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Speaker 1: Bloomberg Audio Studios. Podcasts.
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Speaker 2: Radio. News.
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Speaker 1: For the last couple of weeks, I've been reporting in China, seeing the future of clean tech and meeting the people building it. The last time I was here was eight years ago. The country was in the midst of a pollution crisis.
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Speaker 3: The air was hazy.
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Speaker 1: I never saw blue skies. This time, as I've traveled from Shenzhen to Beijing and many cities in between, it's remarkable just how clean the air in China is now. That's partly to do with electric vehicles, but also better pollution control on industries and power plants. And now a lot of those people who were involved in the cleaning up of air pollution have turned their minds to a bigger problem, climate change. It's something that people want to talk about and to show what they are doing to tackle it. My guest today is Tony Hsieh, and his career straddles the clean air, clean tech world. He's been the chairman of Bluetech Clean Air Alliance since 2013, where he's helping to grow the next era of climate startups. We spoke in Bloomberg's Beijing office.
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Speaker 3: This is Zero.
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Speaker 1: I'm Akshat Rati. Today, inside China's clean tech startup scene. Welcome to the show, Tony.
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Speaker 3: It's my pleasure.
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Speaker 1: So you've worked on environmental issues for more than 20 years in China.
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Speaker 3: Yes.
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Speaker 1: Can you tell us briefly how you got to doing it and what types of experiences have shaped your work?
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Speaker 2: Actually, I'm an engineer by training. I majored in environmental engineering and material science and engineering. So I've been doing this for over 20 years. So we can say for the past 20 years in Korea, I have spent... half of my time dealing with pollution issues and half of my time dealing with climate change.
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Speaker 1: Now, I've returned to China after eight years and every major city I've been in, whether Shenzhen or Shanghai or Beijing, the air is just so much cleaner. What were the major policies and technologies that made it possible to have cleaner air?
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Speaker 2: Back in 2013, that's the year when we launched the Clean Air Alliance of China. with support of leading research institutions in China, and also with funding support from Energy Foundation.
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Speaker 3: So we did a lot of things since then.
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Speaker 2: At that time, I think that the best thing is that we have.
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Speaker 3: The government commitment.
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Speaker 2: So we have central government which commit that we will reduce emission.
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Speaker 3: We will fight against the pollution.
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Speaker 1: But how did you get to the point, because there was a lot of activity before 2013, that got the government to make that commitment?
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Speaker 2: It's the raising awareness of the house issues related to pollution.
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Speaker 3: And also, before that, we don't even know PM 2.5.
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Speaker 2: In 2012, that's the year we actually changed the air quality standards. Then we have PM 2.5. Before that, we only have PM 10. Right. And if we look at the PM 10 number, maybe we will see, okay, it's a good day. The air quality should be good, but you can see haze very clearly there. In 2012, we have the new air quality standards, and people are aware that's a severe issue related to health.
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Speaker 3: It's not, it's everybody knows.
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Speaker 2: And the pollution level goes to that, and then the awareness level goes up. Then I think altogether made the change.
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Speaker 1: Yeah, because there was all this work also done by the U.S. Embassy, which had its own air quality monitor. Then after 2013, the Chinese government also installed air quality monitors around the country to show what air quality was like.
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Speaker 3: Yeah, they have.
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Speaker 2: Actually installed over 1,400 national controlled air quality monitoring stations. And they all release hourly data about air quality. If you have hourly data, you cannot fake it. Yeah, because it's continuous. Then the data quality will be much improved. So we can see what the real air quality are there and then what measures or actions can be taken.
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Speaker 1: And then you did a lot of policy work to try and support the move to cleaner air. What type of policy work did you have to do? And how does policy work that you do then eventually make it to government level?
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Speaker 2: In the year 2012 and 2013, because we already have very strong government commitment, then the policymakers are looking for solutions all around the world. So our first task is we bring international experience back to China. So we work with UK experts, US experts, German experts. We work with everybody to learn what exactly they have done during their pollution time. And I still remember the first report we released is about the emergency actions. So we started the experience from UK, from US in 1970s, in 1950s. So what they are doing when there is a heavy pollution come. Because during pollution episodes, it actually caused a lot of house risks. Only exposure for two or three days will cause very, very big damage. And we produced that report, and also the central government is looking for what we can do. So then the report was actually given back, given to the Ministry of Environmental Protection, and also leading think tanks. So a lot of suggestions were actually integrated into the policymaking process.
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Speaker 1: And can you talk through some of the policies that actually worked?
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Speaker 2: For example, during pollution days, schools... Because we have the vulnerable people, right? So the kids are vulnerable people. So schools can shut down. Children should not go outside. And also for companies, factories that are generating pollutions, they may have to stop manufacturing. And we also created a new approach that if they can have some evaluation process, if their pollution level can reach to very low, They can exempt from these requirements. So that's also ultra low emission standards. If they can reach to that, then they will not be affected by the emergency actions.
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Speaker 1: And then a longer term policy that worked, of course, is the deployment of electric cars. Again, just going through major cities now. You can see so many electric cars on the road. Almost half of the cars already on the road seem to be electric. And that has helped reduce air pollution as well.
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Speaker 3: Of course.
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Speaker 1: And it's really made the streets a lot quieter. On the technology side, beyond electric cars, what type of technology solutions helped make the air cleaner?
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Speaker 2: I think one is for the energy side. So we talked about the electric cars. That's for mobile sources. There are also a lot of stationary sources because the air pollution mostly coming from, I think, the burning of the fossil fuel. That's one of the major sources. In China, a lot of coal-fired power plants are changed to, we say, ultra-low emission. When we say ultra-low emission, it means the emission level is comparable. to gas-fired power plants. So that's a large shift. Right.
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Speaker 1: And that's not CO2 emission, but particulate matter.
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Speaker 3: Particulate matter.
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Speaker 2: And also sulfur dioxide, NOx, and all the air pollutants. This policy actually goes to not only power sector, but also steel, cement, many very heavy pollution industries.
