Municipal Water Industry Outlook in China

China’s municipal water industry used to be highly fragmented. In recent years, a few integrated and large-scale water companies expanded their business into new regions through mergers and acquisitions. Companies with a good reputation, a brand name, advanced technologies, and good financial health are more likely to benefit from larger operation scales and higher efficiency and to speed up their pace of expansion through the acquisition of smaller operators, leading to a higher concentration rate in this industry.

China’s current water tariff still remains at a relatively low level, and there is still room for tariff increases. In addition, the Chinese government is likely to promote upgrades of existing wastewater treatment plants, which would require further increase in water tariffs.

The 13th Five-year Wastewater Treatment Plan aims at building a better municipal water supply system across the country. Total investment into construction sector and operation sector of the wastewater treatment industry is expected to rise from CNY 0.95 trillion in the 12th Five-Year-Period to CNY 1.26 trillion in the 13th Five-Year-Period.

In addition, the number of municipal wastewater treatment plants may increase in small and medium-sized cities and towns urbanization, and wastewater reuse and reclamation rate will also increase due to the rising need to save costs and protect the environment. Frost & Sullivan estimates that at least 20,000 small wastewater treatment facilities are needed, and that reclaimed water use will continue to grow rapidly.

Municipal Wastewater Treatment Capacity in China

The total capacity of municipal wastewater treatment plants in China has been increasing over the past few years. The total capacity of municipal wastewater treatment plants in China increased from 104.6 million m3 per day in 2009 to 168.4 million m3 per day in 2015. From 2015 to 2020, the capacity of China’s municipal wastewater treatment is expected to rise from 168.4 million m3 per day to 218.0 million m3 per day, at a CAGR of 5.3%. The treatment volume may reach 66.3 billion m3 by 2020.