Water and will in short supply in
China By Benjamin A Shobert
Across China, the signs of the country's
distressed water supply have grown increasingly
severe over the past several years. In February,
Vice Minister of Water Resources Hu Simi publicly
stated "The situation is extremely serious in many
areas. With overdevelopment, water use has already
surpassed what our natural resources can bear."
Estimates are that some 400 of China's 600
cities are already facing water crises of some
sort, most related to either pollution of limited
supplies, or in several cases millennia-old
aquifers having been completely used up as the
region has rapidly industrialized. In 2010, the
Ministry of Land and Resources estimated that 57%
of the country's underground water should be
classified either as "bad" or "very bad".
The 2011 drought in southern China made
this issue abundantly
clear. For a country
with a long history of resource-induced famines
and social instability, last year's drought was an
ugly reminder of the role one of the planet's most
easily overlooked, yet increasingly precious
resources, will play as the country develops.
Projects like the South-to-North Water Project,
the largest man-made water diversion project ever
planned, are designed to address the scarcity of
water in China's barren northern provinces where
most of China's northern provinces must subsist on
only 15% of the country's total water supply.
As last year's drought illuminated, the
south of China faces its own problems if global
climate change throws out of cycle the traditional
typhoon season that could be counted on to
replenish the region's water supplies. The most
recent drought was also one of the most unusual,
casually known as a "spring drought", and
something China's south has rarely experienced.
Julien Bedin, a senior research analyst
based in Beijing at the China Greentech
Initiative, shared that "in 2011, severe droughts
and floods across China caused over RMB 230
billion [US$36.5 billion] in economic losses and
led to hardship for 114 million people."
China's water supplies have always been a
concern. The country's Ministry of Water Resources
has said that China's per capita average is only
28% of the world's standard. Another way to put
this is that China must sustain life for 20% of
the world's population with only 7% of the world's
water supply.
This problem, not one of the
country's making, has been made that much worse as
rural-to-urban migration patterns have
intensified, which further localizes the strain on
cities with limited water resources.
In
addition, China's impressive modernization has put
incredible strain on its water supplies, largely
because of the pollution caused as poorly
regulated industries dump waste into lakes,
streams and rivers.
Western travelers to
China may shrug their shoulders at the admonition
to use bottled water for drinking and brushing
their teeth, choosing to see this as the sort of
warning common in any developing nation; however,
the problem in China is much more acute, a reality
that every housewife in China who must boil water
for drinking, cooking and cleaning would be quick
to attest to.
The Global Water Risk Index,
a forward looking database which captures
country-specific and global data on existing water
use for agricultural, industrial and
power-generation has projected forward the likely
parts of the world where water is likely to become
a problem. Its most recent map shows that China,
in particular the northern region, has a greater
than 75% probability of encountering water
scarcity by 2030.
The central government
in Beijing is quickly coming to terms with painful
decisions and trade-offs that the country's water
shortages are going to make necessary. The most
recent five-year plan made particular note of the
need for the country to draw down its use of water
through a combination of mandated water usage
levels in relation to economic output as well as
limiting water-intensive industrial and
power-generation plans in areas of high water
distress.
Beyond these steps, Bedin stated
that "China's dire water situation is pressuring
central authorities to more closely monitor
water-intensive users including the agriculture
and industrial sectors. Agriculture accounts for
more than 60% of China's water consumption,
calling for major improvements in irrigation
efficiency." For a country whose second most
pressing strategic challenge may be how to feed
itself, the role water scarcity could play in
further intensifying its ability to nurture a
self-sustaining agricultural sector should not be
overlooked.
Western businesses, in
particular operators in the clean technology
space, have been quick to recognize the commercial
opportunity inherent in helping China solve these
problems.
As Bedin pointed out, "Financial
investors are increasingly active in China's water
sector in 2011. Private equity and venture capital
[PE/VC] and investments increased dramatically
from US$ 50 million in 2010 to roughly US$ 400
million in 2011. Many of these investors are
exploring the market potential for advanced
water-related technologies, either domestically
developed or imported from technically-leading
foreign markets including Israel, France or
Japan."
The solution, as Bedin was quick
to add, is not purely technological: "In many
cases where advanced technology has been deployed,
for instance membrane treatment solutions, the
long-term performance is often falling short of
initial specifications."
Problems with
deploying advanced technologies have long
bedeviled China's attempt to modernize key
industries, and water appears to be no different.
Bedin shared that these problems are likely
related to "improper use or maintenance by
ill-prepared staff. It is fairly common to see
lower-end solutions with lower initial capital
costs favored over advanced technologies with no
considerations given to lifecycle costs and
performance."
China is not short the
financial nor human capital to pursue solutions to
its water scarcity problem; if anything, the most
pressing challenge to China is whether its
municipal leaders will be able and willing to make
the trade between increased economic development
at the local level in order to address water
shortage issues that may be felt most severely
outside their own city or province.
Within
a political culture that has prized economic
growth above almost anything else for most of the
last three decades, getting local leaders to
accommodate slower growth by tabling
water-intensive industrial and power-generation
plans will be easier said than done.
Even
if China were today able to simply turn on a dime,
the question of whether it would be too late
ominously hangs over the entire issue of the
country's water shortage. Elizabeth Economy, a
Senior Fellow at the Council of Foreign Relations,
is one of the pre-eminent scholars on China's
environmental and water scarcity challenges.
She testified at the US-China Economic and
Security Review Commission in January that,
relative to China's water supply problems, "a
number of factors, such as corruption, lack of
human and financial resources, and a weak policy
environment have often undermined fulfillment of
Beijing's goals. A preference for large projects
also hampers effective planning." She went on to
state "None of these policies-taken alone or
collectively-has been sufficient to address the
challenge at hand."
Many factors that
China's economic ascent presents the country's
leadership with, ranging from the need for clean
energy to limited supplies of oil or other
commodities, seem to be challenging yet
surmountable. Water, like that of its closely
related cousin of sustainable agriculture, seems
to be a factor that will not accept timid or
incremental reforms.
It remains the
simplest and most necessary natural resource for
the Chinese people and crosses over matters that
tie together economic policy, environmental
degradation and social stability. Whether Beijing
has the political will to act persuasively in
advance of a major crisis will likely be one of
the first tests the new leadership will have to
face as 2012 draws to a close.
Benjamin A Shobert is the
Managing Director of Rubicon Strategy Group, a
consulting firm specialized in strategy analysis
for companies looking to enter emerging economies.
He is the author of the upcoming book Blame
China and can be followed at
www.CrossTheRubiconBlog.com.
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