Photo: Epsos.de

Key developments that will boost China’s industrial water market

If you’ve been following our latest blog posts on China’s water crisis and drinking water pollution, you will have read about the alarming water crisis China is facing and how central and local governments are required to work on alleviating these issues.

Heavy water usage and toxic discharge pollution single industrials out as key targets to reform in order to amend the currently dire-looking situation. With the sights set on paving the way towards water security, new regulations and increased enforcement targeting polluting and water-inefficient industries will drive the environmental protection market by $300 billion between 2015-2020.

Urgency of situation and rising public awareness is pushing government to action

Due to increased awareness among the population in the last few years, more and more information on the severity of the water crisis have been surfacing. With citizens becoming more conscious of environmental issues public concern has been growing louder, pushing the government to reform.

 Environmental issues are now the number one cause of public protests in China.

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The message is clear: the Chinese population is no longer keeping quiet about bearing the brunt for irresponsible industrial polluters or lax regulations and enforcement by local governments.

As the situation can’t exasperate any more without deeply scarring the country’s economic development and social stability the government has no other choice but to answer by tightening regulations and increasing enforcement.

Government setting the tone for the country’s war on pollution

The government is clearly looking to change the mind-set of “economy vs. environment” to “economy & environment”, by making the results of water assessments to be a performance indicator in the evaluation of provincial government leaders in 2013 and discounting GDP growth as an indicator for provincial performance.

This is further underlined by the anti-corruption campaign that has shifted its attention towards environmental officials.

New environmental protection law to intimidate companies into compliance

The New Environmental Protection Law that came into effect on 1 January 2015 further aligned environmental protection with the country’s basic policy and offering carrots to go along with the proverbial stick:

The environmental protection law instigates increased transparency and monitoring. While rewarding compliant enterprises and companies in the environmental protection industries financial incentives such as tax breaks, non-compliant enterprises face stricter consequences.

Next to daily and uncapped penalties and fines, companies can also face criminal charges or even face shut down. Furthermore whistleblowing, as well as naming and shaming is encouraged, while non-governmental organisations are now also allowed to file suits to the People’s court.

Especially in the East of China, enforcement has been stringent in the first 6 months. The MEP reported:

  • 160 cases subject to daily penalties with total penalties up to RMB 112 million and with a single penalty as high as RMB 15 million,
  • 1,186 cases subject to shut-down,
  • 698 cases subject to restriction and suspension of operations,
  • 437 cases subject to administrative detentions, and
  • 429 cases of suspected environmental pollution crimes.

Water Ten Plan to boost industry by $300 billion

To round everything up, China’s most comprehensive water policy to date was issued this year in April, setting out 10 general measures, 38 sub-measures and 238 specific actions to improve China’s water quality.

The plan especially targets industrial polluters by introducing stricter industry-specific discharge standards, singling out 10 industries, in which non-compliant small factories will face shut down, and 10 industries to be targeted for technological upgrades, emission reductions and cleaner production.

10 industries to face shutdown if not compliant with relevant national policy, standards & industrial regulation by 2016E 10 major polluting industries targeted for technological upgrades, emission reductions and to achieve clean production
·          Paper & pulp

·          Leather

·          Textile dyeing

·          Dyes production

·          Coking

·          Sulphur smelting

·          Arsenic smelting

·          Oil refineries

·          Electro-plating

·          Pesticide production

·          Paper & Pulp

·          Coking

·          Nitrogen Fertiliser

·          Textile Dyeing & Finishing

·          Agriculture Food Production & Processing

·          Pharmacy Production

·          Leather

·          Pesticide

·          Electro-plating

·          Non-ferrous Metals

Source: China Water Risk

The plan not only stresses pollution control, but also focuses on water efficiency aiming at lowering water consumption per unit and increasing the wastewater reuse ratio.

The MEP estimates that this plan will boost the industry by $300 billion, while $220 billion will be directly invested in equipment and services.

This development will continue and open up even more market space

While these regulations are already very promising, a lot has to be done in the enforcement. Many local governments from less developed regions are still reluctant to completely implement new policies, as they fear this to drive away industries and affect their economy.

However, Chinese leaders just signed off on the broad outlines for the new five-year-plan and even stricter measures towards an environmental-friendly economy are expected. Therefore, local governments and industrials alike will be forced to comply sooner or later. This will further expand the market space for companies that can offer solutions as more and more industrials are forced to comply.

Sources:
China Water risk
The Diplomat
Reuters

Photo: Epsos.de

[1] 13 February, 2014: Work Plan on Implementing Assessment of the Most Stringent Water Management System” (MEP, MWR, NDRC, MoF and six other ministries

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