At present, appropriately 54 billion tons water in urban area has been supplied to a population of 400 million. Last decade, industrial water was accounted for 65%, the major consumer of water, but differently, currently household water application has witnessed a remarkable increase and even surpass the industrial use.
The total investment in water supply infrastructures has increasingly rise, mainly concentrated on new pipeline construction with a rate of more than 50% due to pipeline is the foundation for safe water distribution. On the other hand, old pipeline should be replaced due to leakage and water quality deteriorated.
Virtually, reform on Water supply is proceeded with the development of water market. MOHURD has promulgated Guidance on Gradual Marketization of Urban Utilities in 2002 and followed by Administration on Concessionary Operation of Public Utilities, to define the standard to constrain the behaviors on utilities concessionary, driving a substantial progress for water supply reform. Because: First, concession has changed the government as the only responsibility taker. Water supply, for a long time, has been taken as a kind of public product that invested, constructed and operated all by government, in doing so, water supply has suffered from lower efficiency, bad services and inadequate investment.
After the public water need and urban infrastructure construction primarily guaranteed, the market mechanism should be introduced into investment and service operation sectors, and various market players could be involved into water supply, including foreign companies, private companies and state-owned companies. At present, social investment has accounted for 20% in water supply market, where 70-80% left to local water companies which have been organized as state-controlled company.
The introduction of concession could diversify the investment and change government as the only investors by involving foreign capital and social investment; commercialize the operations, introducing incentive and competition mechanism to select eligible operators; diversify the operation models, various operation models could be tailored by local actual situations under concession, including joint venture, water supply and wastewater treatment comprehensive operation, BOT project and so on.
Second, asset value and investment return has been translated into water price. As the progress of industrial reform, the major form for water supply is the diversified property rights following the principle of property rights packaged with duties and responsibilities. But taking an international eye, the market mechanism applied to municipal utilities, considering the security of utilities assets, always keeps the property assets in public hand. As reform of water supply sector has translated as a reform on property rights, which increases the weight of property rights, and then the property rights capitalized into water price.
