Despite the slightly lowered prospects for growth in the overall market, the energy sector looks to attract an out-sized percentage of investment going forward. China has now become the world's largest energy consumer, surpassing the U.S. for the first time since the statistics first began. While 10 to 20 years ago, this event would have been met with fanfare in China as another symbol of their growing industrial might, Chinese leaders have downplayed the news saying that the report was flawed and inaccurate, with one Chinese official saying that, "the IEA's data on China's energy use is unreliable." This shows just how far the world has come in terms of attitudes on energy usage in just a few short years, leaving the Chinese scrambling to come up with a variety of new technologies and ideas in order to help reduce the country's dependence on oil and coal while still allowing the economy to grow unimpeded by energy issues [also see the Definitive Guide To China ETFs].
In light of this, there are now rumors that the Chinese government is planning to spend roughly 5 trillion yuan ($738 billion) over the next 10 years on clean energy programs, in order to reduce the country's dependence on oil and coal for power. By doing this, the government hopes to nearly double the amount of energy that comes from non-fossil fuel sources in 10 years' time, increasing the overall percentage of non-fossil fuel energy from 8% to 15%.
"This does seem a very high figure on spending, although it's not clear how this has been worked out," said Barbara Hon, an analyst at China Everbright Securities in Hong Kong. "The government is taking the issue of cleaner energy seriously for the reasons of climate change, energy security. It's already meeting some of its targets for sectors like wind power well ahead of schedule."
The country is already a big player in the alternative energy market, attracting over $11 billion in capital for the sector in the second quarter alone -- more than the U.S. and the EU combined. Additionally, the country has invested its own funds in alternative fuels, plowing close to $35 billion into the sector; a 50% increase over the previous year [also read What's Fueling The China Energy ETF? for more on the Chinese energy industry].
Clearly, the country needs a lot more energy to sustain its economic growth, especially given the fact that on a per capita basis, China still uses about one-fifth as much energy as its counterparts across the Pacific in the U.S. If China is ever able to get all of its citizens up to U.S. living standards it will have to be through clean energy programs since there is not enough oil and coal to support a continually growing Chinese economy that is fast approaching developed market levels in many areas of the country. Because of these trends and the likely massive spending program, the following three ETFs look to be good long-term plays to take advantage of growing Chinese demand for alternative sources of energy [also read the Definitive Guide To Clean Energy ETFs].
Arguably the biggest push towards clean energy in China has come through wind power, which is quickly growing into the alternative power source of choice for the world's most populous nation. In fact, China erected more wind turbines in 2009 than any other country and may install a record 18 gigawatts of wind-power capacity in 2010, Bloomberg New Energy Finance estimates show. One way to play this growing trend is with the PowerShares Global Wind Energy Portfolio
Nuclear power is quickly gaining favor as a source of power in China; of 60 nuclear power plants currently under construction worldwide, one-third are going up in China, said Fatih Birol, chief economist of the International Energy Agency (IEA). One fund that stands to benefit from this push to nuclear power in China is the PowerShares Global Nuclear Portfolio
Broad Clean Energy Sector
For investors not sold on either of the above options, the iShares S&P Global Clean Energy Index Fund
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