industry analysis report 11082009

8/6/2019 Industry Analysis Report 11082009

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Industry Analysis, Wastewater Treatment Page 1 Version: Aug 2009

Wastewater Treatment in China

By Innovation Center Denmark, Shanghai

100 Qin Zhou Road200235 Shanghai

www.innovationcenterdenmark.cn [email protected]

Version: 2009-08-13

INNOVATION THROUGH COLLABORATION Innovation Center Denmark facilitates collaboration between Danish and Chinese knowledgebased businesses and organizations that drives research-, development- and innovation results.We innovate business models and market strategies and delivers inspiration that drivesinnovation.

Innovation Center Denmark is a joint effort between The Ministry of Foreign Affairs and theMinistry of Science, Technology and Innovation and a new type of commercial mission located intechnological hot spots around the world. Innovation Center Denmark is currently present inSilicon Valley, Munich and Shanghai.


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Contents

Executive Summary ..................... ....................... ........................ .................... ....................... ....... 3 1. Background .................. ........................ .................... ........................ ....................... .............. 4 1.1. Water Pollution .................... ........................ ....................... ..................... ....................... ... 4 1.2. Wastewater Treatment ................... ....................... ..................... ....................... ............... 4 2. Market Status and Developments .................. ....................... ..................... ....................... 7 2.1. Market Potential ................... ....................... .................... ........................ ....................... ... 7 2.2. Players in Chinas Wastewater Treatment Industry .................................................... 8 2.3. The Challenges ................... ........................ .................... ........................ ....................... . 12 3. Investment Demand .................. ........................ .................... ........................ .................... 16

3.1. Water Treatment .................. ....................... .................... ........................ ........................ 16 3.2. Improvement and Retrofit of Wastewater Treatment Plant ...................................... 16 3.3. Sludge Treatment ................... ........................ .................... ........................ .................... 17 3.4. Wastewater Reclamation ................... ....................... .................... ........................ ......... 17 4. Chinas Technical Status ................... ....................... ..................... ....................... ............. 18 4.1. Wastewater Treatment Technology ................... ........................ .................... .............. 18 4.2. Wastewater Treatment Equipment .................... ........................ ....................... ........... 20 4.3. Wastewater Treatment Reagent and Material .................... ........................ ............... 21 4.4. Operation Monitoring Device and Apparatus .................. ........................ ................... 21 5. Potential Demand for Technology and Equipment .................... ....................... ............ 22 5.1. Wastewater Treatment Technology and Equipments ............................................... 22 5.2. Wastewater Piping Network Operation, Maintenance and Monitoring Technology

23 5.3. Wastewater Reclamation ................... ....................... .................... ........................ ......... 24 6. Government Priorities ................... ........................ .................... ....................... ................. 24 6.1. Constructing Associated Piping Network .................. ........................ .................... ...... 24 6.2. Accelerating Constructions of Wastewater Treatment Facilities ............................. 24 6.3. Attaching Importance to the Safe Treatment of Sludge ........................................... 25 6.4. Promoting Actively the Wastewater Reclamation ................... ........................ ........... 25 7. Business Practices and Options to Access Chinese Market ...................................... 25 7.1. Wastewater Treatment Market .................... ....................... ........................ .................. 25 7.2. Wastewater Treatment Technology and Equipment Sales ...................................... 26 Source .................. ....................... .................... ........................ ....................... ........................ ....... 27


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Executive Summary

China is encountering severe water shortages, resulting from both a large populationand water pollution, which has been one of the major challenges. 320 million people lackaccess to clean drinking water; over 70 percent of lakes and rivers are polluted; andmajor pollution incidents take place on a near daily basis.

Over the past couple of years, there has been a noticeable shift in behavior by theChinese government as it pertains to environmental issues, particularly water pollution.1459 wastewater treatment plants have been built by October of 2008 and the marketscale is forecasted to be 1073.8 million RMB by 2010. However, China is facing major challenges such as low wastewater treatment efficiency, treatment of rapidly increasedsludge, old and out-of-date piping network, water reclamation and energy conservation

of wastewater treatment plant.

Chinese domestic enterprises dealing with water treatment compare weakly with globalgiants in technical level and smaller in size due to a low profit margin. There are morethan 10000 domestic enterprises currently dealing with water treatment. However, mostof them can deal with only small projects (less than 2million RMB) without need for hightechnology. The global industrial giants overwhelm those large and complicated projectsasking for high technical elements e.g. biological agents, separation of pharmaceuticalintermediate. The key equipments and core technology are owned by those foreigncompanies, while the small and medium sized domestic enterprises can involvethemselves in these large projects only by doing part of the system maintenance.

Since the 1990s, Chinas wastewater treatment industry developed various technologiesand equipment through its increased investment in water pollution treatment systems.Notwithstanding the fact that Chinas efforts in developing the technologies are paid off,still there is a big demand for out-of-the-art technologies and equipments operatingefficiently and stably.

The governmental 4 trillion stimulus package has since its issue been a grandinvestment banquet attracting wide attention. Stimulated by the governmentalinvestment, more social investment will also be focused environmental protection andecological projects inclusive of wastewater treatment.

Chinese government has, after the accession to World Wide Trade Organization (WTO),generally opened the wastewater treatment market to international competition andinternational investment. The last section of this report specifies the possible optionsDanish companies can choose to enter Chinas wastewater treatment market.


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1. Background1.1. Water Pollution

At present, China is encountering severe water shortages, resulting from both a largepopulation and water pollution caused by rapid economic development with minimalregard for environmental impacts. 320 million people lack access to clean drinking water;over 70 percent of lakes and rivers are polluted; and major pollution incidents take placeon a near daily basis.

Water pollution not only strains the environment, but also severely impacts public health.Today, China has a growing cancer rate, with hundreds of cancer villages near pollutedwater sources. The World Health Organization recently estimated that nearly 100,000people die annually from water pollution-related illnesses in China, and 75 percent of disease comes from water quality issues.

