Tap water production and supply
Tap water production and supply
Business Model Description
Companies produce and provide tap water to residents and enterprises in the area and earn revenue from water fees that directly collected from users. (8)
Expected Impact
Investment can advance the development of water supply so that more people in water-scarce regions can have access to quality water resources.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- China: Hainan
- China: Gansu
- China: Hunan
- China: Yunnan
- China: Sichuan
Sector Classification
Infrastructure
Development need
Significant differences in terms of quality of the infrastructure exist between urban and rural areas in china. In rural areas, power grids are costly yet of poor quality, and water quality needs to be further improved. (1) China’s circular economy development faces great challenges including lack of standardization, difficulties in recycling low-value material etc. (2)
Policy priority
The 14th 5-Year Plan highlighted the importance of building a modern network of infrastructure that is smart, eco-friendly, safe, and reliable (3)The State Council issued Action Plan for Cabon Peaking, in which promoting circular economy was listed among the ten major actions. (4)The "No. 1 Central Document"" for 2021 also highlighted the need to imporve rural infrastructure. (5)
Gender inequalities and marginalization issues
Significant differences in the quality of infrastructure between urban and rural areas in China exist. Rural residents struggle to get access to quality and green infrastructure.
Investment opportunities introduction
The IOAs in the infrastructure sector center around low-carbon waste treatment, as well as building safer and smarter supply systems of water and electricity.
Key bottlenecks introduction
Infrastructure construction requires large amounts of investment, most of which is government-led or requires subsidies. In some fields, such as waste management, policies and regulations are to be improved; in the field of water and energy consumption, pricing mechanism is also in need of improvement.
Utilities
Development need
Affected by cliamte change, major rivers in eastern China have witnessed decrease in the runoff volume since the mid-20th century. Frequent cliamte-related disasters also reduce the availability of water resources, contributing to water shortage in China. Along with accerlerated global warming, China will face more water resource risks in the future. (6)
Policy priority
The ""14th Five Year Plan for Building a Water-saving Society"" stated that China plans to build a water-saving society. Measures must be taken to establish a comprehensive water pricing mechanism reflecting water scarcity and supply costs. Explore to establish an integrated water management mechanism and encourage the engagement of third-party enterprises in water supply. (7)
Gender inequalities and marginalization issues
There is still a huge gap between rural and urban areas in terms of the water quality and wastewater treatment capacity.
Investment opportunities introduction
The IOAs in this sector center around water supply and treatment, and smart water management system.
Key bottlenecks introduction
The water industry is still facing challenges such as single business model, strong geographical restrictions, and insufficient scale.
Water Utilities and Services
Pipeline Opportunity
Tap water production and supply
Companies produce and provide tap water to residents and enterprises in the area and earn revenue from water fees that directly collected from users. (8)
Business Case
Market Size and Environment
> USD 1 billion
10% - 15%
According to Forward Intelligence‘s "Market Foresight and Investment Analysis of the Water Production and Supply Industry in China", in 2020, the operating income of enterprises above designated size in China's water production and supply industry reached 246.7 billion RMB from 138.7 billion in 2015. (10)
Indicative Return
20% - 25%
In 2020, the average gross profit margin ofJiangxi Hongcheng Environment Co., Ltd, Chongqing Water Group Co., Ltd and Chengdu Xingrong Environment Co., Ltd was 29.8% (seperately 23.85%, 25.83% and 39.70%). (11) (9) (12)
Investment Timeframe
Medium Term (5–10 years)
The usual payback period for water projects is less than 10 years. (13)
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Market - Highly Regulated
Impact Case
Sustainable Development Need
Regional imbalance is a severe problem that widens the gaps between urban and rural areas. By 2018, water supply penetration rate in urban areas were 98.5% compared to 81% in rural.
Gender & Marginalisation
The quality of water supply services in rural areas is significantly poorer than in urban areas. Regional imbalance is outstanding. (16)
Expected Development Outcome
Water for production and daily life directly impacts people's quality of life and the development of production. Quality improvements in water supply services can give people more access to quality water resources, which benefits their healthy development.
Gender & Marginalisation
Improvements in the quality of water supply services in rural areas help mitigate regional imbalance issues.
