Strategies for water and renewables

Red Tide Rising

25th October 2010, 08:40

Much has been made in the last year or so about the potential for China's environmental problems, particularly its water constraints, to act as a brake on the country's economic performance.

 Its main waterways suffer severe and unchecked pollution from heavy industry, major rivers and lakes are shrinking or even drying up, and the country's main water resources are in the north, while the population is rising fastest in the south. Could water indeed be China's Achilles heel ?

These are serious issues. But focusing on them alone in China's water story is missing a trick.

To the extent that they see these crises as having an upside, commentators talk mainly about opportunities for western water companies to go in and fix the mess. But Communist China is not the Warsaw Pact, where environmental catastrophes were left to fester for decades; the Chinese water challenge may yet mean a radical shift in the balance of power in the water industry, with Chinese water companies emerging on the back of domestic needs to become major players well beyond the Middle Kingdom.

Firstly, the sheer size of home demand gives companies such as Beijing Capital, China Everbright and Beijing Enterprises, who between them run hundreds of WTP's and WWTP's, tremendous cashflow and experience as a springboard for overseas growth. Secondly, if China has been slow to commit to desalination as a solution to shortages, this may be because it is looking instead to water re-use - especially as solid waste is also a source of phosphates and nitrogen for agriculture; one Beijing WWTP is now converting sludge into bricks. Thirdly, China could see the development of international water players as a key plank in its wider foreign policy. China needs hydrocarbons, and some of the world's major oil suppliers suffer from water scarcity and poor water infrastructure. Chinese water companies, using technologies, and balance sheets, developed out of domestic necessities, could become fierce (and low cost) competitors.