China’s environmental service sector to benefit from big government spending
Water treatment companies tipped to see boost from public-private partnerships
China’s environmental service sector will benefit from rising government spending to tackle worsening pollution problems, analysts say.
China’s environmental expenditure rose 3 per cent year on year to 112 billion yuan in December, compared with 1 per cent growth in overall expenditures, the latest official statistics showed.
“We believe that the environmental services sector is likely to outperform the market given its much stronger growth rate for investment,” HSBC analysts said in a research note on Tuesday.
Among all the sub-sectors, HSBC prefers water service companies, as they are expected to be the largest beneficiary of public-private partnership (PPP), a model China has introduced to leverage private capital for state-run public sectors, and consequently should see the largest number of new orders in the 2016 fiscal year.
Analysts from China International Capital Corp also expect the environmental service sector to post solid growth this year and say water treatment companies will profit from the government’s promotion of the PPP business model in the industry.
The next step will be to treat industrial boilers, which will likely drive demand for boiler flue gas treatment and small boiler treatment
In addition, smoke, gas and soil treatment companies and environmental monitoring service firms could see their fundamentals improve this year, thanks to the government’s stimulus measures and related investments, they said in a recently released report on the sector’s outlook.