2005 - 2006 - Pinsent Masons Water Yearbook 2012

Responding to these challenges
10
PART 1: 2005-2006 OVERVIEW
Improving the quality and extent of urban sewage treatment is the immediate priority, along with
extending water treatment. Needs and official figures vary greatly, with some private sector
sources believing that US$200-240 billion needs to be spent on this infrastructure by 2015.
Official spending plans are laid out under a series of five year plans.
Total forecast spending on environmental protection:
9th five year plan, 1996-2000: US$43 billion
10th five year plan, 2001-2005: US$84 billion
11th five year plan, 2006-2010: US$157 billion
12th five year plan, 2011-2015: In preparation
It is understood that the 12th five year plan will seek to increase urban sewage treatment to at
least 60% and preferably to 70-80%. It will also need to address water scarcity issues in tandem
with further urbanisation and industrial development.
China has earmarked $33 billion of the five year plan’s spending on water and wastewater
treatment projects between 2001 and 2005. Under the 10th five year plan, 11% of funding is
earmarked from central government, 34% from local and provincial government and 55% from
industry.
But by the end of 2002, just 28% of the plan had been realised and current expectations are for
70% of planned total to be realised by the end of 2005.
Some capital spending estimates and forecasts, 2004-2010
US$ billion Market size
2004 15.0-18.7
2005 16.6-22.7
2010 30.0-33.2
Adapted from Frost + Sullivan, Helmut Kaiser Consultancy
Still an importer’s market
Some 60-65% of environmental protection hardware, including water and wastewater treatment
equipment is imported at present, and although China is keen to develop local capabilities, the
scale and timetables for investment mean that this remains very much an importer’s market.
The scale of foreign activity is best illustrated in the water treatment sector where Degrémont
believes 120 million people are supplied with water from facilities using its technology and Purac
supplies a further 40 million.
At a symposium on the development of urban water-related projects in October 2005, Wang
Guangtao, the Chinese Construction Minister, reiterated the importance of foreign investment.
Total investment needs for wastewater were estimated to be in excess of RMB500 billion
(US$60 billion).
Tariffs, cost recovery and tariff reform
Water provision has been subsidised in order to ensure its universal availability in urban areas,
with formal tariff charging only starting in 1985. Currently, water tariffs account for 0.5% of
household expenditure and there is no effective constraint upon its consumption. In 2004 the
Ministry of Water Resources estimated that China's economy is 85% below the global efficiency
average in water consumption. This is in part due to outdated plant and management
techniques, but mainly as a result of artificially low water fees.
Pinsent Masons Water Yearbook 2005-2006