China's water supply industry is at a turning point.
Under the combined pressure of new urbanization, the national "dual carbon" goals, and rising public expectations, water providers are facing a complex challenge—what many now call a triple dilemma.
This triple dilemma centers on three deeply intertwined issues:
Water quality that struggles to move beyond just "meeting the standard"
Operational efficiency threatened by aging infrastructure and rising costs
Value reconstruction in a system stuck between public service and market logic
Solving just one of these issues is tough. Tackling all three at once? That's the mountain the industry must now climb. But within this pressure lies opportunity—especially with digital tools and ecological thinking leading the way.
So how are utilities shifting from reactive fixes to future-ready strategies? Let's dive into how the water industry is transforming itself through smarter systems, cleaner technologies, and new ways of thinking about value.
Why is water quality still so hard to improve?
On paper, water quality in most cities looks "qualified". But in reality, that's not enough anymore.
Today's standards are stricter. The latest national drinking water standard includes 97 indicators, but that doesn't mean all of them are being monitored effectively. Emerging contaminants like PFAS and endocrine disruptors often fly under the radar, especially in smaller cities and rural areas.
In fact, only 12% of prefecture-level cities currently have the capacity to test for PFAS. And in many county-level towns, labs can only handle a basic set of 42 indicators—leaving a big gap in risk detection. Even worse, traditional lab testing can take days, meaning pollution events can go unnoticed until it's too late.
Then there's the treatment process itself. Many plants still use basic methods like coagulation, sedimentation, and chlorine disinfection. While these are tried and true, they struggle with things like dissolved organics and often create by-products like chloroform. Deep treatment methods such as membrane filtration or activated carbon systems are rare—mostly because they're expensive and hard to scale in smaller plants.
And while cities have made progress, the urban-rural gap is only widening. Rural water plants often rely on outdated methods like visual inspection and chlorine test paper. One township plant, for example, only tests for microbes once every three months—despite third-party checks showing frequent contamination.
So while the national average may look "fine", the real picture is much more complex—and inconsistent.
Can old infrastructure keep up with growing demand?
Beyond water quality, system efficiency is also hitting a wall.
Aging pipelines are a big part of the problem. In many cities, water networks are long past their design life. The result? High leakage rates. In some areas, more water is lost to leaks than is supplied by large-scale water diversion projects.
This not only wastes precious resources, but also drives up energy use. Pump systems are often inefficient, and mountainous cities, in particular, face steep energy bills just to maintain water pressure.
Compounding the problem is a lack of sustained investment. Pipe replacement projects are expensive, and many cities rely on patchwork repairs rather than long-term upgrades. Fiscal subsidies aren't enough, and private capital is hesitant to step in due to uncertain returns and complex regulations.
Meanwhile, smart monitoring systems—which could help utilities identify leaks and reduce waste—are still underutilized. This creates a vicious cycle: high leakage leads to low revenue, which limits upgrades, which causes more leakage. Breaking this cycle will require not just funding, but a new mindset.
What's holding back real value creation?
The water industry isn't just struggling with operations—it's also stuck in a value trap.
As a quasi-public service, water supply operates in a strange space. Prices are often set by government policy, not market forces. While this helps keep rates affordable for consumers, it also limits the industry's ability to invest in new technologies or upgrade aging infrastructure.
Without flexible pricing, utilities can't capture the added value of better water quality or more efficient service. This discourages innovation and leads to low-profit, high-risk operations—especially for smaller providers.
On top of that, the heavy, asset-based nature of the industry makes it hard to attract investment. Pipeline networks are difficult to monetize due to murky property rights and unclear income models. Even franchise projects often come with complex risk-sharing agreements that scare off potential partners.
The result? A stagnant investment environment where infrastructure, technology, and business models all remain stuck.
How can smarter systems improve water quality?
Here's where things start to shift.
Smart water quality monitoring systems are creating a real-time, full-coverage picture of what's happening in the network. Using IoT sensors, AI-driven analysis, and cross-regional data sharing, these systems allow providers to detect pollution events early and respond faster than ever before.
Government and enterprise collaboration is also getting stronger. Many cities are now connected to unified monitoring platforms, while third-party testers play a growing role in daily supervision. This kind of multi-layered oversight improves accountability and builds public trust.
The result is not just safer water, but smarter regulation—and a faster path to truly high-quality service.
Is membrane technology the game-changer?
When it comes to treating hard-to-remove pollutants, membrane technology is leading the charge.
Nanofiltration and ultrafiltration membranes can selectively remove heavy metals, bacteria, and trace organics with remarkable precision. And thanks to recent innovations like anti-fouling coatings and AI-powered pressure management, these systems are becoming more affordable and sustainable.
Some plants, like the one in Shanghai's Lingang area, now run nanofiltration systems using just 0.8 kWh per ton of water—down 30% from older systems. Others are using smart membrane management to extend system lifespans to over 8 years.
Membrane systems are also proving invaluable in industrial reuse and zero-discharge applications. As newer materials like graphene and smart bionic membranes come online, we'll see even more breakthroughs in both performance and cost.
Can digital tools solve the efficiency puzzle?
Yes—and they already are.
Digital twins, for example, are helping utilities build virtual replicas of their entire systems, from source to tap. These models, paired with smart meters and predictive AI, allow providers to anticipate leaks, optimize pump schedules, and reduce unplanned downtime by up to 65%.
Energy use is another area of massive improvement. By analyzing water flow, user habits, and energy prices, some utilities are shaving 25% or more off their power bills. One city even used these insights to adjust its solar storage systems and raise green power usage at pump stations to 65%.
This kind of data-driven decision-making not only cuts costs—it also reduces emissions and enhances resilience.
Can data become a new form of value?
Absolutely.
Smart water systems are generating a new kind of asset: data. And that data is starting to create real financial value.
Some cities are launching blockchain-based platforms for trading water rights and carbon offsets. Others are helping customers lower their bills by offering personalized usage plans. One company in Shenzhen even earns millions each year from selling value-added data services.
By linking water, energy, and digital networks, utilities are evolving from basic service providers into key players in smart city ecosystems. This opens the door to entirely new revenue models—ones that go beyond the water meter.
Where does the industry go from here?
China's water supply system is undergoing a major transformation, moving beyond just technology updates to a broader shift in how it's managed and delivered. Digital tools are making operations more efficient and maintenance easier, while eco-friendly approaches are adding new value to water resources. This change also extends into urban ecology, blending smart water management with ensuring safe water for everyone. To succeed, the industry needs to balance market needs with public service, encouraging innovation across sectors. By evolving from infrastructure operators to creators of ecological value, the water supply sector can meet future challenges head-on.
This transformation will be a key focus at the 2025 Watertech from June 4th to 6th at the Shanghai National Exhibition and Convention Center. The event will feature over 4,000 top brands, 100,000 innovative products, and 80+ high-level summits offering insights into the future of the industry. It's a great opportunity to explore new technologies, share ideas, and help shape the future of water and environmental solutions. Don't miss out on this chance to be part of the movement towards more sustainable water systems!