Industry experts in China are into a complex but forward-looking approach to pollution. They say the momentum of rapid economic growth implies levels of energy consumption and pollution which are themselves dependent on industrial structuring and technology.

Indeed, as China accelerates its pace of industrialisation and urbanisation, the share of tertiary industries to GDP has dropped for three years consecutively, from 41.4% in 2003 to 39.5% in 2006, which should see tangible results against atmospheric pollution.

Also, due to the rapidly rising levels of energy consumption and pollutant emission by the industrial sector in the past two years, China appears determined to place greater emphasis on technology in its efforts to conserve energy and reduce pollution over the next five to 10 years.

China's environmental protection industry, which has already taken shape with an annual output value of over Rmb200 billion, is expanding at an average 17.5% a year and keeps growing.

Currently, the total output of the environment protection industry accounts for 1% of China's GDP, compared to 5% in developed countries.

The environmental protection industry is still very much an emerging one in China. There are only a few state-owned enterprises in the sector and the majority of industry players are private enterprises.

Some of these private environmental protection enterprises started from scratch, developing from "importation" in the beginning, to "standing on their own feet", and reaching the stage of "going out" today.

Guangzhou currently ranks top among Chinese mainland provinces and cities in terms of the overall energy efficiency level in its industrial sectors. However, in the city's 40 industrial sectors, 16 exceed the national average for energy consumption levels, including agricultural and sideline produce processing, textiles and furniture.

In turn, this sectoral problem has become a major bottleneck hampering Guangzhou's economic development and energy conservation efforts. So, the city has introduced an energy saving target in the energy consumption audit report on enterprises: those failing to achieve the target will face restrictive measures. Such measures include electricity rationing. Companies may even be forced to exit the market.

In May 2007, the National Development and Reform Commission issued an urgent circular which banned local authorities from offering their own preferential policies to promote development of high energy consumption industries against the laws and regulations of the state.

Such preferential policies that have already been implemented must be revoked immediately. This stipulation sent a clear message to enterprises, which is that meeting energy efficiency and lower consumption targets have become issues that must be addressed in long-term growth and development plans.

According to figures from the Guangdong Association of Environmental Protection Industry, private enterprises and FIEs have become key players in the development of Guangdong's environmental protection industry.

Among the various cities, Guangzhou, Shenzhen, Foshan and Dongguan are leaders in this development, together accounting for 80% of the annual turnover of the province's environmental protection industry.

The "green" movement is drawing growing numbers of private enterprises and FIEs. Private enterprises now make up the majority of Guangdong's new grade A environmental engineering design projects.

These private enterprises are playing the role of intermediary and social forces entrusted with the vital task of reducing energy consumption. Hong Kong companies in the environmental protection sector should use their expertise to develop opportunities to expand in this burgeoning Mainland market.