JEAN-FRANÇOIS TREMBLAY, C&EN HONG KONG

When considering whether to enter a business in China, one can take it as a good sign when Hong Kong entrepreneurs find the sector attractive. As the leading investors in China, these entrepreneurs constantly monitor the pulse of the country.

After running his family's trading company for nearly 40 years, globe-trotting entrepreneur Dominic Yin passed the reins to his son two years ago. The elder Yin now nurtures the start-up water treatment company Trigo Enterprises. Environmental protection, he believes, is one of the five most promising business sectors in China, along with information technology, biochemistry, new materials, and education.

	STILL DIRTY A waste treatment plant became operational recently in Hong Kong, but it doesn't treat all the sewage that is pumped into the harbor every day. PHOTO BY JEAN-FRANÇOIS TREMBLAY

Until recently, China ignored the environmental impact of industrialization. "But everything pollutes," the gruff and plainspoken Yin says. He adds that most rivers in China are "black and brown."

But the country has become wealthier. At the end of 1999, Beijing ordered all cities of more than half a million people--699 of them--to treat at least 60% of their wastewater by 2005. And all towns with a population exceeding 200,000 must treat at least 40% of their water by 2005. "Now you tell me how many projects that is!" Yin exclaims.

Trigo's main business activity is to build wastewater treatment plants on a build-operate-transfer basis. The Hong Kong-based company looks for promising projects, contacts local governments, designs the plants, and secures financing. It then builds wastewater facilities that it operates, for a fee, for up to 30 years. The facilities are eventually handed over to local customers, usually government entities.

YIN HAS one project running so far in Jinan, Shandong province. The facility uses the German Cleartec process. But Yin is structuring two more projects. Trigo also completed seven smaller deals in which it acted as an agent for U.S. technology that treats leachates from landfills.

In the course of its 2001–06 five-year plan, China will spend almost $9 billion on sewage treatment plants, or 1.75 times the annual sales of Ciba Specialty Chemicals, according to Joe Chan, head of water and paper treatment at Ciba in China. Hong Kong-born Chan is a 20-year veteran of Ciba and has been living in Shanghai for six years.

Over these five years, China plans to build 375 sewage treatment plants capable of treating nearly 22 million metric tons of water per day. About half of these will be in Shanghai, Jiangsu, and Zhejiang, near three lakes and three rivers featuring a high level of industry. Another concentration is at the Three Gorges Dam project on the Yangzi River, where 88 sewage treatment plants will be built.

Ciba participates in the water business as a supplier of organic flocculants, materials that attach themselves to solid particles in water to facilitate their removal. Ciba's Chinese customers are usually government entities running wastewater treatment plants. The company also sells to industrial enterprises such as paper mills that are mandated to treat their water before releasing it.

Chan adds that in the future, global water treatment companies like Vivendi, which owns USFilter, and Suez Lyonnaise, which owns Ondeo Nalco, will be major customers for Ciba in China. But they are just entering the market.

Gerard Mouchiroud, general manager of SNF China Flocculants, the Chinese subsidiary of French flocculant producer SNF Floerger, says there is fierce competition in China. He competes not only against Ciba, but also against Chinese producers. "People think that it's possible to make a lot of money quickly in flocculants," he says. "But that is not true."

Mouchiroud adds that there are perhaps 100 Chinese producers of flocculants, ranging from minor producers with only 10 metric tons of capacity to major suppliers operating plants producing up to 60,000 metric tons per year. "There are about 30 Chinese competitors that we need to pay attention to," he says, adding that in the past three or four years, many of these companies have noticeably improved their production processes and the quality of their products.

	Chan	Yin
	PHOTOS BY JEAN-FRANÇOIS TREMBLAY

ALTHOUGH PROMISING, China's market is not quite mature enough for Dow Chemical's water purification business, says Karen Dobson, commercial director of Dow's water separation business in Asia-Pacific. She explains that Dow's products--ion-exchange resins and reverse-osmosis membranes--are expensive compared with other water treatment technologies and are used mostly to obtain extremely pure, demineralized water.

High-purity water is mostly required in power generation, process industries such as chemicals and petrochemicals, and the production of pharmaceuticals and semiconductors. In China, Dobson says, one of the drivers of growth for Dow is increasing demand for bottled water in urban centers. In the future--and she cannot tell when that will happen--Chinese cities may opt to spend the money that is required to build potable-water-processing plants making use of the reverse-osmosis process. But these plants are expensive to build, she says, partly because water must pass through them at high pressure. Optimistically, she notes that the growth rate of the Chinese market is the highest in the Asia-Pacific region.

Like many things in China, the rush to build wastewater treatment plants is a haphazard affair. Ciba's Chan says such plants are sometimes built only to satisfy Beijing's demands. Local authorities may decide not to spend on the expensive and unglamourous construction of wastewater pipes leading to the plants, meaning that the facilities are effectively useless.

It can be difficult to collect payment in China. SNF now demands that its customers settle half of their invoices on delivery, and the other half within one month. In the past, the company delivered to dishonest customers who, in some cases, "disappeared" before settling their bills, Mouchiroud says. For this reason, he now insists that his salespeople pay attention to whom they sell. "It's nice to build up sales, but it is not really useful if we're not paid in the end," he notes.

Moreover, some wastewater treatment plants in China may not have an operational budget, which means that they are either completely idle or unable to purchase consumables like flocculants. Fortunately, Chan says, only a minority of treatment plants in China are the victims of such absurd management practices.

Chan is an optimist. He says Ciba can not only help to fix China's wastewater problem, but it can also support its efforts to alleviate water shortages. The north of the country is plagued with increasingly severe water shortages and soil erosion.

These are serious problems, but they are not without solutions. China is diverting rivers--and building water treatment stations along the diversions--from areas of the country that are too wet to parts that are too dry. Another opportunity for Ciba is the company's range of soil additives to improve water retention. China is not yet a major buyer, but the outlook is good.

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