BEIJING--(BUSINESS WIRE)--After the Copenhagen Conference, "low carbon" becomes a hot topic in economy and social life, and environmental protection industry is increasingly becoming an issue that the industry and the entire society pay close attention to. As environmental protection industry is considered as the strategic emerging industries highlighted by China, local governments also include environmental protection industry into industrial planning, gradually expand the scale of environmental protection industry, and result in the shaping of its regional layout and spatial pattern. Meanwhile, the environmental protection industry enters a golden period of external development environment, while its segments highlight many investment opportunities.
The General Layout of "One Belt and One Axis" Has Taken Initial Shape
The development of environmental protection industry in China is uneven. The eastern region, based on its economic strength, investment capacity, and advantages in foreign trade, seizes the opportunities to take the lead in high-end domains such as R&D of environmental protection technology, design and consultation of environmental protection project, and investment and financing services for environmental protection enterprises. On contrary, the western region basically stays in the equipment manufacturing industry due to its weak economic foundation and limitation from resources and other factors, which result in the relatively backward and slower development of environmental protection industry. As data shows, the production value of eastern region's environmental protection industry, which is concentrated in Jiangsu, Zhejiang, Shandong, Guangdong, Shanghai, Beijing, and Tianjin, takes up over 60% of national production value. Contrarily, the production value of western region, which includes Guangxi, Sichuan, Guizhou, Yunnan, Gansu, Qinghai, Xinjiang, and Ningxia, is less than half of that of Jiangsu.
In terms of national spatial pattern, the general layout of "One Belt and One Axis" has taken initial shape. i.e., the "coastal development belt" mainly concentrated in Bohai Rim, Yangtze River Delta, and Pearl River Delta, as well as the "development axis along Yangtze River" starting from Shanghai in the east to central provinces such as Sichuan.
Figure: http://data.ccidconsulting.com/portal/rootimages/2011/09/30/1317345210405859-1317345210416011.jpg
The Environmental Protection Industry Clusters Gather in Eastern Coastal Area, and Development Patterns for Central Region and Western Region are Differentiated
In terms of environmental protection industry distribution of all regions, the Yangtze River Delta, with a solid foundation, is the region with highly-concentrated environmental protection industry. Currently, an environmental protection industry cluster centered on Yixing, Changzhou, Suzhou, Nanjing, and Shanghai has taken initial shape.
The Bohai Rim boasts obvious advantages in human resources and technology development & transformation. Beijing and Tianjin are respectively the Environmental Protection Technology Development & Transformation Center and Environmental Protection Industry Base in Northern China. Shandong and Liaoning, with solid foundation in environmental protection industry, gradually unveil their advantages in integrated use of resources and environmental protection equipment & technology.
Moreover, Foshan in Pearl River Delta, Wuhan, Xi'an and Chongqing in central and western regions, and Harbin in northeast region, based on local development advantages, have established their environmental protection industrial parks in succession, contributing to the differentiated development patterns of their environmental protection industries.
Figure: http://data.ccidconsulting.com/portal/rootimages/2011/09/30/1317345210405859-1317345210419845.jpg
The Spatial Evolution of China's Environmental Protection Industry Presents Three Tendencies
Unbalanced Regional Economy Leads to Differentiated Development
There is a consensus that the environmental protection industry, to which great attention has been attached by governments at all levels, is China's emerging strategic industry. Currently, many provinces and municipalities are formulating development plans for environmental protection industry, establishing environmental protection industrial parks, as well as developing policies and measures promoting the development of environmental protection industry, thereby streamlining the management mechanism of the industry.
However, the development of environmental protection industry also varies with regions' different industrial layouts, economic development and the types of pollution. The energy structure and industrial structure and layout are the important factors causing environmental pollution. The differences in development level and focus, especially the industrial layout involving local interests, lead to differences in the development of environmental protection. In future, China will, from the perspective of the entire region, carry out planning according to local conditions, establish rational layout, and impose the plans for the purpose of obtaining better effects.
The Environmental Protection Industry Cluster Will Gradually Expand to the Western regions from the East
It is an inevitable result that, in future, the environmental protection industry will be transferred to central and western regions due to their advantages in land resource and labor cost. On the one hand, the public environmental protection undertaking in western region, such as sewage treatment, air pollution control and solid waste treatment will be gradually developed with the supports from national environmental protection policies and eastern region's related environmental protection technologies; on the other hand, Wuhan, Chongqing and Xi'an in central and western regions, with good economic development and industrial base, will undertake the environmental protection industry, especially the manufacturing industry for environmental protection transferred from the eastern regions. They are expected to be the first batch of demonstration cities succeeding in taking over the transfer.
