SINGAPORE, Jan. 19 Faced with the global financial crisis,in November 2008, China issued a stimulus package with ten measures on housing,rural infrastructure, transportation, health and education, ecology andenvironment where ecology and environment was listed as a priority. The planinvolves construction of sewage and rubbish treatment facilities to preservewater resources in key areas as well as accelerate green belt and naturalforest planting programs. Enhancement for energy conservation and pollution-control projects are also considered.
According to Frost & Sullivan's China Consultant of Chemicals, Material &Food Vivian Chen, the investment includes RMB120 billion in Q4, 2008 and RMB4trillion in 2009. In the 4th Quarter of 2008 about ten percent, RMB12 billion,was devoted to energy saving and ecological projects. In 2009, 8.8 percent,about RMB350 million is planned for the improvement of ecological environment.
She adds that a series of investments are allocated in various regionsnationwide in detail, such as Shanghai, Beijing, Qinghai, Guangdong, Jiangxi,Liaoning, Inner Mongolia, Shandong, and Jilin. A lot of these projects arerelevant to water conditions and are stimulating the demand for the water andwastewater treatment equipment in China.
"Compared to some traditional industries such as petrochemicals, the waterindustry is less impacted by economic fluctuation because of its rigid featureas it belongs to public services and infrastructure construction. Meanwhile,due to political support and market innovation, the industry still expectsgood growth potential," she says.
Chen continues, "The biggest challenge comes mainly from the financialmarket as environmental protection is highly supported by capital input. Theearthquake in the global economic environment will probably slow down thefuture growth rate of the Chinese water industry the coming two years. It islikely to recover to previous forecasts of 17 to 18 percent growth annually inthe third year."
She adds that the Chinese water industry is likely to be one of the mostdynamic markets globally to attract investors. Great demands for both watersupply and sewage disposal are created by fair growth of national economy, theprocess of urbanization, the enhancement of environmental protection, thereadjustment of water price system, the completion of relative regulativesystem, as well as the introduction of market mechanism.
One of the hot sub-sectors for 2009 to 2011 as identified by Chen includethe Chinese wastewater market. This market is regarded as one of the hot spotsin global water industry. "As the enforcement of legislation steadily improves,many major municipal projects were announced since 2002. Meantime, vast needsfor improvements by both municipal and industrial sectors exist. These havecreated opportunities for equipment suppliers and contractors. Wastewaterrecycling and re-use and seawater desalination are gaining momentum in northChina, where water resource is scarce. These have also promoted relativetechnical innovations in China," she continues.
In terms of water supply, she says that more opportunities are found inindustrial applications such as food and beverage, pharmaceuticals, micro-electronics, etc. For instance, there are rules and regulations for food andbeverage industry, such as Hygienic Specifications of Factory for DrinkingNatural Mineral Water (GB 16330-1996) and Hygienic Specifications of DairyFactory (GB 12693-2003). In late 2007, the State Council, China's Cabinet,approved in principle a draft food safety law to raise standards and regulatesupervision. The demand for stable and secure pure water supply createsopportunities for high-tech membranes such as RO and UF.
"Original market leaders were from EU and Japan, but they are now facingfierce competition from rapidly growing Chinese players. In particular is thecivil contracting market which is dominated by local players with a main localfocus and access to cheap labour. The equipment and technology markets aremuch more open to international competitors and are also spawning Chineseplayers that are increasingly turning their attention to export markets. Somecompanies are even ambitiously trying to integrate engineering design andequipment supply through M&A, so as to be more competitive by providing value-added services to the Chinese water industry," Chen adds.
Taking the world economic recession into account, Frost & Sullivanforecasts the Chinese water industry to grow at 12 to 15 percent in 2009,which is above the majority of other industries. However, investors shouldrecognize that the industry's development not only depends on the maturity ofthe market itself, but is also influenced by the executive level of centraland local governments.
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SOURCE Frost & Sullivan