The main sources of water pollution are: industrial (chemical, organic, and thermalwastes), municipal (largely sewage consisting of human wastes, other organic wastes,and detergents), and agricultural (animal wastes, pesticides, and fertilizers) (Brower et.al,1990). For the past several years, China has been affected with the water pollution crisis.

Over the past several years, there has been a noticeable shift in behavior by theChinese government as it pertains to environmental issues, particularly water pollution.China significantly improved its water and wastewater infrastructure, with annual water

supply at 581.87 billion cubic meters in 2007, however there is still annual water shortage of 40 billion cubic meters. Accelerated urbanization and high-speed economicgrowth in China continue to aggravate the water shortage problem.

1.2. Wastewater Treatment

Over viewing the vast amount of potential negative impacts made by the lack of wastewater treatment facilities, strategies have already oriented build wastewater treatment facilities. Wastewater treatment facilities include wastewater collectionsystems, sewer systems, wastewater treatment plants, sludge disposal systems, andany other auxiliary systems.

The total amount of wastewater discharged in 2007 was 55.68 billion cubic meters.Industrial wastewater made up 44.3 percent, and household and service made up 55.7percent. The capacity of wastewater treated per day in 2007 was 220.759 million cubicmeters. In countries, towns, and extensive rural areas, wastewater treatment rates waresignificantly lower. A large amount of wastewater is now discharged directly into surfacewater bodies without treatment. The official municipal wastewater treatment rate is 59%at the end of 2008, which is far from adequate given Chinas serious water pollution.


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Table 1 Wastewater Discharge and Treatment (2001-2007)

Item 2000 2001 2004 2005 2006 2007Waste Water Discharge (100million tons) 415.2 432.9 482.4 524.5 536.8 556.8

Industrial Discharge 194.2 202.6 221.1 243.1 240.2 246.6Direct Discharge into Sea 8.2 8.6 14.1 15.2 13.2 15.7Household and Service Discharge 220.9 230.2 261.3 281.4 296.6 310.2COD Discharge (10000 tons) 1445.0 1404.8 1339.2 1414.2 1428.2 1381.8Industrial Discharge 704.5 607.5 509.7 554.7 541.5 511.1Household and Service Discharge 740.5 797.3 829.5 859.4 886.7 870.8Ammonia Nitrogen Discharge(10000 tons) 125.2 133.0 149.8 141.4 132.3

Industrial Discharge 41.3 42.2 52.5 42.5 34.1

Household and Service Discharge 83.9 90.8 97.3 98.9 98.3Proportion of Industrial Wastewater Meeting Discharge Standards (%) 76.9 85.2 90.7 91.2 90.7 91.7

COD Removed from IndustrialWastewater (10000 tons) 819.8 1045.8 1043.9 1088.3 1099.3 1265.4

Ammonia Nitrogen Removed fromIndustrial Wastewater (10000 tons) 34.1 46.6 48.3 55.3 51.8

Facilities of Wastewater Treatment(set) 64453 61226 66252 69231 75830 78210

Annual Expenditure for Operation(100 million RMB) 132.5 195.8 244.6 276.7 388.5 428.0

Source: Ministry of Environmental Protection

Table 2 Regional Wastewater Discharge and Treatment (2007) Unit: (10000 tons)

Region

Total Volumeof Waste

Water Discharged

DirectDischargeinto Sea

IndustrialWaste Water

MeetingDischargeStandards

Number of Wastewater TreatmentFacilities

(set)

TreatmentCapacity(10000

tons/day)

AnnualExpenditure

For Operation

(10000 RMB)NationalTotal 2466493 157007 2260719 78210 22075.9 4280385

Beijing 9134 8898 549 321.0 46783Tianjin 21444 531 21382 1816 214.2 64189Hebei 123537 1314 113999 4798 2878.3 283455Shanxi 41140 36297 2700 645.9 205359Inner Mongolia 25021 18437 815 300.2 56329

Liaoning 95197 33134 87969 2097 853.4 251792Jilin 39666 34740 731 228.9 43222Heilongjiang 38388 32780 1167 496.9 263509Shanghai 47570 14739 46492 2718 619.1 205127Jiangsu 268762 891 261745 5990 1542.5 377977Zhejiang 201211 12683 173220 6821 1129.9 317335Anhui 73556 69711 1687 972.3 118244


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Fujian 136408 63517 134052 4205 936.7 87565

Jiangxi 71410 67044 1682 459.0 55609Shandong 166574 8940 163365 4615 1633.9 384897Henan 134344 13 126324 3393 1084.1 145228Hubei 91001 85215 2102 878.8 94014Hunan 100113 89934 3125 1060.7 89895Guangdong 246331 16180 211959 9314 1236.1 424373Guangxi 183981 1628 170757 2536 1530.5 95426Hainan 5960 3349 5640 259 31.9 25649Chongqing 69003 63533 1482 174.6 45922Sichuan 114687 86 104780 5205 968.3 203079Guizhou 12101 8703 2038 447.9 51028Yunnan 35352 31997 2026 643.6 67483

Tibet 856 250 12 0.8 220Shaanxi 48523 46652 2362 317.2 89632Gansu 15856 3 12838 818 148.8 43637Qinghai 7318 3677 152 74.7 4887Ningxia 21089 14698 304 80.1 18372Xinjiang 20960 13629 691 165.5 120147Source: Ministry of Environmental Protection

By building or reconstructing effective wastewater treatment facilities, we can helpreduce the amount of polluted effluent that is being discharged into near by water ecosystems. Meanwhile, more effective measures should be taken regarding theassociated issues with wastewater treatment including sludge treatment, piping network,

wastewater reclamation. With the decrease in polluted wastewater, the environment canbe preserved and sustained. Also, by treating the wastewater being discharged into thelands used for agriculture, this can help reduce the amount of vital cropland beingdestroyed. With an increase in low polluted cropland, agricultural rates being harvestedcan increase which in turn can increase the productivity of the economy of the society.Since 1998, China has been endeavored to build more wastewater treatment plants.Figure 1 gives the picture how the wastewater treatment plants arise rapidly from 1995to 2005.