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Speaker 1: As you talked about, your own work has now pivoted towards climate change and carbon dioxide, particularly after 2020, when President Xi Jinping announced that China will reach carbon neutrality by 2060. A lot of activities across China have focused on reducing CO2 emissions. Talk us through what pivoting your work meant.
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Speaker 2: Yes. For example, so far, like in Beijing, the pollution level, IPM 2.5 concentration from 2013 to now, I think it's been improved by 70%. So it's large. It's not only in Beijing. For Jingjing, even for the whole country, that's a significant improvement. That's also a demonstration that the policy framework works. So we believe we can do something new. That's why we shift our focus from policy side and more into the technology side. We believe the technology, the power of technology, innovation, together with the power of market.
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Speaker 3: We can make a change. Then we shift to technology.
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Speaker 2: And so for technology, we believe climate change issue is because it involves the energy and it's more pressing needs. Globally, so we believe this can bring more benefits. So so we focused a larger area for climate change for climate change we actually in 2018 we established blue tackling airlines, so within the lines we deal with both air quality and climate change and then After our president announced the carbon peaking and carbon neutrality goals, climate change became a very hot topic. And in 2022, we designed our award program.
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Speaker 3: In the past, it's Blue Tech Award.
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Speaker 2: It's calling for King Air Technologies all over the world to compete and to be applied in China. Then it changed to Blue Tech Carbon Neutrality Pioneers Award.
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Speaker 3: So we're focusing on the key.
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Speaker 2: Sectors like renewable energy, energy storage, hydrogen, and carbon storage use, and also all that technologies. So we're trying to find the innovators who can actually change progress of climate change in China and even in the world.
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Speaker 1: And with Bluetech, you have now worked with something like 400 companies. climate tech startups. Now, sitting in the West, we hear a lot about climate tech startups. Most of them tend to be found in America because there's a lot of funding available in America. But given what's happened on the politics in recent years, that funding has become more difficult. So some places like Europe, you get more climate tech But very few people know about the climate tech landscape in China. 400 is a big number. Can you give us a few examples of companies that you have been working with that you're very proud of that perhaps won the Pioneer Award most recently?
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Speaker 3: Yes.
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Speaker 2: For climate tech companies, I think we've been working with now is over 400. Last Friday, we just released the winners of the fourth Blue Tap. Carbon Neutrality Pioneers Award. So we have another 15 winners in this award. So in China, there are a lot of companies that are working in these fields. And many of them are related to different research institutions because now it's very difficult to invent new technology just from home. In Chinese, we call it yin ke ji. So maybe in English, it should be translated as deep tech. So there should be a lot of accumulation experience and investment from research projects. Maybe the funding are coming from the government for the research period.
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Speaker 3: For us, I think we are not working with very, very large companies.
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Speaker 2: We have partners with large companies, but they're actually the industrial partners who can provide industrial support for these new companies. So we work mostly with companies who are not yet publicly listed. So still at the early stage. So which means from the Western media or Western sphere, it's.
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Speaker 3: Difficult to know them.
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Speaker 2: So in China, we have, I think, these companies that they are all leaders in different subsectors. So, for example, in hydrogen sector, now, because in the past two years, hydrogen has experienced a global, we can say a global disaster. Many companies collapsed, but we still have some companies who raise very well, steadily. For example, HydroTech. HydroTech is a company who produce square-shaped alkaline electrolyzer. And so they've been actually nominated to us from Aramco Ventures. So it's a Aramco Venture invested company.
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Speaker 3: Saudi Aramco. Yeah, Saudi Aramco.
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Speaker 1: Yeah.
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Speaker 3: And they are pretty good.
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Speaker 2: And so the team is from Tsinghua University. And, you know, it's a leading university in China. And it's been established not for long. but it has successfully raised several rounds of very good investments. And also they have their establishment not only in China, but also in Middle East, in Europe.
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Speaker 1: So in the West, you have typically levels of investment that come in for startups to go from an idea in a university to getting some angel investment that will take it to outside the university and start to hire some people. Then maybe it gets a series A or a series B in which it is now able to show that the technology works outside the lab. It's going to maybe do a demonstration of that technology in the real world. Then it does a pilot, which is sort of maybe one-tenth the scale of a commercial plant. Then it does a commercial plant. And then the company maybe goes public. That's typically the life of a startup. How does it work in China? Is it the same?
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Speaker 3: It's similar.
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Speaker 2: But I think there are some major differences along the process. Because in China, I don't think we have that abundant investment in the very early stage for the seed level and for the angel level. I don't think there are plenty of investors.
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Speaker 1: Yeah, not lots of capital.
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Speaker 3: Yeah, I think in China, a lot of capital are focusing on later stage.
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Speaker 2: post-C level, post-D level, before IPO. I think for that part, it's more sufficient. But for early stage, before A level, or after A to B level, I think they are limited.
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Speaker 1: What do the startups then do? How do they get around that problem?
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Speaker 2: So for the C level, we do not have a lot of market base. Then they will seek for support from their family, friends. So this is a typical, yeah, very typical phenomenon. And for the angel round in the past, I think before China-US trade war, I think a lot of US-based investment funding play very important roles. for the angel round.
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Speaker 3: But now, because they.
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Speaker 2: Are quitting, there's some local government stand out.
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Speaker 3: They are not subsidizing.
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Speaker 2: They actually, they created, they invest in some early stage investment fund. Yeah.
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Speaker 1: No, that is true. I mean, there's a very famous example of an investment from a local government into NIO, the electric car company. And, you know, it did so at a very early stage. And now, of course, NIO is doing really well on its stock market. And so the local government equity stake has actually been very profitable. Yes.
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Speaker 2: For NIO, that's Hefei Industrial Investment Fund. Actually, this fund also invested the PCE company.
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Speaker 1: PCE is polycarbonate ether, a type of polymer. And the company's name is Hefei Poly Advanced Materials.
