China is facing an enormous challenge. As strong as nowhere else, its urban population has grown rapidly over the past 35 years. At the beginning of the 1980s, about 20% of the Chinese population still lived in the cities. Today it is already over 50%. In another 15 years, the share could even rise to 70%. The reasons for this are the state subsidies for economic growth and consumption, which will allow urbanization to progress even faster in the future. It is estimated that water demand will increase by 70-100% between 2005 and 2025, depending on the urbanization model. However, the water supply and the water infrastructure in China are still considerably underfunded. But that is no surprise. China’s four-decade economic boom has exacted a punishing price on the environment. Round about 20% of the world’s population lives in China, but the country itself has only 3% of its water resources. Considering this, China is going to depend on an efficient water and waste water management. This not only because of economic factors but also because of political factors. In order to secure its power, The Communist Party of China would probably never allow any water disruptions or a worsening of the water management which could consequently lead to turmoil in the cities.
Five-Year Plan as a Clue for massive Water Investments in the coming Years
The lack of water, especially of clean, drinkable water, is increasingly becoming a serious problem for the Chinese economy. China faces a huge water problem and as nowhere else, water has become a political factor for the country. However, this problem has partly been recognized by the Chinese authorities for some years, which has made securing water and sustainable water supply one of the key objectives of their five-year plan in 2016. In this 13th five-year plan, the government has allocated RMB 559 billion, a total 0.75% of its whole GDP to the water treatment industry. Even though this might sound more than enough to tackle water issues across the country, it probably won’t be. More than 30 percent of the rivers and more than 50 percent of the drinking water would not meet national quality standards, according to China’s Ministry of Environmental Protection. In August 2013, water samples were taken from the Yangtze River and the Yellow River. These samples showed a 50 percent excess of mercury and an excessive arsenic share of 36.4 percent. Furthermore, it was shown that of 1,200 state-controlled rivers, 850 are polluted. Of the 4,929 groundwater stations surveyed in 198 Chinese cities, 57.3 percent had “bad” or “very poor” water quality. The reason for this is the unfiltered industrial wastewater, which seep into the groundwater.
Although the 12th five-year plan had been drawn up by the Chinese government stating that a total of RMB 450 billion was meant to be invested in the purification of wastewater by 2015, it is estimated that still up to 80 percent of the unpurified wastewater comes in contact with the so called clean water. Furthermore, it is believed that 86 percent of the rivers flowing through cities are polluted. The drinking water situation in China is therefore also becoming increasingly alarming. 82 percent of Chinese people source most of their drinking water from wells or freshwater lakes, but 3 out of 4 such sources are seriously polluted with bacteria and only one in ten Chinese receive their drinking water from a source which meets the water standards.
Additional water and sanitation infrastructure and wastewater treatment plants are urgently needed. However, existing and current investment in water and wastewater treatment infrastructure cannot keep pace with the pace of urbanization. Another important and crucial point is that half of all major Chinese cities have not yet reached the state quality standards for drinking water. In the long-term, this can lead to enormous potential for Chinese water stocks, especially as the Chinese water infrastructure is still in its infancy.