Winner – Best News Website or Mobile Service | Asian Digital Media Awards 2019

Taming the water dragons: Opportunities and challenges in the Chinese water sector, by Brent Giles

China’s growth-at-all-costs strategy over the last thirty years has resulted in an economic miracle that has pulled hundreds of millions out of poverty and lifted the once-backward nation into global economic preeminence. But the success has not been without casualties.

Extreme environmental degradation, especially in persistent water pollution, sickens millions, renders entire watersheds worthless for even industrial use, and threatens the very economic progress the government covets. Beyond the shine of China’s modern new cities is a backdrop of highly polluted factory towns and untreated sewage and industrial waste flowing into rivers that have become too polluted for any use. Severe water shortages in northern China are compounded by industrial waste and farm runoff.

The Chinese central government is taking these issues seriously for the first time. As a result, Western businesses with both a technical edge and the savvy to operate amidst what one industry leader has called the “rawest form of Capitalism beneath a thin veneer of Communism,” are already reaping the rewards of this vast, rapidly unfolding market. However, penetrating the Chinese water market is not for the faint of heart. It is replete with pitfalls and challenges.

Businesses answering a huge industrial demand

The business environment in China has changed profoundly in the last several years as the central government has begun to come to grips with a looming water disaster. Interviews with Western companies reveal a business environment that is uniquely challenging but steadily improving.

Western business competes only at the high end of China’s market. Domestic competition is steadily improving its capabilities and is addressing the high-profile drinking and wastewater markets, though international companies with affordable or unique hardware and services do take part. Most of the companies enjoy the greatest success addressing industrial water, where a pressing need for high-tech and unique solutions to comply with tightening standards gives internationals an edge. Given the scale of the problem, even this relatively small fraction of the market is large enough for many successful players.

The business environment requires constant attention. The field is pitched against international companies due to China’s unspoken protectionism, aggressive piracy of intellectual property, and a business culture based on close personal relationships. Successful players are “all in,” with executives spending as much as half their time in China to build and maintain relations and credibility there. Partnerships help but also require close attention. Despite the blistering pace of Chinese economic growth, most companies have seen slow but steady growth with a ten to fifteen year horizon.

The central government is tightening the screw on local authorities. There has been a sudden and recent growth in opportunities across China, moving from the drought-stricken north southward. In 2009, the government abandoned trivial fines as punishment for illegal waste discharge. It began to enforce industry compliance by charging factory executives with the same laws used to prosecute terrorists who poison water supplies. The most serious cases are punishable by death. The upcoming 2011-2015 five-year plan devotes significant resources and planning to water quality and efficient water use. The central government seems determined to enforce newly minted environmental laws and drive a wedge into the cozy relations between polluters and local officials that lead to widespread corruption.

As Chinese innovation emerges, the IP playing field will level. The global commercial relevance of Chinese intellectual property remains under-developed, which gives China little incentive for aggressively enforcing foreign IP rights. However, over the next decade, as innovation from within China grows in export value, Western entities will benefit from quid pro quo enforcement of IP rights within China. Consequently, non-Chinese companies that establish and maintain a presence during these early days will be better positioned to grow as the IP landscape in China matures.

The new developments in China’s water market are an opportunity many companies can’t afford to miss out on. With the industrial market now gathering steam, we see a huge remediation market on the horizon.

The writer, Brent Giles, is a Senior Analyst at Lux Research in the Water Intelligence practice.

For more information click here.

Thanks for reading to the end of this story!

We would be grateful if you would consider joining as a member of The EB Circle. This helps to keep our stories and resources free for all, and it also supports independent journalism dedicated to sustainable development. For a small donation of S$60 a year, your help would make such a big difference.

Find out more and join The EB Circle

blog comments powered by Disqus

Most popular

View all news

Industry Spotlight

View all

Feature Series

View all
Asia Pacific's Hub For Collaboration On Sustainable Development
An Eco-Business initiative
The SDG Co