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Figure 1 Growth of the Urban Wastewater Treatment Plants 1995-2005

Source: The 11th Five-Year Plan of Construction of Urban WastewaterTreatment Facilities and Recycle Facilities

2. Market Status and Developments

2.1. Market Potential

With the strong government ambition to treat more urban wastewater and industrialwastewater, and with the successful attempt and promotion of BOT and ERP as newcommercial model, the industry of wastewater treatment will remain a fast growth rate of 15%. The market will increase from 44.29 billion RMB of 2005 to 107.38 billion RMB of 2010. The annual average compound growth rate from 2006 to 2010 is 19.5%. The totalinvestment on the wastewater treatment is 332 billion RMB during the 11th five-year plan.The Figure 2 below well illustrates this:


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Figure 2 Market Scale and Growth Rate Forecast of

Water Treatment in China (2006-2010)

Source: http://www.ciw.com.cn/News/topic/2006-05-23/5007.shtml

As of December of 2008, there have been totally 1521 urban wastewater treatmentfacilities put into operation with a total design capacity of 90.92millon tons/day andaverage daily capacity of 66.93million tons.

332 billion RMB is a tempting cake for anyone who is dealing with wastewater treatmentto share a bite. Four Winds announced in 2008 to invest approx. 3 billion Euros in water industry in the developing countries like China. Quite a proportion of the 3 billion will betarget at wastewater treatment. Some of the industrial global giants including Veolia, GE,DOW, Paques and Siemens have already been established in China and are speedingup the market share.

2.2. Players in Chinas Wastewater Treatment Industry

2.2.1. Domestic Companies

Chinese domestic enterprises dealing with water treatment compare weakly with globalgiants in respect of technical level and smaller in size due to a low profit margin.

China started water treatment 25 years ago and came into fast development in 1990s.Early in 1980s, Reverse Osmosis was introduced to China and was widely used byChinese enterprises in the 1990s. As of today, the technology for basic water treatmentproject is mature in China. In respect of technology for hi-tech intensive project, Chinahas done some R&D work and some of them are even leading the world or approachingto the world level. Easy access to basic technology and a huge market potential makes


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the wastewater treatment enterprises set up at a rapid speed. There are more than

10000 enterprises currently dealing with water treatment.Due to the lack of capital and human resource, which is the crucial element for technology research and innovation, most of the Chinese enterprises have the similar technologies, thus low price is the only way to over perform the other competitors.Vicious competition has led to a low profit margin of less than 10%, however it normallyshould be 30% for the industry of wastewater treatment.

The intense competition does not mean that the market is saturated notwithstandingthere are more than 10000 domestic players. In fact, most of the domestic enterprisescan deal with only small projects (less than 2million RMB) without need for hightechnology. The industrial giants like Veolia, GE and DOW overwhelm those large andcomplicated projects asking for high technical support, such as biological agents,separation of pharmaceutical intermediate. The key equipments and core technology areowned by those foreign companies, while the small and medium sized domesticenterprises can only involve themselves in these large projects by doing part of thesystem maintenance.

Supplying equipments for water treatments is another hotspot where the profit margin isbigger than water treatment engineering, which is demonstrated to be the validationpoint for the foreign giants who own sophisticated patented equipments. Take DOW for instance, the profit growth rate for equipments business in 2008 is 120%.

Table 3 2008 Ten Influential Enterprises in Water Industry

Rank Name TotalAssets

NetAssets(Billion)

Number of Wastewater TreatmentProjects

Capacity per Day (10thousandtons)

1 Beijing Capital Co., Ltd. 12.9Billion RMB

4.7 27 1000

2 SHENZHEN WATER(GROUP) CO., LTD

10.7Billion RMB

7.8 15 161

3 Beijing Enterprises Water Group Limited

47.2Billion HKD

24 353.75

4 China Water IndustryInvestment Co, Ltd.

7Billion RMB

5 Sound Group 7Billion RMB

14

6 Veolia Environment7 Tianjin Capital

Environmental Protection149

8 General Water of China 5.2Billion RMB

145.8

9 Golden State EnvironmentGroup Corporation(GSEGC)

10 Sino French Water 33.75


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Source: www.h2o-china.com

2.2.2. Foreign Companies

Most foreign companies operating in China keep very quiet about their actualperformance. For most companies, revenues remain risibly small, and profits non-existent. The only figures which tend to be reported are year-on-year sales growthfigures. These are typically in excess of 40%, and mean little more than the fact that thecompany is expanding from a low base. This makes it very difficult to judge who is in factmaking a success of China. Four companies appear to have strong direction in themarket, and there is something to learn from their example.

Suez Environment, the French group dates its involvement in China back to theearly 1970s, when its contracting division Degrmont won its first contract in thecountry. Since 1985 it has pursued concessions in China through its joint venture,Sino-French Holdings (its partner in this is the New World Group from HongKong). Degrmont has established itself as the technology leader in both water and wastewater treatment plants in China, to the extent that its plants are copiedmore extensively than anyone elses. This means that in order to maintain itsorder-book in China, Degrmont has to stay ahead of the curve technologically. Itis a trade-off which seems to pay dividends for Suez. On the Sino-French side of the business, the strategy has been to focus on quality rather than quantity. Mostof its contracts have been in high-income residential areas (e.g. Sanye in HainanIsland) and industrial markets (e.g. SCIP in Shanghai).

Veolia Water, is the undisputed leader of the Chinese private water market. It hasa highly focussed strategy, which it has executed with the utmost determination.This strategy involves selecting the markets which offer the greatest prospectsfor long-term growth, then bidding what it takes to take the most significantcontract in those markets. The company calculates that the best profits are to bemade from dynamically growing cities where services can be rapidly extendedwithout inflating overheads. Establishing a presence at the epicentre of a growingregion opens the possibility of developing satellite operations at a lower cost ascontracts in neighbouring areas become available.

Energy Recovery Inc., ERI is a small privately owned provider of isobaric energyrecovery devices for desalination. It has established a dominant position in theChinese market, primarily as a result of building a relationship with the leadingdesign institute involved in membrane desalination, the Development Centre of Water Treatment Technology. ERIs systems are now incorporated into theInstitutes model, which municipalities looking to develop desalination areexpected to emulate. This approach has given ERI a remarkable position in themarket, but given the official strategy of import substitution, there is a long-termrisk in working so closely with the design institutes.

