This article expands on China Water Risk’s report, “Bottled Water in China – Boom or Bust?” based on an in-depth investigation by China Water Risk’s Hongqiao Liu. The report goes behind the bottle and explores the physical & regulatory risks of China’s rapidly expanding bottled water industry.
It has only taken China two decades to become the world’s largest bottled water consumer and a major producer as shown in China Water Risk’s (CWR) report, “China’s Bottled Water: Boom Or Bust?”
Bottling activities are encroaching on areas crucial for Asia’s waterways
However, as the report also shows China’s per capita consumption is 19% lower than global average, so there could be room for growth. But even with the current levels there are already significant environmental costs; water used in production can fill more than 21 West Lakes and the plastic used is equivalent to one Jinmao Tower. Moreover, bottling activities are encroaching on ecologically fragile areas crucial for Asia’s waterways, such as the Qinghai-Tibetan Plateau.
Water resources in Tibet are abundant and much cheaper than some other areas of China. Water bottled upstream among snow-capped peaks is also perceived as pure, commanding a premium. Though it only makes up a small portion of China’s annual bottled water production, such premium water is seen a new growth area for the country’s bottled water industry.
52x growth target for Tibet by 2020 but glaciers in Qinghai-Tibetan Plateau have already shrunk 15% over three decades
Aligned with the industry, the Tibet Autonomous Region (TAR) government also wants expansion of the bottled water industry. It released a 10-year plan on natural drinking water development with the aim is to build 5 million m3 of bottled water production capacity by 2020. Tibet’s total packaged natural water production in 2013 was only 95,720 m3. This means a 52x increase by 2020 – indeed a huge jump.
But the stakes are high. The glaciers in the Qinghai-Tibetan Plateau – known as Asia’s water tower – are the source of many of Asia’s major rivers, which are the lifelines and economic belts for China and other Asian countries. This includes the Yangtze and Yellow rivers and also the transboundary Lancang (upper Mekong) river, the Nu (Salween) and the Yarlung Zangbu (Brahmaputra) river. Already the Qinghai-Tibetan Plateau glaciers have shrunk 15% over the last three decades.
Bottling at glaciers is at odds with President Xi’s wish for an ‘ecological civilisation’
President Xi Jinping’s desire to build an “Ecological Civilisation” and China’s commitments regarding climate change mean it must act to protect its glaciers. So surely bottling water in these glacial regions and natural protection zones contradicts such policies. Also, what does it mean for downstream countries?
Plans to exploit Asia’s water tower short sighted?
With concerns over drinking water quality being a key driver for bottled water, it’s not a surprise that companies have moved to upstream regions like Qinghai-Tibetan plateau in search of cleaner water sources. The region is home to China’s largest national parks and the source of major transboundary rivers. It is also known as “the third pole” because it holds the largest stores of fresh water outside the north and south poles.
Glaciers in Xinjiang & the Everest range are also being tapped
The Qinghai-Tibetan plateau is already a hotspot for the bottled water industry. By 2014, the government had approved licenses for 28 companies to produce bottled water in the TAR. Bottled water activities are also growing rapidly in neighbouring Xinjiang, Qinghai and Yunnan provinces, with companies even bottling water straight from glacier tongues.
Gelaixue Glacier Water is one such company. According to its website, all its water comes from the glacier tongue of the “No.1 Glacier” – which sits 4,480 metres high in the Tianshan mountains, Xinjiang province.
The company and its partner, the Tianshan Glaciological Station of the Chinese Academy of Sciences, have not disclosed any details about the extraction process or the environmental impact of its activities. What is clear is that the glacier is melting rapidly – at a rate of 4 to 8 metres every year.
Companies are also tapping glaciers in the Everest (Qomolangma) mountain range. “Qomolangma Glacier Water” bottles water from the Qomolangma National Nature Reserve, 80 kilometres from Everest Base Camp.
“Pamirs Ancient Glacier Water” bottles spring water from the foot of the Ata peaks of the Pamir range near Tajikistan.
Tibet govt held event called “Good water in Tibet should be shared with the world”
16 agreements were signed with investors totalling RMB 2.6 bn
This is just the start of the rush to exploit the region’s water resources. In November 2014 as part of a government advocacy event called “Good water in Tibet should be shared with the world”, the TAR government signed 16 agreements with various investors totalling RMB 2.6 billion (USD 409 million). Among them were state-owned oil producer Sinopec, Bright Food Group, China National Gold Group and the Three Gorges Group (which owns in the world’s largest hydroelectric power station in Hubei province).
