[1] Access to water supply and sanitation has increased significantly in China over the past two decades in parallel with economic growth.

Many of those who have access to adequate infrastructure suffer from poor water quality due to fecal contamination; high levels of naturally occurring fluoride, arsenic, or salts; and growing industrial and agricultural chemical pollution.

[14] The magazine The Economist described the urban-rural gap in the following stark terms: "The reforms that Deng Xiaoping first launched in China's countryside 30 years ago have now left its peasants in the ditch."

[16] Contamination of drinking water from feces is a critical health problem in China, as in other developing countries, that causes serious illnesses such as diarrhea and viral hepatitis.

A 2010 survey by UNICEF in 11 provinces found that over half of all drinking water samples contained unacceptably high levels of bacteria.

[18] Many existing plants are being expanded and upgraded to include a tertiary treatment stage for nutrient removal to comply with more stringent discharge standards introduced in 2002.

[9] Health problems caused by the lack of safe water are exacerbated by poor sanitary conditions, especially in rural China.

In most rural areas, a network of National Patriotic Health Campaign Committee (NPHCC) workers, the All-China Women's Federation representatives, the Communist Youth League of China, local epidemic prevention stations, and schools have led health education campaigns encouraging a wide array of hygienic behaviors.

That work, combined with a high literacy rate (even in poor areas), has led to widespread knowledge of many basic health behaviors, such as the importance of drinking boiled water.

However, actual behavioral change has been slow to follow, especially in poor areas where fuel may be scarce and understanding of the link between raw water or unwashed hands and diarrhea is tenuous.

According to a study by the Asian Development Bank, the city of Shenzhen is leading the reform of local water management in China.

The sewage treatment rate in the Shenzhen Special Economic Zone has increased from 56% during pre-integration to over 88% in 2008, ranking first among large and medium-sized cities in China.

The Asian Development Bank called the Shenzhen case "a model for market-oriented reform in the urban water sector".

For example, the local government of Lianjiang had the 100,000 m3/day Tangshan water treatment plant built by SUEZ under a BOT contract in 1999.

However, the water demand had been grossly overestimated, so that the plant lay idle while the local government had to pay for substantial minimum volumes without using them, which evidently pushed up tariffs.

An Association for Rural Water Supply and Sanitation provides training, information exchange, technical assistance, and undertakes research.

[39] Over the past 20 years, China has engaged in what is possibly the largest program to build wastewater treatment plants in history.

Demand was overestimated, the construction of sewerage lagged behind the construction of treatment plants, designs were sometimes inappropriate, there was no requirement for pre-treatment of industrial effluents thus affecting the effectiveness of treatment processes, and the sites chosen for the first priority investments within a river basin were not always those where the highest impact could have been achieved in terms of improving river water quality.

Many Chinese water and wastewater companies have overcapacities and are in financial difficulties because the revenues are insufficient to cover the servicing of the debt contracted to build the oversized infrastructure.

[47] Competitive bidding for contracts, private sector participation and commercial financing are important element in the transition to a market economy.

Learning from the experience of past BOTs in the sector, local governments sought expert advice on bidding and public tender.

[48] In 2004, a landmark international competitive bid for the entire water supply and sanitation system of Shenzhen was won by a joint venture including the French firm Veolia.

[50] One explanation for the relatively low level of NRW may be that most Chinese live in dense apartment complexes, which results in compact distribution systems.

Overview Many urban water and wastewater utilities in China experience financial stress, because user fees are set well below cost recovery levels and government subsidies are insufficient to cover the resulting gap.

Despite the relatively low water tariff the utility's revenues were twice as high as recurrent costs, allowing for a significant share of self-financing.

The bonds are issued by the Ministry of Finance, and then distributed by the National Development and Reform Commission as long maturity, low-interest loans, which in some cases may be converted to grants.

Under BOTs, private entities undertake investments and recover their costs through fees for bulk water sale or wastewater treatment charged to the utilities.

According to the World Bank, China differs from many other developing countries in that there is not a history of the central government providing large subsidies for the financing of rural water supply and sanitation.

This financing structure causes poor rural areas to "accurately match their ability to pay with the proper type of systems and level of service", i.e. to choose sanitation solutions that they can afford.

[57] According to The Economist magazine, "some provinces are now bypassing both the prefectural- and township-level governments in order to get funds more directly to rural areas.