Dow Water Solutions, of all the western water technology companies involved inthe Chinese market, Dow has perhaps been the boldest. It has looked to China


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not to expand its existing markets or reduce its existing costs, but as a means of

entering a new global market with a low cost base. Through the acquisition of Omex in 2006, it entered the UF membrane market with a strong local productwhich had potential in the global market. The Dow name will undoubtedlystrengthen Omex in China, while Omexs technology and references broadenDows proposition in international markets, with a cost base other companies willfind difficult to match.

Source: Water Market China, www.globalwaterintel.com

2.2.3. Chinese Research Organization and universities

Most of the Chinese research organizations are operating in the form of company. Theyare doing research and development of technology and products, and sell them as well.

There are Chinese universities owning schools and departments involved in researchand develop of the wastewater technology. Some universities have their own R&Dcenters or key laboratory, some cooperate with other companies and researchorganizations to set up a company to deal with R&D.

Table 4 Chinese Research Organization

Name Location Classification Homepage Brief IntroductionDevelopmentCenter of Water TreatmentTechnology

Hangzhou,Zhejiang

City level http://www.chinawatertech.com/english.shtml

The Development Center of National Liquid Membrane Separation Engineering &Technology Research;China production base of liquid separation membranes and modules.The backing unit of Chinese Seawater Desalination and Water Reuse Societyand Zhejiang Province Membrane Society;State Equipping Center of Purifying Water Technology and Equipment;State base for research & development, fruit transfer and production of separation membrane, and academic exchange center both at home and abroad.

XuZhouResearchInstitute of Water Treatment

Xuzhou,Jiangsu

City level http://www.xzwater.com/en/about.htm

A professional company that specialized in researching and developing variouskinds of water treatment technologies. It was founded at 1984, it had suppliedabout 1000 enterprises nationwide with various kinds of water treatment technicalservices. Product covers Ion Exchange Resin, Water Treatment Equipment,Water Treatment Medicament, Padding and Fittings of Water TreatmentEquipment

China IndustrialWater TreatmentResearchCenter

Tianjin State leve http://www.ciwt.cn (no Englishversion)

Established with the approval of the Ministry of Science and Technology, dealingwith technology research of water tr eatment, chemical agent production with acapacity of 20000tons/year

Water Treatment andWater EnvironmentRestorationResearchCenter of theMinistry of Education

Nanjing,Jiangsu

Provincial level http://hjxy.nju.edu.cn/files/organization/xfzx.htm(No EnglishVersion)

Approved by the Ministry of Education, focuses on the technical innovation of wastewater treatment, water restoration and water efficiency.

Chengdu JiniWater TreatmentEquipmentResearchInstitute

Chengdu,Sichuan

http://www.chinagenii.com (NoEnglish Version)

Belongs to Sichuan Yuyang Environment Engineering Co., Ltd., focuses onresearch and development of wastewater treatment engineering and equipment.Supplying reverse osmosis membrane water treatment equipment, buried sewagetreatment equipment, water reclamation equipment and integrated service

Nanjing Water TreatmentEngineeringTechnologyCenter

Nanjing,Jiangsu

City level http://www.njust.edu.cn/site/huayuan/zhongxing5.htm

Research fields: chlorine dioxide for sanitary water and wastewater treatment;corrosion and scale inhibitors and bactericidal algicide deal for recycle water ;cationic polyquaternium for sanitary water, wastewater and sludge dewatering;dealing with waste water difficult to degrade, slightly polluted water

ResearchCenter of

Hangzhou,Zhejiang

Provincial level Directly under the Ministry of Education, focuses on research and development of membrane, separation, membrane material and new membrane-biological


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Membrane andWater

Treatment

reactor.

GuangdongResearch andDevelopmentCenter of Water EngineeringTechnology

Foshan,Guangdong

Provincial level Under Guangdong Water Group, focuses on research and development andpromotion of the technology of water treatment, piping network and water qualitymonitoring

Table 5 Universities Involved in Wastewater Treatment

2.3. The Challenges

Notwithstanding China has moved fast in wastewater treatment and some of the

strongholds are even leading the world, the challenges are still ahead not only pertainingto the wastewater treatment plant it self, such as low treatment efficiency and dependingon too much the imported equipments, but also extending to the derived sectors likesludge treatment, energy conservation and the use of reclaimed water.

2.3.1 Low Treatment Efficiency

The water treatment efficiency is less than 60% in China, however it is more than 80% inthe developed countries, even 90% in USA and Holland. It is specified in the 11th five-year plan that the treatment efficiency is requested to meet 70% by 2010. In order to

Name Location Homepage Brief IntroductionDepartment of Environmental Scienceand Engineering,Tsinghua University

Beijing http://env.tsinghua.edu.cn/Eng/Research

Wastewater treatment and reclamation High efficient bioreactors and their principles Membrane bioreactor and fouling control Energy-saving N and P removal processes

Novel processes based on molecular biological theory Eco-technologies and enhanced principlesCollege of Environmental Scienceand Engineering, TongjiUniversity

Shanghai http://sese.tongji.edu.cn/College/english

Its Institute of Water Environment Rehabilitation s now focusing onthe following research fields: the mathematical and physicalmodeling of surface water environment and ecological water treatment process; the ecological treatment engineeringtechnologies of agricultural production and rural domestic pollution;regional environment planning, environmental standards andpolicies.

