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For many years the importance of China’s economic growth far outweighed the environmental consequences of that growth. Urbanisation and industrialisation have resulted in environmental degradation country so serious that 16 of the world’s 20 most polluted cities are in China.
In response to this growing threat, the Chinese government’s objectives, as detailed in China’s 11th Five-year Plan for Environmental Protection) are threefold.
To place equal emphasis not only on economic growth, but also on environmental protection.
The second objective is to shift strategies for economic growth towards development that promotes environmental protection, not degradation.
The third objective is administrative and attempts to apply more comprehensive legal, technological and necessary administrative frameworks to better facilitate and enforce environmental protection policies.
China’s determination to generate growth to improve the material lot of its population for many years was pursued at any cost; not least that of the environment. Over the past few decades, first at the hands of its lumbering, State-owned industries, and later as at unseen consequence of its market-socialist reform, China’s environment has become the victim of a wide number of environmental issues.
In spite of bold goals outlined in the 11th Five-Year Plan, it remains to be seen how effectively China can implement them and incorporate them into their economic development plans for the future.
China’s acute environmental problems stem from a deteriorating natural resource base, dense population, heavy reliance on soft coal, outmoded technology, under-priced water and energy, and breakneck industrial growth. The World Bank estimates that health costs of air and water pollution in China amount to about 4.3 percent of its GDP. By adding the non-health impacts of pollution, which are estimated at approximately 1.5 percent of GDP, the total cost of air and water pollution in China is about 5.8 percent of GDP.
Dominated by hostile geographic terrain, half of China’s population lives on only 13.5 percent of its land. Since only 10 percent of China’s land is arable, a mere 7 percent of the world’s cultivated land feeds 22 percent of the world’s population.
China’s environmental problems have become a global issue with nations embarking upon multilateral efforts to reduce greenhouse gas emissions. No country exists in isolation; China’s airborne particle pollutants settle in Japan and are even partially to blame for Los Angeles’ smog cloud. Pollutants originated in China have even been located as far away as Lake Tahoe in the western United States.
The 10th Five-year Plan failed to meet its objectives to reduce total pollution discharge by 10 percent from 2000 levels and instead saw only a 2.1 percent reduction in CO2 emissions and an actual 27.8 percent increase in SO2 emissions that it set for its 2005 target [unsure how to unpack this sentence-MS]. Through edicts in the 11th Five-year Plan, the government has unleashed new rounds of environmental legislation and called for the shut down of thousands of factories with the aim of once again reaching a 10 percent reduction of the 2005 levels of emissions for CO2 and SO2. Still, local enforcement of environmental laws is spotty, and investment in pollution control infrastructure is inadequate.
Competition from domestic firms in the environmental protection field is increasingly strong. Products enjoying the best sales prospects include low-cost flue gas desulphurisation systems, air and water monitoring instruments, drinking water purification products, vehicle emission controls and inspection devices, industrial wastewater treatment equipment, and energy efficient and resource recovery technologies.
What environmental solutions does China need most?
Environmental needs vary from region to region in China, but water and wastewater treatment, flue gas desulphurisation (used by coal-fired power plants to reduce sulphur dioxide emissions), energy efficiency improving technologies, and river basin management and flood control rank at the top of the list. Water reuse projects and sludge treatment and disposal are also high priorities for local planners.
Because environmental projects often lack funding, demand for market-based environmental solutions that allow investors to reap financial benefits is growing. Opportunities exist in the areas of environmental treatment, clean production, energy efficiency, and recycling and reuse technologies. Though local planners have shown an interest in industrial waste recycling and municipal waste composting, the market for recycled products remains small, and quality standards for these products are lacking. Demand for remediation of industrial sites is also growing since factories must relocate to make way for residential areas, but local governments have limited resources available for cleanup.
Which regions in China need which environmental projects most?
Though it would be convenient to attribute environmental problems to specific regions in China, the nature of air, land, and water pollution are such that environmental problems tend not to stay in one place for very long. Generally speaking, northern China suffers from soil erosion, air-pollution, desertification, and drought; southern China suffers from silting and acid rain; industrial cities choke from air pollution; urban areas lack proper sewage and water treatment; and many of China’s rivers and lakes are seriously polluted.
Fortunately, environmental projects are sprouting up throughout China, from dust control in Inner Mongolia to wastewater treatment in Chongqing, to hospital waste disposal in Shanghai. Beijing ‘s hosting of the 2008 Olympics has cast a spotlight on the city ‘s environmental protection effort, leading to a host of infrastructure, transportation, and conservation projects. Shanghai ‘s 2010 World Expo plans have spawned similar ‘green’ projects such as clean mass transit, energy-efficient buildings, and auto emissions control. To prepare for the Expo in 2010, Shanghai launched a three-year (2003-05) environmental protection plan that focuses on water, air, solid waste, forestation, industrial pollution, and agricultural contamination problems. Nearly 300 projects are planned, including several large sewage treatment plants along the Yangtze River and medium-scale plants on Hangzhou Bay.
Following the leads of Beijing and Shanghai, many cities and provinces have launched environmental protection campaigns to obtain funding from the central government or attract the attention of foreign investors. But many of these projects offer companies low returns on investment. Like much of China’s development, many of the reliable and well-funded projects are located in the coastal regions, where competition is intense.
