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“China can capture the largest possible return on investment.” 
 -- Shanghai Industrial Holdings Ltd. Chairman

With a consumer population of 1.3 billion and little scrutiny given to the consequences of privatization, China’s newly opened water and sanitation market is becoming magnetic to private water companies. The unparalleled growth rate in China’s economy has aggravated the income gap between the rich and the poor. In the booming cities of Shanghai, Beijing, and Guangzhou, members of the elite class earn as much as six times the income of their rural counterparts, and readily accept the increase in water price while sampling various brands of bottled water on the shelves. However, to two-thirds of the population in this vast developing country who still live on less than $ 0.9 per day, the prospect of privatization poses a severe threat.

Water scarcity has always been one of the most foreboding challenges to China’s development. Though China ranks sixth in the world in terms of total fresh water resources, its per capita quantity is only one-fourth of that. Only 66% of the rural population has access to safe drinking water, compared to the 70% average for developing countries. Safe drinking water access in urban areas has gradually declined from the estimated 98% in 1990 to 94% in 2000, according to a WHO/UNICEF joint monitoring program. Moreover, China’s water resources are very unevenly distributed: Northern China has only one-fifth the per capita quantity of southern China and just 10% of the world average, creating an environment ripe for large-scale water diversions and bulk water sale.

Prior to the “open-door” policy in 1978, the government dictated strict price ceilings on water. In recent years, market reforms have led water prices to be set by the market or through the so-called “guidance pricing” (i.e. allowing market pricing within a range defined by the government). The ownership of water remains with the government, and private firms are required to renew their water management or construction permits with local governments every five years. Yet in a country where economic growth has become a fad, local governments are more than eager in welcoming private investments, especially in the face of aging infrastructure and short public funding. French-modeled concessions and “Build, Operate, Transfer” (BOT) models thrive in the arena of public-private partnership. Between 2000 and 2001, the four World Bank loans for both rural and urban water and wastewater supply averaged $100 million a piece, and all promoted privatization and relied on cost-recovery measures. The provincial legislation on water resource management of Fujian, a southern province with a population of nearly 35million, explicitly lists encouraging water privatization as a function of the provincial government.  

Since 1992, Suez has gained 18 bulk water contracts in high income areas such as Hainan, the Chinese equivalence of Hawaii. Veolia is involved in 13 projects and signed a 50-year management contract in Pudang in 2002. German-owned Thames and Berlinwasser are also on the way, with the latter recently winning a $58 million contract in the eastern city of Hefei. In southern China, direct negotiations between firms and municipalities are being replaced by the competitive bidding process. The multinationals find themselves bidding against a proliferation of local companies, who are inexperienced, but offering far lower prices (20% to 30% cheaper). 

Civil society activities are rare in China, due to the low level of advocacy among the people in general and the heavy-handedness of the government. Many have expressed complaints about the Three Gorges Dam project (in which Bechtel is implicated), which will force over a million who live in the Yangtze River valley to relocate, yet the government makes sure that only positive reports are publicized in the official press. Some activists see blocking the dam as a test for creating civil society in China -- and hope that the success of an anti-dam movement would spur Chinese civil society opposition to water privatization.

The future, fortunately, is not all grim. These days, the growing capacity of the Chinese economy to finance just about anything on its own makes conditional lending of the Asian Development Bank and the World Bank much less appealing. Furthermore, following the RWE/Thames’ office closings in Korea, Japan, Malaysia and Hong Kong since March 2004, the German-owned water giant sold 100% of its interest in Shanghai’s Da Chang water treatment plant back to the municipality of Shanghai. It also withdrew from negotiations to acquire 50% stake (US$ 120 million) in Shanghai Waterworks Shibei Co., which is serving four million people in the northern district of Shanghai. 

In the News:

July 21: A Case of Environmental Money Laundering 
January 24: Prepaid water meters set up - To read about the downsides to prepaid water meters click here.

November 18: China halts dam, sacks official after protests
April 8: Beijing suspends plan for large dam
April 1: Mighty Mekong is drained by Chinese dams
March 26: China to raise water prices to ease water shortage
March 11: Dry Beijing to shun water-intensive industry

December 12: World Bank and ADB’s Role in Privatizing Water in Asia
May 15: Quenching China's thirst

Water for All initiated a new collaborative website to help coordinate our global campaign focusing on the water transnational, Suez. The website is tri-lingal and collects information regarding the abuses, problematic projects, community protests, and exploitative policies of Suez, Go to:
English - www.stopsuez.org
Spanish - www.fuerasuez.org
French - www.arretonssuez.org

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