5 Takeaways from Aquatech China 2014

By Dawn McGregor 9 July, 2014

Is China's water market finally maturing? Dawn McGregor shares her 5 takeaways from Aquatech China

China's water market is growing & maturing with focus on quality, despite split views on the war on pollution
Foreign brand focused on point of use; Chinese brands dominate in membranes & industrial wastewater treatment
Still missing soil remediation & water-energy solutions but domestic interest in China's water market is picking up

June saw two of Asia’s largest water trade shows, Singapore International Water Week (SIWW) and Aquatech China. SIWW 2014 was the largest edition to date with more than 800 companies participating in an exhibition space of 23,000m². An impressive SGD14.5 billion (USD11.6 billion) of projects were announced that week in Singapore in its bid to become a global hydro-hub. Aquatech China on the other hand focuses solely on the China market. This year in Shanghai, there were over 1,400 exhibitors, 75% more than that of SIWW and is growing year on year reflecting bullishness in China’s water market.

Here are five key takeaways from Shanghai:

1. Water issues rising prominence in China

Since its inception in 2008, Aquatech China has grown in size – almost 50% year-on-year.

Its seventh installment held in Shanghai from 25-27 June was China’s largest water show to date with more than 1,400 exhibitors covering 75,000m².
Growth of Aquatech (550 pixels)
Not only is China’s water market growing, it is also maturing. For the first time, Aquatech China included an Industrial Leaders Forum (ILF) to explore how water technology and management can create integrated solutions to China’s water issues.

ILF Roundtable

The ILF kicked off with invite-only roundtable discussions with around 40 industry leaders and experts including representatives from provincial governments.

This was followed by a public forum with presentations & panel from industry leaders across sectors such as Coca-Cola, H&M, HSBC, IFC, McKinsey & Yanjing Beer. The attendance of both local and foreign companies illustrates just how important China’s water issues are to various industry sectors. For the full programme see here.

Aquatech Pic Trio

2. Split verdict on “How real is China’s war on pollution?”

Discussions at ILF revealed a split verdict on how committed Beijing is to China’s “war on pollution”.

The ‘yes corner’ points to government policies – the seven strategic emerging industries, tougher standards, higher fines, the new law and so on (more here). Some commented on the increased willingness of Chinese industries to spend on the environment as evidence of the war effort, citing that numerous textile mills have invested some RMB5-15 million on wastewater treatment. Others commented on the wide-scale closure of SMEs either because they do not have funds to upgrade equipment to meet new standards or because future margins factoring in clean-up costs are not attractive enough. This may not necessarily be bad news as SMEs tend to be more polluting and harder to regulate.

The ‘no corner’ was dominated by one key issue – economic growth still remains the #1 priority. This has translated to companies relocating to the least regulated provinces in order to continue low cost & polluting operations. Additionally, as the ‘Go-West’ movement has accelerated in the recent years, people fear the mistakes of the East are being repeated in the West. So the war on pollution can’t be real, as pollution is just being ‘relocated’ (read about pollution carried by rivers from the West to China’s coastal waters here).

It is worth noting at this point, that Premier Li Keqiang’s declaration of war only happened in March this year; so it is early days. However, regardless of whether the war is for real, everyone was worried over polluted food & water.

3. It’s all about quality, quality, quality

Aquatech Floor Map (600 pixels)With fears over polluted food & water, it’s all about quality. This was apparent in Aquatech event with ‘Point of Use’ monopolising the largest floor space (see floor plan – click to enlarge). Next was water infrastructure & efficiency with ‘FlowEx: Pump, Valves & Pipes’ and then only membranes & wastewater treatment.
With increasing urbanisation and a growing middle class, the demand for quality is growing rapidly. This higher awareness of water quality issues means people are willing to spend more to ensure a healthy lifestyle.

But it’s not just the Chinese people; Chinese companies are also looking towards providing better quality products. The Water Quality Association says business has grown because Chinese brands look to gain foreign quality standards in both their domestic sales and exports.

So it appears Chinese companies are turning towards foreign quality standards, but are foreign brands making inroads into the China market?

