Chinese energy spending soars; Saudi market crashes

What country is the top investor in renewable energy? Experts say it is China. About one of every $6 spent globally on such energy is spent by the Chinese.

China’s Xinhuanet reported Dr. Eric Martinot, a senior research fellow at the Worldwatch Institute, based in the U.S., and a senior visiting scholar at Tsinghua University, said that, leaving out large hydropower, China invested $6 billion U.S. in renewables in 2005 from a global total investment of $38 billion.

Martinot said escalating oil prices have turned renewable energy into a main focus for world investors. In the U.S. and Europe, government support for renewable energy was $10 billion in 2004, including budget and policy support. The U.S. and Europe furnish more than $700 million a year for research and development, Martinot said.

The renewable energy industry is growing. Worldwide, there are more than 70 renewable energy companies with a total market capitalization of more than $40 million apiece. Their total market capitalization amounts to more than $30 billion.

In recent years, major investments and acquisitions have been made by global companies such as GE, Siemens, Shell, BP, Sanyo and Sharp. Martinot said the industry could provide more than 1.7 billion jobs worldwide. China presents a huge potential renewable energy market for world investors.

There was about $6 billion invested in 2005 with most of it going into small hydropower and solar-heated water energy, plus $600 million for wind power.

China has said it intends to raise its electricity-installed capacity for renewable energy to 10 percent of its total power capacity by 2010 and 20 percent by 2020.

With the exception of large hydropower, by 2010 renewable energy will provide 5 percent of China’s total primary energy consumption, and the Chinese plan to boost that to 10 percent by 2020.

The Chinese government has given considerable policy support to the renewable energy industry. A law for renewable energy, the first of its kind in China, took effect the first of this year.

Chinese Premier Wen Jiabao, speaking about energy development last month, urged more effective steps to make sure the government’s energy conserving and renewable development policies are implemented. He emphasized that renewable energy is an important strategic option to coal and oil.

While China focuses on the development of alternative energy, Saudi Arabia is angered and upset about the recent collapse of its bourse or market, the largest in the Arab world. The bourse lost half its value in 60 trading days last March.

Saudi investors engaged in a rare debate about the role of government, the banks and the royal family in the crash, which has affected hundreds of thousands of small investors.

The forum took place in the Red Sea port of Jeddah, according to Reuters. Jeddah is viewed as the most liberal city in the Saudi kingdom. Moderator Abdullah Dahlan told the meeting: “I’m getting a lot of (written) questions from the public asking ‘where has our money gone?’”

More than 1,000 investors were in the auditorium hours before the meeting began, a small percentage of the estimated 4 million Saudis who trade in stocks and suffered the greatest losses individually from the crash.

The market downturn began in February, prompted by a conflict between the market regulator and cash-rich major speculators, with retail investors—most of them lacking any knowledge of market principles—caught in the center.

The market was ready for a correction, according to analysts, after it passed a 600 percent increase in three years, lifted by record oil profits, high liquidity and the lack of quality paper.

Yassine Al Jafri, a well-known economist, said: “There are questions that beg to be asked: Why has state spending slowed? Why the weak supply of shares when you see demand growing, and 64 percent of capitalization is controlled by the government (through state-owned firms)?”

Investors asked why the state hadn’t floated oil giant Aramco and why it held stakes of 70 percent in top-ranked firms. “In other countries,” said Dahlan, “the state and financial institutions join efforts in times of crisis. Why didn’t banks give small investors a six-month reprieve on their debts? They can afford to do it, they make billions of riyals in profits.”

Many investors asked what part the royal court played in all this, and there was open questioning of what billionaire Prince Alwaleed (bin Talal) was doing during the collapse. Prince Alwaleed is the biggest shareholder in Citigroup and one of the top investors in FOX News, according to publisher Mike Ruppert. The prince had announced plans to invest 10 billion riyals ($2.7 billion) in Saudi shares. A prominent analyst, Rashed Al Fouzan, said: “I think he got into the market earlier (before the announcement).”

Representatives of the market regulator, the Capital Markets Authority (CMA), declined an invitation to attend the forum.

Psychologist Mohammed Al Hamed said it may take years for investors’ morale to recover. “Unfortunately, the majority (of investors) have a poor investment culture,” Hamed said. “Access to information is not fair, it reaches some before others. Our society is dominated by nepotism.”

From the May 31-June 6, 2006, issue

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