Interview: digital trends in the Chinese water market

Has the Chinese water tech market been quick to adopt digital tools?

China has emerged as one of the world's fastest adopters of digital tools in the water sector, driven by government mandates like the 14th Five-Year Plan (2021-2025) and its predecessors, which emphasise digital economy integration and smart infrastructure.

Reportedly, by 2024, the plans have resulted in more than 90 per cent of urban water utilities adopting ‘basic’ IoT sensors for real-time monitoring. 

“Adoption accelerated post-2020 with the ‘Digital Water’ initiative, with Smart Water solutions deployed in 70 per cent of new wastewater treatment plants for predictive maintenance and leak detection,” says Lhopiteau. 

This adoption rate outpaced global averages (around 40 per cent in Europe, as per IWA reports, note the metric differs in scope from the Chinese figure, making a direct comparison inaccurate). Adoption was fuelled by massive investments in water tech, exceeding €10 billion annually.

 

Adoption accelerated post-2020 with the ‘Digital Water’ initiative, with Smart Water solutions deployed in 70 per cent of new wastewater treatment plants - Lhopiteau

 

“I would argue most of the ‘smart’ projects did not really deliver operational outputs. From my experience, on the ground, dealing with local water companies, I think that most of what I call the smart money went to non-core systems (intelligent parking lots, facial recognition at entry gates, extremely detailed 3D models), sometimes cosmetic upgrades of existing systems (new SCADA with 3D-like user interface, more beautiful BI reports still relying on manual Excel import-export), or failed IT developments (long list of local IT companies trying and failing to develop their own revolutionary CMMS).”

Lhopiteau explains that the actual reality is somewhere between the pretty statistics and his on-the-ground description above.

 

The role of competition in the market

Intense competition, characteristic of the Chinese market, has played its part in smart water tech struggling to gain traction.

“At the water utility level, every big water company invested heavily in IT, aiming to spin off its IT division, sell the solution to its competitors and get it listed on the stock market...  I don’t think it worked as planned for any of them, leading to massive losses.”

Many companies, especially water multinationals, used similar strategies, which might have worked in Europe or the US, but were not right for the Chinese market.

“At the supplier level, countless providers of IoT, SCADA, GIS, IT services, etc, jumped on the Smart bandwagon at the same time, with the same strategy, integrating similar technologies, and mostly fighting a price war. Many did not survive.”

 

At the water utility level, every big water company invested heavily in IT - Lhopiteau

 

Lhopiteau is quick to point out that everything needs to be placed in the context of the Covid period, which put immense pressure on water companies and the broader economy. 

“The lack of subsequent infrastructure-led stimulus caught even industry insiders by surprise. Coupled with a slowdown in Chinese manufacturing and construction, this has stifled demand for environmental services. It also triggered significant financing issues at all government and state-owned enterprise levels, leading to necessary restructuring.”

The good news is that the market is seeing signs of recovery and the long-term fundamentals appear strong, driven by persistent and growing demands for clean water and environmental services.

 

Large-scale adoption of technology across all sectors

With clear political impetus and widespread efforts by public sector clients (almost all water companies are in one way or another public sector) and private sector suppliers (virtually all IT-related suppliers are private companies), Chinese companies stand out for their ability to accumulate experience and knowledge quickly.

“Despite the very high failure rate, this market presents a strong ability to learn from experience and investment will continue (or restart, after a few years of financial struggles post-COVID in the water sector). This is what will propel water technologies in the coming years, in China and worldwide, as Chinese firms get more involved in international projects (as already happened in the power generation market). To me, this is more significant than specific technologies.”

 

Smart Water systems are everywhere

Looking at specific technologies, smart water technologies, such as Digital Twins, have already been widely adopted. 

“In Chinese railway stations, we even have smart toilets with a beautiful dark-background real-time animated display showing which stalls are available, a form of Digital Twin, relying on the same technology, with highly debatable practical value... All of these are based on using 3D BIM models, IoT, Business Intelligence tools, etc.”

Intense competition, as mentioned above, helps to keep the costs of delivering such smart water projects relatively low. Most smart systems come with AI claims. 

“While practical outcomes are not always rosy, China has developed all the technological bricks, has accumulated immense experience, and has industrialised it at a low price. Those vendors that survive the price war and the current slowdown will emerge as local and perhaps global players. This is happening right now.”

 

A French company adapted to the Chinese water market

Lhopiteau has many years of experience in adapting businesses to the Chinese market, and as the economy strengthens, he has seen demand grow for the solutions his own company provides, both within the country and in the export market.

“Taking my own firm as an example, as a supplier of Asset Management systems, originally from France, we have totally reinvented both our technology and our business model thanks to two decades of participation in the Chinese water market.”

This participation and exposure have made his company more resilient and battle-tested for global competition. 

