China has emerged as a world leader in the manufacture of solar photovoltaic technology, and could soon be the largest supplier of wind turbines, thanks in part to state laws and directives that reward renewable energy equipment companies with cash and tax perks.

Those state polices are now under scrutiny. The United States is seeking talks with China at the World Trade Organization (WTO) over wind power incentives which it calls illegal subsidies; it is contemplating a separate action on solar incentives.

China, which joined the WTO in 2001, has expressed willingness to open discussion with the United States on the wind power complaint.

Western countries also subsidize green technology. But western firms argue such aid is primarily designed to boost the spread of green power. Chinese aid, they complain, is designed mostly to help Chinese companies and shut out foreign firms.

The following measures targeting green technology form part of a larger fabric of laws and regulations that help promote the growth of Chinese companies:

* Ride the Wind Program (1996) promoted wind equipment production. European firms were invited to enter joint ventures with local firms and share technology in exchange for market access. A National Debt Wind Power Program (1999) complemented the plan by extending loan rate subsidies to wind farm owners purchasing locally made wind power components.

* Government Procurement Law (2002) encouraged a buy domestic culture in state-owned entities in their purchase of equipment or approval of projects including the renewable energy industry.

* Administration of Wind Power Construction (2005) required that at least 70 percent of all equipment used in new wind farms be made in China. Beijing removed the local-content rule in 2009, but state-owned companies may still prefer Chinese-made equipment.

* Renewable Energy Law (2006) required utilities to purchase electricity from renewable energy sources, while establishing other incentives for the sector including preferential rates on loans.

* Provisional Measures for the Accreditation of National Indigenous Innovation Products (NIIP) (2006) gives priority to solar, wind and other key technologies developed in China in state procurement programs.

* Export Product Research and Development Fund offers loan discounts and capital support for R&D products in high-tech goods for export. Wind turbines and solar products were added to the revised list in 2006. A company must export 50 percent or more of its output, or record export sales of at least $15 million to be eligible for the grant. China's biggest solar firms export about 95 percent of their output yearly.

* Special Fund for Wind Power Manufacturing (2008) extends cash grants of about 600 yuan a kilowatt, or about 5-10 percent of the cost of a wind turbine, to developers using locally developed technology and components.

* China's $586 billion economic Stimulus Package (2008) allocated a major portion of government spending to renewable energy projects.

Sources: Government announcements, Dewey & LeBoeuf LLP report, United Steelworkers petition.

China Wto Manufacturing Renewable energy