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Speaker 2: The PCE company is the company who actually use carbon dioxide as raw material to produce. It's like a chemical company to produce PCE, polycarbonate polyol. So this one can be used in many consumer products or industrial products. And so they already have their largest scale manufacturer ready this year. And they received investment from, I think for the early stage, they got funding from the Enzo, Sinopac Enzo investment. That's a leading Chinese central government related investment fund.
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Speaker 1: Because Sinopec is a state-owned oil company.
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Speaker 2: Yes, yes.
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Speaker 1: And it is interesting because using carbon dioxide to make materials is something that lots of people have talked about. It is something that is theoretically possible, but requires energy to do that work. And in China, given it doesn't have much of its own oil, it imports a lot of its oil, having use for carbon dioxide to do what otherwise would require oil, is a very good strategic technology that is also good on the environment.
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Speaker 2: Yes, and it actually deals with the oil limits. And also, why I highlight this company, because their products are competitive. So compared with traditional products, they can even be cheaper, more cost-effective. This means that they have a better market share potential in future.
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Speaker 1: After the break, more of my conversation with Tony Hsieh, chairman of the Bluetech Clean Air Alliance. If you are enjoying this episode, please take a moment to rate and review Xero on whichever platform you're listening on. A lot of the startups that become big companies in the West that we now know as either Tesla or Amazon or Google, they started off as small companies and they kept building and building and building to become the giants that they are. They had their core technology. In the case of Google, it was the search engine. In the case of Amazon, it was this online store. In the case of Tesla, it was the electric car. And they developed other business lines as they became bigger. But the core technology they kept investing in and they developed their expertise in that technology and became big companies. In China, it's different. If you look at an example of a BYD, it starts by making batteries, make some batteries, make some profits, then says, oh, maybe we should make cars and goes and makes cars with internal combustion engines. Got no expertise in it, but just because the founder is interested in cars, they go and make cars. And then they realize, oh, the Chinese government is interested in electric cars. We have batteries. We can make electric cars. And then they become electric car company.
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Speaker 3: Right.
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Speaker 1: This visit, I met a company called Innovance, which is an industrial robotics company, but they started with elevators and elevators require motors that are run on alternating current. And so they develop motors. Then those motors were useful also in industrial robotics. So they started making industrial robotics. And now with those motors being used in industrial robotics, they are also making electric car motors, which are different technology, but similar idea. And so they added all these different business lines and that's how they grew their company. So it's a very different way in which Chinese companies go from being small to big.
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Speaker 3: Why is that?
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Speaker 2: Because I think that's the investment environment. In the US, I think the investment resources are very sufficient. So a lot of companies, they can build up They can build up very good image and still raise funds, raise investment. And then at a later stage, then they can become a giant company as a result. But in China, I think the investment is not that sufficient. So the companies, they have to, at certain critical points, they have to make profits. If they can make profits and they can use the profits to reinvest in other stuff, then like what you mentioned, BYD, they made a very good battery. So they are very good battery manufacturer and they made enough profit and then reinvest in related industry. For example, the new energy vehicle. So it's very relevant to their battery, right? So you can see it as an extended business through their battery business. So I think that's a difference, yeah.
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Speaker 3: Yeah, I mean, the.
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Speaker 1: Pivot actually went through an internal combustion engine rather than an electric car battery. The pivot to electric car battery came later. So it was quite a big pivot to try and make cars.
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Speaker 2: Yeah, my feeling is that because if you want to make the battery to be ready for electric cars, it really takes time because the safety issues. So, and you have to learn how to make vehicle because making vehicle is not an easy task. We actually involved in the first runs of the promotion of BYD vehicle, electric vehicles in Shanxi, Taiyuan province, Taiyuan city at the time, that's 2016. So Taiyuan decided to change all their taxes into electric vehicle. So that's $ 8, 000.
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Speaker 3: Texas, so that's a lot, right? At that time, it's BYD.
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Speaker 2: So BYD, firstly, they build up the new energy vehicles and supply it. And they also build up a lot of charging stations for the whole city. And we can see, because we did the survey, so in the beginning, people have a lot of complaint about this new electric vehicle, because Some of them, they didn't follow the way of how vehicle was designed. So there's a learning curve, but now PYD is already doing a great job.
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Speaker 1: Yes, a lot of these companies talk about, very openly talk about reverse engineering. They look at what a product exists in the market that is better than their product. They open it up, they reverse engineer what is good about it and how to deploy those developments inside. But now when I talk to companies, they're like, that was in the past. We used to do that. Now we innovate. We do our own research. We come up with our own ideas and you can see the result. And at least in electric cars, those results are there for everybody to see. Lots of Western markets now prefer a Chinese electric car because it's more affordable and gives you the same number of features, et cetera, and has a very good quality battery. But yeah, that process took a while. Are there technologies that are homegrown Chinese technologies in these startups that you are seeing become bigger and bigger players in the market?
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Speaker 2: Yes, maybe I can firstly give you some numbers. Yeah, so because we also, we are a think tank organization. We not only matchmake company with investors, with industrial players, we also do technology.
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Speaker 3: Assessments and we know patents very well. So we have some number about the patents.
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Speaker 2: From 2016 to 2024, China has filed about 45% of global patents in terms of green technology, low carbon technology. 45% is much more than the sum of US, EU, Japan, Korea, they add up together. I do believe, we also did analysis on articles, literature for the leading journals, for the area in energy storage, in hydrogen, in many of the sectors that Chinese authors accounts for 30 to 40% of the high citing articles. I do believe there is a very high popularity here in China regarding the innovation. So there are also a lot of new innovations coming out to be used.
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Speaker 1: And can you give me a few other examples of startups where this innovation is being applied?
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Speaker 2: So for the companies I mentioned, they all have innovations from China. For example, the PCE company. So they are actually from Zhejiang University. The core technology is about the catalyst. So they can use the catalyst to convert carbon dioxide into PCE.
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Speaker 3: So that's their core technology. So this is from China.
