Given its reputation as the biggest ecological vandal on the planet, it might come as a shock to learn that China is finally taking green issues seriously. However much sceptics might quibble, the most recent statistics published show that at the end of 2010, it was the world's largest investor in clean energy, with a $54.4bn stake. It's also the foremost exponent of wind power, notching up a staggering 44.7GW of installed capacity and overtaking the US in the process.

In addition, Chinese factories manufacture more photovoltaic solar panels and wind turbines than any other nation. And by 2020, the installed capacity of wind, solar and biomass technology in China is set to double. As Sebastian Meyer, a partner at Beijing-based energy consulting firm Azure International, observes: "Green energy is not just a marketing campaign. [Whereas] targets set for 2000 were never met, now [such targets] tend to be surpassed."

For many analysts, though, such figures are conservative. Renewable energy aside, China's commitment to high-speed trains, smart grids, electric vehicles and water-treatment plants has been impressive to say the least.

And while its 2009 commitment at the Copenhagen climate summit - to reduce the intensity of carbon emissions by 40%-45% during the 15 years to 2020 - is nowhere near enough as far as the country's critics are concerned, it does mean some serious changes for the world's second-largest economy and number-one polluter. Few observers doubt that China will achieve its targets, if only to save face.

That said, not everyone in China is convinced of the need to move from double-digit economic growth to a more sustainable model. The debate has raged since the early 1990s, and those defending a cleaner growth model have faced an uphill battle in their efforts to convince state officials and local governments that sacrificing a little GDP is worthwhile.

China's first serious commitments appeared in the 11th five-year plan, launched in 2006, when an energy-intensity target was set (but not reached). Since then it has made a dramatic leap forward, mainly because it doesn't have much choice. Its soil, air and water are degrading rapidly - and its dependence on imported fossil fuels comes at a terrible cost. According to some estimates, pollution kills 1.3 million Chinese people a year.

As well as being the world's biggest CO2 emitter, China is also the largest energy consumer, and its reliance on imported oil - 50% of its consumption - has always been a concern. Most of its overseas acquisition deals this year were energy-driven. And as its burgeoning middle classes head for the car showrooms (often plumping for gas-guzzling SUVs), oil consumption still has a long way to rise, posing energy-security challenges and threatening to drive up the oil price.

Consequently, senior state officials have placed developing a greentech industry at the top of their agenda. Replacing the feeble Environmental Protection Agency, the government created a ministerial-level department and set out its green ambitions in its 12th five-year plan. Launched in March 2011, this plan is much more proactive than its predecessor, making the development of greentech industries and energy conservation a clear priority and promising a political backlash if its goals are not reached.

Progressively and at all levels, laws and regulations have been created to enable local government and companies to enact this national policy. More importantly, billions of dollars have been poured into the sector - if not directly from the government, via bank loans and subsidies.

The state makes no bones about its plan to boost domestic industries in fields where Chinese technology does not lag far behind that of its peers. Indeed, it has made clear from the beginning - to the dismay of foreign firms excluded from the market - that it intends to use industrial policy to capture markets. As the latest report by the China Greentech Initiative - an international collaboration platform sponsored by world's leading energy firms - points out: "The government's objective is now to ensure most energy equipment, especially in wind, solar and biomass will be made in China, using Chinese standards."

Not only does China heavily subsidise and favour local greentech industries, its procurement laws require government organisations to purchase domestic-made goods. On top of that, administrative hurdles make foreign entrance into the market near-impossible, except in very niche, high-end sectors.

During a factory tour of Goldwind, one of China's greentech goliaths, a public affairs officer boasted that "funding and bank loans are just not an issue for us". Many of the country's greentech firms are state-owned, and if they're not, then a complicated shareholding structure ensures that the state is never very far away. Incestuous links with local governments and party officials favour access to cheap loans, land rights, R&D departments of universities and, in particular, help when it comes to winning bids.

