competitive pressure and possible bankruptcy. one-quarter of china's power is not connected to the power grid. today the industry is growing but it's moderated and and reduce the number and more sustainable level. the focus and allow the u.s. to regain clean energy investment dollars in 2011. that said, it's unlikely that the u.s. will top the table in 2012. as policy appears to be particularly in the wind sector. finally, i would like to address the question of what is next for chinese clean energy companies. as the industry cools at home, many are now seeking opportunities abroad. china has a surplus of savings

and a strong need for further investment to drive the economic growth, including more investment overseas. as government has encouraged the clean energy industry to do this. chinese solar companies have exploited their equipment to germany, the united states, and elsewhere for years. the chinese wind turbine and other clean tech investors have remained confined to the domestic market. in coming months, we anticipate chinese power companies and banks developing and clean energy problems abroad. not only in the united states but in europe and in emerging markets, particularly in latin america. at the same time, american and european clean companies continue to sell their products and technology to china and partner with chinese companies as they go overseas. the trade flow and clean energy between the united states and china only increase in the future and it will be a two-way street. however, unlike the break neck pace, it's been slow and

cautious, a trickle and not a flood. thank you for your time and attention. i welcome your comments questions and comments. >> thank you very much. mr. wolff, go right ahead. >> thank you, mr. chairman, murkowski, members of the committee. your hearing today on china and clean energy is both timely and important. china is outinvesting the united states and that does have consequences in our market in clean energies. their industrial policies have created tremendous excess capacity, particularly china's exported until recently about 95% of its production and it's now estimated to be around 75%. many u.s. producers are in serious economic trouble and a substantial part and as a result of china's industrial policies. china has shut its market to our

wind turbines exports as well as those of europe and india. u.s. measures, as you pointed out, mr. chairman, are in support of the industry are temporary, erratic, and are expiring. within a few months with the u.s. anti-dumping case on solar and china's potential claim against the u.s. state programs as well as bringing its own potentially it's own anti-dumping case on u.s. poly silicon. drawing on several experiences that i've had, one is doing a study for the chair at the national committee on science on innovation policies, drawing on the time i've spent advising u.s. semiconductor industries since 1980 and our problems with japan and the study i did, co co-authored and i asked to be

entered into the record. it's not all that long. >> we're glad to enter that into the record. thank you very much. >> the questions i see before us, can we reach a national consensus on that it's vitally important that clean energy account for much greater supply of our total energy usage is complete u.s. domestic industrial production and in the entire supply chain delivering clean energy efficiently from the production it takes through fabrication into panels and deployment on wind farms of vital importance to the u.s. economy, the decisions that have to be made, as senator murkowski said, we're living at a time of fiscal constraint and these are difficult questions. but i would say there are two other questions that we have to

face and that is, is it acceptable for chinese industrial policy to shape the u.s. economy? and i would suggest that that's not acceptable. can the country afford not to seek to find which clean energy technologies lie just beyond the horizon? i think we have to. so what should we do? we need a broad set of measures, beyond the scope of this hearing, but in terms of taxation and job training, manufacturing, extension services, things that will boost our economy and job creation broadly which are subjects that the national academy report goes to. for renewables, until costs come down, there have to be mandates and subsidies and if we're going to increase our deployment of the equipment that generates it. i think we can learn some useful lessons and the semiconductor experience -- and you have a witness here that talks about

what is being doing that in the 1980s japan had a closed market. it was dumping it its semiconductor, selling below cost of production, generation after generation of semiconductor product. vertically integrated japanese producers are quite able to sustain that selling below average cost production. and silicon valley startups, we're really on the verge of extinction. u.s. companies need an unencumbered access to foreign markets. they needed to improve their manufacturing skills. they needed to continue to attract capital, to improve the protection of their intellectual property and make sure universities were training engineers with relevant skills. they needed tax policies that supported the need for r and d spending. in short, they needed a complete strategy, not just a partial

strategy of just a trade element and, in fact, all of the elements were put into place. and the result today is u.s. semiconductors which were half the world market share in the 1980s of japan are now double the japanese market share. in terms of supply and semiconductors account for one of the top in the united states. they have gone into upper new york state now with global foundries and the years of turbulence are behind us. we are now very good friends with the japanese producers and their government working together on things like energy saving and reduction of use of harmful chemicals. so what do we need now? we need to have market stability, predick ta built for

the japanese and u.s. producers. we need to -- for the chinese perspective, we need to avoid large deposits and there is room for enhanced mutual corporation in r and d and chinese investment in the u.s. market. ultimately, trade measures and domestic policy should be integrated into a strategic approach as we did with semiconductors down the road, we get the europeans involved as well. they face some of the concerns that we do. the bottom line is, i believe there is a negotiated solution out there. it probably won't come by october or november. but there are mutual interests that we should explore with china and reach, i would hope, an accommodation that doesn't end up in a trade dispute that goes on for some years. thank you.

