Shanghai is forming its own Silicon Valley-like innovation center for clean technologies, as more venture capital funds are ready to pour money as a result of increasing government attention on environmental protection.

The Knowledge and Innovation Community, a complex already home to a number of IT firms, aims to attract more startups, research agencies, consultancies, VCs and other stakeholders in the clean tech industries, said Hui Shing Sun, executive director of Shui On Development Ltd, which co-developed the KIC with Yangpu District government.

"KIC is trying to build the effective connection between enterprise and capital, technology and market, and this will make a substantial contribution to driving the sustainable economic growth in China," Hui said.

Such new clusters could boost industry concentration rate, Hui said, adding KIC aims to become a key site for international companies in the energy conservation and environmental protection sectors at the forefront of the clean tech industry in the city.

Silicon Valley attracts 80 percent of the world's VC investment in the clean tech sector today, he said.

The KIC, which held a forum yesterday bringing together clean tech players and VCs, signed several partnership agreements with the newly set Shanghai Environment & Energy Exchange, Greenstar Fund and others to facilitate its future development in the clean tech sector.

Clean technology has emerged as the No. 3 favorite among VCs, after information technology and telecommunications, as they are banking on specific technology and related business models to offer competitive returns while providing solutions to global challenges in climate change and other related issues.

According to United States-based Cleantech Group, the clean tech industry in China could attract US$700 million from VC investments this year and US$2 billion in 2010.

Patrick Tam, partner of Tsing Capital, said the US$700 million projected for this year is conservative, adding he saw huge opportunities in power plant desulfurization and water treatment to various renewable energies. China has the world's largest clean tech market, he said.

(Shanghai Daily September 26, 2008)