Examples are numerous. China's state grid will invest $530bn into a smart grid, set to become of the world's largest. And solar-panel producers LDK Solar, Suntech, Yingli and Trina Solar, along with wind turbine-makers Sinovel and Goldwind, received loans from the China Development Bank totalling $6.5bn in 2010 alone.

So the message is: green, yes, but made in China by Chinese firms. What's more, the strategy has paid off. Having groomed and raised its champions, China is now home to some of the world's leading solar photovoltaic (PV) manufacturing and wind turbine-makers. Indeed, five of the top 10 solar PV cell and panel producers in the world are Chinese.

Armed with experience on their home turf, the Chinese are even making inroads in the US and Europe, stirring up international tensions as they go. To their credit, they are able to work inexpensively in a fast-expanding environment. "There will be a steep learning curve for them as they go overseas, but I do believe they have a lot to give," says Azure International's Meyer, "especially if they can offer considerably cheaper products than what is currently available."

Even in areas where China has depended on foreign technology up to now, its huge investment in R&D has helped it to pull ahead of its rivals in certain niche markets. State-owned grid companies China Southern Grid and State Grid Corp are now entrenched in southeast Asia and South America, for example.

Moreover, after developing the biggest high-speed railway network in the world, China is now ready to export its technology, with contracts on the cards in California and the Middle East. Experts say that the collision between two trains at Wenzhou last July, which killed 40 people, will do no more than delay plans for the country to take its place alongside multinational conglomerates Alstom and Siemens. "China has become a global leader in the industry", explains Dominique Pouliquen, president of Alstom China. "We can only acknowledge the fact."

While producing the equivalent of a BMW or Buick remains a pipe dream in the short term, China has devoted itself to developing electric vehicles, and is doing particularly well. As home to the world's largest lithium-battery producers, it has put this advantage to good use and hopes to roll out a million green-energy vehicles by 2015. Some estimate that China has spent $153.8m on the technology in the past decade - as much as the US or Japan.

"We came to China not for cheap labour, but because in this specific field they are the world leaders", says Stéphane Gonnetand, founder of ODC Marine, which manufactures electric boats in the port city of Dalian.

In a similar vein, Daimler and other Western car manufacturers have signed deals with Chinese companies to develop electric and hybrid vehicles jointly. Their aim is not only to tap into the world's largest auto market but to benefit first-hand from Chinese experience.

On paper, then, everything looks good. But is it? In spite of new laws being passed and the billions being poured into greentech, China still has a very long way to go before it can claim with any conviction that it's genuinely green. Challenges include administrative bottlenecks, sluggish infrastructure improvements, gigawatts of clean energy that can't be connected to the grid, corruption and an industry that is in some instances is growing too quickly.

"We are not there yet," admits Changhua Wu, Greater China director of The Climate Group, a not-for-profit organisation that aims to spearhead a 'clean revolution' with the cooperation of governments, businesses and public figures. "There are a lot of barriers in terms of implementation. Every province wants to participate and benefit from tax rebates and subsidies, but local governments are just not following up with the infrastructure.

It will take a lot of effort in coordination and readjustment of local laws for proper application of central policy."

However, the main challenge remains China's addiction to GDP growth. Millions of new cars take to its roads annually and energy capacity has doubled in just six years. Meanwhile, China's annual additions to installed capacity are comparable to the total installed capacity of the UK or France.

"When I think of how much more energy China needs to fuel growth, I can't sleep at night," the managing director and chairman of global markets for JP Morgan in China, Jing Ulric, admitted in 2011.

China consumes 44% of the world's cement, 40% of the world's copper and is the principal meat and grain consumer. And while it has committed to a reduction in its energy intensity per unit of GDP, it refuses to sign the Kyoto Protocol and to reduce its total carbon footprint as requested by Europe. It's estimated that by 2016, it will still rely on coal for 62.5% of its energy.

"Another way of looking at it," said an industry expert recently, "is that China will continue to add 60% of energy intensity until 2020." In other words, it will continue to pollute, just not as much as it used to.

