An overview of China's booming residential water treatment market and the opportunities it offers to foreign SMEs. Learn everything you need to know about drinking water in China and how you can successfully distribute your products in the Chinese market.

1. SALES AND
DISTRIBUTION
IN CHINA’S
RESIDENTIAL
WATER TREATMENT
MARKET

2. Get a free copy of the full report
Sales and distribution in China’s Residential Water Sector

3. What you will learn

4. China has major water pollution problems
Of China’s 634 rivers, lakes and reservoirs: 40% are not potable part of
the year, and 5% are not potable year round
Source: China Water Risk

5. Source: China Water Risk
Chinese groundwater

6. And it’s not just the water sources…
“The water leaves many municipal water treatment
plants in good quality. The biggest problem is the
distribution network, which is usually aging and not
well maintained in some areas.”
Dr Li Lei, Assistant Professor at Tongji University, Shanghai
Source: China Water Risk

7. What is the government doing about it?
 New Chinese Municipal water standard GB 5749 has raised the
number of water quality parameters from 15 to 106
 Drinking water safety is taking increasing precedence in legislation
 90,000 kilometres of urban piping is being replaced
 2016-2020: $300 billion worth of policy-driven investment in the water
sector

8.  The bottom line: municipal water
remains undrinkable
 Government action thus far has
been largely ineffective, with little
tangible improvement seen
 Chinese residents still have no
choice but to seek potable water
independently
Government action
and investment
Weak rule of law
Incoherent nationwide
approach
Rapid urbanization
So, what now?

9. Boiled
water
Bottled
Water
Residential
water
treatment
Finding an independent solution

10.  Boiled water used to be the only choice. It remains popular and is
deeply engrained in Chinese culture
 As consumer trust is low, the tangibility of this process is one of it’s
advantages
 Ineffective at removing heavy metals
 Requires much consumer education to raise awareness as to it’s
ineffectiveness
Boiled
water
Bottled
Water
Residential
water
treatment

11. Boiled
water
Bottled
Water
Residential
water
treatment
 Emerged in China in the 1990s and 2000s as an alternative to boiling
water
 In 2014 China overtook the USA as the world’s largest bottled water
market
 Despite this, the industry has been shaken by a number of high profile
scandals
 Market growth forecast to slow between 2014-2019

12. Boiled
water
Bottled
Water
Residential
water
treatment
 Residential water treatment has emerged as the solution of choice
among groups that can afford it
 Penetration rates remain low but are beginning to rise
 The industry is growing rapidly, and attracting a lot of interest from both
domestic and foreign companies
 In 2015, China is forecast to become the largest residential water
treatment market in the world

13. Have
Residential
Water
Treatment
4%
Do Not Yet
Have
Residential
Water
Treatment,
96%
Have
Residential
Water
Treatment
5%
Do Not Yet
Have
Residential
Water
Treatment;
95%
Penetration rates
China
(Overall) Urban China
Source: TechSci Research

14. Rapidly
Growing
Residential
Water
Treatment
Market
Lack of
municipal
drinking water
solution
Other options
not
sustainable
Increasingly
affluent urban
public
Increasingly
aware urban
public

15. Source: Xylem Inc.
Urban residents are more
educated and aware than ever
before, and overwhelmingly
categorize their country’s water
problems as serious
Urban residents are more wealthy
than ever before, and
overwhelmingly respond ‘Yes’ to the
question “Would you pay more to be
able to drink potable water directly
from the tap?”

16.  2012 > 2013: 20% growth
 2013: Residential water treatment
market estimated at approximately
$2.7 billion
 2017: After-sales market alone
forecast to reach $1.9 billion, total
market nearly $15 billion.
 2019: Market value forecast to reach
$20 billion
China Residential Water Treatment Market Value ($bn)
A rapidly growing market

17.  Market is highly fragmented
 Consumers lack knowledge about
different products available and how
they work
 Chinese consumers’ purchasing
decision is driven by a lack of trust,
so consumers are heavily reliant on a
brand
 Consumers tend not to be brand
loyal
Source: TechSci Research
The residential water treatment market

18.  Influx of foreign and domestic
competitors, now over 3,000
companies in the market
 Most companies in the market selling
POU devices
 Aquatech Shanghai has become the
world’s largest water technology
exhibition since its inception in 2008
‘Aquatech’ Shanghai Exhibitor Numbers
0
500
1000
1500
2000
2008
2009
2010
2011
2012
2013
2014
2015*
291
396
523
796
921
1156
1376
2000
A market attracting much interest
*Projected

19. “Aquatech China has seen huge
growth in the past seven years, from
less than 300 exhibitors to over 1300
exhibitors in 2014. In 2015, we will
reach 2,000 exhibitors.”
William Wang, Manager at CHC Expo (Supporting Partner of Aquatech China)

20.  The focus has traditionally been on 1st tier cities as they have the highest
purchasing power
 Wealthy urban households were traditionally, and remain, the main growth
drivers in the market, but this group are no longer confined merely to 1st tier
cities
 The spread of the internet, better delivery networks and development is
opening up new markets for foreign residential water treatment products,
particularly in 2nd and 3rd tier cities
 Most foreign companies still consider 1st tier cities as the best starting point
from which to enter the Chinese market
Geographical segmentation

21. Source: Huidian Research
Market by area

22. “I think if you start in the 1st tier
cities then you begin to understand
quite quickly whether you’ve got the
branding, the pricing. You need to
learn. This will be a long-term
project.”
Andrew Dahl, Managing Director at KLT
Filtration
1st Tier Cities 2nd and 3rd Tier Cities
“We do not only focus on coastal
provinces. We have requested our
distributor to expand the market
coverage to 2nd tier cities. The
demand for good and reliable
products in developing cities is
larger than in developed cities.”
Sandy Tsai, Business Development
Manager for Asia/Oceania at Oasis
…Further
“The majority of our products can be
found in the majority of provinces. We
are also expanding further, for
example, to Tibet. We cover, let’s say,
85% of China.”
Jeremy Liu, China Business Development
Manager at Rainsoft
Breaking boundaries

