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Environmental companies seek new business on China mission

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Contaminants are visible in China's Chongquing River, prior to the installation of pollution cleanup equipment made by a Minnesota company. (Photo Courtesy of Aeration Industries International)
The World Health Organization says seven of the 10 most polluted cities in the world are in China. And according to a Chinese government study, more than 100 million urban residents are exposed to air pollution levels that are considered very dangerous. China's environmental problems could be an opportunity for some Minnesota businesses. About a dozen companies participating in Gov. Pawlenty's China trade mission specialize in environmental cleanup.

St. Paul, Minn. — Sam Roy of Mankato has been to China at least a half dozen times since the mid-1980s. He has a pretty good idea of the conditions he'll encounter on this trade mission.

When he visited his doctor a few days ago he asked for special drops to help his eyes adjust to China's polluted air.

"Oh, can you feel it -- and you can see it," says Roy. "When we will be in Beijing, we will see that the visibility is so poor. There's always a haze. You can almost see maybe three to four blocks clearly, and then after that you could not see anything."

Roy is excited about this trip because he thinks his company, EPS Technologies, has a product that will help solve China's air pollution problem. The product is a patented formula that's injected into the air intake on a boiler to improve flame combustion.

Roy says the product increases the efficiency of the combustion process, which reduces the amount of fuel used and the amount of harmful emissions released into the atmosphere. Company tests have shown that the injection formula can cut nitrous oxide and carbon monoxide emissions by as much as 50 percent.

Roy says such reductions could make a dramatic difference in air quality.

"We couldn't ask for better timing. With the prosperity they are realizing, their own masses are demanding a lot more cleaner air to breathe," says Roy.

In fact, the Chinese government has already begun to make some of those environmental investments, according to Kent Kedl. Kedl is the co-author of a new book, "The China-Ready Company." He's a business consultant who splits his time between offices in Minneapolis and Shanghai.

The Minnesota Trade Office recently invited Kedl to share his China expertise with Minnesota's trade delegation. Kedl told the group that China is concerned about pollution.

He says in Shanghai, officials recently converted their entire fleet of buses and taxis to vehicles that run on natural gas. Kedl says the city has also enacted other pollution measures.

"They've moved the manufacturing outside the city. They've really improved the air quality in the last five years, but they have so much farther to go," says Kedl. "And they're looking for technology, they're looking for assistance in doing that. And the Chinese government's got money. They're investing in this kind of stuff."

Not to have China as part of your strategic vision would be wrong.
- Mankato businessman Sam Roy

Adding to the urgency is the 2008 Olympics, which will be held in Beijing. The event will draw world attention and with it, scrutiny of environmental conditions in China.

Minnesota trade delegation member Dan Durda hopes the games will increase demand for his water aeration equipment.

"This is our Tritan," says Durda, pointing to a pontoon-like device floating on the surface of a test pool at his Chaska headquarters. "We're selling a lot of these in China."

Underneath the pontoon, a single propeller churns the water, spitting out tiny bubbles that sound like fizz in a can of pop. Durda says his device cleans up polluted water by creating conditions that help grow good bacteria.

Durda's company has already sold about 1,000 aeration devices in China, including one that was used to clean up a river near the athletes' village during the 1990 Asian games in Beijing.

"They don't want to have garbage and polluted rivers and that sort of thing, that people are going to be looking at," says Durda. "So they've made the commitment to clean that up."

Even if the Olympics were not a factor, Durda believes the Chinese would still be serious about investing in environmental cleanup. Recently the Chinese government enacted tougher pollution standards for industries, which say new factories can't be built without a plan for cleaning up their waste.

The standards are not as strict as in Europe or the U.S., but they've opened up a market for environmental cleanup where none existed before. All some companies need now is a strategy for getting their product into China.

"This is called Ultra," says Rob Herbon, who holds a plastic jug filled with light blue powder. "It's a series of products. And this was the first reason that piqued our interest in China."

The powder is made by Freemont Industries in Shakopee. The material is used to clean corrosion from water used in boilers.

Herbon, a sales manager at Freemont, says the Ultra chemical is an ideal product to send to China because it's easy to ship.

"You could strap one of these on the back of a scooter and run it to a customer if you had to, as a means of transportation. You couldn't do that with a 55-gallon barrel of chemical," says Herbon. "That's one of our technologies that we're bringing to China."

During the governor's trade mission, Freemont Industries will sign a distribution agreement in Hong Kong designed to help it break into the Chinese market.

Freemont's CEO Mark Gruss hopes it will help him get back business that he's lost to China. Last year Gruss had to sell off part of his company, because many of his customers have left the U.S. to take advantage of China's cheap labor.

Instead of being bitter about the situation, Gruss says he intends to expand his remaining business by taking his environmental expertise and products to China.

"We would love to see container loads of our products solving problems in Shanghai and Hong Kong and Beijing," says Gruss, "versus the flood of imports that we have to deal with here."

But like many other business leaders participating in the Minnesota trade mission, Gruss is not sure what to expect once he gets to China.

The Minnesota Trade Office has warned there might be some pitfalls. Steve Riedel, an international trade representative with the office, says his office plans to talk to all the delegation members about making sure they don't violate the Foreign Corrupt Practices Act.

"They have to stay away from giving bribes, or from engaging in business practices that would be somehow illegal," says Riedel. "Companies may face temptations because sometimes it may appear to be the only way they can do business in China. But we would like to convince them that it isn't, that the risk is not worth it."

Reidel says Minnesota companies will also get information about how to protect their products.

"China does not have a good reputation right now for protecting foreign intellectual property," says Riedel. "So one of the main objectives is to educate the companies when we get there on what sort of steps do they need to take to file a proper patent, to guard against intellectual property theft, and to be aware of the threats that exist where their intellectual property and their technology could be stolen, frankly."

That kind of theft has happened before. Reidel says during a trade mission to Vietnam last fall, Aeration Industries in Shakopee discovered that someone had duplicated their aeration device, right down to the product labeling.

Still, that situation has not deterred Aeration Industries from participating in this trip. And it hasn't deterred other members of Minnesota's environmental delegation.

Mankato businessman Sam Roy says breaking into the Chinese market is worth the risk.

"It's a great opportunity for us. The question is how we go about making things happen," says Roy. "But not to have China as part of your strategic vision of any company, whether it's a startup or a billion-dollar company, would be wrong."

Thirteen environmental companies are participating in Minnesota's trade delegation to China. Two-thirds of those businesses specialize in water cleanup. The rest focus on air quality and solid waste disposal.

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