 

The growing use of AI in the Chinese water sector

In the water market, Lhopiteau says that excellent progress is being made in the use of AI, such as algorithms for real-time contaminant detection in treatment processes, said to achieve 95 per cent accuracy in pathogen identification in support of the China Water Pollution Prevention Action Plan.

“Leak detection to minimise non-revenue water losses (up to 30 per cent nationally) has received enormous attention, which I would argue can also still benefit enormously from down-to-earth improvement in maintenance programs: AI-powered acoustic sensors and machine learning analytics are said to be able to detect 85 per cent of leaks in real-time in Beijing's network.”

Robotics is also a very hot topic, with the technology being strongly encouraged by the government.

 

Leak detection to minimise non-revenue water losses has received enormous attention - Lhopiteau

 

“Beijing is said to have piloted swarm robot technology for sludge removal and pipe cleaning, with initial reports indicating efficiency gains of up to 40 per cent. Adoption still seems to lag behind that of the manufacturing sector, in part due to water-specific challenges (wet and underground work environment). Water companies are also more careful nowadays with tech investment, again learning from the past Smart Water craze.”

China is the world leader for scalable IoT and big data. Projects with over one million IoT devices in urban water networks (e.g. in Shenzhen), enabling AI-driven demand forecasting and other optimisation, far surpass US or EU experience.

“Elsewhere, AI for predictive Flood and drought management, historically a topic of great concern and innovation in China (tips for would-be suppliers to China: it is always enlightening to study a bit of Chinese history), is also claimed to have reached levels of accuracy far superior to those in the West.”

 

A country full of opportunities for committed companies

China is very open to international companies, and there are many potential opportunities for a company that is willing to put the required work into becoming a success.

But Lhopiteau also offers caution: “It is an extremely tough, cut-throat market. And there is no cookie-cutter solution or out-of-the-box advice for success.”

However, he highlights three areas of interest that would require specific in-depth analysis by would-be suppliers:

• First, the Foreign Investment Encouraged Catalogue: this is a key policy document issued by the National Development and Reform Commission (NDRC) and the Ministry of Commerce (MOFCOM) to attract foreign direct investment. This makes it clear that China seeks foreign expertise, technology, and investment in the water sector to address its significant environmental challenges. It encourages foreign investment, in the form of joint ventures or fully-owned subsidiaries, technology transfer and licensing agreements, rather than just selling from abroad (although this is not at all discouraged).
• Second, the Belt and Road Initiative: this opens new avenues for business working with Chinese firms in overseas projects. We see increasing Chinese involvement in water projects in Southeast Asia and Africa. My own firm is a good example of how suppliers can take advantage of this trend. Certainly, this requires either strong experience of China, to become part of the local ecosystem, or specific knowledge of the target country, typically to influence the end client and enter the project.
• Third, this is more of a niche, but rural water infrastructure is the sub-segment where you still see funding from multilateral agencies, such as the World Bank, which may also open doors, although Lowest-Priced Technically Acceptable tenders would naturally favour local players. Consulting opportunities (contracting with the lender) still exist in such projects.

 

In what areas does China need to improve its digital technology adoption?

Lhopiteau shares the observation that China is sometimes seen to lag behind the rest of the world in interoperability and standardisation, with data silos and slow adoption of standards like ISO 50001 hindering AI integration. 

“I would argue this is a temporary phase, as underperforming smart water systems are getting rationalised and the country has long laid the groundwork for this, with early involvement in the design of ISO 55000 (also a national standard GB/T 33172), although it is true that adoption has been slow so far. However, experience in power generation demonstrates China’s capacity for fast standardisation.”

In the past few years, the Chinese government has considerably strengthened its regulatory arsenal (which foreign suppliers must take into account) on data sovereignty and cybersecurity, yet technical weaknesses exist.

 

How will the next 5-Year Plan affect the water market?

The 15th Five-Year Plan (2026-2030), currently in drafting, builds on the 14th Plan's digital focus, emphasising AI for ‘new quality productive forces’ in water, with indications of €50+bn investment to achieve ‘water security’, amid climate risks. 

“We are likely to see AI mandates, and I would not be surprised to see a call for increasing involvement of international firms in PPP projects (there are currently very few foreign players in water utilities in China, I think now only Suez and Veolia, Singaporean firm Sembcorp in industry parks; other players have all left). Rural infrastructures, cutting water losses, will remain priorities, so will water tech exports via Belt and Road.” 

Lhopiteau concludes: “All this represents opportunities for foreign firms, none of them easy to grasp. There is an exciting journey ahead.”

 

Aquatech China is the leading water technology trade show in China, covering all aspects of water: drinking water, industrial water, waste water treatment, sludge treatment, smart water solutions and water management. This year’s event runs from November 5 to 7 in Shanghai.

For more information, to register for a free ticket, or to enquire about exhibiting, visit: https://www.aquatechtrade.com/shanghai