Circular economy on the rise amid environmental push
Chinese companies in the environmental sector are poised to benefit this year as the country steps up implementation of its waste-sorting and recycling campaign, backed by central and local government policies.
With preferential policies and hundreds of billions of dollars to support the campaign, environmental companies that supply equipment, chemicals and other services will see a significant rise in market demand, industry insiders and analysts said.
This expectation has been reflected in the recent stock rally by environmental companies, which outperformed China's major indexes last week. Many of these companies rose by the daily limit of 10 percent in response to new policies.
On June 5, the State Council, China's cabinet, approved a draft law for curbing solid waste pollution during an executive meeting. One day later, the Ministry of Housing and Urban-Rural Develop?ment issued a draft plan to implement garbage-sorting in cities across the country.
Major cities across the country have also released their own policies and regulations. For instance, Shanghai will start to implement waste-sorting from July, with potential fines of up to 200 yuan ($29) for individual violators and up to 50,000 yuan for offending organizations.
This intensive rollout of policies shows the government's commitment and points to massive demand for a wide range of environment friendly products and services. Guosheng Securities Co based in Beijing estimated that about 160 billion yuan will be needed for investment in equipment and facilities after garbage-sorting is fully implemented.
Makers of equipment for chemical and biological disposal of wet garbage will see an estimated growth potential of 56.5 billion yuan in equipment sales, and operating this equipment will cost about 13.7 billion yuan every year, Shanghai-based Guotai Junan Securities said in a research note.
In Shanghai alone, from 2018 to 2020, a total of 20 billion yuan will be invested in the implementation of its waste-sorting plan, Shanghai-based newspaper Jiefang Daily reported.
Companies are already rushing to prepare for rising demand. Tus-Sound Environmental Resources Co told the Global Times that it is planning to increase production, upgrade its business structure and expand its markets to take advantage of the new round of beneficial policies. The company's share rose 32.42 percent to 12.99 yuan last week.
Zhang Miao, the founder of waste-sorting company R Cubic, said that she is confident about business growth. "With so many preferential government policies, there is no excuse for companies to fail anymore," she said.
The expected boom for the environmental sector could persists because sustainable and green development concepts are what China's economy needs amid a transition from high-speed to quality growth, analysts said.
"More quality environmental projects will inspire private investment, which is crucial to steady economic growth," Tian Yun, vice president of the Beijing Economic Operation Association, told the Global Times.
Private investors want new growth points that are in line with the new development ideas of green, sustainable and circular development, Tian said.