Primary SDGs addressed
6.1.1 Proportion of population using safely managed drinking water services
Percentage of urban and rural population with access to tap water in China is 99.4% and 84% respectively (25)
Secondary SDGs addressed
Directly impacted stakeholders
People
Planet
Indirectly impacted stakeholders
Corporates
Outcome Risks
Over-marketization of water supply may lead to problems such as high volatility and high prices.
Impact Risks
The decline in water quality affects people's health and causes illness, reducing labor efficiency, increasing medical expenses, and influencing their quality of life.
Impact Classification
What
The outcome is very likely to be positive, long-term and large-scale, for investment can advance the development of water supply for more people to use quality water resources.
Risk
Marketization leads to water price fluctuations.
Impact Thesis
Investment can advance the development of water supply so that more people in water-scarce regions can have access to quality water resources.
Enabling Environment
Policy Environment
(Policy document): In 2021, the NDRC stated that by 2025, we should have shorn up weaknesses in water conservation infrastructure and supervision to improve the efficiency and benefits of water resource utilization, achieving remarkable results in building a water conservation society. (17)
(Policy document): : In 2019, the NDRC and the Ministry of Water Resources issued the ""National Water Conservation Action Plan"", which stated that we should accelerate the construction and renovation of water supply facilities and support pipeline networks in villages and towns. (18)
(Policy document): In 2022, 4 ministres jointly issued the ""Notice on the Consolidation and Expansion of the Achievements in the Poverty Alleviation Combat in Rural Areas"", which specified that using rural revitalization assistance fund to promote water conservation infrastructure. (24)
Financial Environment
Financial incentives: In 2015, the ""Opinions on the Implementation of Encouraging and Guiding the Participation of Social Capital in the Construction and Operation of Major Water Conservancy Projects"" issued by the NDRC encouraged the participation of social capital in these fields. (22)
Fiscal incentives: In 2016, 5 departments including the Ministry of Housing and Urban-Rural Development jointly issued an opinion on improving the policy support in terms of prices, fees, and taxes for private capital's participation in urban water supply and other industries. (23)
Regulatory Environment
In 2020, the State Council issued the ""Regulation on Urban Water Supply (2020)"" to strengthen the administration of urban water supply, develop the urban water supply undertaking, and ensure the water supply for everyday life, production, and other construction activities. (20)
In August 2021, NDRC and the Ministry of Housing and Urban-Rural Development jointly issued 2 Administrations to establish a clearer pricing mechanism based on ""allowable cost plus reasonable income"", enhancing a scientific, refined and standardized urban water supply system. (21)
Marketplace Participants
Private Sector
Chongqing Water Group Co., Ltd., Haitian Water Group Co., Ltd., and Guangxi Nanning Waterworks Co., Ltd. The subsidies are provided by governments in the form of subsidies for specific projects.
Target Locations
China: Hainan
China: Gansu
China: Hunan
China: Yunnan
China: Sichuan
References
- (1) National Development and Reform Commission, Ministry of Finance, Ministry of Housing and Urban-Rural Development, State Administration for Market Regulation, and National Energy Administration, 2020, Opinions on the High-Quality Development of Urban Water, Electricity, Gas and Heating Industry By Reviewing and Standardizing Charges, http://www.gov.cn/zhengce/content/2021-01/06/content_5577440.htm
- (2) National Development and Reform Commission, 2021, "Fourteenth Five-Year Plan for the Development of Circular Economy", http://www.gov.cn/zhengce/zhengceku/2021-07/07/5623077/files/34f0a690e98643119774252f4f671720.pdf
- (3) Xinhua News Agency, The Outline for the 14th Five-Year Plan for Economic and Social Development and Long-Range Objectives through the Year 2035, http://www.gov.cn/xinwen/2021-03/13/content_5592681.htm
- (4) State Council, 2021, Action Plan for Carbon Dioxide Peaking Before 2030, http://www.gov.cn/zhengce/content/2021-10/26/content_5644984.htm
