Bottling enterprises dismiss hyped controversy of using overseas resources

By Liu Tianliang and Ni Hao Source:Global Times Published: 2019/10/23 19:42:27

The controversy over Chinese bottling companies has various reasons, including a lack of solid research on local environmental investments and conflict of interests with local enterprises

Some governments and companies in the water resource sector welcome Chinese companies as they have technologies and money to help with local development

A British adventurer walks across Lake Baikal. Photo: VCG

From the Lake Baikal in Siberia to the island country of New Zealand in the Pacific, news about Chinese companies investing and building bottling factories surfaces from time to time. Most are normal business practices, however, some foreign media take it as an opportunity to invent stories like Chinese companies are "plundering" local resources and encountering "strong objections." 

Are Chinese companies posing a threat? The answer is "No." The Global Times reporter found that Chinese companies' seeking water overseas is linked to the growing market. The controversy over their business activities has various sources.   

In Spring, protests under the slogan "Save Baikal" occurred in Russia targeting the Chinese-invested bottling factory AquaSib. Many celebrities joined the protests not only in Irkutsk where the factory is located, but also in Moscow. 

In March, chairman of the Russian State Duma Committee on Ecology and Environmental Protection Vladimir Burmatov responded to the protests on the petition website saying that construction of the factory may violate the law. He called on the Prosecutor General Yury Chaika to check the legality of the plant's construction.

The AquaSib project, which had started for three months and was estimated to attract 1.5 billion roubles ($23.5 million) while providing 150 jobs, was then halted by local court. 

It is not the first time that Chinese bottling factories' project at Lake Baikal has been halted. Similar protests occurred in recent years. 

According to Sergei Sanakoyev, chairman of the Baikal Region Development Fund, there are about 80 bottling factories along Lake Baikal invested by different countries. 

The Global Times reporter found that, on one hand, most Chinese companies investing in the Baikal region are private companies who lack access to reliable partners and research in the local investment environment. 

On the other hand, sentiment against Chinese people has been brewed in the region for various reasons including Chinese companies' previous behaviors of building hotels in forests that did not impress local people, as well as some local groups' interruption of China-Russia cooperation by provoking negative public opinion. 

Some projects with Chinese investments which have qualifications are also halted, which raises the question of local accountability.  

Similar things happen in New Zealand where media hyped up local residents' opposition to Chinese bottling companies.

However, opposition was caused by various reasons rather than the targeting of only Chinese companies. 

Two main Chinese companies involved in the issue were Creswell NZ Limited, a wholly owned subsidiary of the Zhejiang-based bottled water brand NongFu Spring, and Cloud Ocean Bay under the Shandong-based Yingyunhai Sugar Industry Group. One thing the two groups have in common is that they both entered the New Zealand market through purchasing local companies.   

According to local media, Creswell had gained support from New Zealand Trade and Enterprise at the first. The company then applied to the Bay of Plenty parliament in August 2017 to increase the amount of underground water it can draw up per year from 2 million liters to 580 million liters and planned to purchase a 6.2-hectare land in Otakiri, near Whakatane. 

As New Zealand law does not require publication for capacity expansion, the Overseas Investment Office approved the trade. The Land Information and the New Zealand Treasury announced the approval with conditions that the company provide 60 full-time positions and obtain a resource license. 

At that time, there were 73 bottling factories across the island, drawing up 23 billion liters of water per year. Cresswell could draw up 700,000 liters per day paying 20,000 New Zealand dollars ($13,000) per year as a supervision fee. Under this circumstance, some New Zealand people's nerves were struck when an overseas bottling company tried to expand its capacity by a factor of 290.

Local people care about not only water rights, but also environment impact as media reported that they also protested against the company's illegal measures to process waste water and plastics, which had led to punishment from the government - an individual case. Environmentalists mainly worried that the factories would cause pollution to lakes and underground water. 

Customers visit a plant of a Chinese bottling water company in Hangzhou, East China's Zhejiang Province. Photo: VCG

Increasing demand

China has a strong consumer demand for water, as a report released by the Beverage Market Corporation, a leading source of global beverage data and consulting, shows that a total of 2.8 billion gallons of bottled water was sold in China, a quarter of the entire water supply in the world. The US follows China with half of China's consumption volume. 

However, in China, water consumption per capita is 20 gallons, while it is 42 in the US.

Bottled water sales volume in China leaped from 2.8 million tons in 1997 to 39.5 million tons in 2013, with 18.1 percent of Compound Annual Growth Rate (CAGR), while the world average rate was 7.8 percent, according to data released by The International Bottled Water Association.

In 2018, the bottled water industry expanded by 9.5 percent year-on-year in China, with a CAGR of 11.5 percent in the last five years, according to Euromonitor International, a world leading market research provider.

China faces a  huge demand for water and fast-growing bottle water consumption with limited water resources. China has one fifth of world's population, and merely 7 percent of the world's fresh water, and a quarter of China's fresh water is contaminated.

Four of the world's top 10 largest bottled water companies are Chinese enterprises. Most of them still use domestic water resources, and some have eyed overseas resources to maintain their brands.

Li Fuxing, director of a Beijing-based potable water research institute, told the Global Times that one of Chinese enterprises' favorite water resource countries is New Zealand.

Li has investigated the development that Chinese potable water enterprises have made in countries around the world such as New Zealand, Australia, the Netherland, and Russia.

However, because of the interest competition among various parties seeking to change government policies, some projects were boycotted, according to Li's introduction.

 Flowing and circular  

"It is not a very big deal that some local residents have hard feelings about Chinese enterprises developing drinking water projects as the shortage of water resources is an international topic," Li said.

Li noted that he used to conducts surveys in Siberia and learned that some residents there were conservative and did not benefit from some practices in the market economy.

There are also different voices when it comes to water related commercial projects in some places in China, Li said, noting that residents in Tianshui of Northwest China's Gansu Province asked the Hangzhou Wahaha Group, one of the largest beverage producer in China, to leave when the company planned to build a factory there. 

Li believes these projects should not be controversial as the Chinese company is not developing drinking water in large scales abroad. They usually target high-end water markets and would abide strictly by local laws and regulations.

"In nature, water is flowing and circular. Water that has been taken by the companies will be supplemented. It is a kind of waste if we let the water flow without using it," Li said.  

In contrast to local residents, governments and local companies usually welcome overseas companies. Chinese companies have rich experience and economic strength. The market in China is also very big, which brings more profit to the water resource areas, Li said. 

"During my trip to Siberia, I found that many people welcome Chinese companies to invest there as they lack money, technology and market. All they have is a simple water resource," Li said, adding that it is also a necessary step to enter overseas market once the Chinese companies have developed well. 

Some people in Russia also think that discussions over water plants have been "politicized" as many people living by the Lake Baikal support companies investing in the area. 

Sergei Sanakoyev from the Far East and Baikal Region Development Fund gave some suggestions, including that instead of being made into cheap, low-end products, the drinking water from the Baikal region should be made into high-end, special products; capable companies from China and Russia which have social responsibilities can better solve environmental problems and cooperate in public relations, and Chinese companies should firmly refuse local politicians who want to blackmail them. 

Li also agreed that Chinese companies should also pay attention to the development of the market and not develop regular drinking water products in a large scale. 

An anonymous insider told the Global Times that different policies should be applied to different countries in accordance with local environment. For example, Chinese companies which want to develop in New Zealand should balance profit and social benefit and should seek broad support from the society.


Newspaper headline: Water cooperation

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