2008 - 2009 - Pinsent Masons Water Yearbook 2012 - 2013

CHINA
PART 2: COUNTRY ANALYSIS
impact of continued economic development and the broader adoption of water intensive domestic
goods.
Global Water Intelligence estimates that operating spending on municipal water services will rise from
USD4.65billion in 2007 to USD10.88billion by 2016, with operating spending on municipal wastewater
services rising from USD4.20billion to USD5.95billion during that period.
PSP and politics
Private sector participation in water and wastewater services in China has been enabled by legislation
such as the 1984 PRC Water Pollution Prevention Law and the 1988 PRC Water Law and
subsequently by various laws governing such aspects as Contract Law (1999).
The Ministry of Construction ("MOC's") 2000 “Circular on Accelerating the Marketisation of Urban
Utilities” encourages domestic and foreign investment in urban public utilities through a variety of
ownership arrangements such as sole ownership, joint ventures, or partnerships. The joint “Circular
on Accelerating the Commercialisation of Urban Wastewater and Solid Waste Treatment” by the
MOC, the National Development Reform Commission and the State Environmental Protection Agency
in September 2002 provided specific references to wastewater treatment plants and promotes
arrangements such as build-operate transfer (BOT), joint ventures with municipal utilities, and
transfer-own transfer (TOT) contracts.
The Chinese Government formally opened the national urban utility market to domestic and overseas
investors in 2003. Domestic and foreign investors would be allowed to invest alone or cooperate with
local authorities or enterprises. The ministry would further promote charges for sewage and refuse
treatment in 2003, and deepen the price reform of water supply, so as to establish a price system
adapted to the market economy.
The Ministry of Construction’s 2004 “the Administrative Method of Urban Utilities Concessions” was
meant to fully establish the legal status of concession contracts, but may need to be further developed
regarding the legal status of contracts, the imbalance between the enterprise and the government and
limitation of its applicability.
Water provision is subsidised in order to ensure its universal availability in urban areas. This applies
both to piped water and water provided by vendors. The supply of water has deteriorated both in
terms of availability and the quality of the water provided because of the lack of funding. On average,
water accounts for 0.5% of household expenditure. In consequence, domestic water use in urban
China is at an appreciably higher level than is currently sustainable. There have been a number of
developments at the municipal level designed to eliminate subsidies, while ensuring that water
services are both of a higher quality and affordable (up to 1.5% of average household expenditure).
The State Development Planning Commission (SDPC) has announced that urban residents and
enterprises will pay higher prices for excess water consumption by the end of 2005, and sewage
processing fees will be charged throughout the country by the end of 2003, on the basis of cost
recovery.
At the end of 1999, Chinese and expatriate companies served 11million people against 15million
being served by international players. More recently, water and sewerage PSP has moved forward at
a dramatic rate. Since 2000, contracts serving a further 21million people have been awarded to
international companies, while contracts serving 36million people have been awarded to Chinese and
expatriate companies.
International companies seeking to enter this market need official support from at least one of the
main Beijing government bodies. The State Planning Commission (SPC) approves BOT projects. The
Ministry of Construction (MOC) approves STW construction and operation projects inside cities,
having been involved with the private sector since 1993 with the water and sewerage sectors. The
Ministry of Water Resources (MWR) is responsible for non-urban areas. While the MWR is still
responsible for major infrastructure projects, it is much less powerful than the MOC, and therefore the
MWR is not seen as important when seeking international BOT proposals. The State Environmental
Protection Administration (SEPA, formed in 1998) looks after STWs and industrial effluent treatment
projects. The NEPA works with provincial EPAs, which are essential partners for sewerage and
sewage treatment BOT projects. To date, all such projects have in fact remained in state hands, whilst
mobilising finance from international multilateral agencies.
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Pinsent Masons Water Yearbook 2008-2009