School of theEnvironment, NanjingUniversity

Nanjing,Jiangsu

http://hjxy.nju.edu.cn/en _wbe/eng

High-concentrated and Hard-degraded Toxic and Organic WasteWater Treatment Clean Production Technology Waste Water Treatment Project Stratagem on Water Pollution Control

Nanjing University of Science andTechnology

Nanjing,Jiangsu

www.njust.edu.cn Please refer to Nanjing Water Treatment Engineering TechnologyCenter in Table 4, which is affiliated to NJUST

Wuhan University WuhanHubei

http://sdsy.whu.edu.cn/sdxy

Owns 1 State Key Laboratory of Water Resources and Hydropower Engineering science and 4 provincial key laboratory

College of Environmental andResource Sciences,Zhejiang University

Hangzhou,Zhejiang

http://www.cers.zju.edu.cn/

The school owns the Key Lab of Ministry of Education (Laboratoryof Remediation of Polluted Environment and Ecological Health), andthe Research Center of Environmental Technology.Research Center of Membrane and Water Treatment is affiliated toZhejiang University, please refer to Table 4


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achieve this target, China has to invest huge amount of money in building and improving

more water networking, building more water treatment plants and retrofitting the old ones,and sourcing new equipments.

2.3.2 Out-of-date Piping Network

The construction of piping network lags behind the urbanization, has been the bigchallenge of the infrastructure construction. Out-of-date piping network do not work well,the rainwater goes with the sewage due to lack of separate system, the difficulty of sewage collection, poor system of sewage interception which degrade the water environment. In addition, due to the shortage of hydraulic calculation sort, quite a fewpiping network is designed based on experience, which make it difficult to optimize thesystem function.

2.3.3 Wastewater Reclamation

The earliest wastewater reclamation in China occurred in the 1950s, when wastewater was used for irrigation. Large-scale wastewater reclamation development began 20years ago, mostly in commercial buildings, and spread gradually into the municipal andindustrial sectors. Today, most buildings, residential areas, municipal wastewater treatment plants, and industrial enterprises have installed wastewater reclamationfacilities.

Compared with wastewater reclamation in buildings and residential areas, thewastewater reclamation in municipal wastewater treatment plants has been highlyemphasized because of the large volume of wastewater. Table 6 shows severalwastewater reclamation projects for municipal wastewater treatment plants. Wastewater reclamation is especially important in Northern China, where severe water shortages areemerging. Municipal wastewater reclamation is in its infancy in China: the volume of reused water and the number of end users are still low. The recycle rate (Recycle Rate =Water Recycled/Water Discharged) in developed countries is 70%-80%, and even hasexceeded 95% in some specific industrial fields, while in China it was 2.7% in 2007equal to 1billion cubic meters per year. The target of 2010 is 10% (10%-15% in northernarea and 5%-10% in south area) with new-increased recycled water of 6.8 million cubicmeters per day, and the total recycled water will be accordingly 5 billion cubic meters per year. In 2015 this target is increased to 20% (20%-25% in northern area and 10%-15%in south area), meaning 10 million cubic meters water must be recycled.

According to the experts of south-to-north water diversion project, if the recycle ratecould reach 30%, there shall be 4 billion cubic meters water reclaimed. The annual water shortage in China is 6 billion cubic meters, 4 billion cubic meters reclaimed water is rightequivalent to 67%, which can compensate more than 50% of the shortage and canrelieve the stress of south-to-north water diversion project.


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Table 6 Status of the Use of Reclaimed Water in Several Cities

City Name Water Treatment PlantsWater Amount

ten thousandm 3 /day

Purpose

Chun Liu He Wastewater Treatment Plant 8 Industrial park service

Developing Zone Wastewater Treatment Plant 7

Municipal service andindustrial cooling water Dalian

Ma Lan He Wastewater Treatment Plant 12 Municipal service Bei Jiao Wastewater Treatment Plant

( Grade I ) 40( Grade II ) 10 Municipal serviceChangchun

Xi Jiao Wastewater

Treatment Plant

( Phase I ) 5

( Phase II ) 10 No. 1 Automobile Factory

Handan Handan Wastewater Treatment Plant 10Municipal service

Taiyuan Yang Jia Bao Wastewater Treatment Plant 0.2Municipal service

Tianjin Ji Zhuang Zi Wastewater Treatment Plant 0.2Municipal service

Beijing Gao Bei Dian Wastewater Treatment Plant 30Municipal service andcooling water

Source: www.chinaep.net

2.3.4 Sludge Treatment

China begins to realize the importance of sludge treatment when faced with a sever situation less than wastewater treatment plants are equipped with stable operatingsludge treatment facilities and less than 1/10 have relatively well working facilities. Thecurrent way to deal with sludge is condensing, dewatering and transporting.

With more and more water treatment plants are built, and with the improvement of water treatment efficiency, the annual output of sludge can expect to reach 20 million tons in2010. Such huge amount of sludge, if not properly dealt with, could be a heavy burdenfor the wastewater treatment plants, in addition, it will be a second pollution to theenvironment. Sludge treatment is one of the major challenges with high importancefaced China.

The issue of Technical Policies for Sludge Treatment and Disposal and PollutionPrevention in Town Sludge Treatment Plants (on trial) on 18 February of 2009 showsthe government began to highlight the importance of value sludge as resource. It is thefirst government policy targeting to promote and to give a guideline to sludge treatmentsectors.

2.3.5 Energy Conservation in Water Treatment

The main energy consumed by water treatment plant includes electricity, fuel andmedicament, wherein the consumption of the electricity is 0.15~0.28kWh/m3,


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pump and aeration blowing system, which respectively accounts for 10%-20% and 40%-

50% of the total electricity consumption.

2.3.6 Shortage of Research and Innovation Capacity

Around 100 research institutes and universities in China are involved in research andinnovation of waste water treatment at a professional level, in contrast, only part of thedomestic enterprises have their own research and innovation center, most of the smalland medium sized enterprises even have no R&I departments due to short of moneyand human resource.

3. Investment Demand

The governmental 4 trillion stimulus package has since its issue been a grandinvestment banquet attracting wide attention. The State Development and ReformCommission announced the investment fields and distribution of the 4 trillion from the4th quarter of 2008 to 2010 wherein 210 billion will be invested in energy saving andemission reduction projects, and ecological projects. Stimulated by governmentalinvestment, more social investment will also be focused on environmental protectionfields including water treatment.

3.1. Water Treatment

It is forecasted there will be 3000 wastewater treatment plants by the end of 2010 whenapprox. 30 billion cubic meters waters shall be treated. Direct investment from Chinacentral budget in wastewater treatment industry is 90 billion RMB. According to the 11thfive-year plan, the demand of new-increased investment for new built water treatmentplans is 54 billion RMB from 2006 to 2010.