- (5) https://www.gov.cn,2019, Rural Infrastructure Construction Upgrading is in Urgent Need, http://www.gov.cn/zhengce/2019-10/14/content_5439186.htm
- (6) China Meteorological Administration, 2020, Climate Change and Water Security, http://www.cma.gov.cn/2011xzt/2020zt/20200323/2020032307/202003/t20200318_549083.html
- (7) State Council, 2021, 14th Five Year Plan for the Construction of a Water-saving Society, http://www.gov.cn/zhengce/zhengceku/2021-11/09/5649875/files/146d1a6fcb7c42f3a4aad9dca6104719.pdf
- (8) Development and Reform Commission, 2021, National Development and Reform Commission and Ministry of Housing and Urban-Rural Development Revised and Issued the ""Measures for Supervision of the Urban Water Supply Pricing Costs"" and the ""Measures for the Administration of Urban Water Supply Prices"", https://www.ndrc.gov.cn/fzggw/jgsj/zys/sjdt/202108/t20210813_1293659.html?code=&state=123
- (9) Chongqing Water Group Co., Ltd., 2021, 2020 Annual Report, http://static.cninfo.com.cn/finalpage/2021-04-02/1209615790.PDF
- (10) Forward Intelligence, 2021, 2020 Market Foresight and Investment Analysis of the Water Production and Supply Industry in China, https://bg.qianzhan.com/trends/detail/506/210309-f0c77093.html
- (11) Jiangxi Hongcheng Environment Co., Ltd., 2021, 2020 Annual Report, http://static.cninfo.com.cn/finalpage/2021-04-22/1209757050.PDF
- (12) Chengdu Xingrong Environment Co., Ltd., 2021,2020 Annual Report, http://static.cninfo.com.cn/finalpage/2021-04-22/1209758596.PDF
- (13) Risk Control of Water Projects, https://wenku.baidu.com/view/fa68080b5a0102020740be1e650e52ea5518ce85.html
- (14) China Urban Engineering Technology Application Center of Water Pollution Control, 2021, Summary of the latest nationwide waterwork projects in the second week of September 2021, http://www.watermc.org/page122?article_id=870
- (15) Baidu Wenku, 2021, Current Market and Development Prospect Analysis of China's Water Affiairs Industry in 2021, https://baijiahao.baidu.com/s?id=1707069600809580447&wfr=spider&for=pc
- (16) Suntront Technology Co., Ltd., 2021, Current Development and Trends of Integrated Development of Urban and Rural Water Supply, https://www.suntront.com/news/info41735.htm
- (17) Development and Reform Commission, 2021, Notice by the National Development and Reform Commission and other departments on the issuance of the 14th Five Year Plan for the Construction of a Water-saving Society, http://www.gov.cn/zhengce/zhengceku/2021-11/09/5649875/files/146d1a6fcb7c42f3a4aad9dca6104719.pdf
- (18) National Development and Reform Commission and Ministry of Water Resources, 2019, National Water Conservation Action Plan, http://www.gov.cn/gongbao/content/2019/content_5419221.htm
- (19) Ministry of Ecology and Environment, 2015, Guiding Opinions on Strengthening the Protection of Rural Drinking Water Sources, https://www.mee.gov.cn/gkml/hbb/bgt/201506/t20150610_303329.htm
- (20) State Council, 2020, Regulation on Urban Water Supply, http://www.gov.cn/zhengce/2020-12/26/content_5575062.htm
- (21) Development and Reform Commission and Ministry of Housing and Urban-Rural Development, 2021, Measures for the Administration of Urban Water Supply Prices, https://www.ndrc.gov.cn/xxgk/zcfb/fzggwl/202108/t20210806_1293274.html?code=&state=123
- (22) 2015, Development and Reform Commission, Opinions on the Implementation of Encouraging and Guiding the Participation of Social Capital in the Construction and Operation of Major Water Conservancy Projects, http://www.gov.cn/zhengce/2016-05/22/content_5075668.htm
- (23) 2016, Ministry of Housing and Urban-Rural Development and five other departments, Opinions on Further Encouraging and Supporting Private Capital in Entering into the Urban Water Supply, Gas, Heating Supply, Sewage and Waste Disposal Industries, http://www.nea.gov.cn/2016-10/21/c_135771836.htm
- (24)Ministry of Water Resources, 2022, Notice on the Consolidation and Expansion of the Achievements in the Poverty Alleviation Combat in Rural Areas, http://www.gov.cn/xinwen/2022-04/16/content_5685501.htm
- (25)State Coucil, 2022 http://www.gov.cn/xinwen/2022-04/15/content_5685320.htm Ministry of Housing and Urban-Rural Development Releases, 2022, Communiqué on China's Urban Construction Status 2021 http://swj.wuhan.gov.cn/tzdt/hykd/202210/t20221009_2054179.html