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Speaker 2: And then from the pilot, the laboratory size and pilot size. And now they have a large manufacturing site to produce that. I can also use another sample that's for energy storage. We don't talk about the lithium battery. They're already very mature in the market. So for the compressed air energy storage. So we have a company called Zhongchu Guoneng. So it's actually a company, their technology are from Chinese Academy of Science. They get funding from, firstly, the Academy of Science got research funding. They developed the prototype, right? And then they decided to go to the market. And then they got investment from different investors, including both market-based and state-owned company-based investment.
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Speaker 3: So, and the local government investment as well.
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Speaker 2: So, they have been, I think they raised maybe more than 10 rounds of investment. I can't calculate that. Now, the valuation, I think, is over One billion US dollar. So we call it a Unicom company. And so they got the original innovation from China-based research.
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Speaker 3: And they have produced.
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Speaker 2: Over 100 megawatt scale compressed air energy storage facilities. And they got very successful use and connected to the grid in Zhangjiakou.
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Speaker 3: For the 100 megawatt. That's a label for the success of this technology.
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Speaker 1: Yeah, and it's also a strategic technology that China needs. Of course, there's lithium-ion batteries that can store electricity on the grid, but they can only store for four, six, eight hours most of the time because they are expensive. So you need a technology that will do longer duration energy storage, that will be much, much cheaper. And for it to be cheaper, you want to use the cheapest technology. materials that you can, and air is probably the cheapest material you can get to be able to do energy storage. There are compressed energy storage startups.
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Speaker 3: In the West.
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Speaker 1: In the UK, for example, there's a company that does compressed air storage. So you talked about how the funding landscape has changed over the past 10 years, given what's happening between the US and China. Geopolitically, less and less investment is coming from America into China, into startups. Are there other types of funders, maybe Asian funders or European funders that are looking to invest in China?
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Speaker 2: Yes, I think there are more funders. I think, for example, we work with, like I said, agronomical ventures. So they are from Middle East. So they come to China, they believe there are a lot of good innovations, energy related. And so I think they have already invested a bunch of, projects in China. And we also collaborated with Temasek. So they also have different investments that are looking at investment opportunities in China. But I think overall, speaking, the funds from international investors are not sufficient. Most of the cleantech investors, they're still looking at North America for new companies. I think this is the timing for them to look at China And so we have hundreds of very good technology companies in early stage. So if in future there are opportunities, we definitely want to act as a bridge to linking them.
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Speaker 1: And we are, of course, seeing a lot of the new energy technology giants in China. go abroad because the market in China is starting to either shrink or saturate. So they're finding places abroad where people are interested in electric cars or batteries or solar panels. Are you also seeing among startups any move to try and build demonstration pilot scale projects outside of China?
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Speaker 2: Yes, there are such requests because sometimes The application scenarios are even better in the overseas market than in China. For example, we have a company who is actually making leather from mushroom. So of course, mushroom-based leather, what's the best way to use it? It's in the luxuries, right? So for most of the luxury brands, they are all international brands. So we're actually helping them to connect with some potential client in Singapore. And also we're trying to link them to some other international brand in Italy, in France. That can make the best use of the equal parts of the products.
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Speaker 1: And the other thing that happens in Western startups is they typically attract customers. talent from across the world because they are interesting companies doing interesting things and they are raising money to be able to support those activities. Are you seeing any interest from abroad to work in Chinese companies, people-wise, not just funds?
00:31:56
Speaker 2: For the time being, this is not a very, very clear trend. Yeah, I didn't see a lot of international talents coming back to China to join in this.
00:32:06
Speaker 3: Maybe there are some.
00:32:07
Speaker 2: Cultural difference issues. It's difficult to adapt because, you know, we speak Chinese. And if you don't speak Chinese, maybe it's not very easy for the communication and for a lot of things. But I'm sure in future, especially when Chinese has become more and more popular, when you speak Chinese, you will learn how Chinese.
00:32:32
Speaker 3: People are thinking.
00:32:33
Speaker 2: Because I've seen language forms of how the brain works. So I think more and more people, international talents, may be interested in coming to China to join in the early stage companies.
00:32:46
Speaker 1: Our colleagues broke the story that maybe China will be hosting COP 33 in two years time. The government might want to bring this climate conference, the biggest climate conference with 50,000 people to China. When a country does that, when it hosts a COP, they try to do so by showing to the world where they are improving, what they are doing. Have you heard anything about how maybe China would like to show off its climate tech startups to the world?
00:33:17
Speaker 3: I haven't heard about it.
00:33:21
Speaker 2: I'm going to attend COP 31 in Turkey, so in this November. But I didn't know China is going to be the host for 33.
00:33:30
Speaker 3: If yes, that's perfect.
00:33:32
Speaker 2: Because we made commitment to pick up a mission by 2030. So 33 is 2028, right? So it's very close. So which means we should have a lot of achievements to show, to demonstrate. both on innovation side, on industry side, on city side. So I think it's going to be a good idea if we can do that.
00:33:57
Speaker 1: Thank you, Tony.
00:33:57
Speaker 3: Oh, it's my pleasure, Aksha. Thank you.
00:34:03
Speaker 1: And thank you for listening to Zero. Now for the sound of the week. That is the sound of a mushroom controlling a synthesizer. Mushrooms aren't just for fancy leather. They can be musicians too. If you liked this episode, please take a moment to rate and review the show on Apple Podcasts, YouTube and Spotify. This episode was produced by Oscar Boyd. Special thanks to Lily Pike, Somersadi and Alyssa McDonald. I'm Akshat Rati, back soon.
Speaker 1: Bloomberg Audio Studios. Podcasts.
00:00:05
Speaker 2: Radio. News.
00:00:08
Speaker 1: For the last couple of weeks, I've been reporting in China, seeing the future of clean tech and meeting the people building it. The last time I was here was eight years ago. The country was in the midst of a pollution crisis.
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Speaker 3: The air was hazy.
