From a general point of view, water price in China is seen as inadequate: it does not represent the true value of the available resources, the cost of water supply and wastewater retreatment. Until 2004, the authorities’ state of mind was that despite the severe shortage, water was too cheap to be used sparcely. Only a raised price could motivate consumers to conserve. Facing a more and more critical management of scare resources and spreading pollutions, the reassessment of the price of a water cubic metre was revised upwards since the 2006 reform of water urban sector (up already established in 2004 in some regions).

Given the recent statements of recurrent water waste, during the 11th 5-years Plan, measures have been taken to give consumers a sens of responsability. The government wants to see water prices rise to 50-100% during this period. The establishment of a metering and volumetric count and high hiked tariffs are designed to induce consumers to limite their water consumption. But, compared to standards of occidental water consumption, the chinese one is not this big at all: in Beijing, the average use of water is evaluated to an average of 104,14 liter per capita per day (l/c/p), whereas America’s one can reach 280 l/c/d, France’one: 125 l/c/d, Spain’s one:180 l/c/d, in Cyprus’s one:175 l/c/d. Regulated prices based on service cost (tapping resources, providing running water, constructing pipes and plants, treating sewage) are envisaged. The 11th Plan also targets the biggest consumers who are industry and agriculture: to decrease of 30% of industrial consumption and to rise the efficiency ratio in irrigation from 45% to 50%. Indeed, since 1993, the national resources are tapped to 70% per year for irrigation use, which represent about 520 km3 of water. Inefficiency due poor ditches and antiquated irrigation facilities has a bad effect on a such large consumption.

Low fees for water supply and sanitation

The chinese water prices system distinguishes different categories of users: agriculture -biggest consumer-, industry, tourism facilities, health facilities (hospitals…), trade, domestic consumers… Although the tariff system uses a metric and linear valuation of consumption, it is the industry and trade that are given the highest fees. The tariff scheme can be summed up in 2 types of fees, since 1985: one for water supply , and one for sanitation. Nowadays, 2 RMB per cubic meter is the average price domestic consumers are charged for water supply. Sanition fees barely reach an average of 0,1RMB per ton. But it is planed that price would reach 0,8 or 1 RMB.

These tariffs are left to the charge of local government. Thus, in urban areas, prices are fixed by the responsible offices. This leads to a large disparity from a region to another, or even from one city to another. Only can be observed, as a quasi-evident, that the highest rates are found in the highly urbanized cities, as Chongqing and Beijing. As the tariffs reform has an impact on people opinion, Government wishes for that collected fees would not be more than 1,8% of an household income, as in Beijing now. Campaigns for saving water are now bearing fruits: people have become aware of the importance of the issue. Some citizens even mail the water resources authorities methods for saving water.

Old water facilities

Decreasing consumption is not the only aim the Government wants to achieve to conserve water resources. The reconstruction, efficiency improvment of networks and plants are two of the flagship measures of the reform. An investment of 358 billion RMB was announced in August 2007, benefiting to the urban centres. Also, several loans from the World Bank and the Asian devlopement Bank will be acquired for. The Government wants to see the rate of drinking water supply reach 98%, and treated wastewater to 70% in urban areas by 2010. Rising standards of the quality of drinking water and sanitation are also being considered.

During the 2008 Asian Water Summit, held in January, the marketisation of the water sector, its development and management were discussed. The reform of the water sector in urban areas requires capital investment to reach its goals by 2010. The technical and technological challenge is huge. Most of the water infrastructures receive significant financial support from local governments. The fees charged consumers are not large enough to cover the costs of infrastructures management. The fee for the collection and disposal of wastewater is now too low for the utilities to ensure the daily operation. The 2006 report of the World Bank for ubran water sector in China suggests an increase to 3 RMB of the rate currently levied (about 0.1 Yuan in 2005). The proposed tax increase would reduce the gap between cost of services and fees properly collected.

To reach these goals, the government is gradually opening and reforming the water market. Is this an opportunity for foreign companies to get a foothold in China or consolidate their position in the area? The new policies marketisation are there to ensure its smooth conduct, encourage and attract foreign and private funds in the construction and infrastructure management. The downside will be increased competition between local firms and their foreign competitors. The government will still retain oversight on the system and franchise operations. The death of BOT and others PPP contracts is in no way envisaged. Given the appetite of Chinese, accelerating the skills and technology transfers are in the mind of Chinese authorities in charge of water management in the country. So the next 5-10 years is the key period of the development of China’s water affair.

Cities Raise Water Price China.org.cn – 2004/12/25

China to charge for urban sewage treatment later this year Worldwatch Institut – 2006/08/26

China to raise water prices to encourage conservation, efficiency Gov.cn – 2006/12/08

China’s water use – FAO database 1999

China water projects to get big investment IHT – 2006/08/22

China’s water industry survey Fdi.gov.cn (Ministry of Commerce) – 2007-05-15

China’s water affair report 2005-2006 Research and Markets

Chinese water management system Wikipedia page

water law text MWR

Improving the performances of China’s urban water utilities World Bank – 2007

Report Chongqing water pricing for poor World Bank 2007

Report Water pricing Beijing World Bank July 2007