Made in China 2025:
A future with limited water

By Debra Tan

Director, China Water Risk

Made in China 2025; Circular Economy; Water Ten; Internet Plus; One Road, One Belt – the new buzzwords of “Future China”. These have one thing in common; they are all necessities arising from limited water resources.

Basically, China is drier than you think. With per capita renewable water resources far from that in the US, there is no choice but to develop differently. Indeed, 44% of China’s GDP is generated by water scarce provinces with water resources similar to the Middle East. Moreover, these dry regions are home to over a third of China’s sown lands and 93% of China’s power generation is water-reliant. China’s water-energy and food nexus is complex and exacerbated by rampant water pollution which has bought about concerns over soil pollution and food safety.

China’s “Three Red Lines” water policies rein in pollution and impose national and provincial quotas on water use as well as stipulate water efficiency gains. According to a recently published HSBC report with China Water Risk, “No Water, More Trade-offs – Managing China’s growth with limited water”, these water quotas and intensity targets could limit China’s annual GDP growth at 5.7% per annum between 2020 and 2030.

However, China is still hungry for food and power with its per capita power generation installed capacity at 0.87kW, far below the G20 average of 1.6kW. Strategies to develop the nation mean tough choices ahead as warned in our recent report “Towards A Water & Energy Secure China”. The extensive report on balancing power generation mix for food, water and climate, argues that China’s actions have moved beyond water and energy savings targets – optimisation of its power, GDP/industrial and crop mixes are also key strategies to ensure water security.

China’s power mix is already evolving. Water-reliant power is expected to fall to 72% by 2050 with a projected aggressive add of wind & solar capacity. Industrial mix is also changing. On this front, there are two “Lists of Ten Industries”.

The first list of 10 hails from the ‘Made in China 2025 Action Plan’, touted to be the first 10 year action plan designed to transform China from a manufacturing giant into a world manufacturing power. China is to embrace “Industry 4.0” with a list of cutting-edge industries by 2025.

The second list of 10 is somewhat different and encompasses China’s “old” industries (see table below). These ‘Circular Economy 10’ are industrial sectors prioritized by the State Council to transition from a linear and resource-heavy “take, make & dispose” economic model towards a “reuse, refurbish, recycle & manufacture” circular economy. It is worth noting that China is the only other country aside from Germany and Japan to have a national policy to go circular with its ‘Circular Economy Development Strategies & Action Plan’.


Made in China 2025 – Ten Key Industries vs Circular Economy
Made in China 2025 Circular Economy
1 Energy Saving & Clean-Energy Vehicles Coal
2 Power Equipment Power
3 Biomedical & High Performance Medical Devices Steel
4 New Materials Textile
5 Next Generation IT Nonferrous Metals
6 Advanced Rail Transportation Equipment Petroleum & Petrochemicals
7 Advanced CNC Machine Tools & Robots Chemicals
8 Agricultural Machinery Food
9 Aerospace Equipment Building Materials
10 Marine Engineering Equipment & High-tech Ship Paper

Source: State Council

Managing growth with limited water means China has to find new ways to develop. Whether it is a “re-vamp” of the old economies or promotion of advance industries, China’s future is business unusual. The stakes are high – can the old industries survive the transition? Only time will tell.

Biography – Debra Tan

Debra Tan heads China Water Risk, a non-profit initiative dedicated to highlighting and addressing business and environmental risk arising from China’s limited water resources. She was responsible for the build out of the initiative’s free-access website, funded by ADM Capital Foundation, RS Group and Rockefeller Brothers Fund. Since launch, China Water Risk has become the ‘go-to’ resource for water issues in China. Tan has written extensively about the water-energy-food nexus as well as ground-breaking reports analysing the impact of water risks on certain sectors for financial institutions and corporates. Aside from investor conferences, she has also been the keynote and panellist at numerous industry conferences as well as G2G and academic forums.

Tan started her career in finance, spending over a decade as a chartered accountant and investment banker specializing in mergers & acquisitions and strategic advisory. She has lived and worked in Beijing, Hong Kong, Kuala Lumpur, London, New York and Singapore. Tan left banking to explore her creative side. She has since pursued her interest in photography and within a year had her first solo exhibition. She also ran and organized hands-on philanthropic and luxury holidays for a small but global private members travel network and applied her auditing, financing and photography skills in the field for various charitable organizations and foundations.