What Is Behind A Strong Gathering of Forces in China’s Environmental Protection Industry?

This article, a collaborative effort by the Qingshan Research Institute and WieTec, delves deeply into the latest trends and developments within China’s environmental protection industry. Our goal is to offer valuable insights that will help stakeholders navigate the evolving landscape of environmental protection.

By analyzing the current state of the industry, we aim to shed light on the integration and consolidation taking place, driven by the need for more cohesive and effective environmental strategies. This research is intended to serve as a reference point for those looking to understand and predict the trajectory of the environmental protection sector in China.

Scenic horizon symbolizing the future of China's environmental protection sector and industry trends.

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Co-sponsored by the China Environmental Protection Federation, China Energy Conservation Association, China Membrane Industry Association, China Environmental Protection Machinery Industry Association, China Instrument Industry Association, Shanghai Environmental Protection Industry Association, Herui Group, and Informa Markets, the 16th edition of WieTec will take place at the Shanghai National Exhibition and Convention Center from June 3-5.

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Trend Insights

Research and statistics from Qingshan Research Institute reveal that the performance of provincial environmental protection groups over the past two years has varied widely, with revenue ranging from hundreds of millions to several billions (yuan). While a few companies in Jiangsu and Guangdong stood out, most hovered in the hundreds of millions range.

A comparison of data from 2022 and 2023 shows a marked decline in the performance of some provincial environmental protection groups last year. This fluctuation is more pronounced when compared to other leading companies in the environmental protection sector.

Despite these challenges, the environmental protection groups have continued to expand over the past year. New groups have emerged, raising questions about their origins, trajectories, and past activities. What industry trends are indicated by the large-scale, continuous entry of these groups? This article will delve into these issues, providing valuable insights for readers.

Environmental Protection Groups Continue to Gather, Intensifying Industry Integration

In 2023, the influx of environmental protection groups has accelerated. Provincial groups in Anhui and Zhejiang have officially been listed, with Zhejiang Environmental Protection Group emerging from the merger of state-owned enterprises under the Zhejiang Provincial Department of Ecology and Environment. This new entity aims to establish the province’s first comprehensive ecological environment industry state-owned capital investment and operation platform. Hangzhou Steel Group, the controlling shareholder, transferred its 33.01% equity in Feida Environmental Protection to the Zhejiang Environmental Protection Group.

Additionally, China Resources Environmental Protection increased its investment in Gansu Runlong Environmental Protection Group, achieving controlling operations with a 66% shareholding, marking another success in its western strategy. In 2022, China Resources Environmental Protection acquired a 51% stake in Inner Mongolia Environmental Investment Group.

China Resources Environmental Protection, a professional platform under China Resources Group, focuses on environmental technology and investment. It has quickly become a formidable force in the environmental protection sector among central enterprises, uniquely holding environmental protection groups within the industry.

At the provincial capital level, Shenyang Environmental Protection Group was officially established last year. The Jinan Municipal State-owned Assets Supervision and Administration Commission announced plans to establish a municipal environmental protection group promptly.

Shenyang Environmental Protection Group, with Shenyang Urban Investment Group as the major shareholder, aims to integrate the regional environmental protection industry chain, promote innovation, assist in developing high-precision intelligent equipment, and build green operation service platforms. This initiative is expected to address industry shortcomings, foster a 100-billion-level environmental protection industry cluster, and accelerate the development of a central city in Northeast Asia.

At the prefecture-level, Qinhuangdao Environmental Protection Industry Group was launched in August last year. Formed by integrating six companies, it operates several sewage treatment plants, gray water treatment plants, sludge treatment plants, and a pipeline network, demonstrating its robust capabilities.

County-level municipal environmental protection groups have also emerged. Jiangyin Environmental Protection Group, unveiled in April last year, focuses on implementing major ecological and environmental projects, covering investment, management, technology R&D, and incubation.

Jiangsu Province now boasts one provincial-level environmental protection group and several prefecture-level groups, making it the province with the most environmental protection groups in the country.

In addition to provincial and municipal groups, central enterprises like Yangtze River Environmental Protection Group and China Resources Environmental Protection have established strong presences. Water affairs groups, formed under similar circumstances, are also prominent. In 2023, provincial water affairs groups such as Shaanxi Water Development Group and Gansu Water Investment Group were established, focusing on integration, environmental protection industry reinforcement, and regional coordination.

Harbin Water Affairs Development and Construction Group and Turpan Water Affairs Investment and Development Group have also been formed, indicating a trend of accelerated asset integration among water groups.

Central enterprises’ environmental protection groups are another significant force. Baowu Group, for example, announced the integration of its environmental resources and water technology subsidiaries to create a comprehensive environmental protection industry platform starting January 1, 2024.