Hotspot Regions for Environmental Protection Will Cooperate with Each Other More Closely
The environmental protection industry comes into being spontaneously or is caused by production change due to the continuous development of environmental movement. Although it grows in an open environment and has strong adaptability to the market, it suffers from the small-scale, scattered and low-grade pattern, which is not helpful to the research of advanced technology and the economy of scale. The further development of environmental protection industry requires all regions to cooperate with each other in solving the problem of insufficient industrialized operation space, thereby meeting the requirements of socialized production.
In terms of industrial technology and industrial development mode, in future, Beijing, Tianjin, Shanghai, and Suzhou will leverage fully on their advantages in intensive knowledge, maintain the technology, talent and market sources for environmental protection industry, encourage enterprises to increase inputs in R&D, and enhance their indigenous innovation capability and marketability. Meanwhile, they will encourage key environmental protection enterprises to strengthen industrial integration through the technology radiation, production cooperation and asset restructuring, realizing the specialized collaboration between key technologies and products, integrated production, socialization of production process, and diversity of production mode. They will ultimately form the rationally-structured and profitable environmental protection industry with Chinese characteristics that can meet domestic environment and protect market demand.
China's Environmental Protection Industry Enters the Golden Period of Development, and Various Segments Have Unveiled Investment Opportunities
Since the reform and opening up of the economy more than three decades ago, China has been increasingly paying attention to and has continuously increased inputs in environmental protection, with the proportion of environmental protection inputs in GDP increased year by year. China's environmental protection industry started in the 7th Five-Year Plan period. Since then, the scale of environmental protection investment has expanded gradually. Since the 10th Five-Year Plan period, the annual growth rate of inputs in environmental protection industry has been over 15%. During the 11th Five-Year Plan period, the total investment in environmental protection industry was planned to reach RMB 1.375 trillion. During the 12th Five-Year Plan period, the investment in environmental protection industry, which will continue increase, takes up 1.5% of GDP according to the investment proportion. The total investment will reach RMB 3.1 trillion, more than double of that in the 11th Five-Year Plan period.
The environmental protection industry is in the golden period of external development environment and in the growth period on the whole. The development speeds and mature periods of all segments are different: The solid waste treatment industry is in the growth period in general; the development of sewage treatment industry lags behind that of the urban water supply system; the growth potential of de-nitration sub-industry in air pollution control industry is greater; the de-sulfurization industry in power plant is mature; the de-sulfurization market (such as steel industry) beyond power plant is yet to be initiated.
The Solid Waste Treatment Industry Enters the Peak Growth Period of Investment on the Whole
The solid waste treatment industry, which is in the peak growth period of investment, is the major growth point for China's environmental protection industry in future. From the industrial chain for solid waste treatment industry, where the upstream enterprises include equipment manufacturers, midstream enterprises are those responsible for solid waste treatment engineering and operation, and downstream enterprises include solid waste treatment plants and those responsible for waste recycling, we can conclude that the returns on investments in the construction of solid waste treatment engineering and equipment integration are greater. In terms of the three different ways for waste treatment including landfill, compost and incineration, waste incineration for power generation will become the hotspot for urban waste treatment in China.
The Sewage Treatment Industry Highlights Four Investment Opportunities
Currently, the sewage treatment industry enters a relatively stable growth period after the previous round of peak growth. With China’s policy supports to sewage treatment in cities and towns, the future investment opportunities lie in: (1) A new round of investment for sewage treatment facilities in cities and towns, especially in counties and medium- and small-sized township. (2) The sludge treatment and harmlessly-integrated land use are the key point of sewage treatment plants in lower reach of the industrial chain. (3) The escalation of standards for industrial enterprises' sewage treatment brings new investment opportunities. (4) The industrial sewage treatment and regenerated water technology (such as MBR) may become the popular investment spot.
The De-nitration Sub-industry in Air Pollution Control Industry Is Initiated
The air pollution control industry is stable and will be consolidated, while the status of its various sub-industries is slightly different. De-sulfurization industry: The peak period for investment into de-sulfurization industry in power plant is over, while the sintering gas de-sulfurization technique in steel industry is taking shape. De-nitration industry: The moving-up of the industrial standards drives de-nitration industry to a peak period of investment. Dust removal industry: The investment opportunities lie in the regular replacement of dust removal equipment's core components as well as the improvement of industry concentration.