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Speaker 1: I never saw blue skies. This time, as I've traveled from Shenzhen to Beijing and many cities in between, it's remarkable just how clean the air in China is now. That's partly to do with electric vehicles, but also better pollution control on industries and power plants. And now a lot of those people who were involved in the cleaning up of air pollution have turned their minds to a bigger problem, climate change. It's something that people want to talk about and to show what they are doing to tackle it. My guest today is Tony Hsieh, and his career straddles the clean air, clean tech world. He's been the chairman of Bluetech Clean Air Alliance since 2013, where he's helping to grow the next era of climate startups. We spoke in Bloomberg's Beijing office.
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Speaker 3: This is Zero.
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Speaker 1: I'm Akshat Rati. Today, inside China's clean tech startup scene. Welcome to the show, Tony.
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Speaker 3: It's my pleasure.
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Speaker 1: So you've worked on environmental issues for more than 20 years in China.
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Speaker 3: Yes.
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Speaker 1: Can you tell us briefly how you got to doing it and what types of experiences have shaped your work?
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Speaker 2: Actually, I'm an engineer by training. I majored in environmental engineering and material science and engineering. So I've been doing this for over 20 years. So we can say for the past 20 years in Korea, I have spent... half of my time dealing with pollution issues and half of my time dealing with climate change.
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Speaker 1: Now, I've returned to China after eight years and every major city I've been in, whether Shenzhen or Shanghai or Beijing, the air is just so much cleaner. What were the major policies and technologies that made it possible to have cleaner air?
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Speaker 2: Back in 2013, that's the year when we launched the Clean Air Alliance of China. with support of leading research institutions in China, and also with funding support from Energy Foundation.
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Speaker 3: So we did a lot of things since then.
00:02:33
Speaker 2: At that time, I think that the best thing is that we have.
00:02:37
Speaker 3: The government commitment.
00:02:40
Speaker 2: So we have central government which commit that we will reduce emission.
00:02:45
Speaker 3: We will fight against the pollution.
00:02:47
Speaker 1: But how did you get to the point, because there was a lot of activity before 2013, that got the government to make that commitment?
00:02:56
Speaker 2: It's the raising awareness of the house issues related to pollution.
00:03:03
Speaker 3: And also, before that, we don't even know PM 2.5.
00:03:06
Speaker 2: In 2012, that's the year we actually changed the air quality standards. Then we have PM 2.5. Before that, we only have PM 10. Right. And if we look at the PM 10 number, maybe we will see, okay, it's a good day. The air quality should be good, but you can see haze very clearly there. In 2012, we have the new air quality standards, and people are aware that's a severe issue related to health.
00:03:36
Speaker 3: It's not, it's everybody knows.
00:03:38
Speaker 2: And the pollution level goes to that, and then the awareness level goes up. Then I think altogether made the change.
00:03:45
Speaker 1: Yeah, because there was all this work also done by the U.S. Embassy, which had its own air quality monitor. Then after 2013, the Chinese government also installed air quality monitors around the country to show what air quality was like.
00:04:01
Speaker 3: Yeah, they have.
00:04:01
Speaker 2: Actually installed over 1,400 national controlled air quality monitoring stations. And they all release hourly data about air quality. If you have hourly data, you cannot fake it. Yeah, because it's continuous. Then the data quality will be much improved. So we can see what the real air quality are there and then what measures or actions can be taken.
00:04:28
Speaker 1: And then you did a lot of policy work to try and support the move to cleaner air. What type of policy work did you have to do? And how does policy work that you do then eventually make it to government level?
00:04:41
Speaker 2: In the year 2012 and 2013, because we already have very strong government commitment, then the policymakers are looking for solutions all around the world. So our first task is we bring international experience back to China. So we work with UK experts, US experts, German experts. We work with everybody to learn what exactly they have done during their pollution time. And I still remember the first report we released is about the emergency actions. So we started the experience from UK, from US in 1970s, in 1950s. So what they are doing when there is a heavy pollution come. Because during pollution episodes, it actually caused a lot of house risks. Only exposure for two or three days will cause very, very big damage. And we produced that report, and also the central government is looking for what we can do. So then the report was actually given back, given to the Ministry of Environmental Protection, and also leading think tanks. So a lot of suggestions were actually integrated into the policymaking process.
00:05:59
Speaker 1: And can you talk through some of the policies that actually worked?
00:06:03
Speaker 2: For example, during pollution days, schools... Because we have the vulnerable people, right? So the kids are vulnerable people. So schools can shut down. Children should not go outside. And also for companies, factories that are generating pollutions, they may have to stop manufacturing. And we also created a new approach that if they can have some evaluation process, if their pollution level can reach to very low, They can exempt from these requirements. So that's also ultra low emission standards. If they can reach to that, then they will not be affected by the emergency actions.
00:06:46
Speaker 1: And then a longer term policy that worked, of course, is the deployment of electric cars. Again, just going through major cities now. You can see so many electric cars on the road. Almost half of the cars already on the road seem to be electric. And that has helped reduce air pollution as well.
00:07:04
Speaker 3: Of course.
00:07:04
Speaker 1: And it's really made the streets a lot quieter. On the technology side, beyond electric cars, what type of technology solutions helped make the air cleaner?
00:07:15
Speaker 2: I think one is for the energy side. So we talked about the electric cars. That's for mobile sources. There are also a lot of stationary sources because the air pollution mostly coming from, I think, the burning of the fossil fuel. That's one of the major sources. In China, a lot of coal-fired power plants are changed to, we say, ultra-low emission. When we say ultra-low emission, it means the emission level is comparable. to gas-fired power plants. So that's a large shift. Right.
00:07:48
Speaker 1: And that's not CO2 emission, but particulate matter.
00:07:51
Speaker 3: Particulate matter.
00:07:52
Speaker 2: And also sulfur dioxide, NOx, and all the air pollutants. This policy actually goes to not only power sector, but also steel, cement, many very heavy pollution industries.
00:08:08
Speaker 1: As you talked about, your own work has now pivoted towards climate change and carbon dioxide, particularly after 2020, when President Xi Jinping announced that China will reach carbon neutrality by 2060. A lot of activities across China have focused on reducing CO2 emissions. Talk us through what pivoting your work meant.