In summary, the environmental protection group army has expanded from provincial groups to various levels and fields, driven by government initiatives and state-owned asset integration. This expansion suggests a new wave of asset restructuring and reform in the environmental protection sector. Industry insiders have humorously remarked that the environmental protection industry is now “surrounded by groups,” signaling that a large-scale consolidation and competitive era is imminent.

Environmental Protection Group’s Triumphant Strategy

Amidst the challenges sweeping the industry, environmental protection groups are pioneering innovative approaches fueled by their vast resource reservoirs. A prime example is the recent endeavors of Shaanxi Environmental Protection Group during the Chinese New Year festival:

Strategic Partnerships: Shaanxi Environmental Protection Group spearheads market development by forging robust alliances with key players like China Construction Fifth Engineering Bureau Northwest Company and China Construction Eighth Engineering Group Northwest Company. Their collaborative ventures, exploring PPP and EOD cooperation models, signal a concerted effort to propel mutual growth in the environmental protection sector.

Exploration of New Avenues: Venturing beyond conventional realms, Shaanxi Environmental Protection Group partners with Datang Shaanxi Branch to embark on an exciting “environmental protection + energy” journey. Embracing the “double carbon” goal, the focus shifts towards enhancing service quality in online environmental monitoring, flue gas treatment, solid waste disposal, and resource utilization. This bold leap into uncharted territories underscores the group’s innovative spirit and commitment to sustainable practices.

Business Integration and Financial Platforms: The group strategically positions itself for future success by consolidating its business portfolio and fostering a robust financing ecosystem. The impending IPO of subsidiary Sanqin Environmental Protection in the A-share market promises to elevate the group’s brand visibility and streamline financing avenues, amplifying its impact in the hazardous waste disposal domain.

These strategic maneuvers epitomize the Environmental Protection Group’s meticulous “three-step plan” strategy: bolster traditional performance, explore new horizons, and fortify financial infrastructure. By leveraging strategic partnerships and innovative business models, these groups are poised to bridge existing gaps and emerge as formidable contenders in the environmental protection landscape.

Forging Pathways to Progress

In a bid to navigate the competitive terrain, environmental protection groups are actively seeking external collaborations to augment their market presence. From strategic alliances with state-owned construction giants to joint ventures with academia, these partnerships underscore a concerted effort to accelerate performance and foster innovation.

As exemplified by Shandong Environmental Protection Group, platform building emerges as a cornerstone of their operational framework. Through the establishment of four pivotal platforms, they endeavor to cultivate industry-leading enterprises, drive technological innovation, and galvanize the regional environmental protection industry.

Amidst this backdrop, the rise of environmental protection groups unveils a strategic paradigm shift, driven by a blend of performance imperatives and industry dynamics. By embracing innovation, fostering collaboration, and prioritizing sustainable practices, these groups are poised to shape the future trajectory of the environmental protection sector.

A Paradigm Shift in Environmental Protection Dynamics

The rise of environmental protection groups marks a pivotal shift in the industry landscape, with far-reaching implications for market dynamics and operational frameworks. Unlike traditional models, these groups are poised to navigate the complexities of the stock market, setting the stage for sustainable growth and strategic expansion.

Orchestrating Integration: A Government-Led Initiative

Central to the genesis of environmental protection groups is the steadfast support and guidance of governmental bodies at all levels. These groups not only underscore the significance of environmental preservation but also serve as vehicles for fostering local industry development. Anchored by a commitment to efficiency and integration, they represent a transformative force in the environmental protection arena.

Fostering Efficiency Through Integration

Amidst the rapid expansion of the environmental protection industry, the need for consolidation and optimization has become increasingly apparent. By streamlining assets and resources, environmental protection groups are poised to enhance operational efficiency and drive sustainable growth. Through strategic partnerships and asset integration, they pave the way for a more cohesive and streamlined industry landscape.

Charting the Path Forward: A Vision for Sustainable Growth

As environmental protection groups embark on their transformative journey, they are guided by a vision of holistic integration and collaborative progress. By aligning with governmental policies and industry standards, they seek to forge a path towards sustainable development and operational excellence. Through innovation, collaboration, and strategic foresight, they endeavor to shape the future of the environmental protection industry.

Embracing the Power of Collaboration

Ultimately, the success of environmental protection groups hinges on the collective efforts of industry stakeholders. By fostering a culture of collaboration and innovation, they aim to create an ecosystem where all entities thrive. As they continue to chart new territories and explore innovative solutions, they remain steadfast in their commitment to environmental stewardship and sustainable development.