International investing isn't just about knowing where to put your money. It's also about knowing where not to put your money.
As the world's most vibrant and energy-intensive emerging market, but also one of the most politically repressive places on earth, the development of renewable energy in China presents a quandary for green energy investors.
You may not be a tree-hugger, but people who would prefer to place bets on over-the-counter renewable energy stocks over, say, a junior resource company of similar market cap often make their choices with a dose of idealism.
The same goes for government-led financial choices. As of Wednesday, German officials have broken off talks on renewable energy financing that were to take place in Beijing in May. According to German Development Minister Heidemarie Wieczorek-Zeul, "The two sides can only arrive at a solution through dialogue. Under these conditions, it's hardly possible to conduct government negotiations."
In 2007, Germany promised a 65.7 million euro ($105 million) loan to China for investment in renewable energy and efficiency improvements. Germany, which has become a clean energy dynamo in recent years with the world's largest market for solar energy, is a country China needs on its side financially and technologically.
Now the question for private investors is, to what extent will the Tibetan situation affect Chinese energy stocks?
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German Financing Cut; Will Stocks Suffer?
Out of China in recent years we've gotten the stock offerings of several clean energy companies like Trina Solar, Yingli Green Energy and LDK Solar. The executives and bankers who brought those firms public were able to tap so much interest in drawing China away from coal-fired power that a slew of them went straight to the New York "big boards," listing on the NYSE and NASDAQ instead of messing with the over-the-counter bulletin boards and pink sheets.
As the Chinese economy has become the global investing story of the decade, the situation on the ground still has its independent ebbs and flows.
Those of us who have spent time in China's western reaches, which are historically dominated by some of China's fifty-plus ethnic minority groups, have waited with bated breath for events like this week's Tibetan uprising.
When embarking on the entirely worthwhile venture to become a globally-minded investor, political risk is foremost in the mind. You're banking on the management skills and market prowess of strangers in faraway lands, instead of strangers in your own country who may make you slightly more comfortable by conducting conference calls in your native tongue.
One thing is certain with regards to the current turmoil in China, which spreads beyond the Tibetan Autonomous Region into the provinces of Sichuan, Gansu and Qinghai, where I spent a month in 2005--Chinese solar companies are thousands of miles away.
China's industrial heartland is in the east, where pollution is so heavy and population is so concentrated that the Beijing government has been encouraging denizens of eastern provinces to pack their bags. They've launched a "Go West" campaign and built the world's highest-elevation railroad to traverse the Tibetan Plateau, among other things.
In fact, these measures and the steady influx of Han (ethnic Chinese) into formerly Tibetan-majority areas is a large part of the simmering resentment that is now boiling over in Lhasa and elsewhere.
Tibetans Need Renewable Energy
If anything, seeing subsistence farmers in huts and roadside encampments across the Tibetan countryside washing clothes in the river and burning noxious coal to power radio sets and cook food has made me more bullish on Chinese renewable energy.
It is Tibetans, Uyghurs, Monguors, Salars and dozens of other groups who stand to gain the most from solar energy and water procurement technology. They have the potential to leapfrog coal-based power systems, turning small villages into self-sufficient showcases of off-grid power.
And, like it or not, well-connected Chinese businessmen in faraway cities like Shanghai are in the best position to put China's far-flung minorities in the world's energy avant-garde.
We're watching this situation carefully for investment decisions in our Green Chip International service to see how Chinese solar energy companies will be affected. Stay tuned for the latest.
Kind regards,
Sam Hopkins
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