3.2. Improvement and Retrofit of Wastewater Treatment Plant

On one hand, the improvement and retrofit of the water treatment plant is facing bigchallenge, on the other hand, the demand for investment has never stopped increasing.It is specified by 11th five-year plan the investment demand for improvement and retrofit

of the facilities in wastewater treatment plants is 12 billion RMB, and will be expanded to210 billion RMB for 2010 and 100 billion RMB for 2015.

In large cities such as Beijing, Shanghai, Tianjin, and Chongqing, the infrastructure of wastewater treatment has been developed for many years, but it needs to be expandedto meet growing demand. The best opportunities lie in the reconstruction of agingwastewater treatment facilities, including water network and equipment replacement.

The investment demand for piping systems is much higher than that for buildingwastewater treatment plants. The total investment demand for water network of the


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wastewater treatment plants including the ones existing, under construction or to be built

is over 208.5 billion RMB during the 11th five-year plan.

3.3. Sludge Treatment

The investment demand for sludge treatment is 32.3 billion RMB according to the 11thfive-year plan. In the following 2-3 years the government will allot 50 billion RMB tosupport sludge treatment and to build demonstration projects of sludge treatment in themajor cities. The market scale of sludge treatment is anticipated to be 3-9 trillion RMB.

3.4. Wastewater Reclamation

The 11th Five-Year Plan specified the reclamation in northern cities encountering water shortage will be 5 million cubic meters per day. The reclamation rate is to be 20% by2010. The costal cities are encouraged to build water reclamation facilities in proper sizebased on the local practice and being able to operate stably. For the coastal cities in thesouth of china, it is requested to reach a reclamation capacity of 1.8 million cubic metersper day. The new increased daily capacity during the 11th Five-Year will be 6.8 millioncubic meters. The total investment demand for the wastewater reclamation is 10 200million according to the 11th Five-Year Plan.

Table 8 The 11th Five-yare Plan of Scale and Investment of Urban Wastewater Treatment

Item Description Scale Investment(100 million

RMB)

Remarks

Carry-over projects of 10 th five-year plan

37.03 millionm 3/day

150

Improvement andReconstruction of theold wastewater treatment plants

20 millionm 3/day

120

New projects of 11 th five-year plan

58 millionm 3/day

540 15 millionm 3/day during11 th five-year

1 Construction of Wastewater Treatment Plants

Sub-total 810Retrofit of the existingpiping network

30000 km 400

Increment of pipingnetwork under construction

78874 km 853 31.1 billionRMB wasfinished at theend of 2005

New increased of 11 th five-year plan

53850 km 832

2 Associated PipingNetwork

Sub-total 162724 km 2085


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Digesting andstabilizing

33720tons/day (wetsludge)

132

Landfill andincineration

33720tons/day (wetsludge)

191

3 Sludge Treatment

Sub-total 3234 Water Reclamation New increased 6.8 million

m 3/day102

Total 3320

Source: The 11th Five-Year Plan of Construction of Urban Wastewater Treatment Facilities andRecycle Facilities

Competition for wastewater treatment projects in China is fierce. Chinas domestictechnology, equipment, and serviced sectors do not compare favorably to importedproducts; however, they do complete favorably with low prices, easy access to domesticmarkets, and continuous improvements in quality. Foreign enterprises from France,Germany, and the United Kingdom gained a comparatively strong market share inChinas water market. The long investment history of successful foreign enterprises inChina helped these enterprises build solid relationships with the Chinese governmentand sound reputation for providing technology and services. The foreign enterprises alsogained a good understanding of Chinas market status and its associated business risks.Chinas water sector policy reforms unleashed a wave of optimism in Chinas water market and created significant market opportunities. Investors know certain factors couldinfluence these policy changes and affect the long-term development of the market.Rewards in the Chinese water market will come from long-term strategic investment andbusiness performance, so the risk is clearly manageable. Investors with strongmanagement knowledge and skills will be better able to avoid potential risks and achievesuccess in China. In addition, risk will likely be lower for technology and equipmentimport companies where DK products already enjoy distinct market advantages.

4. Chinas Technical Status

4.1. Wastewater Treatment Technology

Since the 1990s, Chinas wastewater treatment industry developed various technologiesand equipment through its increased investment in water pollution treatment systems.

4.1.1 Municipal Wastewater Treatment Technology

The conventional activated sludge (CAS), anaerobic-aerobic activated sludge process(A/O), and anaerobic-anoxic-aerobic activated sludge process (A/A/O) are widely used inmunicipal wastewater treatment plants. From 1995, the commonly used technologiesincluded the following:


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Oxidation ditch process, including almost all the derivative technologies

developed by other countries. Sequencing batch reactor (SBR) activated sludge process, including almost all

the derivative technologies developed by other countries, such as intermittentcyclic extended aeration system (ICEAS), cyclic activated sludge system (CASS),cyclic activated sludge technology (CAST), and demand aeration tank-intermittent aeration tank (DAT-IAT).

Other processes, such as absorption biodegrading (AB) process, biologicalaeration filter (BAF) process, and biological membrane process. From 1995to2000, 70 percent of more than 100 newly built wastewater treatment plansemployed oxidation ditch, and from 1998 to 2000, at least 20 p lants applied SBRprocess. In addition, the BAF, biological membrane, and hydrolysis-acidificationand aerobic process have also been applied in small municipal wastewater treatment plants.

In the future, various SBR processes are expected to be widely used. Biologicalmembrane, physical-chemical treatment, and biological treatment processes with goodnitrogen and phosphate removal attributed are also expected to develop in China.

4.1.2 Industrial Wastewater Treatment Technology

Physical-chemical and biological processes are widely used to treat industrialwastewater, including coagulation-sedimentation, coagulation-flotation, high-efficiencyfiltration, catalytic oxidation, anaerobic and aerobic activated sludge, and biologicalmembrane contact oxidation process.