00:08:31
Speaker 2: Yes. For example, so far, like in Beijing, the pollution level, IPM 2.5 concentration from 2013 to now, I think it's been improved by 70%. So it's large. It's not only in Beijing. For Jingjing, even for the whole country, that's a significant improvement. That's also a demonstration that the policy framework works. So we believe we can do something new. That's why we shift our focus from policy side and more into the technology side. We believe the technology, the power of technology, innovation, together with the power of market.
00:09:14
Speaker 3: We can make a change. Then we shift to technology.
00:09:19
Speaker 2: And so for technology, we believe climate change issue is because it involves the energy and it's more pressing needs. Globally, so we believe this can bring more benefits. So so we focused a larger area for climate change for climate change we actually in 2018 we established blue tackling airlines, so within the lines we deal with both air quality and climate change and then After our president announced the carbon peaking and carbon neutrality goals, climate change became a very hot topic. And in 2022, we designed our award program.
00:10:04
Speaker 3: In the past, it's Blue Tech Award.
00:10:06
Speaker 2: It's calling for King Air Technologies all over the world to compete and to be applied in China. Then it changed to Blue Tech Carbon Neutrality Pioneers Award.
00:10:17
Speaker 3: So we're focusing on the key.
00:10:19
Speaker 2: Sectors like renewable energy, energy storage, hydrogen, and carbon storage use, and also all that technologies. So we're trying to find the innovators who can actually change progress of climate change in China and even in the world.
00:10:37
Speaker 1: And with Bluetech, you have now worked with something like 400 companies. climate tech startups. Now, sitting in the West, we hear a lot about climate tech startups. Most of them tend to be found in America because there's a lot of funding available in America. But given what's happened on the politics in recent years, that funding has become more difficult. So some places like Europe, you get more climate tech But very few people know about the climate tech landscape in China. 400 is a big number. Can you give us a few examples of companies that you have been working with that you're very proud of that perhaps won the Pioneer Award most recently?
00:11:22
Speaker 3: Yes.
00:11:23
Speaker 2: For climate tech companies, I think we've been working with now is over 400. Last Friday, we just released the winners of the fourth Blue Tap. Carbon Neutrality Pioneers Award. So we have another 15 winners in this award. So in China, there are a lot of companies that are working in these fields. And many of them are related to different research institutions because now it's very difficult to invent new technology just from home. In Chinese, we call it yin ke ji. So maybe in English, it should be translated as deep tech. So there should be a lot of accumulation experience and investment from research projects. Maybe the funding are coming from the government for the research period.
00:12:16
Speaker 3: For us, I think we are not working with very, very large companies.
00:12:21
Speaker 2: We have partners with large companies, but they're actually the industrial partners who can provide industrial support for these new companies. So we work mostly with companies who are not yet publicly listed. So still at the early stage. So which means from the Western media or Western sphere, it's.
00:12:43
Speaker 3: Difficult to know them.
00:12:45
Speaker 2: So in China, we have, I think, these companies that they are all leaders in different subsectors. So, for example, in hydrogen sector, now, because in the past two years, hydrogen has experienced a global, we can say a global disaster. Many companies collapsed, but we still have some companies who raise very well, steadily. For example, HydroTech. HydroTech is a company who produce square-shaped alkaline electrolyzer. And so they've been actually nominated to us from Aramco Ventures. So it's a Aramco Venture invested company.
00:13:30
Speaker 3: Saudi Aramco. Yeah, Saudi Aramco.
00:13:32
Speaker 1: Yeah.
00:13:33
Speaker 3: And they are pretty good.
00:13:35
Speaker 2: And so the team is from Tsinghua University. And, you know, it's a leading university in China. And it's been established not for long. but it has successfully raised several rounds of very good investments. And also they have their establishment not only in China, but also in Middle East, in Europe.
00:13:58
Speaker 1: So in the West, you have typically levels of investment that come in for startups to go from an idea in a university to getting some angel investment that will take it to outside the university and start to hire some people. Then maybe it gets a series A or a series B in which it is now able to show that the technology works outside the lab. It's going to maybe do a demonstration of that technology in the real world. Then it does a pilot, which is sort of maybe one-tenth the scale of a commercial plant. Then it does a commercial plant. And then the company maybe goes public. That's typically the life of a startup. How does it work in China? Is it the same?
00:14:45
Speaker 3: It's similar.
00:14:46
Speaker 2: But I think there are some major differences along the process. Because in China, I don't think we have that abundant investment in the very early stage for the seed level and for the angel level. I don't think there are plenty of investors.
00:15:04
Speaker 1: Yeah, not lots of capital.
00:15:06
Speaker 3: Yeah, I think in China, a lot of capital are focusing on later stage.
00:15:12
Speaker 2: post-C level, post-D level, before IPO. I think for that part, it's more sufficient. But for early stage, before A level, or after A to B level, I think they are limited.
00:15:29
Speaker 1: What do the startups then do? How do they get around that problem?
00:15:33
Speaker 2: So for the C level, we do not have a lot of market base. Then they will seek for support from their family, friends. So this is a typical, yeah, very typical phenomenon. And for the angel round in the past, I think before China-US trade war, I think a lot of US-based investment funding play very important roles. for the angel round.
00:16:00
Speaker 3: But now, because they.
00:16:02
Speaker 2: Are quitting, there's some local government stand out.
00:16:07
Speaker 3: They are not subsidizing.
00:16:08
Speaker 2: They actually, they created, they invest in some early stage investment fund. Yeah.
00:16:14
Speaker 1: No, that is true. I mean, there's a very famous example of an investment from a local government into NIO, the electric car company. And, you know, it did so at a very early stage. And now, of course, NIO is doing really well on its stock market. And so the local government equity stake has actually been very profitable. Yes.
00:16:37
Speaker 2: For NIO, that's Hefei Industrial Investment Fund. Actually, this fund also invested the PCE company.
00:16:46
Speaker 1: PCE is polycarbonate ether, a type of polymer. And the company's name is Hefei Poly Advanced Materials.