>> thank you very much. we appreciate it. >> thank you, mr. chairman. it's by pleasure to be here. thank you senators murkowski, wyden as well. you asked what is the current landscape of china's investment and it's been delineated a little bit by the last two speakers. i chi china is committed to achieving air superiority aircraft as part of its pivot to asia. that is to say, the united states air force is not thinking of turning to european or asian suppliers to supply its number one strike aircraft.

developing leadership is the highest national security. and china is not thinking of it in their comparative advantage. i say that because it has to inform, then, our own response to china. and i want to emphasize, not just china. i remember in february of 2009 i was invited to a white house meeting to discuss the future of green technology in the obama administration. and there was a debate between those who in the administration who wanted to become proactive with various kinds of incentives

to promote green energy and other market -- traditionally, market-oriented officials who argue that we don't want winners and lose hers, that we should rely on the market. and the point i made in that discussion was, are you kidding me? i look around the world and i see germany has a huge program subsidizing solar technology, denmark has a big program subsidizing wind powered technology and japan is doing solar and wind power and korea is doing batteries and china is doing batteries and wind power and solar. i said, that's the market. and so when you say, leave it to the market, you're saying, leave it to the tender mercies of german, japanese, norwegian, industrial policy. and so when we ask ourselves what -- is it an appropriate

reaction or response now, that same situation pertains to us. we're not living in a world of open market free trade now. this is not adam smith living in an environment living with industrial policy of defining the outlines of the market and the incentives. so that being the case, it seems to me that the first major question that we, the united states, have to answer is, how important do we think it is for the united states to have a capability in these technologies? and when i say capability, i mean technological capability that is an understanding of the technology and the ability to do research in the technology and

somehow to remain at the leading edge of research but also because it's often difficult to remain at that leading edge without some competitive productive capability. then the question also arises to what extent is it necessary for us to have a commercially productive competitive productive capability? and that question has to be asked not for the short term but for the long term. because the nature of these kinds of industries is that they are characterized by economies of scale, by doing by learning, by path dependence and so you don't get to there unless you kind of have gone through the preliminary steps. you don't marriage huge leaps

ahead without having a preliminary experience. and so if we think that these technologies are really going to be important down the road, even if, for example, the low price of shale gas undercuts them today but maybe that's a temporary phenomena. if they are going to be important down the road, then it's necessary to adequately identify the incentives and disincentives in the market that are being created by the industrial policies of our various competitors and trade and partners and adjust them in such ways so as to assure that there's a continuing competitive u.s. capability. now, as my colleague, alan wolff, pointed out, this is not a new question. this is not a new phenomena.

we've been here before. we saw this in the '70s and '80s with japan and more recently in the '90s with others, japan, korea, taiwan, singapore, all of them have adopted similar kinds of proactive industrial development policies to achieve their miracles. and to achieve dominance in industries that used to be dominated by the u.s. and let me understrike industries that are capital intensive, labor intensive, not -- i mean, not labor intensive. capital intensive, technology intensive, not labor intensive. so those are the industries in which we keep telling ourselves, our top economists keep telling us that we are incentive and technology intensive industries. what we keep seeing is loss of competitiveness in those

industries in the face of the policies of some of these i've mentioned. however, as alan rightly points out, in the case of japan, semiconductor industry, there was recognition in the u.s. of a need to respond. and we did respond. it wasn't a perfect response. but as alan pointed out, the united states retains a very powerful leading edge capability in the semiconductor industry. how did we respond? with a broad, comprehensive policy. we self-initiate. let me say the word get. self-initiate. that is, the white house did not wait for our industry to bring a complaint. the white house brought a complaint of dumping of

semiconductors. we created a consortium in order to foster the advance of the leadership in the commitment industry. we had an agreement that resulted in reevaluation of the vastly undervalued japanese yen. and so a whole range of measures comprehensively linked together to deal with the question of, how do we stay competitive in this industry? we have an agreement with japan, so-called semiconductor agreement, under which the japanese, number one, agreed to halt their dumping but also commit to seeing to it that foreign producers got a fair share of the japanese market defined as about 20%, which in fact we did get. so that, i think, is indicative

of the kind of policy approach, kind of attitude and response and with the situation with china. >> thank you very much. you're the person who is an expert on semitechs. you can correct the previous witnesses and give us your view. could you push that button there for everyone to hear. >> thank you very much. and thank you for inviting me here to speak on these important topics. we at sematech, on these matters of industrial competitiveness that is so important to our continued growth and prosperity. we are facing challenges today comparable to the late 1980s which my colleagues have spoken on here when sematech was