High-efficiency anaerobic or aerobic reactors are used throughout different industrialsectors and include the use of aerobic inner circulation fluidized beds, pressurebiological reactors, membrane bioreactors, upflow anaerobic sludge beds, inner circulation anaerobic reactors, and complex anaerobic biological filters.

High-efficiency and low-cost wastewater treatment technologies, automatic controlsystems, and wastewater treatment agents will be extensively developed in China in thenear future.

4.1.3 Other Wastewater Treatment Technology

In water purification treatment, industrial water treatment, and wastewater reclamation,various physical-chemical separation technologies are widely used, including filtration,coagulation sedimentation, adsorption, and membrane separation technology. Oxidizeddisinfection technologies are also developing quickly in China. With the exception of chlorine dioxide (ClO2), disinfection technologies using ozone, ultraviolet, and combinedultraviolet-ozone have also been applied in organic pollutant degradation andsterilization.


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Biological treatment equipment is widely used in municipal and industrial wastewater

treatment. Domestic biological treatment equipment in China includes devices in aerobictreatment, anaerobic treatment, sludge digesting, comprehensive biogas utilization, andanaerobic-aerobic treatment. The basic technical principle of these devices is the sameas it is in developed countries. Low prices offset the low quality of these products.

Aeration devices have developed rapidly in the past five years in China. China nowproduces almost every kind of aeration device available, including microfine bubbles andmiddle porous diffusers; screw, jet, vertical and horizontal surface, submerged, andfloating aerators; and aerators used in oxidation ditches. The quality of these devices isalways problematical. The products produced by joint venture companies are of muchbetter quality but usually cost more. The variety and amount of decanters increasedconsiderably because of SBR technology applications. For sludge digesting processes,the key domestic products include heat exchange and stirring devices. Currently, nodomestic comprehensive biogas device is used in China.

4.2.5 General Wastewater Treatment Device

Domestic wastewater treatment devices include blowers, pumps, valves, and auto-control devices. Some of these products are produced based on imported technology.The centrifugal water pump and submersible sewage pump, which used the importedtechnology from Germany. The clip-on disc valve and flange disc valve importedtechnology from U.S.A and Japan. The roots fan used Japanese technology. Belt typedewatering machine used technology from France and Austria. Microporous aerationused Finnish technology. Some domestic manufacturers can produce valves accordingto international standards, such as the DIN German standard and American Water Works Association (AWWA) standard, and some firms obtain international certificates.Many products achieve and internationally advanced quality level and are exported toother countries with competitive pricing. However, for most domestic manufacturers, it isstill a long way to go before they can handle the mechanical failure, high materialconsumption, unstable performance and fabrication precision issues.

4.3. Wastewater Treatment Reagent and Material

The key wastewater treatment agents made in China are inorganic coagulants,germicides, and algaecides. Wastewater treatment materials include fillings, filtrationmaterials, and resins. Domestic production of wastewater treatment reagents andmaterials meets domestic demand, but there is a crucial gap in product quality,performance, and variety between the domestic and imported products. Chinas ability toproduce high-technology wastewater treatment agents lags behind developed countries.

4.4. Operation Monitoring Device and Apparatus

China produces continuous monitoring, portable monitoring, and large laboratoryfacilities, but monitoring devices and equipment are not well developed in China. China


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imports high-quality analytical devices, special monitoring devices, and auto-monitoring

systems. Although the variety of domestic monitoring devices is quite limited, they stillcommand a very high market share in China because of their low prices.

5. Potential Demand for Technology and Equipment

Notwithstanding China has moved fast in developing the technology and equipments for wastewater treatment, it is encountering the bottleneck to achieve breakthrough,therefore the advanced technology and equipment especially those suits Chinesesituation are most welcome.

5.1. Wastewater Treatment Technology and EquipmentsHigh-efficiency treatment and energy saving technologies are needed in wastewater treatment sectors where the pollution of surface water and groundwater creates demandfor deep treatment technologies. In the municipal wastewater treatment sector, nitrogenand phosphate removal technologies are need. In the industrial wastewater treatmentsector, technologies that can efficiently remove non-biodegradable organics are neededin various sectors, including the pulp and paper, textile, chemical, and petrochemicalindustries. The following specific technologies and equipment represent the best marketpotential in China:

5.1.1 Municipal wastewater treatment

Biological denitrification and phosphorus removal technologies Anaerobic biological technology including equipments such as aeration biological

fluidized tank, upward-flow anaerobic sludge bed reactors, anaerobic filters,anaerobic attached-film expanded beds

ozone advanced oxidation in order to remove COD and other pollutants Immobilized microbe technology Membrane manufacturing technology Low-speed and variable-speed multi-pole centrifugal blower Sludge treatment and disposal equipment Packaged thickening and dewater belt presses Horizontal screw centrifugal dewatering Methane electric generators Automatic control equipment for water treatment

5.1.2 Industry Wastewater Treatment


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High-concentration organic wastewater treatment technology and equipment Membrane separation technologies, such as reverse osmosis, nanofiltration,

ultrafiltration, microfiltration, and ion exchange Wastewater deep treatment and reuse technology and equipment in industry

sectors, such as surface treatment, coal and mining, pulp and paper, metallurgy,petroleum exploitation, electronics, machining, and chemical sectors

High-efficiency ozone generators and chlorine dioxide generators High-efficiency ultraviolet disinfection devices, microwave or electromagnetic

wave

5.1.3 Monitoring Instruments

Pollution source on-line monitoring instrumentation Portable monitoring instruments Intelligent auto-sampling, data collection, treatment, and remote control systems

with high reliability and precision City water monitoring networks

5.1.4 Water treatment agents

Water treatment biological and enzyme agents High-efficiency flocculation and coagulation agent Pollution-free bactericide

5.1.5 Service

Integrated engineering project services, including financing, design, equipmentsupply, construction, installation, and operation

Operation and maintenance of professional water treatment facilities

5.2. Wastewater Piping Network Operation, Maintenance andMonitoring Technology

The technologies helps to improve the operation stability, to reduce the maintenancecost and to deliver the accurate monitoring information are welcome to Chinese market.China has developed some technologies in relation with this regard, however at a lowlevel.


