By
Lucy Hornby
and Jane Lanhee Lee
world's
second largest economy, but hundreds of millions of its people still rely on
fouled water that will cost billions of dollars to clean.
Growing cities, overuse of fertilisers, and
factories that heedlessly dump wastewater have degraded China's water
supplies to the extent that half the nation's rivers and lakes are severely
polluted.
China needs to spend up to $20 billion a year to
bring its urban water supplies up to standard, according to the World Bank.
Larger and wealthier cities have already
started investing in the sector, but water supplies in smaller cities and the countryside
still fall short, leaving about 800 million people without clean drinking
water.
Water infrastructure
was given unusual pride of place this year in the government's first policy
document of 2011, with 4 trillion yuan ($606.4 billion) allocated to water
clean-up and rural water
infrastructure over the next decade.
"China is facing a grave challenge of water
pollution," said Ma
Jun, whose Institute
of Public and Environmental Affairs names and shames water
polluters.
"If you travel along the coastal
regions, which are the most populated areas in China, you can hardly find much clean
water...
In the northern part of China
you will find many rivers have either dried up or have turned into open
sewers."
While central planners worry that intense
pollution could
choke
crop production and poison the food chain, a prosperous
urban
population wants clear tap water and clean showers.
Foreign firms ploughed $1.7 billion into China's water
sector
from 2004-2009, investing over $500 million in 2009
alone.
The projects include wastewater
treatment, municipal
water
supply, industrial water supply and direct investment in Chinese water
companies.
But undermining those ambitious plans is
the stark fact that low Chinese water tariffs offer citizens and companies
little incentive to save water.
"It's still cheaper to just dump
wastewater. The people
whose
behavior will change if tariffs rise are residential
users,
more than companies," said Michael Komesaroff, principal of Australia-based
consultancy Urandaline
Investments, who has studied Chinese industrial water use.
"The industrial user knows he can
probably talk his way out of any higher fees from the local government."
China's water tariffs remain strikingly low among
major
economies,
despite the doubling in average water tariffs in
recent
years to 39 U.S. cents a cubic metre, according to Global Water Intelligence.
Of 19 major economies, only India charges
less.
CITY WATER
Years of investment have already begun to
pay off. Tap water in Beijing, Shanghai and other major cities is now drinkable,
although
few Chinese are willing to do so without boiling.
But even in the cities, tariffs remain an
issue.
are major players in the Chinese municipal
water
market,
with over 17 contracts apiece.
They face rising competition for contacts
from China's
home-grown
water treatment firms like Beijing Capital Co
, many of which have evolved from city water
bureaus
or
water equipment suppliers.
But low residential water tariffs -- and
the city water
authorities'
inability to raise them -- means thin profits are pushing Suez and Veolia to target
industrial water contracts instead.
At 14 million people served, China accounts
for 20 percent of Suez'
water consumers but only 7 percent of its revenues.
"I think [foreign water companies]
find it difficult to make money in the Chinese environment," said Paul Kriss,
sector coordinator for Urban Development at the World Bank in Beijing.
"Prices are capped, so you need to be
sure you are going to be paid. It's not a high-margin business. It's not iPads."
PRICE POINTS
Where water is expensive, companies are
already moving to
reduce
consumption.
"Water intensive industries tend to
save water when it is in their benefit," said the World Bank's
Kriss.
Coca-Cola , whose bottlers use 2 litres of water
for
every
litre of Coke sold, has reduced water use at its China
plants
by 35 percent since 2004, employing more efficient
techniques.
"Certainly if there is any rise in
water price that will
impact
our cost of production," said Brenda Lee, Coca-Cola's
vice
president for public affairs and communications for Greater China.
"What we can try to do is try to
mitigate the water rates
impact
by being a more efficient water user. That is one of the drivers for us to be more
water efficient."
Coke draws on municipal water for most of
its plants, but a 90-kilometre benzene slick that polluted the Songhua river in 2005
convinced it to source some of its supply directly from groundwater.
Many of the worst polluters have little
incentive to change.
Fines for polluting are still generally
lower than the costs of retrofitting a plant, and many of the biggest
industrial users control their own water supply, making higher tariffs irrelevant.
Even wastewater treatment creates its own demons, in
the
form
of 30 million tonnes of toxic sludge buried or dumped each year into rivers and
the sea.
China's plans for water include limiting annual
consumption to 670 billion cubic metres, although it is not clear what mechanism
would be used.
Even if the cap is as crudely applied as
current efforts to rein in energy usage, the end result could be greater
efficiencies,
Komesaroff said.
Massive investments meant to upgrade state-owned energy
and metals plants and reduce their fuel usage has had a knock-on effect in
raising water efficiency.
"The big, fixed asset investment we've
seen has resulted in new plants that are state-of-the-art in efficiency,"
Komesaroff said.
"Shutting old or outdated plants saves
water as well as
fuel,
because inefficient fuel burners need more water for
cooling.
($1=6.596 Yuan)
(Editing by Daniel Magnowski)
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