 4. Foreign brands: focused on drinking water

US Flag (150 pixels)

Although Aquatech boasts exhibitors from over 30 countries and is China’s largest international water show, foreign companies were in the minority. Interestingly, the majority of the foreign brands were in the ‘Point of Use’ space. Many of them commented that this was due to the relatively low barriers to entry compared to other areas such as municipal or industrial wastewater treatment.
Others said they were still concerned about intellectual property protection whilst some confided that they were still not price competitive compared to Chinese companies.  Nevertheless, they were all still exhibiting in Shanghai as China remains too huge a market to ignore.
“The China market for water technologies is huge. While there is no shortage of people now interested in water technologies in China, from the perspective of getting started on the ground it is more challenging.”

John Haffner, Director and Asia Representative, Dagua Technologies Inc

In comparison, Chinese brands represented a much wider array of the water sector including: membrane technology, wastewater treatment, point of use, metering equipment and more.

5. What wasn’t there

Perhaps what’s more telling is what wasn’t there. Soil remediation technology and the water-energy nexus (both key issues in the pursuit of China’s water, food and energy security) were under represented. We only came across one Chinese company based in Shanghai which had products to absorb heavy metals from the soil.

We also expected to see more industrial wastewater exhibitors considering the amount of industrial discharge that is not treated (see here). Perhaps this is because there was another trade show focused on water technologies in May.

The message is clear. The water sector is buzzing and there is room for both foreign and Chinese players. Many local industry leaders echoed that the scale of China’s water issues is so large that existing foreign technology should be adopted to solve immediate issues like pollution and water efficiency. At the same time, China should focus on R&D to cultivate local innovations as China can’t ‘cut & paste’ foreign models and solutions for some of its water issues.

2015 booking boothDomestic interest in the water market is picking up. The large (and increasing) number of Chinese companies at Aquatech indicates this trend. Another way to measure success is by looking at the demand for booths next year – already, one third of the booths for Aquatech 2015 has been reserved during the event (see photo); most of these are by membrane technology companies (read more about membrane tech in China here). With higher water standards plus reclaimed water capacity to increase 221% to 38.85 million m3 per day by the end of 2015, who wouldn’t want to make a reservation now.

Dirty water creates new markets – China is planning to spend RMB 2 trillion on a “Water Pollution Prevention Action Plan”

Further Reading

  • China’s Membrane Rush: Foreign vs. Local – Tom Freyberg, Chief Editor at Water & Wastewater International, reviews the opportunities for Chinese & Foreign companies in China’s membrane technology market
  • Pollution: Is Data Real?: Inconsistencies in the recording and reporting of pollution data begs the question: is the data real? With 7,700 tonnes of lead in China’s rivers carried to the sea unaccounted for in 2011, is the real state of environment worse than we thought?
  • China’s Coast: The Unbearable Weight of Heavy Metal Pollution – Environmental toxicologist Dr. Tan Qiaoguo from Xiamen University on historical trends of heavy metal pollution in China’s coastal waters & the worrying amount of heavy metals carried by China’s rivers to the sea
  • The Power of Pipe Management – Mark Nicol from Echologics tells us on how acoustic technologies can non-evasively detect underground leaks as well as save water. Globally, 35% of water supplied is lost through leaking pipes; managing this is is key given rising urbanisation
  • The War on Pollution – Premier Li Keqiang has just declared war on pollution. Tan expands on the government’s stratagems & offensives and fundamental changes required to shore up the MEP’s arsenal in order to wage a successful war
Dawn McGregor
Author: Dawn McGregor
Dawn leads CWR’s work to help corporates navigate increasingly disruptive & material risks from water & climate threats, as well as transitional risks in the supply chain arising from new regulations in China. Here, Dawn engages extensively with the global fashion industry delivering on-ground workshops in China to keynotes and strategic input at European HQs. She has written at length on the end of dirty and thirsty fast fashion and her report to overcome gaps between brands and manufacturers for a clean and circular future inspired the industry to create a new wastewater tool. Dawn also works closely with the property and tourism sectors where she not only conducts strategic assessments of their exposure but builds collective action toward resilience via closed door working groups and invite-only events. Having helped build CWR, Dawn is a frequent keynote, panellist & moderator at events, including being twice selected as the lead-rapporteur at World Water Week. Her articles are cited in various industry publications including the UN’s ‘World Without Water’. Dawn previously worked in a global investment bank assessing geo-political risk, crisis management and business resiliency. She was born and bred in Hong Kong and has lived in France, England, Singapore and Beijing.
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