Thirst quencher

Water transfer project back in the headlines


Northward bound: Yangtze water

When Mao Zedong first mooted the idea of the South-North Water Diversion Project in 1952 ‘corporatisation’ was not one of the terms in his government’s lexicon.

Today that is how China likes to frame most of its megaprojects – under the leadership of a series of high-powered and mostly state-owned corporate entities.

The Three Gorges Dam was built this way, as was part of China’s high-speed rail network.

So it was perhaps an outlier that the South-North Water Diversion Project – the world’s biggest water transfer scheme – was made the direct responsibility of the Ministry of Water Resources.

That state of affairs changed on October 23 when Premier Li Keqiang announced the creation of the China South-to-North Water Diversion Group Corporation – a move designed to improve management of two existing waterways and speed up construction of a third ‘western route’.

The idea of the water diversion programme was said to have originated with Mao’s rather mundane observation that the “the south has plenty of water, but the north much less. If possible, the north should borrow a little”.

Years of research followed and construction finally began on the eastern route of the transfer scheme – which runs from the lower reaches of the Yangtze River in Jiangsu province to the city of Tianjin and Shandong province – back in 2002.

By 2013 the route – which in part tracks the path of the ancient Grand Canal – was finally completed.

A year later the central route – which stretches north from the Han River in Hubei province – started to deliver water to its main destination, Beijing.

Today more than 70% of the capital’s water is supplied by this lifeline – without it, Beijing would be dependent on depleted groundwater resources and erratic rains.

The two water diversification channels, while functional now, require major upgrades. For instance, the central waterway supplying Beijing needs more reservoirs to store water in case of interruption at source. And because water demand in the capital is growing, there are plans to divert more of the flow from the Yangtze River into the Han River, so that it can then be moved through the transfer scheme to the capital.

Similarly the eastern route – which supplies water to major farming provinces like Shandong – is slated for an increase of capacity to meet growing demand.

A new option for a western route, which will run through the Tibetan plateau, is also being researched. Construction will be challenging because the area is prone to earthquakes and landslides. But if it gets built, the project will transfer 45 billion cubic metres of water a year. Completion of the waterway is estimated to take at least 20 years because of the difficulties in constructing it, however.

Speaking to Beijing Business Daily, Zhang Wenkui, a director at the Development Research Centre of the State Council, said the South-North Water Diversion Group had been set up to bring in more funds and wider expertise. The new unit was tasked with “organically combining the role of the government with the market mechanism,” he explained. “It is the right time to set up a company,” he added.

The group has ‘temporary’ registered capital of Rmb150 billion ($22.6 billion) and is registered under the name of Jiang Xuguang, deputy minister for water resources in China.

As yet it is not clear which other entities might be asked to join the enterprise. The group underpinning the Three Gorges Dam draws on support from about 10 corporate partners, for example. However, the State Council will not be giving up direct control of the new company.

Unlike most state-led projects of substantial size, leadership of the South-North Water Division Group will not be handed over to Sasac, the agency that serves as the holding company for China’s largest state-owned enterprises.

Instead it will remain as one of only four corporatised state units reporting directly to the State Council. The others are China State Railway Group, Citic Group and the China Investment Corporation.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.