Opportunity in crisis

China is scouring the globe for oil, minerals and natural gas to import to keep its economic machine humming. But water will remain the one commodity that China cannot acquire through trade; it is too cheap, too heavy and too highly demanded to be imported practically.

Yet over the past three decades, China’s galloping economic growth has wasted water resources and pushed the country towards a water crisis. China has about 2,200 cubic meters of water per capita, or one-fourth of the world’s average.

Beijing is waking up to this crisis: It has devoted US$635 billion to upgrade outdated and inadequate water infrastructure and promote conservation between 2011 and 2020 – almost four times what it spent over the past 10 years. That funding is creating big opportunities for water-related companies. Yet experts remain divided over the proper course for solving water shortages. China Economic Review spoke with some of those affected by water shortages and those working to solve them.

Mr. David He, a native of Yunnan province:

Environmental degradation is the flipside of economic development. My home province has been stricken with droughts for the past three years. Back in February 2010, when Yunnan province experienced its most severe drought, each household was allocated only one bucket of water and the entire family had to survive on that for three days. The local government mobilized Communist Party members and experts to hunt for underground resources but they were often unsuccessful. I remember my dad and I trekked for two hours to find water but had no luck. People are growing more reliant on the government to carry out emergency policies and remain dangerously ignorant of the reality.

Mr. Wang Shichang, head of the desalination research centre at Tianjin University:

We will face very severe water shortages in China in the next 20 or 30 years because of our large population and small per capita water resources. Beijing is trying to solve the problems by launching centrally administrated projects. Take Tianjin as an example: The massive chemical factories and other enterprises that are developing around the port in the Binhai New Area demand a lot more water than is available locally. So Tianjin has issued policies such as income tax exemptions for companies producing and using desalinated water and a 10-15% allowance for purchasing desalination equipment. These policies have become almost compulsory, since the government cannot provide companies with any conventional water. We’re also trying different ways to use desalinated water to meet household demand, but we haven’t made much progress yet because the price of desalinated water is about RMB5-7 (US$0.79-1.11) per cubic meter in Tianjin, while tap water is about RMB3.9 (US$0.62) per cubic meter.

Zhang Boting, secretary general of the Chinese Society of Hydropower:

China’s pollution problems will be resolved as our economy develops. Our ability to treat water is low, and many industries that have produced pollution abroad have come to China. Economic growth solved similar problems with the rivers of developed countries, such as the Rhine and the Thames. In China, after we earn profits from the Three Gorges Project, we can deal with the pollution of Yangtze River. There are two methods we should use to deal with water shortages. First, we should strengthen our management system. Unfortunately, water resources are governed by the Ministry of Water Resources while hydropower construction is controlled by national and local development and reform committees. Second, the government should continue to enhance infrastructure construction. China has twice as many as reservoirs as the US, for example, but our ability to store water is half that of US. I think it’s very important to use environmental factors to evaluate officials’ performance. GDP is only one aspect of development. But pollution problems can be better resolved if GDP is larger. That makes local officials realize the importance of protecting the environment and encourages them to maintain it.

Mr. Jorge Mora, Asia CEO of Veolia Environment:

Managing drinking water and wastewater in emerging markets will be one of the major challenges we face in the next century. The first step in protecting water resources is to make sure that they’re not wasted. The water leakage through the production cycle, especially in municipal networks, is a severe challenge for water conservation in China. So locating and repairing leaks in water distribution networks has to be major priority in the future. China has improved the regulations that govern market entry, creating big opportunities for foreign and Chinese companies in both the water supply and wastewater treatment sectors.

Mr. Wang Limin, deputy conservation director at Worldwide Fund for Nature:

Dams are not always the best option [for alleviating water shortages]. Sometimes the solution requires more consideration. We’re not opposed to building dams, but from the perspective of ecology, dams are harmful to ecosystem – on this point everyone agrees. The Three Gorges Dam project is now putting greater focus on ecological protection, but it’s far from enough. The environmental damage the Three Gorges Dam has caused is already irreversible. What we’ve seen so far is just the tip of the iceberg – more problems are coming. The important thing to understand is that, in all of these project, the parties involved have different demands. What the Worldwide Fund for Nature seeks to do is to help find a balance point between ecological concerns and economic interests. So we argue for a comprehensive environmental assessment to minimize the environmental risks before any projects are undertaken, and we work to decrease the negative effects of any projects as much as possible. We believe that, one day, everyone will recognize this environmental assessment as a necessary procedure. All in all, to solve China’s water problems, all interested parties need to talk. We would be glad to provide a platform for those discussions.