental Protection
5.Clean Energy Vehicles
6.New Materials
7.Next Generation IT
2020: 15%
MOFCOM Target SEI
Contribution as % GDP:
2015: 8%
2011: 2%
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Key Areas of Opportunity for U.S. Renewable
Energy and Clean Tech
Diversification into Hard
Greenfield Renewable Energy Projects:
Assets
• Renewable energy was fastest growing sector for global FDI from 200311; China emerged as one of the top 10 providers of global FDI targeted
to renewable energy projects
• Many renewable energy projects across N. America need capital due to
legislative uncertainty, financial market stress, and expiration of grants;
significant effort is expected at federal, state, and local levels to attract
greenfield investments from China to fill the funding gap
Operating Companies and Technology:
•U.S. is home to 7,000 clean tech companies (37% of worldwide)
•BUT MORE IMPORTANT – 58% of the “professionally sponsored” (PE, VC,
etc) clean tech companies are in the U.S. GWC’s PED catalogues and
analyzes the subset of companies likely to appeal to Chinese investors,
tracking 1,050 clean tech firms with professional sponsors, covering each of
the sustainability focused SEIs plus Advanced Materials
©2013
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Capital for a Greener World
Industry Breakdown of Companies In The
Portfolio Enhancement Database
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Industry
Share of 1,050 Company
Population
Energy Generation
34%
Energy Efficiency
16%
Energy Storage
9%
Air & Environment
7%
Advanced Materials
6%
Water & Wastewater
6%
Transportation
5%
Recycling & Waste
5%
Agriculture
4%
Manufacturing / Industrial
4%
Energy Infrastructure
4%
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Capital for a Greener World
A Word on the Committee on Foreign
Investment in the U.S. (CFIUS)
Recent
Case
Wanxiang’s recent acquisition of A123 out of bankruptcy:
the transaction received opposition, but Wanxiang
offered more than twice the $125 million bid of Johnson
Controls.
Resolution
After lobbying by A123’s creditors, the $256 million
transaction received CFIUS approval after agreeing to
exclude a $2.6 million military contract, approximately 1% of
the transaction value.
Our View
Given the high volume of cross-order transactions involving
Chinese investment, there will likely be additional instances
where CFIUS may block certain deals. We expect these
instances to be rare and most transactions that raise issues
at CFIUS will be handled with negotiated mitigation.
©2013
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Partners LLC, member of FINRA and SIPC
GreenWorld Capital, LLC
Capital for a Greener World
Conclusion: Chinese OFDI to U.S….
• Provides a much-needed source of capital for
U.S. public and private stakeholders
in the
renewable energy and clean tech industry
• Provides attractive investment returns to Chinese
investors and useful technologies for Chinese
companies
• Accelerates deployment of renewable energy
and clean tech projects in the U.S., in turn
preserving and creating U.S. jobs
• Facilitates U.S. companies’
enormous Chinese market
access
to
the
THANK YOU!
©2013
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Broker dealer services provided through Mufson Howe Hunter &
Partners LLC, member of FINRA and SIPC
GreenWorld Capital, LLC
Capital for a Greener World