On September 28-29, the Cleantech Group will co-host a conference in Tianjin, China to talk about the development of Tianjin as an eco-city on par with Masdar City.

As a Chinese-American, I’m conflicted.  On one hand, I’m encouraged that China has taken a leadership position on clean energy, with their impressive stimulus and market share in solar and wind manufacturing.  On the other hand, as a proud American, I’m extremely concerned that we may be ceding the clean technology race to China.

Perhaps the blueprint for China’s rise in clean technology can be best summarized by the works of famous Chinese general Sun Tzu, known for his military treatise “The Art of War.”

“To know your Enemy, you must become your Enemy.”

The US is a leader in innovation because of its great universities and research laboratories, free market principles, and a healthy stock of entrepreneurs.  But as our research analyst Stephen Marcus notes, China is emerging as a source of cleantech innovation and valuable IP.  There are currently over 1,600 government supported incubators and science park In China and China is now fourth in the world in patent origination for six key clean technologies.

“Pretend inferiority and encourage his arrogance.”

Perhaps the words “inferiority” and “arrogance” may be too harsh (Sun Tzu was not one to mince words), but it’s worth noting that China has continually violated WTO rules by vastly under-reporting its list of subsidies, particularly in cleantech.  As the NY Times article states, China argues that it is still a “developing country struggling to understand its commitments.” That’s given China carte-blanche to support its home-grown industries while US and EU companies are at a disadvantage.  With many companies and governments hesitant to call China out for fear of retaliatory measures, few are willing to step up and cry foul.

“Opportunities multiply as they are seized.”

Or in Western parlance: “when it rains, it pours.”  As our analyst Stephen Marcus points out in his research piece, China/Hong Kong accounted for the largest share of money raised from cleantech IPOs in 2009 at 69%, ahead of the US at 26%, and by number of deals (53% of all cleantech IPOs).  The success of recent China cleantech IPOs like LDK Solar (NYSE: LDK) and Yingli Green Energy (NYSE: YGE) can be drawing more investment interest into the space.  In 2009, cleantech venture capital in China only accounted for 5% of total amount invested and number of deals done but we expect this percentage to increase significantly over time.

So where does that lead “US”?  I think China’s rise in cleantech is a net positive to the US and to the world on the whole.  By bringing down the costs of solar, for example, we may reach solar grid parity at a faster pace, which helps US companies like SunRun.  And I would be cautious to count out the US in this race to a clean energy economy.  Since I quoted Sun Tzu, I’ll end with a quote from a famous American general:

“Americans love to fight. All real Americans love the sting of battle.” – George S. Patton