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5.3. Wastewater Reclamation

Wastewater reclamation is in its infancy in China. Wastewater reclamation requiresadvanced treatment technologies and equipment, such as membrane separationdevices. Municipal wastewater reclamation demands large-scale treatment technologies,while buildings and residential areas need small- to medium scale treatmenttechnologies and equipment. In general, technology and equipment with high efficiency,low cost, and convenient operation and maintenance have the greatest sales potential inChina.

6. Government Priorities

Chinas 11th Five-Year Plan prioritized the sectors in developing wastewater treatmentindustry, wherein constructing piping network is given the most priority.

6.1. Constructing Associated Piping Network

During the 11 th Five-Year Plan, more efforts should be put in constructions of pipingnetwork which lags behind. It is specified to give priority to piping network inconstructions of sewage treatment facilities; to define the urban sewage system andtreatment capacity reasonably, and pay more attention to planning and construction of piping network; to promote reconstructions of separate rain water system and sewagesystem integrating with reconstructions of urban roads and old city town, constructions of residential communities; to accelerate the construction speed.

The primary goal of pipe network construction is to build 162724 km of sewage linesduring the 11 th Five-Year Plan. 30000 km of them are supporting pipe network for existing sewage treatment plants, 78874 km of them are for plants that under constructions, and 53850 km of them are for newly building plants. There will be 247734km of sewage lines totally by the end of 2010. The collection rate of sewage will beimproved and the load rate of urban sewage plants will reach 70%.

6.2. Accelerating Constructions of Wastewater TreatmentFacilities

Reconstruct existing wastewater treatment facilities with capacities of 20 millioncubic meters per day

Finish all projects started in the tenth Five-Year. Reach the capacity of 37 millioncubic meters per day.

New constructions of wastewater treatment facilities with capacities of 58 millioncubic meters per day.


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6.3. Attaching Importance to the Safe Treatment of Sludge

At present, wastewater treatment plants in China output totally 7778 tons of dewateredsludge everyday, equal to 38990 tons of wet sludge with 80% of water. But only somebig treatment plants in some big cities stabilize sludge by anaerobic digestion. Most of sludge is just dewatered and put into landfill. It is estimated that output of dewateredsludge will become 20083 tons/day by 2010.

The prime goal of sludge treatment is decontamination. The method is to stabilize sludgebefore putting it into landfill. According to the pollution discharge standard for urbansewage treatment plants, all sludge should be stabilized. By the end of the 11th Five-Year Plan, the dewatered sludge treatment capacity should reach 20083 tons/day.Pollution transportation must be avoided.

6.4. Promoting Actively the Wastewater Reclamation

In water-shortage cities in north or coastal area such as Beijing, Tianjin, Hebei,Shaanxi ,Shanxi, Shandong, Liaoning, Jilin, Heilongjiang, Inner Mongolia, Ningxia,Gansu, Qinghai, recycle of wastewater should be developed. It is asked to establish andimprove the policy of wastewater reclamation. Research on technology should beinitiated. Promote the development of the end users. Develop recycle solution to meetneeds of different users for water quality. Enhance the development of new technologyand raise the rate of reclamation according to local water consumption status.Wastewater recycle facilities with capacities of 5 million cubic meters per day will be

constructed in water-shortage cities in north area during the 11th

Five-Year Plan. By2010, recycle rate will reach more than 20% of the treatment capacity. South coastalprovinces and cities will have a wastewater recycle capacity of 1.8 million cubic metersper day. In 5 years, wastewater recycle capacity will increase 6.8 million cubic metersper day.

7. Business Practices and Options to Access ChineseMarket

Following Chinas WTO accession and some government policy changes, there isnotable change in the environmental investment and financial market in the country.Foreign participation in the investment, construction and operation of the wastewater treatment market is every active. Danish companies can choose to enter Chinaswastewater treatment market in several ways.

7.1. Wastewater Treatment Market

7.1.1 Build-operate-transfer


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Representative Offices , which is the easiest way for foreign firms to set up its

office in China; however, they can perform only limited tasks, such as liaisonactivities, according to Chinese law.

Trading Companies and Local Agents , which is the link between the DKcompanies and the Chinese market, handling import and export. Most of theagents have no authorization for import and export and have to buy importedproduces from those who are authorized.

Chinese Subsidiaries , this could be in the form of joint venture or WFOE (whollyforeign owned enterprise). Bu cooperating with local investors and localizing thetechnology especially the equipment manufacturing, the DK companies canobtain preferential policy support, such as subsidy, tax reduction from the localauthority.

Technology License , Danish companies can transfer by granting the Chineselicensee the right to use their patent, to produce and sell their products given it isdifficult for Danish companies to promote their technologies in the Chinesemarket due to lack of good clients relationship and distribution channel. Themodel of license could be exclusive or non-exclusive depends on the market andterritory issue. The normal way of license fee is lump sum (initial cost) plusroyalty with a rate of 3%-5% of the contract price or sales price, which is subjectto the negotiation and practice. Danish companies have to highlight the necessityand importance of protection of Intellectual Property Right when sign the licensecontract.

Source

1. China Statistical Yearbook, 2007, China National Bureau of Statistics,www.stats.gov.cn

2. China Data Bulletin of Environment, 2007, www.stats.gov.cn

3. Water Supply and Wastewater Treatment Market in China , U.S. Departmentof Commerce, International Trade Administration, Washington D.C.

4. Data of Ministry of Environmental Protection5. The 11th Five-Year Plan of Construction of Urban Wastewater Treatment

Facilities and Recycle Facilities

6. 2008 Research Report of China Water Industry Market

7. Research data of Shanghai Municipal Engineering Design General Institute

8. www.chinaep.net, China Environmental Protection


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9. www.h2o-china.com, China Water

10. http://www.cnmembrane.cn , China Membrane

11. www.ccw.com.cn , Computer World

12. http://www.mwr.gov.cn/, The Ministry of Water Resource of the P.R.C

13. Water Market China 2009, www.globalwaterintel.com

industry analysis report 11082009

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