00:16:55
Speaker 2: The PCE company is the company who actually use carbon dioxide as raw material to produce. It's like a chemical company to produce PCE, polycarbonate polyol. So this one can be used in many consumer products or industrial products. And so they already have their largest scale manufacturer ready this year. And they received investment from, I think for the early stage, they got funding from the Enzo, Sinopac Enzo investment. That's a leading Chinese central government related investment fund.
00:17:37
Speaker 1: Because Sinopec is a state-owned oil company.
00:17:40
Speaker 2: Yes, yes.
00:17:41
Speaker 1: And it is interesting because using carbon dioxide to make materials is something that lots of people have talked about. It is something that is theoretically possible, but requires energy to do that work. And in China, given it doesn't have much of its own oil, it imports a lot of its oil, having use for carbon dioxide to do what otherwise would require oil, is a very good strategic technology that is also good on the environment.
00:18:13
Speaker 2: Yes, and it actually deals with the oil limits. And also, why I highlight this company, because their products are competitive. So compared with traditional products, they can even be cheaper, more cost-effective. This means that they have a better market share potential in future.
00:18:40
Speaker 1: After the break, more of my conversation with Tony Hsieh, chairman of the Bluetech Clean Air Alliance. If you are enjoying this episode, please take a moment to rate and review Xero on whichever platform you're listening on. A lot of the startups that become big companies in the West that we now know as either Tesla or Amazon or Google, they started off as small companies and they kept building and building and building to become the giants that they are. They had their core technology. In the case of Google, it was the search engine. In the case of Amazon, it was this online store. In the case of Tesla, it was the electric car. And they developed other business lines as they became bigger. But the core technology they kept investing in and they developed their expertise in that technology and became big companies. In China, it's different. If you look at an example of a BYD, it starts by making batteries, make some batteries, make some profits, then says, oh, maybe we should make cars and goes and makes cars with internal combustion engines. Got no expertise in it, but just because the founder is interested in cars, they go and make cars. And then they realize, oh, the Chinese government is interested in electric cars. We have batteries. We can make electric cars. And then they become electric car company.
00:20:11
Speaker 3: Right.
00:20:12
Speaker 1: This visit, I met a company called Innovance, which is an industrial robotics company, but they started with elevators and elevators require motors that are run on alternating current. And so they develop motors. Then those motors were useful also in industrial robotics. So they started making industrial robotics. And now with those motors being used in industrial robotics, they are also making electric car motors, which are different technology, but similar idea. And so they added all these different business lines and that's how they grew their company. So it's a very different way in which Chinese companies go from being small to big.
00:20:51
Speaker 3: Why is that?
00:20:52
Speaker 2: Because I think that's the investment environment. In the US, I think the investment resources are very sufficient. So a lot of companies, they can build up They can build up very good image and still raise funds, raise investment. And then at a later stage, then they can become a giant company as a result. But in China, I think the investment is not that sufficient. So the companies, they have to, at certain critical points, they have to make profits. If they can make profits and they can use the profits to reinvest in other stuff, then like what you mentioned, BYD, they made a very good battery. So they are very good battery manufacturer and they made enough profit and then reinvest in related industry. For example, the new energy vehicle. So it's very relevant to their battery, right? So you can see it as an extended business through their battery business. So I think that's a difference, yeah.
00:22:08
Speaker 3: Yeah, I mean, the.
00:22:08
Speaker 1: Pivot actually went through an internal combustion engine rather than an electric car battery. The pivot to electric car battery came later. So it was quite a big pivot to try and make cars.
00:22:21
Speaker 2: Yeah, my feeling is that because if you want to make the battery to be ready for electric cars, it really takes time because the safety issues. So, and you have to learn how to make vehicle because making vehicle is not an easy task. We actually involved in the first runs of the promotion of BYD vehicle, electric vehicles in Shanxi, Taiyuan province, Taiyuan city at the time, that's 2016. So Taiyuan decided to change all their taxes into electric vehicle. So that's $ 8, 000.
00:23:01
Speaker 3: Texas, so that's a lot, right? At that time, it's BYD.
00:23:06
Speaker 2: So BYD, firstly, they build up the new energy vehicles and supply it. And they also build up a lot of charging stations for the whole city. And we can see, because we did the survey, so in the beginning, people have a lot of complaint about this new electric vehicle, because Some of them, they didn't follow the way of how vehicle was designed. So there's a learning curve, but now PYD is already doing a great job.
00:23:38
Speaker 1: Yes, a lot of these companies talk about, very openly talk about reverse engineering. They look at what a product exists in the market that is better than their product. They open it up, they reverse engineer what is good about it and how to deploy those developments inside. But now when I talk to companies, they're like, that was in the past. We used to do that. Now we innovate. We do our own research. We come up with our own ideas and you can see the result. And at least in electric cars, those results are there for everybody to see. Lots of Western markets now prefer a Chinese electric car because it's more affordable and gives you the same number of features, et cetera, and has a very good quality battery. But yeah, that process took a while. Are there technologies that are homegrown Chinese technologies in these startups that you are seeing become bigger and bigger players in the market?
00:24:35
Speaker 2: Yes, maybe I can firstly give you some numbers. Yeah, so because we also, we are a think tank organization. We not only matchmake company with investors, with industrial players, we also do technology.
00:24:50
Speaker 3: Assessments and we know patents very well. So we have some number about the patents.
00:24:56
Speaker 2: From 2016 to 2024, China has filed about 45% of global patents in terms of green technology, low carbon technology. 45% is much more than the sum of US, EU, Japan, Korea, they add up together. I do believe, we also did analysis on articles, literature for the leading journals, for the area in energy storage, in hydrogen, in many of the sectors that Chinese authors accounts for 30 to 40% of the high citing articles. I do believe there is a very high popularity here in China regarding the innovation. So there are also a lot of new innovations coming out to be used.
00:25:58
Speaker 1: And can you give me a few other examples of startups where this innovation is being applied?