China argues that it still needs time to lift millions out of poverty and provide basic services such as clean water, electricity and public transport to the majority of its population. Even if growth targets have been reduced, they remain high by European standards, and analysts estimate that it will continue to see its GDP grow at 8% or so a year in the medium term.

As the race for growth continues to exact a heavy toll on the environment, domestic and international NGOs are warning of an increased risk of soil and air pollution. Indeed, Greenpeace's Dirty Laundry report, published last July, warns of hazardous chemicals from the textile industry seeping into China's rivers, posing a serious threat to ecosystems and human health.

Although a big effort is being made to get eastern and coastal provinces to clean up their act, the less developed western provinces have asked for the right to go on polluting. "China is thinking of imposing a coal cap to help shift the energy structure to renewable from fossil fuels," says Li Ang, a climate and energy campaigner with Greenpeace. "However, western provinces who rely on coal argue that this will slow GDP growth."

And therein lies the challenge for China. Many provinces are still primarily motivated by growth and are reluctant to change. In many cases, cleaning up will mean closing factories and laying off thousands of workers, so weaning provinces off the 'growth at all costs' mentality will be a slow process.

"We are looking at a country that will continue to consume and grow," says Richard Balme, a professor at Sciences Po, Paris, who also teaches at Beijing's Tsinghua University.

"Yes, China is getting greener. It is also continuing to pollute."

GREEN GIANTS

Xinjiang Goldwind
Founded in 1998 and listed in Shenzhen and Hong Kong, Goldwind has always benefited from massive government support, mostly to finance R&D but also for overseas acquisitions and investments. In November it announced a credit facility of $1.6bn from a local bank and last year received $6bn in loans.

Along with its rival, Sinovel, the firm dominates its home market and for the past two years has been looking at investment opportunities abroad, often clashing with US authorities and local industrial lobbies. After launching a production facility in Germany last year, it plans to open more offices in Africa, South America, the US and Europe.

In 2011 it announced plans to build a $200m windfarm in Illinois. Having purchased German manufacturer Vensys in 2008, it recently branched out into offshore wind projects.

In 2010, revenues totalled 10.7 billion yuan. The company plans to triple those in the next three to five years.

BYD
BYD's success is due to its development of nickel and lithium-ion batteries for mobile phones. With heavy subsidies, it moved into the electric vehicle market in 2005 and now aims to sell solar cells and power storage.

The company gained media attention after Warren Buffett acquired a 9.9% stake in 2010.

As CEO, Wang Chaunfu's ambitions to sell the first Chinese electric car in the US by 2011 and become the world's top car manufacturer by 2025 look fanciful now. Sales at home have been disappointing and the company has scaled down its objectives. However, in the long term, analysts are optimistic that it will come up with a viable commercial electric car. Industry reviews for its hybrid F3DM and electric e6 have been encouraging. In 2010 it teamed up with Daimler and VW to develop electric vehicles for the Chinese market.

Suntech Power
Shi Zhengrong, CEO of Suntech Power, is the world's 59th richest man. His company, listed in New York, is the world's largest solar company with an 11% market share.

As Suntech's products are cheaper than Western brands, growth has been fuelled by overseas sales, which grew by 40% in 2009 and 80% in 2010.

Suntech's main challenge has been to develop in its home market. The government has been slow in kickstarting the industry, preferring wind power until now. However, feed-in tariffs have been announced that should give the industry a boost. Solar capacity in China is expected to double by the end of this year.

Goals listed in China's 12th five-year plan

• Planned installed capacity for wind: 90GW
• Planned installed capacity for solar: 5GW
• Natural gas consumption: up 150%, rising in the energy mix from 4% to 8%
• Coal consumption: down from 70% to 62%
• All new buildings: mandated to achieve 65% energy savings
• Likely energy and environmental taxes
• 200GW of renewable capacity by 2020