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The Chinese Water and Wastewater Treatment Market Presents Great Opportunities

Water and Wastewater Treatment


China's environmental protection industry is growing at approximately 15 percent
annually during the past several years.

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At present, China is encountering a severe water shortage, due to both a large population
and water pollution created by rapid economic development with minimal regard for
environmental impacts. In recent years, China has seen a significant improvement in its
water and wastewater infrastructure, but there is still an annual water shortage of 30 - 40
billion cubic meters. Among the 669 cities in China, nearly 400 cities suffer from
inadequate water supply, among which 110 cities, including Beijing, Shanghai and
Dalian, suffer from severe water shortage. In the wastewater treatment sector, the official
municipal wastewater treatment rate was only 45.7% at the end of 2005. According to a
report released by Chinese Ministry of Construction, as of June 2005, there are still 297
cities in China which do not have any wastewater treatment facilities.

The water and wastewater treatment industry has been considered a public service in
China for many years, and only limited fees were levied for the consumption of resources
and provision of services. This system has led to the squandering and pollution of large
amounts of water a scarcity of capital for the construction, renovation, operation, and
maintenance of water and wastewater infrastructures or facilities. The Chinese
Government has realized this and is determined to reallocate resources by introducing
market mechanisms in the water supply and wastewater treatment sector. In April 2005,
the Chinese government issued the National Water-saving Technology and Policy
Guideline which is aimed at promoting development and application of water-saving
technology, and improving water usage rate to achieve sustainable unitization of water
resources. Water tariff and wastewater treatment fees are rising to a rational level and
public water infrastructure has been opened to foreign and non-state owned capital

China's water market reform has undoubtedly created many opportunities for foreign
enterprises. Significant amounts of new water infrastructures will be built, and the
operation and maintenance of all existing and newly built municipal water and
wastewater treatment plants have been or will be transferred to authorized enterprises.
Many forms of Private Public Partnership (P3) are now accepted by the Chinese
Government, which provide technology and equipment supply, and long-term investment
opportunities for foreign enterprises. It is anticipated that the following technology and
associated technology transfer needs and product demand will provide U.S. companies
the most opportunities:

* Biological denitrification and phosphorus removal technologies,
* Membrane separation and manufacturing technologies and equipment,
* Manufacturing technology of anaerobic biological reactor,
* High concentration organic wastewater treatment technology and equipment,
* Series-standard water and wastewater treatment equipment family with high
* Water saving technologies and equipment,
* Water treatment agents,
* Monitoring instrument, and
* Natural water body rehabilitation technology.


South-to-North Water Diversion Project

The construction of South-to-North Water Diversion Project will create a large water
supply and wastewater treatment market. In the water destination areas, including
Beijing, Tianjin, Hebei, Henan, Shandong and Jiangsu, the construction or expansion of
water plants and piping systems will offer the market opportunities worth US$6.09 and
5.92 billion respectively. In addition, water pollution control will be a major part of the
Eastern Route project. US$1.93 billion will be spent on the construction of municipal
wastewater treatment plants. These projects are located in Jiangsu, Shandong, Hebei,
Tianjin, Anhui and Henan Provinces.

Three Gorges Watershed Area
The Three Gorges Area is located in Yichang, Hubei Province. To maintain the water
quality, wastewater treatment projects will be implemented in Hubei, Sichuan, Guizhou,
Yunnan Provinces and Chongqing Municipality. From 2006 to 2010, 146 projects with
the total budget of US$0.93 billion will be conducted. According to a recent report dated
December 30, 2005, China plans to build 20 more sewage disposal plants in the Three
Gorges Reservoir area in central Hubei Province on the Yangtze River to further improve
water quality in the reservoir. These projects will be built in Zigui, Xingshan, Badong,
Yuan'an, Enshi and Lichuan counties. Meanwhile, the province will build 20 garbage
processing plants in the next five years with an additional daily handling capacity of
1,000 tons.

Beijing 2008 Olympic Games
Beijing, as the host city of 2008 Olympic Games, also has ambitious plans to develop its
wastewater treatment infrastructures from now to 2008. According to the Beijing City
Planning Department, nine wastewater treatment plants, 1000 km long wastewater main
pipelines, nine wastewater reclamation and reuse facilities, and four sludge digesting
facilities will be completed. The total investment will be US$1.45 billion.

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