China, now a leader in everything from cleantech investment to carbon emissions, can expect to see its star keep rising in 2011. However, the business atmosphere there promises to show much more volatility in the coming year … with uncertain implications for outside investors.

Companies ranging from Apple to Siemens, from IBM to Wal-Mart, have made huge investments in China in recent years, spending on everything from shiny new factories to whole smart-city projects. Multinationals haven’t yet shown any slowdown in their appetites for Chinese business ventures, but 2011 could be the year that causes some to reconsider future strategies.

That’s because China’s economy, while still charging ahead, faces some challenges that can be ignored or masked for only so long. The government has already raised interest rates twice since October to counteract growing inflation, which is making everything from food to rent more expensive for its citizens. Prices have been accelerating especially fast in real estate, leading many to predict that China — like the US before it — will soon see the bursting of its housing bubble.

With far more young and well-educated college graduates than it has high-paying jobs for, China could also see growing levels of social unrest.

For now, however, China still holds a winning hand of cards, particularly in the areas of green technology and sustainability. There is, for example, its near-total control of the world’s supply of rare-earth elements, materials that are vital for producing technologies from wind turbines to electric-car batteries. It also enjoys the top spot in renewable energy, both in terms of domestic production and in production of wind turbines and solar panels for export. And considering the austerity and debt-reduction measures being enacted in both Europe and the US, that position for China isn’t likely to change in 2011.

The US, in particular, faces a difficult year ahead. Despite President Barack Obama’s calls to rejuvenate the US economy with green jobs and clean technology, money for such goals will become increasingly tight. Much of the billions provided under the nation’s economic stimulus bill will run out this coming year, and the incoming US Congress features a new class of Tea Party members, climate-change-deniers and small-government proponents unlikely to put a value on further investments in sustainability. If anything, look for a steady stream of proposals to roll back green jobs spending, environmental regulations and investments in energy and technology research and development.

All things considered, it appears that China — and not Europe or the US — will continue holding the green leadership role as we enter 2011.

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