Aquatech China : A Changing Landscape
By CWR 30 June, 2011
China Water Risk finds out the latest trends in this fast changing space.
Earlier in June, China Water Risk attended Aquatech’s fourth water conference in Shanghai. Aptly referred to as a ‘Water Show’, Aquatech China provided a platform for showcasing water technologies, and disseminating information on the many aspect of water management relevant to China’s water market. Since Aquatech’s 2008 debut in China, interest in the country’s water market has continued to grow, and this year 688 exhibitors showcased products– up seven per cent from last year. Aquatech is the largest event of its kind in China.
Interest in China’s water market is being driven by a combination of factors, including widespread water scarcity and pollution, urbanization, progressive government policy, increasing financial flows, and development of wastewater treatment capabilities. As a result the water treatment market is booming and looks to expand, indeed Global Water Intelligence estimates a growth of nine and half per cent between 2007 and 2016.
China’s water technology market growing fast
The first impression when arriving at the Shanghai exhibition center was how diverse participants were, visitors it seemed having traveled from all corners of the world. This was in stark contrast to the same exhibition in previous years when attendees were predominantly Chinese.
The reason for such international interest perhaps is reflected in the sentiment of one Spanish SME buyer who explained to China Water Risk that for his particular company’s Reverse-Osmosis (RO) membrane, every single euro makes a difference, a result of which, the company is now mostly sourcing these type of products from China. When it comes to the most widespread and scalable technologies such as RO membranes, price competition is fierce and China manufacturers offer competitive products.
Six hundred and eighty eight water technology companies displayed their wares at the conference, of which 455 were Chinese companies with 10 or less years of experience, indicating just how young the industry is in China. Although Chinese Companies are relatively new to the water technology business, in 2010, based on 15 key product categories, the country was estimated to export close to 2 Bn1 USD worth of water treatment equipment. Since 2003 the market has grown by an impressive +32632 per cent. Notably, before 2002 there were no records of Chinese water technology exports.
By comparison, during the same period, German export figures for the same product categories show a decrease of 75 per cent to 142m USD.
While the Chinese water market is undoubtedly expanding, expertise from international players is still a driving force. At the conference, two thirds of the speakers were from foreign companies and leading foreign exhibitors had a strong presence including companies such as GE, Siemens, ITT and Suez-Degremont technologies and Nalco.
We can expect that this growing market encompassing both innovative and mature technologies, will provide Chinese companies with the opportunity to develop and market domestic products, gain expertise and become increasingly competitive internationally.
Capital expenditure far outweighs operational expenditure
Leading players in China’s water business such as Veolia Water and Beijing Capital were not present at the exhibition, despite Aquatech being billed as “the biggest water show in China”. The absence of such companies is easily explained when considering the relative size of the water operations market (Veolia and Beijing Capital’s strength) compared to the larger size of the equipment supply and Capex in general (see Figure 1).
Indeed, the water engineering market by far outweighs the operations market, representing 70% of the total water market. This in itself is a reflection of China’s massive urbanization and infrastructure development. When considering that in China 52 per cent of the population’s waste water is collected3, compared to 84 per cent4 in Japan, efforts to catch up with developed country norms are likely to spur continuous development of water infrastructure across the country.
Point of use drinking water
Another surprise when visiting Aquatech was that despite industrial water equipment representing only 3% of the domestic water market (Figure 1) more than one third of the Aquatech exhibiting companies were showcasing such products e.g. filters, purifiers and other types of point of use treatment technologies. This may reflect the growing demand for the domestic market – while China has a long tradition of boiling its water for disinfection purposes, it seems that the modern household, restaurants, bars and commercial operations are willing to transform their tap water into drinking water by using different types of filtering techniques. It may also be due to the fact that international buyers are sourcing these mature technologies from China with increasing frequency. While in many developed countries, tap water is considered as drinking water, traditionally in Asian countries this is not the case although increasingly in places such as the district of Shanghai Pudong tap water is safe to drink. This sentiment is confirmed by the fact that, despite new drinking water standards to be effective as of July 2012, more than one third of the so-called drinking water in China is not safe5 . Eventually consumers want to ensure quality themselves and thus install their own equipment.
The overall impression from the exhibition was that China’s water equipment market is developing in line with principles of the country’s “green economy”. That is, a strong local market, developing capacity and a growing export market.
Having seen the increasing interest in such point of use technologies in China, next month we will expand the subject including home water purification. We will talk to “Culligan” one of the world’s leading water purification manufacturers and service providers to gain additional perspective on the Chinese water purification market and its trends.