(April 21, 2011) Water treatment companies look to cash in on billions of dollars invested by the Chinese government in providing clean water, though investors are being warned that the lack of transparency in the companies makes them risky investments.

Farah Master and Samuel Chen
Reuters
April 21, 2011

Private equity and venture capital firms are pouring money into Chinese water-treatment companies, targeting high returns from the industry heavily supported by the government.

The mainland’s rapidly expanding water sector, valued at $48 billion, is currently the third largest in the world, according to research firm GWI Global Water, behind the United States at $110 billion and Japan at $59 billion.

Analysts estimate the industry will triple to reach at least $150 billion over the next five years.

“Investing in water plays in China is one of the easiest decisions I can make as far as where to allocate capital,” said Aaron Visse, portfolio manager for San Francisco-based Forward Management.

“I can sleep very well at night with these investments and the valuations that they are sitting at right now.”

Investments from Chinese private equity and venture capital firms into the sector have jumped more than 40 times to $382 million so far this year from $8.6 million for the whole of 2010, according to consultancy firm China Venture.

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