At first glance, Daliuta in northern China appears to have a river running through it. A closer look reveals the stretch of water in the center is a pond, dammed at both ends. Beyond the barriers, the Wulanmulun’s bed is dry.
Daliuta in Shaanxi province sits on top of the world’s biggest underground coal mine, which requires millions of liters of water a day for extracting, washing and processing the fuel. The town is the epicenter of a looming collision between China’s increasingly scarce supplies of water and its plan to power economic growth with coal.
“Water shortages will severely limit thermal power capacity additions,” said Charles Yonts, head of sustainable research at brokerage CLSA Asia-Pacific Markets in Hong Kong. “You can’t reconcile targets for coal production in, say, Shanxi province and Inner Mongolia with their water targets.”
Coal industries and power stations use as much as 17 percent of China’s water, and almost all of the collieries are in the vast energy basin in the north that is also one of the country’s driest regions. By 2020 the government plans to boost coal-fired power by twice the total generating capacity of India.
About half of China’s rivers have dried up since 1990 and those that remain are mostly contaminated. Without enough water, coal can’t be mined, new power stations can’t run and the economy can’t grow. At least 80 percent of the nation’s coal comes from regions where the United Nations says water supplies are either “stressed” or in “absolute scarcity.”
Desert State
China has about 1,730 cubic meters of fresh water per person, close to the 1,700 cubic meter-level the UN deems “stressed.” The situation is worse in the north, where half China’s people, most of its coal and only 20 percent of its water are located.
Shanxi -- the nation’s biggest coal base, with about 28 percent of production -- has per capita water resources of 347 cubic meters, less than the Middle Eastern nation of Oman. Inner Mongolia and Shaanxi, which together contribute 40 percent of coal output, have less than 1,700 cubic meters per person.
A government plan to boost the coal industry and build more power plants near mines will lift industrial demand for water in Inner Mongolia 141 percent by 2015 from 2010, causing aquifers to dry up and deserts to expand, according to Greenpeace and the Chinese Academy of Sciences’ Institute of Geographical Sciences and Natural Resources. About 28,000 rivers have vanished since 1990, according to the Ministry of Water Resources and National Bureau of Statistics.
Ordos Wells
“After five years there won’t be enough water in Ordos in Inner Mongolia,” said Sun Qingwei, director of the climate and energy campaign at Greenpeace in Beijing. “The mines are stealing ground water from agriculture. Local governments want their economies to boom.”
Wells drilled near Haolebaoji near Ordos by Shenhua Group, the world’s biggest coal producer, have caused groundwater levels to drop to a depth of as much as 100 meters, drying out the region’s artesian wells, Greenpeace said in a report yesterday. Two calls to Shenhua weren’t answered.
The water that does exist is mostly polluted. A government survey published in February shows that only about a quarter of the groundwater in the North China Plain -- an area that’s bigger than Greece and includes Beijing and Tianjin, the province of Hebei and parts of Henan and Shandong -- is fit for human consumption.
Severe Pollution
Severe water pollution affects 75 percent of China’s rivers and lakes and 28 percent are unsuitable even for agricultural use, according to the 2012 book “China’s Environmental Challenges,” by Judith Shapiro, director of the Masters program in Natural Resources and Sustainable Development at the School of International Service at American University in Washington.
Geneva-based Pictet Asset Management’s $3.17 billion global water fund doubled its exposure to stocks offering water services in China to 10 percent since 2007. For Zurich-based RobecoSAM’s 611 million-euro Sustainable Water fund, “emerging markets offers the best opportunities in the world for water investments and China is the standout.”
Water-treatment companies Beijing Enterprises Water Group Ltd. (371) and China Everbright (165) International Ltd., which Pictet invested in in 2009, are among its best performers this year, partly on prospects for stricter environmental regulation in China, said Geneva-based portfolio manager Arnaud Bisschop.
Beijing Enterprises has risen 55 percent this year to HK$3.10 and Deutsche Bank sees it reaching HK$3.20 within a year. China Everbright is up 83 percent to HK$7.18 and JPMorgan Chase & Co. estimates it will reach HK$7.60 by mid-October.