April 25, 2010, 11:33 PM HKT
The Water (Profit) Margin
In a new report, consultancy McKinsey & Co. says fixing China’s looming water crisis can be profitable. But the government’s focus on increasing water supply with megaprojects like the multibillion-dollar network of canals being built to divert water to the north offers a poor return on investment.
“A number of recent policy measures have focused on increasing China’s water supply. Managing demand, however, will be far more critical in China’s efforts to address its water gap,” says the report.
Instead of spending as much as an estimated 500 billion yuan, about $73 billion, on the <span style='color:red'>South-to-North Water Transfer Project</span>, which will divert water from the Yangtze, Yellow, Huaihe and Haihe Rivers along a series of canals to the parched north, <span style='color:red'>McKinsey says China should invest in things like patching up leaky municipal water pipes, managing irrigation better and recycling more industrial-use water.</span>
Right now, water pollution and scarcity is costing China 2.3% of its gross domestic product, the report says. Traditional thinking holds that it will cost even more to provide enough water for future growth.
McKinsey argues against that. In another of its famous cost-curve analyses similar to an earlier model on reducing greenhouse gases (see it <a href='http://www.mckinseyquarterly.com/A_cost ... ction_1911' target='_blank'>here</a>) it figures water conservation and recycling projects could actually bring in 131 billion yuan, or $19 billion, in annual profits.
China needs all the good news it can get. <span style='color:red'>Its population of 1.3 billion and growing is one-fifth of the world’s poulation</span>. But China has very poor water resources – only 7% of the world’s freshwater. Urbanization and industrialization are only increasing China’s demand for more water, straining already depleted sources. <span style='color:red'>The ongoing drought in southern China, which has been called the worst in a century</span>, has underscored the urgency of the problem.
But the rates of return on some of the solutions “represent attractive investment opportunities for the private sector,” said Martin Joerss, a partner at the company who led the study.
– Shai Oster
source: <a href='http://blogs.wsj.com/chinarealtime/2010 ... it-margin/' target='_blank'>http://blogs.wsj.com/chinarealtime/2010 ... margin/</a>
South-to-North Water Transfer Project
南水北调工程
McKinsey says China should invest in things like patching up leaky municipal water pipes, managing irrigation better and recycling more industrial-use water.
麦肯锡提出三大建议：修缮城市供水系统、加强灌溉建设、循环工业用水
Its population of 1.3 billion and growing is one-fifth of the world’s poulation
中国……养活了占地球五分之一量的13亿人口
The ongoing drought in southern China, which has been called the worst in a century.
中国西南区域正遭受着百年不遇的旱灾