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[Photo of Algal bloom in Chengdu]Without water, China cannot grow

When Bruce Lee told his students to be like water, he probably didn't mean that they should be contaminated, underutilized and scarce. But that's how water is in many parts of China and the water crisis could deliver a knockout punch to the country's development.

According to Water in China: Issues for Responsible Investors, a report released by water management advocacy group Asia Water Project: China (AWP) in April, two-thirds of China's 660 cities lack adequate access to water. Of the two-thirds, 110 cities have 'severe' water shortages.

AWP says 70% of China's lakes and rivers are 'significantly polluted,' half its cities draw polluted groundwater, and 30% of the country—about 2.8 million square kilometers—is affected by acid rain.

This means 700 million Chinese drink water contaminated by human and animal waste. Contaminated water  kills 60,000 people a year and causes 190 million others to get sick.

China's losses are not limited to people, either, although that is terrible enough. AWP says China loses some US$35 billion a year because of the water shortage. That's two times more than average losses from flooding. Lack of water means China's mills produce 170 million tons less steel, a shortfall valued at US$100 billion.

Historically, China has always had to contend with water from flooding and droughts. Another historical fact, at least according to the US Department of Energy, is that massive industrialization has caused rainfall in China to go down by about 25% in the last 50 years.

This may have caused the winter drought in northern China in 2009 that affected some 10 million hectares of farmland and left 4 million people without access to adequate water. Severe drought also hit Yunnan and surrounding provinces in southwestern China this year, affecting 51 million Chinese and wiping out half of Yunnan's grain harvest.

The Yellow River—both the cradle of Chinese civilization and 'China's Sorrow' because of its devastating floods—has regularly run dry since the 1990s. Changing rainfall patterns and rising sea levels caused by climate change further endanger China's water supply. As sea levels rise, salt water could seep into the fresh water aquifers under China's coastal cities and make the ground water unsafe to drink.

Dry regions like the northern provinces of Shanxi and Hebei are 'intensely farmed' even as corporate and industrial demand for water rises with private consumption. Meanwhile, China produces some 57 million tons of waste water a year, waste that its antiquated water systems cannot handle.

Unwashed Unrest

AWP says the water shortage could hamper China's growth and stability. Access to clean water, which the United Nations declared a human right in July, is expected to become a sore point with China's increasingly organized protesters.

In 2005, protesters (estimates range between 20,000 to 60,000) shut down 16 chemical plants suspected of dumping their waste into the water supply of Dongyang, a city south of Shanghai. In August last year, 10,000 locals in Fujian province clashed with police in a protest against tanneries and factories contaminating their drinking water with carcinogens. AWP estimates mass disturbances (involving 15 or more people) because of water issues will increase by 30% every year. This unrest could spillover and disrupt multinational joint ventures, scaring away investors.

The water crisis could also cause tension with China's neighbors. Plans to divert the Tsangpo River to supply northeast China with water, for example, could sour relations with India, Bangladesh, and Myanmar (Burma) who also get water from the river.

Aside from stricter environmental regulation and a program by the China Ministry of Water Resources to reduce by 60% the amount of water needed to produce US$1 of GDP by 2020, AWP says China will have to raise water prices. The group says low water prices, about 2.8 yuan  (US$ 0.41) per cubic meter in Beijing, not only leads to wastage, but also keeps China from upgrading its water treatment and delivery system. Prices are expected to rise to 11 yuan (US$1.62) per cubic meter because of rising demand.

Even that price does not reflect the cost of treating and distributing water and can hardly pay for building more efficient water infrastructure but raising prices is a prickly political issue and local politicians have steered clear.

This is where the private sector is expected to take over. Although water is still not seen as market oriented and profit driven, a trickle of investors is already coming in backed by the Asian Development Bank and Imagine H20, a Harvard-linked organization that supports water entrepreneurs. Modern water technology is slowly being adopted but there is still little reason for investors to risk upgrading China's water systems and passing on the cost to consumers.

Until then, China's industry associations are expected to do their part to keep available water clean. China's pulp and paper industry has held a sustainable development forum to discuss more efficient and sustainable use of water and the China Banking Association released water management CSR guidelines for its members early last year.

A Sustainable Water Group has also been formed by companies who want to protect China's textile industry by managing water use and the disposal of waste water. Understandably, many of the group's members are based in the Pearl River Delta, the center of China's textile and apparel manufacturing industry. The China Training Institute, another textile-industry business social responsibility group, now holds water management training programs for factory managers.

China is already reeling from the worst drought of the century but it isn't too late to reorient its industrialization, shift to 'greener' industries, and upgrade its water and wastewater facilities. It has little choice, really—JDS

Print ed: 09/10


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