China’s Water Crisis and the Privatization of Urban Water in Kunming

This reportis a follow-up of the pilot research published in April, 2010 “The Reform ofthe Urban Water Supply in Southern China”. In the previous report, the social, economicand political impacts of water privatization in six cities among the southernregion were studied, by conducting surveys and in-depth interviews. The resultsfrom the pilot study provided an overview of the historical development, aswell as some useful empirical data to unveil the problems faced by the Chinesepeople due to the privatization.

In order tofurther investigate the issues of urban water supply brought about by theprivatization of urban water services, this report includes the results of theadditional surveys and in-depth interviews that were conducted in Kunming ofthe Yunnan Province in 2010 and the most recent developments in the six studiedcities in terms of urban water supply. This new report also identifies therecent trends and characteristics of the urban water reform, and investigatesthe degree of privatization of China’s urban water by mapping the models of theprovision of water supply in different cities throughout the country.

Key Findings:

• In terms of the water companies’ financing, the overall degree of privatization among the cities in concern was very high. Only 24% of first-tier cities were state-owned.
• In Kunming: Even though the majority of people (72%) felt comfortable with the quality of tap water, 66% of them said that they often bought bottled water for daily consumption. 64% of the people said that they did not know the ownership of the city’s water supply system, and 50% said that they never received any information from the water supply company. Over half of the people we interviewed said that they did not see any improvement in terms of the service quality of water supply after the marketization reform.
• The Rise of Local Water Giants: the financial capability in many cities has been improved gradually over the past ten years and the need to attract foreign investment is slowly declining in many second-tier cities. On the other hand, by making use of their governmental back­ground, some big domestic water companies are expanding. It is reflected by the fact that more domestic water firms have moved up in ranking among their foreign-owned competitors in China’s water industry, most of them are state-owned shareholding companies or former state-owned enterprises. Their special status is beneficial for their expansion.