In July 2014, a special leader office was set up by the TAR government to coordinate all relevant departments with the aim “to strengthen the responsibilities and duties on pushing forward the development of natural water industry”. Companies investing in packaging natural water can enjoy not only a preferential tax rate, but also exemption from certain income taxes. Additional low-interest loan policies as well as a RMB 250 million development fund was set up to support the development.
With the support of local and central government, companies have moved fast. Since early 2015, Sinopec Group has sold glacier water bottled from Tibet in its 23,000 petrol stations and convenience stores across China. Official data said the overall design capacity in TAR had reached 3 million m3 by the end of 2014, already more than half way to the 5 million m3 2020 target. Sales doubled in 2014 compared to 2013, reaching RMB 830 million, according to the TAR government.
Risks are high with a changing regulatory landscape
Since China sits at the headwaters of Asia’s major rivers and glaciers, any development within China could have a significant impact on the region’s water security. China’s plans to build an extra 124 gigawatts of hydropower on transboundary rivers have already raised many concerns in the region. As highlighted in China Water Risk’s latest report “Towards a Water & Energy Secure China: Tough Choice Ahead in Power Expansion with Limited Water Resources”, China is facing tough choices in expanding its generating capacity. Coal-fired power could exacerbate glacial melt and water scarcity, while “greener” hydropower on transboundary rivers could raise geopolitical tensions.
China’s leadership recognises the tough choices needed to balance climate, water & energy security
Yet central and local policies are misaligned
China’s leadership recognises the tough choices needed to balance climate, water and energy security, with the need to protect watersheds. Yet local policies appear to be misaligned. As the government moves to realign these policies, there will be implications for industry.
The Qinghai-Tibetan Plateau should be protected for long term prosperity and survival rather than exploited for short term economic gain.
If the bottled water industry runs wild, this could exacerbate current climate issues (melting ice & others) as well present new environment challenges. Moreover, the lack of environment impact assessments and the lack of disclosure by the majority of bottling companies mean it is pretty much impossible to measure the impact to the environment, the status of water sources and factory efficiency.
Companies that do disclose information, such as the Hong Kong listed “Tibet 5100”, claim that the amount of water withdrawn from the springs or glaciers is not enough to deplete them.
However, is it ethical to withdraw any water from protected areas where glaciers are already shrinking and where the central government has invested billions of yuan in conserving the region for climate adaptation and mitigation?
Also, the cost of bottling mineral water at the foot of high-altitude glaciers is much higher, with the extra technologies and transportation needed to bring the product from source to market. The carbon emissions of the latter should also not be ignored.
The local government in Tibet has also said it will promote the export of bottled water. Is this the right way forward to secure China’s water security?
The government of Jilin province in northeast China is also encouraging drinking water for export with a 10% target by 2020. However as CWR’s report shows the Jilin government has also halved its growth ‘red line’ from 100 million m3 to 50 million m3. So it seems the future of bottled water is uncertain with both growth and more stringent regulations forecasted.
An uncertain future
While many companies are flooding in to exploit the “blue gold” of Tibet, there are signs some are struggling to survive. On 28 July 2015, shares of Tibet 5100 – one of China’s top high-end bottled water brands – fell 12.7% in the Hong Kong Stock Exchange after the China Railway Corporation stopped providing free mineral water to its passengers.
Some of those exploiting Tibet’s “blue gold” are struggling to survive…
…China Railway Cooperation did not renew its contract with Tibet 5100 – worth 13% of the company’s total revenue
Tibet 5100 sources its water from glaciers at an altitude of 5,100 metres in Tibet and was one of the first companies to market glacier water in China. During 2011 to June 2015, the company sold 200 million litres of bottled mineral water to the China Railway Corporation.
China Railway failed to renew the contract in June 2015. There was speculation this is in line with China’s crackdown on corruption in the railway system, but it may also signal a shift in demand. Most high-speed railway stations and trains are now equipped with drinking water facilities, instead of giving out free bottled mineral water.
Although Tibet 5100 has argued that China Railway Cooperation only made up 13% of its total revenue in 2013, the end of the contract has been a blow to the company. China Railway Corporation has been the company’s single largest client. Nine out of 10 bottles of Tibet 5100 were sold to China Railway Corporation during 2008 to 2010.
For other brands and bottlers in the third pole region, this should be a warning. Demand for bottled water may fall, especially with the Chinese government continuing to invest in the public supply service, growing consumer awareness of the ‘costs’ of bottled water and increased distribution refillable dispensers.
It should be clear from the above that the future of bottled water is uncertain. Consumers have a role to play and investors should rethink their strategies for bottled water, especially in Asia’s water tower.
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- China Water Riskspecial report: ”Bottled Water In China: Boom Or Bust?“
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