23.  Foreign products usually command a 300% or 400% price premium over their
Chinese competition, although sometimes this is as high as 800%
 Domestic companies are becoming increasingly competitive and innovative
 Chinese companies will usually focus on competing on price
 Chinese consumers are willing to pay a premium for peace of mind. They do
not trust Chinese brands and automatically regard foreign products as both
reliable and better quality
Foreign and domestic offerings

24. Focus should be on differentiating your product from domestic offerings as far as
possible, leveraging your foreign brand name to its full extent and offering what
domestic brands don’t
Differentiating from domestic offerings
“I would rather say we compete with our
competitors on performance. We also always use
the best materials and components.”
Laurence Dai, China Business Development Manager at
Rainsoft
“The difference from product to product is
so large so sometimes they [Chinese
consumers] have to rely on brand.”
Laurence Dai, Chinese Business Development
Manager at Bluewater

25.  Branding is more important than ever as the market is increasingly confused,
and smarter consumers are carrying out more extensive pre-purchase research
 Online is becoming a more important sales channel
 Emphasize the quality, performance and foreignness of your product
 Focus on offering after-sales service, educating the consumer and building
trust
Marketing your foreign product in China

26. Although some parts of the Chinese population are increasingly well-educated
and aware, many consumers are not aware of:
 The severity or extent of China’s water pollution
 The effect that drinking polluted water has on their health
 That some methods of making water potable are simply ineffective given
the severity of China’s water pollution, such as boiling
 The residential water treatment systems that are available and how they
work
The importance of education

27.  Some slight product modification may be necessary due to specific market
requirements in China
 Concerns of Chinese residents are centered on potability, whereas in
developed markets reducing water hardness and odor/taste improvement is
more relevant
 Some choices may not be suitable for offering the Chinese market, such
as the trade-off between removal capability and flow-rate
Product adaptation to local market

28. Distributing and selling your products in
China
 You can use distributors without needing to use a joint-venture or even have
your own entity to sell in China
 Having a local presence is essential to reach your sales potential
 Before doing anything, ensure to manage your IPR “in China, for China”

29.  Biggest cause of intellectual property infringement in China is negligence on
behalf of foreign companies
 The Madrid Protocol is not sufficient protection, you should work with a local
law firm specialized in your industry
 There are numerous things you can do to ensure optimal IPR protection.
Examples include conducting due diligence on your distributors or
manufacturing IPR-sensitive parts abroad whilst manufacturing basic
components in China
 Work with multiple trusted suppliers and assemble your final product in a
secured assembly space
Intellectual property rights protection

30. Trade fairs
Chambers of Commerce
Service Providers
 There are an increasing number of water related trade fairs in China
 Make sure to adequately protect intellectual property before attending
 Distributors are often looking for a final product rather than a single component
 Host industry-related events and trade missions
 May be able to assist in the distributor search
 Organize events and trade missions
 Advice given may not be industry-specific
 Using a service provider to find distributors provides the essential due diligence
 Often have extensive distributor databases and local expertise
 Use a service provider with specialist knowledge of your industry
 Find out more about our solutions here
Finding your distributors

31.  Do not work with one exclusive distributor, to avoid transferring too much
power and leverage
 Work with a web of regional distributors who are each well grounded in
their respective local markets
 Ensure to conduct thorough due diligence on all your future partners in
China
 The largest distributor not necessarily the best, servicing too many clients
and commanding too much leverage
Selecting your distributors

32.  Distributors in China are unsophisticated, often focusing on price
 Your product’s real selling points will often be overlooked if not
managed properly
 Chinese distributors are known to favor the company that offers the
highest commission
Chinese distribution channels

33. Distributors need local support
 Provide continuous training, support and management on the ground to
avoid common mishaps and reach your sales potential in China
 Essential if you want full control of your brand and direction
 Constant management and supervision offers increased IPR protection
 Benefit from first hand information and communication by having a
presence in China

34. Gain more insights on how to successfully
distribute your products in China.
Get in contact with us to learn how we can make you more competitive in the
Chinese water technology market.
Visit our website: www.launchfactory88.com
Send us an email: info@launchfactory88.com
Give us a call: +86 21 6402 7352
Download our full report with case-studies of SMEs distributing in China here

35.  Need to have local entity or Chinese representative to obtain
certification, but we strongly advise you not to have your distributor
register your products
 All products entering China have to comply with standards set by the
General Administration of Quality Supervision, Inspection and
Quarantine
 Residential water treatment products, of all types, must receive Ministry
of Health approval
 If equipped with an electrical supply, Chinese CCC (3C) certification is
also required
Obtaining local product certification

36. Qualification Testing Permit
Approval
Time and cost taken to successfully register your product varies widely, and is
mainly dependent on your understanding of the system. Using a local
contractor can significantly speed up the process
3 – 6 months* 2 months* 3 months*
Obtaining Ministry of Health approval
*Timeframes given are based on the
use of a contractor

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38. Launch Factory 88 supports industrial SMEs in the water technology
sector to increase their sales and become more competitive in the
Chinese market. We do so by offering two core services; a
distribution support platform and localized manufacturing and
assembly.
Launch Factory 88 is part of the CHC Group which was established
in 1998 by two Dutch entrepreneurs and has since then developed
multiple market leading companies in diverse industries in China. We
help your company succeed in China using the same careful
methods we employed to build our own businesses.
Visit our website or contact us to learn more about our services
About us