Five years to clean up China’s wastewater

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The Chinese plan to spend $60 billion on urban wastewater infrastructure over the next five years. The move will maximise the potential of under-utilitised assets.

China’s State Council announced plans last month to spend RMB3.4 trillion ($536 billion) on environmental protection before the end of 2015, of which RMB380 billion ($60 billion) will go on urban wastewater systems, including reuse. More than half (56%) of this is expected to come from private sources. The 12th Five-Year Plan (FYP) implies a 14% increase in municipal wastewater investment compared to the previous five-year period.

Two thirds of the investment (RMB250 billion/$40 billion) will go on extending municipal sewerage networks, an increase of 20% on the previous plan, while RMB66 billion ($10 billion) will be spent on wastewater treatment plants, 20% less than under the previous plan (see chart below). During the period 2006-2010, plant capacity increased more rapidly than the expansion of collection networks, leading to under-utilisation of assets. The changed emphasis of the new plan should help to redress this imbalance.
Over the course of the next five years, wastewater treatment coverage should rise to 85% nationwide. Larger, more developed cities will be required to attain treatment rates of 90%, while smaller cities and towns need to reach 80%. Coverage increased significantly during the 11th FYP, from 52% in 2005 to 72% in 2010, but the emphasis was on major urban areas. For the first time, the new plan shines the spotlight on reducing pollution in areas located away from major conurbations.
“The government is trying to encourage more investment in rural areas. This may translate into higher expenditure on rural water treatment projects,” said Chi-Man Wong, an analyst at Piper Jaffray in Hong Kong.
The 12th FYP also sets out targets for discharges of specific pollutants. Chemical oxygen demand (COD) in rivers and lakes should be reduced by 8% at the national level, while ammonia levels will need to be reduced by 10%. This is the first time that ammonia has been a focus of pollution control efforts, and the fresh mandate will require new investment in monitoring and treatment technologies.
Reducing pollutant levels will be an uphill struggle. “All indicators seem to point to continued increases in pollution of both fresh surface waters and groundwater in China,” said James Leckie, professor of environmental engineering at Stanford University.
Expenditure on pollution control will be greatest in the highly industrialised provinces of Guangdong, Shandong and Jiangsu. Inland provinces have softer targets to reduce conflict with their economic growth objectives, and in some cases – such as Qinghai – pollution levels will be allowed to rise. Nevertheless, investment will still be needed to develop treatment assets and acquire equipment.
The 12th FYP also tightens targets on improving water quality in key rivers and lakes throughout the country. This will generate demand for advanced wastewater treatment technologies in specific geographic areas. Beijing Origin Water, which specialises in MBR, should be well placed to benefit from this policy. The company is now turning its focus inland, and last year spent RMB600 million ($95 million) for a 49% stake in a joint venture with water infrastructure construction company Yunnan Water Industry Investment and Development Co.
The key speech announcing the environmental protection targets was delivered by vice premier Li Keqiang, who is expected to take over as premier from Wen Jiabao at the People’s Congress later this year. Li’s speech signals that the policy of balancing economic growth with efforts to protect the environment and manage resources sustainably – the hallmark of Hu Jintao’s presidency – is likely to be maintained after the leadership changeover.