By Kari Williamson

"Our country is sitting on the sidelines as the equivalent of 16% of our GDP is up for grabs," says Joshua Freed, Third Way Vice President for the Clean Energy Program.

Freed and his co-authors say China is adopting policies to slowly gain ground against the US in the areas of finance and innovation, particularly in clean energy. The report shows China has the highest public market financing in the clean energy sector, while the United States ranked third in total clean energy investment in 2010, behind China and Germany. In 2008, the United States ranked first.

China has secured US$47.3 billion of asset financing in 2010 for clean energy projects, while the United States attracted US$21b in 2010. Some 60% of all clean energy technology IPOs in the world in 2010 were from Chinese companies, the analysis says.

Meanwhile, Third Way cites data from Ernst and Young showing for the first time, in 2010, China beat the United States in terms of its attractiveness for renewable energy investment, receiving 20% of total global clean energy investment in 2010, compared with the 19% drawn by the United States.

Just 7 years ago China had only 3% of the total, while the United States drew 20% of investment. Furthermore, China attracted US$54.4bn in clean energy financing in 2010, a 39% increase over 2009 and equal to the entire amount of clean energy investment worldwide in 2004. Similar financing in the United States stagnated last year at US$34.4bn, approximately equal to 2007 levels.

Leading innovations

In the realm of innovation, China is expected to lead the world in overall number of patents filed in 2011, surpassing the United States and Japan for the first time. China ranks second in the estimated number of people engaged in scientific and engineering research and development.

China has seen the largest increase of any nation in its innovation score over the last decade, up 19.5 points (compared to a 2.7-point increase in the US score).

China is creating 16 national energy research and development centres intended specifically to drive innovation in the clean energy sector, and by the end of 2011, national Chinese R&D expenditures are targeted to rise 11% over levels recorded just earlier in the year.

Eight of 10 companies with the largest R&D budgets have established R&D facilities in China, India, or both. There has been a 600% increase in the number of college graduates in science fields in China between 1995 and 2005.