Mounting pollution in China boosts investment in air purifiers

Want China Times, Staff Reporter 2013-01-26

A man outside Beijing's National Stadium does his best to avoid
inhaling fine particles. (Photo/Xinhua)

The investment market for firms in China offering technology to reducing air pollution is attracting a lot of attention after smog blanketed Beijing earlier this month.

Private equity firms are seeking opportunities to invest in clean technology firms, as businesses and consumers are more willing to purchase such devices given their concern over serious air pollution.

"We have been investing in the clean technology in the past, and now we are focusing on the possibility of investing in firms that develop technologies for monitoring and managing air quality," said Zhang Lihui, a partner with venture capital management firm Tsing Capital.

According to the Chinese-language Economic Observer, air pollution readings showed that half of the country's 74 largest cities have terrible air quality.

Beijing touched nearly 900 on the particularly hazardous PM2.5 (particles smaller than 2.5 micrometers) index of air quality, indicating the existence of dust, coal fumes, car exhaust and chemical compounds, such as secondary sulfates and nitrates, in the air.

Face masks sold out across the capital, while indoor air purifiers continue to gain popularity.

The market for large air cleaners is developing, although they cost over 10,000 yuan (US$1,600), said an investor from the environmental protection industry.

Lei Yang, managing director of Northern Light Venture Capital, said his company was evaluating opportunities for investing in an air purifier business called Beiang Technology which can help remove inhaleable particles as small as 20 nanometers.

Beiang, which is still in the early stages of technology development, is targeting air cleaners for domestic use. It plans to expand operations by providing solutions for other firms in the future.

For investors in the industry, the market for such devices is highly competitive as many international firms with considerable resources have launched various related products. As a result, it is not easy to find firms which have reached a certain scale and are worth investing in.

Fundraising in the environmental protection and energy saving industry has also grown gradually over the years. Starting from 2007, it touched a record high of US$1.42 billion in 2009, according to the Economic Observer.

In 2011, CDH China Management spent US$258 million to take over the Singapore stock exchange-listed Sinomem Technology, while US global private equity firm Kohlberg Kravis Roberts & Co invested US$114 million in Singapore's United Envirotech, which helped boost the market.

A total of 27 fundraising instances were reported in 2012, down 43.8% from the previous year, according to CVSource from ChinaVenture Investment Consulting Group.

The value of fundraising was pegged at US$359 million last year, representing a fall of 52.2% from 2011. The lowest levels of fundraising were recorded during the last four years.

"The new energy sector was the major contributor to the market slow down, the environmental protection industry remained unchanged and has better market potential," Chang said.

According to a report of the 18th National Congress of the Communist Party, developing the country's environmental protection industry will be a key policy in 2013.

Around 620 billion yuan (US$100 billion) will be earmarked for this during the 12th five-year plan period, with the largest amount of over 120 billion yuan (US$19.3 billion) invested in reducing industrial pollution, according to UBS, a Swiss global financial services company.