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Overcoming these difficulties is the biggest problem curbing development of these enterprises in Hebei, said Xu Dong with the Hebei Environment Protection Industry Association. More than half of their association member enterprises had problems in financing, he said.
According to Huang Junwu, an analyst of environmental economics with CCID Consulting, since China's environmental protection industry is a latecomer among international player it currently lags behind in terms of scale and output value.
"China's top environment protection enterprises have annual output value less than 10 billion yuan ($1.59 billion), only about one 10th of that of the France-based Veolia Water, the world's leading operator in water services," Huang said.
"Since most environment protection enterprises are small and do not have their own collateral, such as real estate, it's hard to get loans from banks," said Chen Shuguang, Vice General Manager of China Energy Conservation and Environmental Protection Group.
Bankers admitted that their support for clean industry has room for improvement.
"Financial institutions have been used to serving traditional industries. The characteristics of the clean industry, such as long investment cycle and slow returns, pose higher risks. We should be more innovative in providing credit to clean enterprises," said Ma Weihua, President of China Merchants Bank.
Industry analysts pointed out that China would face challenges in raising funds for the development of its green economy.
According to Xue Tao, Director of the China General Consulting and Investment, from 2011 to 2015, around 3.4 trillion yuan ($539.6 billion) of environmental protection investment will be required and the government-backed projects will demand investment of 1.5 trillion yuan ($238.1 billion). The remaining 1.9-trillion-yuan ($301.5-billion) gap will be filled by social capital.
Funds and subsidies provided by the government are far from enough for China's green economy, and various investment tools and financing means are desperately needed, said Huang.
"Since the establishment of China's multi-level capital market, China's green sector has seen a surge in investment activities," said Huang.
According to the CCID report, in the past decade, 37 environment protection enterprises obtained 46 rounds of equity investment. Of this total, the 32 investments disclosed raised capital of $717 million.
"Most of the capital was invested in the infrastructure construction of water treatment and solid waste treatment," said Huang.
As active players at the industrial forefront, venture capital (VC) and private equity (PE) institutions have long participated in the emerging industries with low energy consumption and high growth. With the establishment of the strategic positioning of environment protection industry, their investment in this sector has increased. The data from CCID showed that from 2010 to 2011, China's environmental protection industry saw 41 new VC/PE investment deals, involving $269 million.
"The Chinese Government recently set new policies to stimulate the continued growth of the VC industry, and more investment is planned to increase VC investors' appetite in energy conservation, environmental protection, next generation IT, biotech, advanced manufacturing, alternative energy, innovative materials and new-energy-powered vehicles," said Maria Pinelli, Ernst & Young's Global Vice Chair for Strategic Growth Markets.
With the launch of ChiNext, China's growth enterprise board, in October 2009, green enterprises across China got the chance to seek financing through initial public offerings (IPOs). Statistics show that companies in the strategic emerging industries, including new energy, new-type materials, environmental protection and energy conservation, information technology and bio-pharmaceutical sectors, account for 88.19 percent of all the listed companies.
"ChiNext mainly serves new sectors with high growth potential and new technologies. The environment protection industry is a golden apple for ChiNext investors," said Sun Yansheng, a lawyer with Beijing Tianyin Law Office whose major business is IPO-related legal affairs.
According to the CCID report, during the 2000-11 period, China's environment protection industry saw 38 new IPOs, raising 23.58 billion yuan ($3.74 billion). Of the total, 24 IPOs happened on the mainland.
"Before ChiNext, Chinese green enterprises mainly were listed in overseas stock markets. Out of the 13 environmental protection enterprises listed from 2001 to 2009, eight were in the overseas stock market. Obviously, ChiNext accelerated the IPO pace for them," said Huang.
In addition to the stock market, China's environment protection industry gets financial support from industry funds and government support.
In 2009, China General Technology Group launched China's first green industry fund, with an initial offering size of 2 billion yuan ($317.46 million) aimed primarily at operational projects including water delivery, sewage treatment, solid waste disposal, renewable energy, energy conservation and carbon reduction, as well as equity investment in environmental protection enterprises.
Since 2010, six industry funds specializing in environment protection have been set up, raising a total of 15.8 billion yuan ($2.5 billion), according to the CCID Consulting report.
Local governments have also been active in terms of involvement in the green industry. In April, China's biggest investment fund specializing in the development of the environmental protection industry was established in Guangzhou. The fund will support the local government's efforts to build a financial innovation platform focusing on waste disposal. The fund is planned to reach 50 billion yuan ($7.94) within three years.
In addition, the Ministry of Environmental Protection is joining forces with other departments to discuss the possibility of establishing a national development fund for green industries, according to Beijing-based China Securities Journal.
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