00:26:03
Speaker 2: So for the companies I mentioned, they all have innovations from China. For example, the PCE company. So they are actually from Zhejiang University. The core technology is about the catalyst. So they can use the catalyst to convert carbon dioxide into PCE.
00:26:26
Speaker 3: So that's their core technology. So this is from China.
00:26:29
Speaker 2: And then from the pilot, the laboratory size and pilot size. And now they have a large manufacturing site to produce that. I can also use another sample that's for energy storage. We don't talk about the lithium battery. They're already very mature in the market. So for the compressed air energy storage. So we have a company called Zhongchu Guoneng. So it's actually a company, their technology are from Chinese Academy of Science. They get funding from, firstly, the Academy of Science got research funding. They developed the prototype, right? And then they decided to go to the market. And then they got investment from different investors, including both market-based and state-owned company-based investment.
00:27:21
Speaker 3: So, and the local government investment as well.
00:27:23
Speaker 2: So, they have been, I think they raised maybe more than 10 rounds of investment. I can't calculate that. Now, the valuation, I think, is over One billion US dollar. So we call it a Unicom company. And so they got the original innovation from China-based research.
00:27:45
Speaker 3: And they have produced.
00:27:47
Speaker 2: Over 100 megawatt scale compressed air energy storage facilities. And they got very successful use and connected to the grid in Zhangjiakou.
00:28:00
Speaker 3: For the 100 megawatt. That's a label for the success of this technology.
00:28:04
Speaker 1: Yeah, and it's also a strategic technology that China needs. Of course, there's lithium-ion batteries that can store electricity on the grid, but they can only store for four, six, eight hours most of the time because they are expensive. So you need a technology that will do longer duration energy storage, that will be much, much cheaper. And for it to be cheaper, you want to use the cheapest technology. materials that you can, and air is probably the cheapest material you can get to be able to do energy storage. There are compressed energy storage startups.
00:28:37
Speaker 3: In the West.
00:28:38
Speaker 1: In the UK, for example, there's a company that does compressed air storage. So you talked about how the funding landscape has changed over the past 10 years, given what's happening between the US and China. Geopolitically, less and less investment is coming from America into China, into startups. Are there other types of funders, maybe Asian funders or European funders that are looking to invest in China?
00:29:05
Speaker 2: Yes, I think there are more funders. I think, for example, we work with, like I said, agronomical ventures. So they are from Middle East. So they come to China, they believe there are a lot of good innovations, energy related. And so I think they have already invested a bunch of, projects in China. And we also collaborated with Temasek. So they also have different investments that are looking at investment opportunities in China. But I think overall, speaking, the funds from international investors are not sufficient. Most of the cleantech investors, they're still looking at North America for new companies. I think this is the timing for them to look at China And so we have hundreds of very good technology companies in early stage. So if in future there are opportunities, we definitely want to act as a bridge to linking them.
00:30:12
Speaker 1: And we are, of course, seeing a lot of the new energy technology giants in China. go abroad because the market in China is starting to either shrink or saturate. So they're finding places abroad where people are interested in electric cars or batteries or solar panels. Are you also seeing among startups any move to try and build demonstration pilot scale projects outside of China?
00:30:39
Speaker 2: Yes, there are such requests because sometimes The application scenarios are even better in the overseas market than in China. For example, we have a company who is actually making leather from mushroom. So of course, mushroom-based leather, what's the best way to use it? It's in the luxuries, right? So for most of the luxury brands, they are all international brands. So we're actually helping them to connect with some potential client in Singapore. And also we're trying to link them to some other international brand in Italy, in France. That can make the best use of the equal parts of the products.
00:31:34
Speaker 1: And the other thing that happens in Western startups is they typically attract customers. talent from across the world because they are interesting companies doing interesting things and they are raising money to be able to support those activities. Are you seeing any interest from abroad to work in Chinese companies, people-wise, not just funds?
00:31:56
Speaker 2: For the time being, this is not a very, very clear trend. Yeah, I didn't see a lot of international talents coming back to China to join in this.
00:32:06
Speaker 3: Maybe there are some.
00:32:07
Speaker 2: Cultural difference issues. It's difficult to adapt because, you know, we speak Chinese. And if you don't speak Chinese, maybe it's not very easy for the communication and for a lot of things. But I'm sure in future, especially when Chinese has become more and more popular, when you speak Chinese, you will learn how Chinese.
00:32:32
Speaker 3: People are thinking.
00:32:33
Speaker 2: Because I've seen language forms of how the brain works. So I think more and more people, international talents, may be interested in coming to China to join in the early stage companies.
00:32:46
Speaker 1: Our colleagues broke the story that maybe China will be hosting COP 33 in two years time. The government might want to bring this climate conference, the biggest climate conference with 50,000 people to China. When a country does that, when it hosts a COP, they try to do so by showing to the world where they are improving, what they are doing. Have you heard anything about how maybe China would like to show off its climate tech startups to the world?
00:33:17
Speaker 3: I haven't heard about it.
00:33:21
Speaker 2: I'm going to attend COP 31 in Turkey, so in this November. But I didn't know China is going to be the host for 33.
00:33:30
Speaker 3: If yes, that's perfect.
00:33:32
Speaker 2: Because we made commitment to pick up a mission by 2030. So 33 is 2028, right? So it's very close. So which means we should have a lot of achievements to show, to demonstrate. both on innovation side, on industry side, on city side. So I think it's going to be a good idea if we can do that.
00:33:57
Speaker 1: Thank you, Tony.
00:33:57
Speaker 3: Oh, it's my pleasure, Aksha. Thank you.
00:34:03
Speaker 1: And thank you for listening to Zero. Now for the sound of the week. That is the sound of a mushroom controlling a synthesizer. Mushrooms aren't just for fancy leather. They can be musicians too. If you liked this episode, please take a moment to rate and review the show on Apple Podcasts, YouTube and Spotify. This episode was produced by Oscar Boyd. Special thanks to Lily Pike, Somersadi and Alyssa McDonald. I'm Akshat Rati, back soon.