How should my company approach World Bank- and Asian Development Bank-financed projects?
It is important to identify projects that are likely to receive World Bank (WB) or Asian Development Bank (ADB) funding early in the process by networking with local design institutes, government authorities, foreign engineering firms, and bank project officers. Equipment requirements and specifications for these projects are usually identified before the loan is finalised, well before the tender opportunity is made public. Having a local presence in the market, either through a sales office or a sales agent, helps companies learn about projects early, introduces their technologies, and follow up as the project unfolds. Embassies and Consulate Generals may be able to help foreign firms through liaison officers at the WB and ADB.
Is there much demand for environmental consulting services?
Although consultants have traditionally had difficulty selling their services in China, the opening of China’s services market to foreign competition, improved environmental standards and compliance requirements, and the demand for sophisticated technologies have led to more consulting opportunities. Many European firms have been successful in bundling consulting services with turnkey design-and-build projects. Some equipment providers offer free consulting services up front to develop sales later in the project. WB and ADB projects usually include substantial consulting and technical assistance components that are open to bids from international firms.
Though it may be difficult to sell consulting services to China’s state-owned enterprises, the steady stream of foreign investment into China has created a niche for consulting services that offer their expertise to foreign manufacturers throughout the country. Foreign consulting firms that sell environmental due diligence, environmental health and safety, or environmental impact study services to major corporations outside China should consider offering these services to their clients‘ China operations, if they haven’t already. Many environmental consulting firms target multinational corporations in China’s burgeoning manufacturing, information technology, semiconductor, pharmaceutical, and petrochemical industries.
Is it true that the PRC government plans to invest billions of dollars in wastewater treatment?
PRC government plans call for massive investment in this sector, but most projects are either financed in Chinese yuan or lack financing altogether. Foreign companies that want to access a larger portion of this market must be willing to accept local currency, make equity investments in projects, or offer competitive
financing terms on equipment and technology sales. Although multilateral bank loans represent a drop in the bucket compared to China’s investment needs, there are several USD multimillion WB and ADB projects currently in the planning pipeline, including urban environmental planning, acid rain control, river basin management, and wastewater treatment in Anhui, Beijing, Jiangsu, Shanghai, Sichuan, and Zhejiang, to name a few projects. These projects usually offer international competitive bidding opportunities and payment in hard currency.
Do build-operate-transfer (BOT) projects make sense for wastewater treatment projects?
BOTs are possible but there are few, if any, profitable BOT projects in China’s wastewater sector. Because environmental projects perennially lack funding, local officials hope to attract foreign investment into this sector by offering 20-30 year operating concessions to foreign companies in return for building the facilities. Since the government commonly subsidises domestic treatment plant operation, domestic project planners and their foreign counterparts often disagree on the technology and investment required to turn a profit. Low tariff rates, fragmented fee-collection systems, irregular accounting practices, and lack of payment guarantees are key barriers to developing viable BOT projects. These projects make more sense in the water- supply sector where increasing demand combined with gradually rising water tariffs in residential, commercial, and industrial sectors make investment more attractive.
Are there any good environmental trade shows in China?
There are a number of trade shows in China, but most of them are small and regional, and many are not well organised. The biannual China International Environmental Protection Industry Conference is the country ‘s largest. (see www.chinaenvironment.org/index_en.aspx ). The conference will cover a wide range of sectors including air pollution, water, wastewater, solid waste, recycling, green transportation, and energy conservation. The Guangzhou International Environmental Protection Exhibition, is also broad in scope. The China Environmental Protection Industry Association plans to organise a large show in Shanghai. Foreign firms should consider participating in technical seminars and conferencesto network and learn the latest trends. Local government bureaus are often eager to co-organise workshops and technical seminars to introduce foreign technologies.
There has been a general increase in water projects creating a large, diverse and growing market for water treatment technologies, including municipal water treatment facilities for drinking water, as well as drinking water treatment equipment for the bottled water and home treatment sectors.
The government ‘s inability to invest and to fill the huge capital demand creates opportunities to involve non-state-owned or foreign investment. The Chinese government is encouraging non-state-owned and foreign investment participation. These policies include preferential tax policies for the industries and projects listed in the Foreign Investment Industry Guideline. Guided by the state ‘s policies, local governments established relevant policies applicable to local areas. Companies can obtain details on these policies from the local governments and taxation bureaus.
Forming a private and public partnership (PPP) is a common method for non-state-owned and foreign participants in the water supply and wastewater treatment sector. For specific projects, build operate- transfer (BOT), and design-build-operate (DBO) schemes are often used. Because the concept of PPP is a new one in China, the Chinese government has not set specific regulations or guidelines regarding schemes. Foreign companies and investors are likely to encounter a dilemma in assessing the opportunities and challenges for participation and the accompanying financial risks.
Clean fuels, desulphurisation, coal washing, air quality monitoring, and other related technologies for prevention and control of air pollution are also required.
As for the solid waste treatment sector, advanced equipment and technology are always welcome, especially for the treatment of hazardous solid waste and medical solid waste.
Whilst research centres have been created advanced environmental technology for hazardous solid waste treatment is still essentially in the research stage and is only recently being put into practice. This means there is a large-scale environmental market in China offering a wide range of market opportunities for foreign companies.