China's water pollution prevention and control action plan – the "Water Ten Plan" is finally here. Commentary across the board points to the fact that the Water Ten Plan is stricter than expected. The fact that tasks/actions in the plan are designated to different departments from various ministries has also received positive feedback. There is consensus too that the plan has a new focus on water treatment and the potential upsides in the wastewater and sludge markets, with bullish recommendations for listed companies along the whole environmental and water value chain.

Less obvious is which sectors will be hit most by the plan. The English summary masks tough measures outlined within the ten action points. Already the Chinese press is saying that it will lead China to the "new norm". Indeed, a circular economy plan following hot on the heels of the Water Ten Plan might be a not-so-subtle way of telling us where the top brass intends to take China.

How serious is China? Very. If you haven't caught the drift yet, it is all about un-siloing. To solve water issues effectively, the government has to plan a coordinated strike across the board – to prevent and control pollution from agriculture, industrial sectors, municipal water and rural water. It also needs to rein in water use. Therefore, the Water Ten Plan is not one plan but an "umbrella plan" that ties in other plans, policies, and standards that have wide-ranging and game-changing impact across sectors.

This umbrella plan forms part of a remarkable vision that will transform China and bring it to the "new norm", an "ecological civilization", with an ambitious new economic model. Whether China can get there is another question. But for now, at least, there is a plan in place.

One of the key points to note is that the new plan recognizes the geographical mismatch in water resources and arable land, and acts accordingly. Water Ten actions show that the dire groundwater situation (from severe pollution to over-extraction) in the north of the country is well-acknowledged. A series of measures, across the board, prioritize groundwater protection.

Water scarcity
Since pollution exacerbates water scarcity, water-scarce regions are also prioritized. Beijing, Hebei and Tianjin, in particular, face stricter targets all round for municipal and industrial water, as well as wastewater management and reuse. These three provinces also face tighter deadlines compared to the rest of the country, underscoring the urgency of their plight.

Other geographical areas of focus that have been singled out with tighter deadlines are the Yangtze River and the Pearl River Deltas. Actions and targets laid out in the Water Ten Plan basically boil down to the protection of water sources – both groundwater and surface water. For surface water, the focus is on China's seven key rivers: the Yangtze, Yellow, Pearl, Songhua, Huai, Hai and Liao Rivers. For many cities in China, groundwater is their only water source. Protecting drinking water sources (be it ground or surface) is imperative. The plan has tailored action to tackle water pollution in rural areas, as
well as urban areas.

There is no doubt that all industries and agriculture will be affected but especially those industries located along the seven key rivers and in urban areas. Since most of China's population and industry (and hence the industrial pollution) are clustered around 1) Beijing, Tianjin and Hebei 2) the Yangtze River Delta and 3) the Pearl River Delta, it comes as no surprise that these areas face tighter compliance deadlines. However, given the enormity of the problem, protecting water sources will remain an uphill struggle despite the new targets set.

Perhaps the question at this point is not 'whether China has the political will to stomach a costly clean-up of industrial and agricultural pollution of its drinking water sources' but 'what happens if this is not done'. Since maintaining stability is an even more cherished mantra than food security, there is little room to manoeuvre.

Industrial water use
A nod to rampant pollution exacerbating existing water scarcity is clear in the push to 'restructure' both the composition of industrial sectors and of crops grown. As expected, heavily polluting and water-intensive industries have been singled out for compliance and upgrading.Agricultural water use is also targeted.

The combination of the use of wastewater discharge permits and new stricter industrial standards will hurt some industries, even without rate hikes. Investment in wastewater treatment plants means not just upfront capital expenditure, but annual operational costs, as well. Only those with a long-term commitment to the sector will remain.

Across China, textiles, dyeing and finishing, and pulp and paper industries will be hardest hit. Textiles, dyeing, and finishing are the only industry singled out for action across all key target areas. Moreover, new stricter standards and tighter deadlines in the Yangtze River and Pearl River Deltas, where the sector is concentrated, amount to a triple-whammy hit.

The plan is actually tougher than many had expected, closing old loopholes caused by a mismatch in standards. These standards vary from sector to sector and it is important to note here that, in the past, some industrial processes were not subjected to any industry-specific standards. Previously businesses could be fully compliant despite discharging untreated wastewater into water sources. So, on top of the impending water and wastewater tariff hikes, these new and/or more stringent industrial standards will hurt.

Wastewater
Factories will have to treat wastewater to higher standards or face high violation fines under the amended environmental law. Also, parties responsible for the pollution violations could go to jail for offenses. This means it will no longer pay to pollute.

In reality, the high cost of installing and operating wastewater treatment equipment will likely mean that some smaller factories with thin profit margins may be forced to close or merge with others, leading to consolidation within some industries. The fact that over 90% of the textile factories are small and medium-size enterprises makes this sector particularly vulnerable.

But it is not just the textile sector. Six new industrial pollution discharge standards, including petroleum refining and petroleum chemistry, are in force as of 1 July 2015. Watch out for crackdowns on illegal activities, such as secret groundwater discharge, and the use of fake environmental impact assessment approvals and monitoring data. The simultaneous anti-corruption campaign mounted by the current administration should go hand-in-hand with a pollution crackdown.

Someone said recognizing a problem is halfway to solving it. The recognition of key stumbling blocks by the plan is another indicator of China's seriousness in tackling pollution. Overlapping and unclear responsibilities between ministries have resulted in poor enforcement and mismatched standards. These disparate responsibilities, which could have hampered pollution prevention and control, are addressed in the new plan with tasks designated to different ministries.

Now, under the new plan, each action has a 'lead ministry', which takes primary responsibility, and 'supporting ministries', which will have to work with the lead ministry to get the job done. That said, coordination between departments will still require much effort. We remain cautiously optimistic that this will ensure the proper execution of the policies.

Debra Tan is the director of China Water Risk, a non-profit initiative designed to help investors, businesses and individuals understand and mitigate risk around water.