Water Utilities Market "Scarce Resources, Many Competitors" E20 Xue Tao: The era of water utilities development dominated by "fighting for territory" has ended

Economic Daily Beijing, March 26 (Economic Daily reporter Li Biao) On March 26, at the “2026 (24th) Water Industry Strategy Forum” hosted by the E20 Environmental Platform, discussions within the industry about the evolution of the water services sector and future growth paths were underway, and the “scale expansion” development model appears to be collectively being abandoned by water utilities.

Zhang Lizhen, Deputy Director of the National Center for Environmental Protection Technology Management and Assessment Engineering Technology Center, said that 2026 is a year with special significance. We are at the historical intersection of the closing of the “14th Five-Year Plan” and the opening of the “15th Five-Year Plan,” and we are also in a critical period when China’s water services industry is being profoundly reshaped. The complex and ever-changing external environment, and the in-depth structural adjustments within the industry, are driving the sector to shift from the past model of scale expansion to value-focused development centered on “intelligent-empowered productivity.” Low-carbon transition, improving quality and efficiency, systematic governance, and digital-intelligent integration are redefining the underlying logic and development path of the water services industry.

In response, Ma Yuntong, Senior Vice President of Beikong Water Group Co., Ltd., said that the whole industry has already entered the deep-water area of existing scale. A specific manifestation is that the speed of releasing incremental scale has fallen off sharply. Compared with the “13th Five-Year Plan” period, during the “14th Five-Year Plan” period, whether it is pipeline networks and wastewater or sludge, the downward percentage in the incremental release speed of each business segment may exceed 50%. Therefore, the traditional model of heavy-asset scale expansion, one could say, can no longer be sustained.

Meanwhile, at the forum, Xue Tao, Executive Partner and Executive Dean of the Research Institute of the E20 Environmental Platform, pointed out that an era of water services development led by large-scale construction or “picking up land while riding horses” has ended. In recent years, the overall municipal wastewater marketization rate has remained stable, but different regions may perceive it differently.

Xue Tao further said that local governments in first- and second-tier cities are gradually reclaiming franchise rights, while in third- and fourth-tier cities, due to fiscal pressure, franchise rights are still being released; some cities are in the middle ground. Although their fiscal conditions are still acceptable, they choose to extend franchise rights for debt-consolidation considerations. Therefore, the current municipal wastewater marketization rate is in fact the result of the balancing of multiple forces above, and the municipal wastewater marketization rate basically maintains itself within a stable range of normalcy.

“Over the past few years, the number of franchise projects newly released in the water services market has indeed decreased, and the companies competing for projects in the market have correspondingly decreased as well. Overall, the water services market still shows a situation of ‘too little porridge and too many monks’—this is what our data reflects. What is even more worrying is that in recent years, most local governments willing to release water services franchise projects have relatively poor location conditions. Even if they are put on the market, it is not certain that anyone will take them over,” Xue Tao said.

So where is the way out for the industry? In response, Xue Tao told reporters from the Economic Daily: for scale expansion, most water utilities are showing relatively cautious behavior. Now, enterprises in the water services industry are exploring certain development paths and there are some examples of transformation and development, but it is still hard to compare them with the prior conventional models.

2026 (24th) Water Industry Strategy Forum现场 Economic Daily reporter Li Biao photo