formed. the u.s. has always lead at r and d and there has been a broad consensus that science and technology is integral to recent growth. it has been less well understood. while we as a nation still lead the world in discovery, we do face a real danger becoming a producer of intellectual property that is commercialized elsewhere. such an outcome denies the benefit that comes with manufacturing, transforming i.p. into products resulting in both revenue and jobs. as we face stiff global competitive and severe pressures, the sematech story is particular particularly instruck tif and matched dollar for dollar by

industry to fund an energy in semiconductors. by the mid-1990s, sematech withdrew from federal funding and improved manufacturing tools and processes, sematech played a key role in pulling the industry together. through the memberships, cooperatively funded, and conduct projects, developing key tools, materials, processes, providing test beds to facilitate innovations of production. this experience of groundbreaking industry support by private and public funding is applicable to industries today including energy storage, smart

grid, cyber security systems, biofuels, materials, and others. such a consortium has three important attributes. bob said, knowledge is power but knowledge shared is power multiplied. it's assuring that the direction and decisions are atune to the industry's market. its broad representation creates a critical and built on initial government funding and support

sufficiency and similar to what they are working on with the advanced manufacturing office. and protesting and is very critical. accelerating the advanced production line in the u.s. and commercial lie sdplags of new materials, equipment, and products. it's a national initiative but with collaboration, especially in areas such as environmental safety and health, standards, reliability, we have proven methodologies and still protect u.s. manufacturing. sema tech has evolved to keep pace and help lead the industry. we have expand the the program scope and diversified our funding sources as we develop generation equipment and technology platforms such as extreme uv programs, transistor

materials, 3-d and at the same time we are starting to apply sematech new technology areas. last year sematech was selected by the department of energy, pvmc. to establish and accelerate the commercialization and manufacturing of next generation solar photo tech systems. in keeping with the model and proven best practices, pvmc will provide r and d programs and test and demonstrate new technologies and manufacturing processes at production scale, which is very critical. in conclusion, in our view, a model for collaboration with a catalyst of public partnerships must be part of the u.s. playbook to leverage the innovations and strengthen the bridge between r and d and manufacturing. in addition, to leverage the

strong universities and capital system, we as a nation must nurture the development and robust manufacturing. thank you. >> thank you very much. dr. scissors, please go right ahead. >> thank you. i don't think we've heard enough today about how china is actually doing. i'm going to say a few things about that and maybe we'll hear more. i will suggest or recommend to some extent my written testimony which is hardly perfect but documents a little bit on china's actual performance. it's poor and apply lessons to the u.s. and let me start with positives on what china has done so far and possible that there

will be a possibility that exists and that's enough for the positives. the negatives are pretty stark. number one, china is significantly more dependent and coal importer and pull away from everyone import shares rising and that u.s. energy efficient for the 2.5 percentage and china had far greater and 1.7% in energy efficiency and technology we talk about and carbon

emissions. and second to the united states in global and carbon emissions. they have spent a great deal of money. they are not at least 50% ahead. that's the result of their green energy spending. innovation. some people think that you spend money, you get more innovation. okay. i don't agree. there is very little primary innovation in china. there's a lot of plans for innovation. maybe we'll see it in the future. we haven't seen it yet. even in the jobs performance, china's job performance is heavily dependent on foreigners, particularly demand subsidies now drying up. or it's dependent on domestic overcapacity in wind and when we actually breakdown chinese energy performance and china extended a lot of support and not all of them, but three of the top five have debt now that is six times their market cap.

their system just failed and they are going to either go out of business or be subsidized by the state. we will now innovate more. the decrees come a lot faster than protection of intellectual property. i would argue that you don't protect china very far away from doing. you're not going to innovate no matter how far you go from beijing. this changed when the state decided to alter economic policy, which is 2002, 2003 is changed in chinese government. their coal use was declining, mission profile soars and wants to consolidate sectors of large enterprises. china imposes price controls. price controls keep energy too cheap, they overuse it, import it.

their goes self-sufficiency. the theme of all of this is the role of the state. that's why the energy performance is so poor. so what are the implications for the u.s.? cooperation is certainly worthwhile. i think it's not going to accomplish anything. china's priority in energy is stay control of energy. not breakthroughs. i think imitating china is a terrible idea. they spend a little more than us and get much worse results. us imitating china would hurt the entire planet economically and in a competition sense we're winning. we're getting closer to self-sufficiency, they are getting farther away. and tech leadership unless you

substitute, they are much better, of course there is and lose track of fact and a brief moment and green energy and realize it will be helpful and a stable and regulatory environment is very important and jumping back and forth and not helpful and i would go on add, why, technology does not turn out to be the right ones. this is a very dynamic industry. we should not be looking and saying we should subsidize it d