China invests in water treatment solutions
The environment is high on China’s political agenda. It’s all about ‘war on pollution’. The message is clear: policies to tackle pollution and water scarcity will ‘spill over’ to impact industry. Financial analysts are trying to quantify the financial implications of these regulations. On the flip-side, there is increased interest in the water & wastewater treatment and waste-to-energy sectors.
At the start of the year, we predicted that the government will act to rein in pollution and safeguard water resources with more policies. Why? Because these policies would not only ensure the success of SEI #1, they will allay the people’s rising concerns over the smog, water pollution & food safety.
Beijing did not disappoint: Premier Li Keqiang declared war on pollution in March, by April previously state-secret soil statistics were released and the new Environmental Protection Law was passed. There is no let-up in May with new water & soil conservation fee standards, the low carbon development plan and a slew of other polices which tighten discharge standards & environmental data collection by industry. There is also action to increase monitoring through EIA reform and open invitation to the public to participate in the war on pollution. The new ad campaign out this month urges
“Don’t let freshwater become a memory. Act now. Protect water sources”.
3 red lines on water conservancy
Pollution is but one ‘enemy’; China has pledged to hold ‘3 red lines’ on water conservancy. The other two are:
- total water use
- water efficiency
Consensus of water experts says that China’s water demand will exceed supply by 2030. To tackle this, a series of national & provincial water use caps were introduced back in 2011. More recently, China said it would boost water conservation projects (water transfer, reservoirs and irrigation) to increase water supply in 2020 by 80 billion m³ per annum. Additional savings of 26 billion m³ of water will also be saved by expanding irrigated areas and improving irrigation efficiency. Water savings are also expected from the power sector, the largest industrial user of water in China through energy savings.
All of this means more investment in water efficiency and water treatment across all sectors. Technology will be the key driver and those that offer solutions for water treatment, water management, water infrastructure & supply and water-friendly energy generation should stand to benefit. Corporates may have no choice but to invest in equipment upgrades & technology to meet these new and upcoming Chinese regulations. A recent report by Bank of America Merrill Lynch anticipates that some of the largest opportunities will emerge around the US$50billion industrial water treatment market.
In the long term, China is already looking past water & water-related sectors. The other SEIs (agritech, new energy, new materials) indicate a ‘business unusual’ approach. When water scarce provinces with water resources per capita similar to the Middle East drive 45% of China’s GDP, it is not difficult to see why. Water is not just essential for food & energy security, it also drives economic growth. It’s time we all remembered that. Technology innovations will drive “business unusual” but investors also need to put in risk capital to develop these. It’s time to rethink water investments – China’s regulations & policy making are moving in a favorable direction; also a 1% market share of China’s planned SEI#1 is still a staggering US$7 billion – surely the investment in the water sector deserves a deeper.