Not everyone is saddened by China's growth-at-any-cost and the environmental tragedy it has ushered in. What is broken must be fixed, and the government is creating programs to cope with urbanization and clean up the damage. China's 11th Five-Year Plan, announced in 2005, marked the beginning of an environmentally-conscious era.
"It is much more than window dressing," said Khalid Malik, the United Nations Development Program resident representative in Beijing.
"How do we sustain growth while dealing with the environment and trying to fix it has been a concern of economists and policy makers for some time."
Jun Ma, Deutsche Bank's chief economist for Greater China, estimates the government will spend US$243 billion on the environment during the five years of the plan, about 1.6% of GDP, up from the US$86 billion or 1.23% of GDP it spent between 2000 and 2004. In 2005, China spent US$29.9 billion.
The most pressing problem is water. The UN says China is one of the 13 most water-scarce countries in the world, with per capita water resources about one-quarter the world average.
According to the World Health Organization, 27% of China's rural population has no access to safe water, sanitation coverage is limited to only 51% of the entire country and 279 cities do not have water treatment facilities. In many cities facilities do not operate regularly.
The situation has prompted the government to significantly increase spending. For the past three years, wastewater treatment investment has been growing at 23% annually.
Late last year, State Environmental Protection Agency Vice-Minister Pan Yue estimated China would need to invest US$50 billion and build 10,000 wastewater treatment plants just to reach a 50% treatment rate. But the government's targets are higher than that. Beijing aims to treat 70% of urban wastewater and 60% of household wastewater by 2010, up from the current 45%.
State media reported China would spend US$125 billion on improving water security and sewage treatment systems in the next five years and Deutsche Bank expects 25-30% compound annual growth in this area for the next five years.
The investment needed to repair the environmental devastation from China's growth is outpacing the country's ability to pay, particularly in secondary cities.
But SEPA is putting pressure on regional leaders and they are, in turn, looking to the private sector for help.
Zhuang Ping, president of environmental engineering consultancy Easen International and a founder of the International Fund for China's Environment (IFCE), said around 50% of garbage and wastewater projects in second and third-tier cities are being built or managed by the private sector.
Some of the biggest global players are targeting the market. Veolia Water, the water division of the world's largest environmental services company, and its major rival, Suez Environment, are both in China, as is Thames RWE, the world's third-largest water company. But they can't clean up China alone and smaller players are also rushing into the space.
"My strategy is not to go for tendering because competition is too fierce and that tends to drag down the price," Zhuang said.
"I prefer to go into smaller second- or third-tier cities or development zones where you have 20-50,000 cubic meter per day projects, which tend to be decided through negotiation rather than tender."
Zhuang cites Bengbu, a city on the Huai River in the north of Anhui province, as an example. At least 19 domestic and foreign companies bid to build a 100,000 cubic meter per day wastewater treatment plant for 800,000 inhabitants.
This type of competition may dampen investor spirits but Zhuang takes solace in the size of the country and the size of the problem. But there is no time to lose.
"If you don't come in now, the only chance will be a few small new developments or buying into an existing project, which will be more expensive."
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