In the People’s Republic of China (PRC), the largest foreign water technology companies have an established presence, but the $100 billion water sector has been challenging for small to midsize enterprises. Companies must be prepared to hit the ground running with fully mature technology and local references for projects already completed in the PRC.
Sun Tzu, the Chinese master tactician of the sixth century B.C., wrote, “cleverness has never been seen associated with long delays.” In keeping with this axiom, China’s government-issued Five Year Plans (FYPs) quickly set markets in motion, and Chinese officials rush to meet ambitious targets on a grand scale in the world’s most populous country.
Water’s role in latest Five-Year Plan
The current Five-Year Plan, which is focused on green growth and rural infrastructure, heavily involves the water sector. As Fluence China’s General Manager Wong Jin Yong recently told Global Water International (GWI), “Currently in the municipal sector, there are three focuses: rural wastewater treatment, upgrading of wastewater treatment plants, and river cleanup.” And according to a report from the U.S.-China Economic and Security Review Commission, the FYP also calls for raising the surface water quality: More than 70 percent will have to meet or exceed Class III standards.
New water technologies
In an environment of high-pressure deadlines, PRC clients are often willing to step to the forefront to invest in cutting edge-technology that is not yet available from Chinese sources. At the same time, the market is less tolerant of new technologies that need time for further development.
With little time to achieve goals under a FYP, it’s essential for companies to develop local references and be prepared to commission fully functioning demo plants as soon as possible. Although there may be many opportunities in the sector now, after the five years are up, there are no guarantees.
The Chinese market has become more difficult for equipment sales because local operators usually combine competitive equipment prices with fast, local support. So, integrated solutions offering prompt, local support may well be competitive, whereas equipment sales alone may falter. With restrictions on how much foreign equipment may be used on a project, manufacturing the company’s product in China can also markedly boost potential sales and involvement in projects.
Jennifer Santaniello, Fluence’s Senior Manager for Branding & Communications, explains Fluence Corp.’s early success in the PRC market:
"We have local manufacturing and local representation in China, where these relationships are highly valued. Because we took the time in 2016 and 2017 to set up a solid infrastructure that can meet these expectations, we now have an advantage over competitors."
As of 2017, water sector partnerships have shifted, with a preference for domestic services and products. With this shift, the role of private and foreign firms is shrinking in percentage of involvement. Nevertheless, in terms of absolute numbers, the sheer size of this FYP’s projected buildout represents a large growth opportunity for private and foreign water technology firms.
As the world watches China’s green transformation, the private foreign companies who laid their groundwork early are intrinsically involved in the process.