China has a population of 1.3 billion. Its economy grew at a rapid annual rate
of over 9%, and its urbanization growth increased by 10% in 2005. However,
according to the Bank of China International (”BOCI”), and various government
officials, more than 400 cities and 13 provinces and regions in China currently
face a water shortage problem. There are three main drivers that contribute
to the current water crisis in China.

According to the Deutsche Bank AG, the main contributor to the water crisis
is the lack of coordinated national infrastructure to distribute water across China.
This is exacerbated by the fact that the North has only 19% of the water in
China yet this area contains 47% of the population, produces 45% of the GDP,
and contains 65% of the cultivated land in the country.

Investments in Chinese water utilities.
Worldwide, per capita water availability is 16 times greater than it is in China’s
most water scarce areas. According to accepted world standards of water
scarcity, the water supply in all of North China is now at recognized danger
level, and in the North China Plain area the annual water supply is now at a
crisis level - the minimum world standard to sustain public health and safety.
The Chinese government now recognizes this to be a serious issue, and is looking
to the private sector for help and expertise in both the distribution of water from
other parts of the country and the enhancement of inefficient water systems.

Increased Future Demand - Further Water Shortages

A change in the pattern of water consumption in China has accompanied the
country’s rapid economic growth. China’s water resources per capita are
approximately 2,300m3, which is only a quarter that of the global average. At
present, shortage in irrigation water in China’s agricultural sector amount to
over 30 billion m3 per year on average. There are more than 30 million people
in rural areas who do not have access to drinking water and more than 400
cities (out of 668 cities) in the country that are facing a water supply shortage.
Water shortage in urban areas of China amounted to 1,600 m3 per capita per day,
and annual industrial product value affected by water shortage amounted to
more than $200 billion. It is also affecting approximately 40 million of the urban
population.

Investments in Chinese water utilities.
While water demand is rising, uneven water distribution, falling groundwater
tables, poor efficiency of utilization, as well as pollution are contributing to
the decline and deterioration of water resources, which had led to more acute
water scarcity in the world’s most populous country.

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